[PODCAST] US Open Rundown 29th January 2020
- European bourses are rangebound in a mild reprive from coronavirus, as focus turns to earnings/FOMC
- SCMP article suggests that the coronavirus could impact Beijing’s ability to meet US-China Phase 1 trade deal import demands
- World Health Organisation are reportedly to hold a press conference at 14:00GMT on the Coronavirus
- Apple beat on top and bottom lines, and iPhone sales came in above expectations; 2% higher in pre-market
- Looking ahead, highlights include US Trade, Pending Home Sales, DoEs, FOMC Rate Decision and Press Conference
- Earnings: Microsoft, Facebook, Mastercard, AT&T, Boeing, Mcdonald's, PayPal, Tesla, Mondelez International, ADP, Marathon Petroleum, Sprint
World Health Organisation are reportedly to hold a press conference at 14:00GMT on the Coronavirus. For reference, the World Health Organisation's current classification of the virus is that the risk is very high in China, and high at both a regional and global level. (Newswires) Total number of coronavirus cases in China rose to 5974 and total deaths at 132 as of January 28th according to state media, while the National Health Commission said the total number of suspected coronavirus cases in China was at 9239. (Newswires)
China Global Times tweeted that 11 Wuhan residents traveling back from abroad were found to be infected with the novel coronavirus as of 6am Tuesday citing Chinese customs, while an article in SCMP suggested that the coronavirus could impact Beijing’s ability to meet US-China Phase 1 trade deal import demands, (People’s Daily/Global Times/SCMP)
PBoC Beijing Branch said it will increase funding support to financial institutions under its administration to help tackle coronavirus. (Newswires)
Senior US administration official later commented that White House did not call airlines and did not ask for suspension of flights between US and China. (Newswires)
Asian equity markets were mostly higher as the region found some reprieve following the rebound on Wall St where sentiment was underpinned by vaccine efforts to tackle the coronavirus, touted dip-buying and encouraging US data, while a stellar report from Apple which beat on both top and bottom lines, as well as iPhone revenue added further fuel to equity futures after-hours. ASX 200 (+0.5%) and Nikkei 225 (+0.7%) took impetus from their US peers but with upside somewhat capped as participants also digested a slew of corporate updates, while Tokyo sentiment was driven by recent favourable currency flows and a heavy slate of earnings. Conversely, Hang Seng (-2.8%) suffered a bloodbath on return from the Lunar New Year holiday and briefly slipped into correction territory with heavy losses across a broad range of industries including financials, airliners and retailers due to the coronavirus fears which prompted measures from Hong Kong to reduce cross-border travel with mainland China, while casino stocks were also a losing bet after China stopped issuing individual travel visas for visits to Macau by mainland residents in an effort to control the outbreak. 10yr JGBs were flat after the recovery in risk appetite dampened safe-haven demand, but with downside also stemmed by support at 152.50 and amid the BoJ’s presence for over JPY 1.1tln of JGBs in up to 10yr maturities.
BoJ Summary of Opinions from the January meeting stated there has been no further increase in the possibility that the momentum toward achieving the price stability target will be lost and that it is appropriate to maintain the current guidelines for market operations. BoJ also noted that Japan's economy has been on a moderate expanding trend, although exports, production and business sentiment have shown some weakness, mainly affected by the slowdown in overseas economies and natural disasters. Furthermore, the BoJ stated that although risks concerning overseas economies remain significant, signs of recovery have started to be observed in part and there was the opinion that they may need to conduct review of policy framework given heightening debate in Europe and US over 'Japanification'. (Newswires)
US Senate Majority Leader McConnell said the GOP doesn't have the votes to block impeachment witnesses. (Newswires)
UK government will introduce a bill into parliament today for legislation to end automatic rights for EU vessels to fish in UK waters. (Newswires)
The Times’ shadow MPC voted 8-1 (1 hawkish dissent) in favour of leaving rates unchanged at 0.75%; cites return of economic confidence and planned budget stimulus. (Times)
Senior Tory backbenchers are considering a HoC revolt to force a total ban on Huawei and there were feelers out last night on how many will back them with 45 Conservative MPs needed to defeat the government, according to Sun's Tom Newton Dunn. (Twitter)
ECB's Rehn says given that negative risks within Europe do not materialise we could then be closer to 1.5% growth for Europe next year, latest information regarding core inflation indicates a rise; ECB has not run out of tools if monetary policy needs to be strengthened. (Newswires)
IMF sees Italian deficit/GDP ration at 2.4% in 2020 (vs. govt's 2.2% target); sees Italy's GDP growth the lowest in EU in coming years, notes that further consolidation is needed in the Italian banking sector. (Newswires)
Turkish President Erdogan told Russia that Turkey is running out of patience regarding the ongoing bombings in Syria's Idlib, via NTV. (Newswires)
European stocks trade modestly in positive territory [Eurostoxx 50 +0.3%] – following on from a similar APAC lead, with the exception of Hong Kong markets which had its first chance to react to the coronavirus developments following its Lunar New Year holiday. Sectors are mostly in the green with material names outperforming, albeit more-so a consolidation from the recent virus-induces losses. Overall, sectors do not reflect a clear risk tone in the equity-space. Individual movers are more earning-orientated; Pharma-giant Novartis (+1.3%) shares rose amid a beat on both revenue and net income forecasts, whilst also forecasting sustained long-term growth, albeit the Co’s core EPS metric missed expectation. LVMH (+0.3%) nursed opening losses of almost 2%, which was initially induced by a 40% YY drop in Hong Kong sales in Q4 amid ongoing unrest in the region; the Co. topped its FY19 forecasts and posted an improvement in operating profit. Santander (+3.5%) extended on its opening gains amid stellar earnings, with share prices underpinned by a 3% boost to its dividend. Elsewhere, Apple (+2% pre-market) earnings have provided tailwinds to the European chip-space, with AMS (+2.5%), STMicroelectronics (+1.2%), Infineon (+1.4%), Dialog Semiconductor (+1.4%) and ASML (+1.3%) all supported in the aftermath. For reference, DJ constituents Boeing and McDonalds will be reported before the bell today and carry weightings of 7.47% and 4.97% respectively.
