US Morning Briefing 12th of Aug 2019

Lingering China worries weigh on U.S. futures to kick off trading week

The S&P 500 futures trade 18 points, or 0.6%, below fair value following a turbulent week on Wall Street, while investors continue to assess U.S.-China trade relations and the Hong Kong government protests.

The Hong Kong protests have yet to materially affect U.S. equity markets but given the limited scope of corporate and economic news today, the protests have garnered some attention and have weighed on risk sentiment. Today, the city’s airport authority canceled all flights that were scheduled to leave on Monday afternoon, heightening fears of forceful Chinese intervention.

As for U.S.-China relations, currency remains a focal point. Today, the People’s Bank of China fixed the yuan at 7.0211 per dollar, down from the previous fix of 7.0136. On a related note, the International Monetary Fund stated after Friday’s close that China has not manipulated the yuan and that it remains broadly in-line with economic fundamentals. 

Separately, today’s economic data will be limited to the Treasury Budget for July (Briefing.com consensus -$100.0 billion), which will be released at 2:00 p.m. ET. 

Growth concerns, meanwhile, continue to lead investors into U.S. Treasuries and drive yields lower across the curve. The 2-yr yield is down five basis points to 1.58%, and the 10-yr yield is down four basis points to 1.69%. The U.S. Dollar Index is up 0.1% to 97.54. WTI crude is down 1.0% to $53.98/bbl. 

In U.S. Corporate news:

  • Barrick Gold (GOLD 18.50, +0.36): +2.0% despite missing revenue estimates and reporting in-line earnings results. The company, however, did forecast annual gold production toward the upper-end of guidance.
  • Cloudera (CLDR 7.15, +0.15): +2.1% after the company announced a standstill agreement with investor Carl Icahn, who will increase his active stake to 18.36% from 16.48%. 

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region began the week on a mixed note but overall participation was on the light side due to holiday closures in Japan, India, and Singapore. Japan’s Nikkei CLOSED, Hong Kong’s Hang Seng -0.4%, China’s Shanghai Composite +1.5%, India’s Sensex CLOSED, South Korea’s Kospi +0.2%, Australia’s ASX All Ordinaries +0.1%.
    • In economic data:
      • China’s July New Loans CNY1.06 trln (expected CNY1.275 trln; last CNY1.66 trln) and Outstanding Loan Growth +12.6% yr/yr (expected 12.8%; last 13.0%). July M2 Money Stock +8.1% yr/yr (expected 8.5%; last 8.5%)
      • New Zealand’s July Electronic Card Retail Sales -0.1% m/m (expected 0.0%; last 0.0%); +1.6% yr/yr (expected 2.2%; last 1.1%)
    • In news:
      • The weekend saw continued protests in Hong Kong, prompting the city’s airport authority to cancel flights that were scheduled to leave on Monday afternoon.
      • The People’s Bank of China fixed the yuan at 7.0211 per dollar, down from the previous fix of 7.0136.
  • Major European indices trade in negative territory. STOXX Europe 600 -0.3%, Germany’s DAX -0.2%, U.K.’s FTSE 100 -0.5%, France’s CAC 40 -0.5%, Italy’s FTSE MIB  -0.1%, Spain’s IBEX 35 -0.8%.
    • In economic data:
      • Investors did not receive any economic data of note
    • In news:
      • The Italian parliament is expected to schedule a confidence vote that is likely to lead to a dissolution of the current government.
      • Deputy Prime Minister, Matteo Salvini, said he will cut taxes if Lega wins the election.
      • Fitch affirmed Italy’s BBB rating with a Negative outlook.

U.S. equity futures:

  • S&P 500 Futures -20.13 @ 2899.62
  • DJIA Futures -181 @ 26087
  • Nasdaq Futures -56.50 @ 7603.75

Overseas: 

  • Europe: DAX -0.29%, FTSE -0.49%, CAC -0.51%
  • Asia: Nikkei CLOSED, Hang Seng -0.44%, Shanghai +1.45%

Commodities: 

  • Crude Oil -0.47 @ 54.03
  • Nat Gas +0.003 @ 2.122
  • Gold +9.15 @ 1517.65
  • Silver +0.042 @ 16.973
  • Copper 0.00 @ 2.589

U.S. Summary:

