May 20


Covid-19 Globally over 4.9m cases, 325k deaths
US Futures opened lower but now indicating a slightly higher open

DOW -1.59%, NDX -0.54%, S&P -1.05%, Russel 2K -1.95% markets opened flat and DOW and S&P retracing sideway whilst the NDX saw some gains but all three sold down into the close. Retail saw good mixed results Home Depot opened lower and remained so; despite increased SSS sales it also increased costs due to covid (but +VE cross read to Techtronics (669 HK)). Walmart also good sales was initially higher but gave up those gains through the day. Kohls reported Q1 which was worse than expected which had a -VE cross read to Macy’s, Nordstrom etc. Banks sold down too. Developer slight +VE on the slightly better than expected housing data.
Many investors, I think, realising that yesterday’s rally was overdone as even the defensive stocks were weaker.
Mnuchin says Treasury and Fed willing to take losses on the bailout programmes and prepared to spend the entire $500bn appropriated. Powell said Fed committed to doing what it takes to keep the markets functioning.
Spotify +8% on news US comedian Joe Rogan’s podcast will be available from Sept.
Yum China +4.7% on no specific news but good updates about quick service restaurants.
DATA
Building Permits Apr -20.8% MoM vs -5.7% Mar (F/cast was -28.9%)
Housing Starts Apr -30.2% vs -18.6% Mar (F/cast was -30.1%)
Redbook 16 May -9.5% YoY vs -7.5% prior (16 May -2.6% MoM vs -1.5% prior)
API Crude Oil Stock Change 15 May -4.8m vs +7.58m prior)
USD was unch vs Yen & Euro. Bitcoin % @ , VIX +4.2% @ 30.53,
US T10 0.695% fell slightly on Powell’s testimony
OIL Brent -0.46%, WTI +2.14% futures trading lower after market
Gold +0.6%, Silver +0.8%, Copper -0.2% but seeing a broadening rally in precious metals +VE
AHEAD MBA Mortgage Applications and 30yr Mortgage Rate, EIA Gasoline Stock Change, EIA Crude Stock Change, FOMC Minutes.

DAX +0.15%, CAC -0.89%, FTSE -0.77% Markets opened higher but trended lower for most of the day but did see an upturn into the close. Short selling restriction were remove which may have been part of the reason, New EU car registrations were -76.3% but that was better than f/cast but Autos lead the declines. German ZEW sentient showed a significant improvement with +VE expectations for the 2H. On-line and Healthcare continue to see good interest.
Beazley +7.8% after a successful placement. Compass -3.4% announced it was raising GDP2bn.
Imperial Brands -6.5% said it was cutting its dividend.
DATA
EUROZONE New Car Resigtratons Apr -76.3% YoY vs -55.1% Mar (F/cast was -96%)
Construction Output Mar -15.4% vs +0.2% Feb (F/cast was -17%)
ZEW Economic Sentiment Index May 46 vs 25.2 Apr (F/cast was 29)
GERMANY ZEW Economic Sentiment Index May 51 vs 28.2 Apr (F/cast was 32)
ZEW Current Conditions May -93.5 vs -91.5 Apr (F/cast was -82)
UK Employment Change Feb 210k vs 172k Jan (F/cast was 51k)
Ave Earnings Inc Mar +2.4% vs +2.8% Feb (F/cast was +2.5%)
AVE Earnings Ex Bonus Mar +2.7% vs +2.9% Feb (F/cast was +2.7%)
Unemployment Rate Mar +3.9% vs +4% Feb (F/cast was +4.3%)
Labour Productivity Prelim Q1 -1.1% vs +0.3% Prior (F/cast was -2.6%)
AHEAD
EUROZONE Current Account, Core Inflation Rate, Inflation Rate, Consumer Confidence Flash. ECM Policy Meeting.
GERMANY No data due
FRANCE No data due
UK Inflation Rate Core Inflation Rate, PPI Output & Input, PPI Core Output, Retail Price Index

JAPAN Nikkei opened slightly higher, Yen currently 107.92 weakening in early trades. Market currently trading higher with caution ahead of the Chinese policy meetings at the end of the week, rising US/China tensions and the announcement of an extra BoJ meeting.
Data out Tankan Index May -44 vs -30 Apr (F/cast was -36)
Machinery Orders Mar -0.4% MoM vs +2.3% Feb (F/cast was -6.7%) [Mar -0.7% YoY vs -2.4% Feb (F/cast was -8.8%)
Govt may lift the state of emergency restrictions in more prefectures as the number of new covid case drops.
BoJ to hold extra meeting to discuss the impact of covid on SME’s Slight -VE
Sony Corp offers shareholder in a 26% premium to Monday’s closing price to buy its financial services unit a wholly owned subsidiary. The unit makes a large slice of Sonys profits and whilst off the March lows it is still at a discount to January’s highs.
Softbank reported to be considering a sale of up to $20bn of T-Mobile shares after the merger with Sprint is complete.

