ASIAN MACRO INITIAL THOUGHTS 2 June Dow futures falling
Covid-19 Globally over 6.2m cases, 373k deaths
Russia gives temporary approval to Avifavir to treat covid-19 patients while clinical trials continue.
US Dow futures opened flat but fell (-120pts) on news that Trump says he’ll deploy the military to quell the riots; NY announced an 11pm-5am curfew. As US markets approached all time highs in Monday trading
PMI data showed signs of recovery in Europe but it was a mixed picture for Asia with Japan and S Korea still seeing some weakness although China looks to be recovering
DOW +0.36%, NDX +0.66%, S&P +0.38%, Russel 2K +0.81% having opened lower on rumours that China is telling state-owned Cofco and Sinograin to pause imports of some US farm goods. But the markets trended higher with re-opening beneficiaries seeing good interest Carnival Cruise +6.7%, Norwegian Cruise +10.4%, Royal Caribbean +7.3%, Hilton +3.3%, Marriot +7.4%, American Airlines +5.8%, Delta +3.8%, Southwest +4.7% and United +5%. Apple +1.2% despite the riots, Target -2.8% on the riots which were given little weight although they will have a further -VE on insurers and retail names I would think.
ZOOM +10% announced planning to increase encryption for paying users
Pfizer -7.2% after announcing after market Friday disappointing results for a breast cancer drug
Manufacturing PMI May 39.8 vs 36.1 Apr (F/cast was 39.8)
ISM Manufacturing Data
New Orders May 31.8 vs 27.1 Apr (F/cast was 34)
Prices May 40.8 vs 35.3 Apr (F/cast was 28)
Employments May 32.1 vs 27.5 Apr (F/cast was 23)
PMI May 43.1 vs Apr 41.5 (F/cast was 42.5)
Construction Spending Apr -2.9% MoM vs +0.9% Mar (F/cast was -6.3%)
USD was flat vs Yen & Euro. As GS builds short positions in the USD; citing re-opening, easing covid-19 and encouraging moves in the EU recovery fund but only as short term play at this stage.
Bitcoin +3% @ 9711.79, VIX +2.6% @ 28.2, US T10 0.674% rose slightly
OIL Brent +1.3%, WTI -0.14% on US/China concerns but sentiment improving on reprots the OPEC and Russia close to extending output cuts.
Gold +0.7%, Silver +2%, Copper +0.04% as BoA raises its forecast for copper as a recovery play.
AHEAD Total Vehicle Sales, Redbook, ISM New York Index, API Crude Oil Stocks
DAX Market closed, CAC +1.43%, FTSE +1.48% markets opened higher and effectively traded sideways in a tight range. Volumes were light with a number of markets closed. Some concern about the rioting in the US adding to the existing concerns over covid-19 and US/China relations. PMI data was in-line with expectations.
Associated British Foods +8% announced that their Primark Stores would re-open from June 15.
EUROZONE Manufacturing PMI May 39.4 vs 33.4 Apr (F/cast was 39.5)
GERMANY Manufacturing PMI May 36.6 vs 34.5 Apr (F/cast was 36.8)
FRANCE Manufacturing PMI May 40.6 vs 40.3 Apr (F/cast was 40.3)
UK Manufacturing PMI May 40.7 vs 32.6 Apr (F/cast was 40.7)
GERMANY No data due
FRANCE No data due
UK Nationwide House Prices, Mortgage Lending, Mortgage Approvals, BoE Consumer Credit, Net Lending to Individuals,
JAPAN Expect Nikkei to open flat as US futures fall with upside limited without a major driver having closed at a 3 month high on Monday. News of further stimulus +VE but investors will probably wait to see the details. Yen currently 107.59. There were fireworks last night to cheer up the public last night but I doubt it will have an impact on the market to day.
No data due
Parliament to debate second extra budget to fund US$1.1tn stimulus plan.
Japan's corporate profits for January-March quarter posted the largest fall (-32%) since 2009, the fourth quarter of falling; affected by the new coronavirus pandemic that has ripped through the global economy, government data showed Monday. -VE for sentiment
Government may open borders to travellers from countries with low covid-19 infections like Thailand, Vietnam, Australia and New Zealand.
The Costa Atlantica cruise ship, which docked in southern Japan with over 100 crew members testing positive for COVID-19, has left the country and is en route to the Philippines, local government officials said on Monday.
Apple to re-open its flagship Tokyo store today, Universal Studio’s to re-open this month.
BANKS looking to extend on-line operations via internet and smartphones having previously lagged Western Banks in the field +VE
AUTO Sales of new minivehicles posted the sharpest fall in May as Japan's auto market nearly halved amid the coronavirus epidemic, which dampened demand and restricted business at car dealers, data from industry bodies showed Monday. -VE
SOUTH KOREA Expect markets to open slightly higher as pre market data was slightly better than expected and on news of the governments ’New Deal’ stimulus plan.
Data out GDP Growth Rate Final Q1 -1.3% QoQ vs +1.3% (F/cast -1.4%)
GDP Growth Rate Final Q1 +1.4% YoY vs +2.3% (F/cast +1.3%)
Inflation Rate May -0.3% YoY vs +0.1% Apr (F/cast was -0.4%) [May -0.2% YoY vs -0.6% Apr (F/cast was -0.3%)]
Stimulus Government unveiled a 76 trillion won (US$62 billion) “New Deal” spending plan to reshape the economy in the aftermath of the COVID-19 pandemic after slashing its growth forecast for the year. The plan, first outlined by South Korean President Moon Jae-in in April, aims to refocus the economy through 2025 by supporting job growth and new industries. It would partly be funded by a third extra budget now being drafted, according to a statement on the policy outlook for the second half of this year. +VE for sentiment.