Apple (AAPL) Q1 '20 earnings (USD): EPS 4.99 (Exp. 4.55); Revenue 91.82 (exp. 88.50bln), iPhone: 55.96bln (exp. 51.51bln), iPads: 5.98bln (exp. 6.70bln), Mac: 7.16bln (exp. 7.15bln), Services: 12.72bln (exp. 13.07bln). (Newswires) NOTE: AAPL has a 4.8% SPX weight; a 11.9% weight in the NDX, and a 7.47% weight in the Dow – Co. shares rose 3% after-market post-results.
eBay Inc (EBAY) Q4 19 (USD): EPS 0.81 (exp. 0.76), Revenue 2.8bln (exp. 2.81bln); Sees 2020 net revenue 10.72-10.92bln (exp. 11.0bln); boosts share buyback by USD 5bln, raises dividend to 0.16/shr (+14%). (Newswires)
Advanced Micro Devices Inc (AMD) - Q4 19 Adj. EPS USD 0.32 vs. Exp. USD 0.31, Revenue USD 2.13bln vs. Exp. 2.11bln. Q1 20 revenue view USD 1.8bln (+/- 0.50mln) vs. Exp. 1.84bln. (Newswires) Co. shares fell 3.5% in after market trade following soft Q1 revenue forecast
Dow Inc (DOW) Q4 19 (USD): operating EPS 0.78 (exp. 0.74), Revenue 10.20bln (exp. 10.07bln).Co. have a 1.11% DJIA weighting.
LVMH (MC FP) – FY19 revenue EUR 53.7bln vs. Exp. EUR 53.5bln. Adj. net EUR 7.17bln vs. Exp. EUR 7.30bln. Adj. operating profit EUR 11.5bln vs. Prev. EUR 10.0bln. Q4 sales EUR 15.3bln, -11% QQ amid headwinds from Hong Kong. Hong Kong sales -40% YY. (Newswires) NOTE: Co. has a ~1.3% weighting in the Stoxx600 and ~8% weighting in the CAC40.
Novartis (NOVN SW) – Q4 revenue USD 12.40bln vs. Exp. USD 12.36bln. Net income USD 2.8bln vs. Exp. USD 2.6bln. Core operating profit USD 3.46bln vs. Exp. USD 3.54bln. Core EPS USD 1.32 vs. Exp. USD 1.33. Co. says net sales are expected to grow mid to high-single digits, Core operating income expected to grow high-single to low double-digits. Co. expects to sustain long-term growth and margin expansion, driven by market growth drivers and 15 ongoing or upcoming major launches. Co. does not see any disruptions to supply chain due to coronavirus outbreak. (Newswires) NOTE: Co. has ~2.3% weighting in the Stoxx 600 and ~18% weighting in the SMI.
Santander (SAN SM) – Q4 net income EUR 2.8bln vs. Exp. EUR 2.6bln. Revenue EUR 12.6bln vs. Prev. 12.5bln. Co. is to raise dividend 3% to EUR 0.23/shr. NII EUR 8.84bln vs. Prev. EUR 8.81bln QQ, ROTE 12.62% vs. Prev. 9.86% QQ. CET1 ratio 11.65% vs. Prev. 11.3% QQ. Net loans EUR 942.2bln vs. Prev. EUR 916bln QQ. Co. guides initial FY20 CET1 close to 12%. Co. is confident on reaching mid-term targets, seeing annualised high-single digit growth EPS over the next three years. (Newswires)
USD - The Dollar remains firm almost across the board, and especially vs EM currency peers that are more sensitive to risk aversion and prone to swings in market sentiment. The DXY continues to straddle 98.000 as several major pairings rotate around round numbers in tight confines ahead of the Fed that is likely to provide clearer direction via guidance and the tone of Chair Powell’s first post-meeting press conference of the New Year. In the interim, prelim trade and wholesale inventories may offer some impetus ahead of pending home sales, while any further updates on China’s coronavirus will also be pivotal.
