Nov 9 FT Thoughts Lots on Biden, Adidas/Reebok, China Inflation, Funds in cash and Lunch updates


12 Nov

Nov 9 FT Thoughts Lots on Biden, Adidas/Reebok, China Inflation, Funds in cash and Lunch updates

MARKETs at 1:30pm HK Time
JAPAN
opened at a 29yr high, much higher than the futures indicated and has worked higher for most of the session. Resistance as it approached 25k (day high 24,963) Currently +2.3% @ 24,886. Topix opened higher and worked higher currently +1.5% @ 1,684
Pre market Data
Tankan Index Nov -13 vs -26 Oct (F/cast was -28). Least -VE for 9 mths but manufacturers remain pessimistic about the recovery and govt efforts to boos domestic demand.
Foreign Reserves Oct $1384.4b vs 1389.8b Sept
Out midday
Leading Economic Index Prelim Sept 92.9 vs 88.5 Aug revised (F/cast was 88)
Coincident Index Prelim Sept 80.8 vs 79.7 Aug (F/cast was 80)
S KOREA opened strongly rallied but then eased back before working slowly higher.
Kospi currently +1.5% @ 2,454
Kosdaq currently +1.58% @ 850
TAIWAN opened above 13,000 and gapped higher to test 13,150 in early trades , before easing back to 13,050 and then trading sideways currently +1% @ 13,097
After market we get Trade Balance, Imports, Exports.
CHINA CSI 300 opened strongly helped by the good trade data out Saturday. Market worked higher to test 5,000 just before lunch. PM opened lower and tick down currently +2% 4,981.
Shanghai Comp +1.8% @ 3,371
Shenzhen Comp +2.4% @ 14,164
ChiNext +3.5% @ 2,828
HONG KONG Opened @ 26,158 +445pts vs +135pts ADR’s @ 25,847. E-commerce names rebounded, AIA strong as Q3 numbers in line. Shorts squeezed as the uncertainty over the US election removed. At lunchtime all sectors were strong E-commerce leading, Tech components, Macau names and Brokers were strong. Razer issued a +VE profit alert.
EUROPE Expect markets to open higher, with short positions being squeezed as the uncertainty over the next UYS President is removed and the current expectation of the Republicans controlling the Senate is seen as a +VE.
Data due
EUROZONE No data due, Speeches from Lagarde and MerschGERMANY Balance of Trade, Imports, Exports, Current Account FRANCE No data due UK No data due BoE’s Haldane speaks
US Futures Opened higher Dow +152pts and quickly rose to +319pts in early trades with the S&P and NDX higher too by around 1%. Have worked slightly higher through the morning to +387pts with the S&P and NDX higher too. Obviously some covering of short positions but the general mood likely to remain +VE.
Data due
Consumer Inflation Expectation. Speeches from Mester and HarkerEarnings include McDonald’s, SoftBank, Beyond Meat, Simon Property Group, Ambac Financial, Tilray, ZoomInfo, Occidental Petroleum, Myriad Genetics, Taubman Centers, International Flavors and Fragrances, Norwegian Cruise, Canopy Growth, Aurora Cannabis, Party City


Lots of articles on Biden and Harris; their backgrounds and the issues they face in the weeks and years ahead.


FT leads with Biden moves to unravel key Trump policy calls. Key is covid but also mentioned are re-entering the Paris climate accord, and World Health Organisation. Re-instate the ‘“Dreamers’ programme and reverse some travel bans. He has said he will announce the most diverse cabinet in US history.
Trump is still maintaining the election was stolen although most of his team are aware of the reality of things. But the question remains about how co-operative Trump will be during the transition period.

Senate run-off polls. Two victories for Democrats in southern state of Georgia seen as crucial for Biden to push ahead with his legislative agenda. If he can win both then the Senate is 50:50 Democrat /Republican which would mean that the Vice President would get to vote and effectively give the Democrats control. There are still 2 others in North Carolina and Alaska but expected to go to the Republicans. Hence the Democrat campaigners are flooding the Georgia to try and win the run-offs. The vote will take place in January and historically Republicans have done better but who knows this time.

President-elect faces tough challenges in restoring US leadership to world Foreign policy objectives include countering a rising China and resetting relations with Europe. Looks at what Biden would like, what the other party wants and the possible outcome. Looks at Europe, Middle East, China, Global Trade and Climate.
The key I think is that he will seek to rebuild a lot of the things that Trump broke. There is likely to be a lot of ‘friendship’ events in the short term.
On China some think he underestimates China but he has said he will hold China to account. He has the advantage that Trump has demonstrated what can be done with sanctions to bring China down; ZTE, Huawei etc. Biden now has those options too. The problem for China is that a lot of supply chains are in the process of changing and they are not going to revert to the previous position just because Trump has gone. Tariffs and covid showed the dangers of having all your supply chains in one country. The article expects Biden to seek to work with allies in the region and to have a strong military presence. That is likely to annoy China but might give a number of countries the reassurance that the US remains committed to helping them against Chinese aggression. As China has recently been more aggressive towards its neighbours that may be crucial. It doesn’t mention Taiwan but I think Biden will look to help Taiwan become more internationally accepted, again as a counter to China.

Opinion A divided Congress need not deter Biden. Summary 'Diplomacy is an area where Mr Biden may well shine. And he won’t need Republican support for that.'
Notes that Trump managed to get a lot of things done with support from the House of Representatives by using the Federal Government system and Biden will be able to use those same tools to circumvent the Senate. He can also use his diplomatic skills to achieve other aims on the agenda which some Republicans agreed with too.

Buyout groups explore moves for Adidas’s Reebok unit. The two have never had a successful union and so options are seemingly being considered. Reebok’s archive of classic and retro style shoes being the main draw. But in the hands of another that will be new competition to Adidas. It will be watched careful as the shoe manufacturers in Asia would obviously like to see a more successful brand which would mean more shoes to manufacture.

Will the rate of inflation in China continue to fall? CPI out from China tomorrow and expected to show a continued slowing according to a Bloomberg poll. The average consumer in China has been cautious in contrast to the rapid recovery in other parts of the economy. They have been hit by floods and concerns over employment. It is likely Beijing will seek to remain ‘accommodative’ in its policy as global covid cases have surged again and raised concerns about the global recovery.

Berkshire Hathaway profits surge to $30bn. Looks at the results which were driven by the investment portfolio which offset the losses in the insurance business. Notes the increase in share repurchases too, although they did little to impact its large cash balance. Doesn’t mention the investment into Japan but with the market there hitting a 30year high that could beam a future driver.

Rotation trade Value stocks lag behind Big Tech in post-election rally on Wall Street. Without control of the Senate a lot of the hopes for currently unloved sectors (banks and autos mentioned) have been dashed. The focus is likely to remain on big tech rather than value.

Silicon Valley faces political tests under the new guard. Few in tech industry expect return to Obama’s ‘golden era’ of cosy relations. Expects some changes to take place but in a more reasoned and reasonable manner.

Funds cut cash holdings to pre-Covid levels Seems that since March fund managers have been putting as much money to work as possible. The article suggests that fund managers don’t believe that investors seek redemptions in the near future; even in the light a further waves of covid. Good news for brokers and exchanges. Certainly in HK the daily trading volumes have been good.

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