AUTO sales -36% YoY last month as the new coronavirus outbreak continued to dent demand for cars amid the coronavirus pandemic, with overseas sales hit particularly hard, industry data showed Monday. The country's five carmakers -- Hyundai Motor Co., Kia Motors Corp., GM Korea Co., Renault Samsung Motors Corp. and SsangYong Motor Co. -- sold a combined 423,416 vehicles in May, down from 665,136 units a year ago, according to data from the companies. -VE
Doosan Group creditors decided Monday to provide an additional 1.2-trillion-won ($1 billion) to the conglomerate. Main creditors, such as Korea Development Bank and the Export-Import Bank of Korea (Eximbank), said they agreed to give financial support at a meeting held on Monday. +VE
PROPERTY +VE Despite the government’s tightened regulations to curb apartment prices in Seoul, the average rate has risen during the first five months this year, particularly in the middle-class districts, data showed Monday.
Samchuly Bicycle said Monday its sales of electric bicycles have surged 34% YoY as people are looking for new ways to travel amid the coronavirus outbreak. +VE
TAIWAN Expect market to open higher following the US but investors remain cautious over US/China relations.
No data due
Trade Taiwan is looking forward to closer trade and economic ties with India in the post-pandemic era, Representative to India Tien Chung-kwang said in an interview published by eGov Magazine on Friday last week. +VE
Hon Hai Precision Chairman said decentralized production would be the new focus in manufacturing at an on-line forum on Monday. He expects its the end of ‘world factories’ and for more countries to want more control over ’their’ production. Hon Hai has 16 production suites around the world but 70% still comes from China.
Former D-Link Corp chairman John Lee is to resume his post at the company, replacing Lori Hu, after a special shareholders’ meeting in Taipei yesterday voted to reinstate him. +VE but tensions remain within the company.
Local life insurers net worth recovered to NT$1.77 trillion (US$59.09 billion) as of the end of April, after dropping to NT$1.46 trillion at the end of March, (lowest in the past 13 months), Financial Supervisory Commission data showed.
CHINA Expect market to open flat as investors react to news that the US is still considering specific measures against China over Hong Kong.
No data due
State-owned Chinese firms bought at least three cargoes of U.S. soybeans on Monday, even as sources in China said the government had told them to halt purchases after Washington said it would eliminate special treatment for Hong Kong to punish Beijing.
US Republican lawmakers, Mike Gallagher, Jim Banks and Doug LaMalfa, are preparing legislation that will keep Americans from investing in foreign defense enterprises with ties to Chinese military, Reuters reported. Its also reported that the US is considering specific measures against China regrading the imposition of a national security law on China along with opening increased immigration quotas for HK citizens.
China said on Monday the United States was "addicted to quitting" following a U.S. decision to leave the World Health Organization (WHO) and said the withdrawal reveals a pursuit of power politics and unilateralism.
Embraer SA said on Monday that China and India could be potential new partners, following a Reuters report last week that said those two countries as well as Russia were interested in the planemaker’s commercial jets division.
Credit Suisse shares fell after announced the completion of the transaction to become a majority shareholder in its China securities joint venture, Credit Suisse Founder Securities Limited (CSFS). With the transaction completed, Janice Hu has been appointed Chairwoman of CSFS. Credit Suisse has successfully closed the increase of its shareholding in CSFS from 33.3% to 51%.
HONG KONG ADR’s +13% pts to open at 23,745 but expect market to open lower with investors likely to consolidate; increased caution as local covid-19 cases means government likely to extend local restrictions and US/China tensions remain in focus. Netease launches its secondary list IPO which is likely to suck up significant amounts of margin from retail investors and could prompt some rotational selling. US futures falling also -VE
Police cite covid-19 as reason for banning June 4 vigil raising concerns the government is using the lockdown to stifle local freedoms -VE for sentiment.
Data out Retail Sales Apr -37.5% YoY vs -44% Mar (revised from -43.8%)(F/cast was -45%) better than expected, so expect the sector to see selective rebounds; Jewellery remained very weak. It was the fifteenth month of declines:-
Department stores (-18.8% vs -44% in March)
Food, alcoholic drinks & tobacco (-21.4% vs -27.8%);
Other consumer goods, not elsewhere classified (-27.7% vs -28.2%);
Electrical goods & other consumer durable goods, not elsewhere classified (-19.1% vs -21.7%);
Wearing apparel (-62.1% vs -66.1%);
Medicines & cosmetics (-63.7% vs -65.4%);
Jewelry, watches & clocks, and valuable gifts (-78.2% vs -77.2%);
Motor vehicles & parts (-20.8% vs -21.4%);
Fuels (-10.1% vs -9.6%);
Books, newspapers, stationery & gifts (-41.1% vs -49%);
Footwear, allied products & other clothing accessories (-50.8% vs -55.8%);
Optical shops (-41.1% vs -44.1%).
IPO DEBUT SMC Electric (2381) Offer price HK$0.25 reportedly -20% inn grey market
Short Selling HSI Monday 18.3% vs 19.5% Friday
Top Shorts Geely Auto (175) 55%, Wharf REIC (1997) 50%, CCB 9939) 33%, Hang Seng Bank (11) 31%, MTRC (66) 30%, Want Want (151) 29%, Country Garden (2007) 27%, Swire Pac A (19) 27%, Galaxy Ent (27) 26%, HSBC (5) 25%.