JPY/SEK - Bucking the broad trend of underperformance vs the Greenback, the Yen is grinding back up towards the 109.00 level from 109.26 or so lows amidst a wider recovery in safe-haven assets, including Gold and global bonds, as the US Treasury curve flips back in to bull-flattening mode. Meanwhile, the Swedish Krona is also paring more losses vs the Euro after yesterday’s knee-jerk decline post-soft data (overall) with some momentum from an improvement in industrial sentiment over consumer confidence that dipped, with Eur/Sek probing the lower end of 10.5965-5630 parameters.
GBP/AUD/CAD/EUR/CHF/NZD - All softer against the Usd to varying degrees, as Cable clings to 1.3000 in advance of Thursday’s eagerly awaited BoE rate call that is seen on a knife edge, while the Aussie is holding in above 0.6750 with assistance from firmer than forecast Q4 CPI metrics and supportive Aud/Nzd cross winds as the Kiwi falters close to Tuesday’s lows within a 0.6527-52 band awaiting NZ trade data later tonight. Elsewhere, the Loonie is gleaning some traction via firmer oil prices to consolidate between 1.3155-76 compared to 1.3200+ at one stage yesterday, but the Euro is still struggling to bounce from around 1.1000 after sub-consensus Eurozone M3 growth, and remains depressed vs the Franc in the low 1.0700 area even though Usd/Chf is hugging the top of 0.9750-27 extremes in wake of a fall in Swiss ZEW investor morale.
EM - In contrast to the aforementioned general depreciation against the Dollar, the offshore Yuan is sustaining recovery momentum on hopes that the worst of the health scare may be over soon, while the Rand is keeping its head just above 14.6000 following Moody’s decision that it is too early to review SA’s credit standing and post-budget will be more appropriate.
Australian CPI (Q4) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.5%) Australian CPI (Q4) Y/Y 1.8% vs. Exp. 1.7% (Prev. 1.7%) Australian RBA Trimmed Mean CPI (Q4) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.4%) Australian RBA Trimmed Mean CPI (Q4) Y/Y 1.6% vs. Exp. 1.5% (Prev. 1.6%) Australian RBA Weighted Median CPI (Q4) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.3%) Australian RBA Weighted Median CPI (Q4) Y/Y 1.3% vs. Exp. 1.3% (Prev. 1.2%)
Notable FX Expiries, NY Cut:
- USD/CAD: 1.3065-80 (1BLN), 1.3100 (390M), 1.3125 (1.1BLN), 1.3150 (260M)
- AUD/JPY: 73.00 (1.3BLN)
It’s been a relatively slow grind, but no less compelling and perhaps fulfilling rebound across bond land, as Bunds completed a 180 degree turnaround before having a glance over 174.05 and then easing back after a so-so 5 year German auction, while Gilts edged a marginal new 134.82 Liffe high and US Treasuries topped out at 130-27. However, Italian BTPs are still leading the complex and hit 147.54 at best on more political relief and little in the way of syndication issues. Ahead, some US data to digest before Wednesday’s main course and afters in the form of the FOMC and Fed chair Powell.
WTI and Brent front-month futures remain on consolidation-mode and hold onto most of their APAC gains, with prices somewhat relieved by the latest private inventory report. Headline crude posted a surprise draw of 4.27mln barrels vs. expectations for a 500k barrel build. Desks note that price action W/W suggest that markets see a substantial demand impact from the coronavirus outbreak, with airlines continuing to suspend travels to and from China. Demand side implications could be significantly impacted – contingent on the strictness of the travel restrictions and the time frame – which may prompt OPEC+ to revaluate their output cut pact. ING notes that prolonged pressure on oil prices could lead to deeper cuts by the oil-rich countries, although Libya’s current oil disruptions may help in regard to the scope of cuts Saudi and Russia could take on. Sources yesterday highlighted a slight shift in Russia’s stance, who prefers exiting the pact in March – but may be willing to stay on if Brent prices remain sub-60/bbl. That said, Russian Energy Minister Novak stated that the country's tax system may pose risks to Russia's ability to maintain oil output. Elsewhere spot gold has clambered off overnight lows as DXY pulled back from yesterday’s high, with the yellow metal on standby for significant macro developments ahead of the FOMC rate decision later today. Similarly, copper prices have experienced relatively muted price action thus far following six consecutive sessions of losses.
US Private Inventory Crude Stocks (w/e 24th Jan) -4.3mln (exp. +0.5mln, prev. +1.6mln). (Newswires)
Libya NOC said oil production on January 27th was at 271k bpd which was slightly up from the prior day. (Newswires)
Russian Energy Minister Novak notes that the country's tax system may pose risks to Russia's ability to maintain oil output, via IFAX. (IFAX)