SOUTH KOREA Kosdaq opened higher and Kospi flat but both working higher.
No data due
Pharmaceutical companies in focus as they begin stages of coronavirus vaccine development, whilst lagging US rivals still +VE
Hanwha Solutions said Tuesday it acquired a 20.26 percent stake in Australia-based energy management system firm SwitchDin that specializes in virtual power plant technology. It is seeking to diversifying its business portfolio that is currently focused on hardware such as solar power cells and modules. +VE
Telco’s report seeing fewer customers changing suppliers and I guess buying nw phones as customers remain reluctant to visit stores on covid concerns.

TAIWAN Opened higher but tending lower in early trades. Expect some caution with Tech still reacting to the US tightening on Huawei but sentiment probably slight +VE ahead of President Tsai inauguration.  11,000 remains resistance

Data due after market Export Orders and Current Account
President Tsai inauguration investors will be watching her speech which is expected to reiterate the Independence of the Republic of China (Taiwan’s official name) especially in the light of recent support for Taiwan’s entry into the WHO. She is likely to reject the 'one country two systems’ not least because if the example of how China has not honoured that in HK. Along with peace, stability and economic growth.
There is rising concern though that China will be increasingly aggressive militarily because if Taiwan were together formal WHO recognition it would undermine President Xi pledge to what it call ‘reunites Taiwan into China’.
No new covid cases for twelve days and the no domestic cases for 37 days.
Kaohsiung Mayor Han Kuo-yu yesterday announced that businesses in “eight major special establishment categories” — including karaoke bars, dance venues, massage parlors and hostess bars — would be allowed to reopen from today. +VE for sentiment
Cathay Financial Holding yesterday expressed caution about lending growth this year due to concerns over loan quality amid the COVID-19 pandemic. Cathay United Bank its banking arm, is focused on retaining existing clients, but would exercise more caution in approving loans to new clients, be they local or foreign currencies Slight -VE

CHINA Expect market to open lower following the US sell off and worsening relations with the US and a number of other countries over covid investigation.
But Team China in the wings to support the markets ahead of the NPC an CPPCC meetings

Data out PBOC Prime Loan Lending rate 1 year @ 3.85% and 5 year at 4.65% both unchanged. Some were expecting a cut to help the economy; I wouldexpect some weakness
Nasdaq to delist Luckin Coffee and tighten rules for foreign companies listing on there. Likely to make it more difficult Chinese companies to list there. China is suggesting that Chinese companies look to list in London and utilise the London Shanghai Connect, so far only one company has done this.
FT article on how US action against Huawei will hurt it’s suppliers; mentions TSMC and SMIC and questions whether SMIC will respect the US action or stick with China; to do so would put it on Washington’s black list which could restrict its ability to but future manufacturing equipment that it will need to meet China’s ambitious chip targets. Underlines the strength of the US position.

HONG KONG Pre market +75pts @ 24,462 vs -284pts ADR’s at 24,104 but I still expect market to trend lower on press reports of increasing credit card delinquencies and personal loans, a local business survey which sees 30% of companies expecting to close in the next six months and the HK unemployment hitting a 10 year high, which came out after market Tuesday.
No data due
After Market Tuesday Unemployment Rate Apr 5.2% vs 4.2% Mar (F/cast was 4.3%) highest in 10 years. The under employment rate also rose -VE

Short Selling HSI Tuesday 19.9% vs 21.1% Monday
Top Shorts Wharf REIC (1997) 51%, Techtronic (669) 37%, Hengan (1044) 35%, Country Garden 28%, Ping An (2318) 28%, Hang Seng Bank (11) 27%, Galaxy Ent (27) 25%
PROFIT WARNING. TRANSPORT INT'L (62.HK) issued a -VE profit warning, expecting a loss for the six months ending 30 June 2020, as compared to the net profit of HK$302 million for the corresponding period in 2019. The expected loss was mainly due to the outbreak of the coronavirus disease and corresponding anti-pandemic measures implemented by the government of Hong Kong, said the parent of KMB.JU TENG INTL (3336.HK) issued a +VE profit warning , expecting to record a profit of the Group for the six months ending 30 June 2020 as compared to a loss of approximately HK$47 million for the period last year.
RESULTS Today : Wednesday Lenovo (992), Xiaomi (1810), Later this week Thursday Parkson Retail (3368), Alibaba (9988).

WATCH
TECHTRONICS (669 HK) good SSS at Home Depot will be +VE for the company .CK ASSET (1113 HK) wins the Anderson Road site in Kwun Tong, paying HK$4.95bn (HK$4,546psf) the low end of estimates which will be -VE for sentiment but good for CK Assets margins. The site is designated for private starter homes and subsidised units.