  • Earnings/Guidance:
    • Barrick (GOLD) reports EPS in-line, misses on revs
    • Nine Energy Service (NINE) beats by $0.04; revs in-line
    • The Stars Group (TSG -14%) beats by $0.01, misses on revs; guides FY19 EPS below consensus, revs below consensus
  • General News:
    • Argentina stocks plummet after President Mauricio Macri dealt ‘shocking’ upset in primary vote
    • Entercom (ETM -13%) cuts quarterly dividend to $0.02/share from $0.09/share
    • Cloudera (CLDR) reaches voting and standstill agreement with Carl C. Icahn
    • President Trump is considering executive order to have FTC and FCC regulate alleged censorship on social media, according to CNN
    • WeWork expected to unveil IPO prospectus this week, according to Bloomberg
  • M&A:
    • AtriCure (ATRC) to acquire SentreHEART for approximately $40 mln upfront; FY19 guidance updated
    • BlackRock (BLK) makes strategic investment in Authentic Brands Group; terms not disclosed
    • CBS (CBS) and Viacom (VIAB) could finally announce merger agreement today, according to Bloomberg
    • Globant (GLOB) acquires Belatrix Software; terms not disclosed
    • Stifel Financial (SF) to acquire certain assets of George K. Baum & Company
  • Syndicate:
    • Insight Enterprises (NSIT) to offer $300 mln aggregate principal amount of Convertible Senior Notes due 2025 in a private offering
  • IPOs:
    • Expected This Week
      • 9F (NYSE: JFU): Leading digital financial account platform integrating and personalizing financial services in China [Planning to offer 8.9 mln ADS between $7.50-9.50]
      • CrossFirst Bankshares (Nasdaq: CFB): Kansas corporation and registered bank holding company with total assets of $4.5 bln [Planning to offer 7.11 mln shares between $15.00-17.00]
      • WiMi Hologram Cloud (Nasdaq: WIMI): Provider of augmented reality-based holographic services and products [Planning to offer 4 mln shares between $7.50-9.50]

Gapping Up/Down

  • Gapping upSBGL +4.5%, HIMX +4.3%, ABB +3.2%, OSTK +3.2%, TWOU +2.8%, SWN +2.6%, DRD +2.3%, HL+1.9%, AU +1.8%, NVO +1.1%, AA +0.8%, GDX +0.7%, RIO +0.5%
  • Gapping downDB -4.5%, AUY -3.2%, FCEL -2.9%, HSBC -2.7%, ING -2.3%, GFI -2.1%, MT -2%, AMRN -1.8%,STM -1.7%, C -1.4%, NFLX -1.3%, NOK -1.3%, MS -1.3%, BAC -1.2%, GS -1.2%, TSLA -1.2%, LITE -1.1%, BABA-1%, MU -1%

Analyst Research:

  • Upgrades:
    • Humana (HUM) upgraded to Overweight from Neutral at Cantor Fitzgerald; tgt raised to $345
    • Natl Oilwell Varco (NOV) upgraded to Positive from Neutral at Susquehanna; tgt $25
    • Zimmer Biomet (ZBH) upgraded to Buy from Hold at Argus; tgt $160
  • Downgrades:
    • Bluebirdbio (BLUE) downgraded to Mkt Perform from Outperform at William Blair
    • Manitowoc (MTW) downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $19
    • Occidental Petro (OXY) downgraded to In-line from Outperform at Evercore ISI
  • Others:
    • Roku (ROKU) target raised to $150 at Needham

Upcoming Events:

  • Econ Data:
    • 14:00 ET Treasury Budget for Jul (Briefing.com consensus -$100B, Prior -$76.9B)
  • Earnings:
    • Monday (August 12)
      • After-Hours: BE, TME, VFF
    • Tuesday (August 13)
      • Pre-Market: AAP, AVYA, BEST, CVET, EAT, ELAN, GDS, IIVI, JD, PSN, RUBY
      • After-Hours: ADPT, BILI, CDK, GO, HUYA, MYGN, PSNL, TLRY, YY
    • Wednesday (August 14)
      • Pre-Market: AIT, CAE, ERJ, GOOS, LK, M, PFGC
      • After-Hours: A, CACI, CGC, CSCO, HOLI, NTAP, PRSP, SPTN, VIPS
    • Thursday (August 15)
      • Pre-Market: BABA, BGG, CSIQ, JCP, TPR, WMT
      • After-Hours: AMAT, CRMT, GLOB, NVDA, PAGS, VIAV, ZTO
    • Friday (August 16)
      • Pre-Market: DE, QD
      • After-Hours: None of note

Asia & Europe detail:

Asia: Nikkei CLOSED, Hang Seng -0.4%, Shanghai +1.5%

Equity indices in the Asia-Pacific region began the week on a mixed note but overall participation was on the light side due to holiday closures in Japan, India, and Singapore. The weekend saw continued protests in Hong Kong, prompting the city’s airport authority to cancel flights that were scheduled to leave on Monday afternoon. The People’s Bank of China fixed the yuan at 7.0211 per dollar, down from the previous fix of 7.0136.

  • In economic data:
    • China’s July New Loans CNY1.06 trln (expected CNY1.275 trln; last CNY1.66 trln) and Outstanding Loan Growth +12.6% yr/yr (expected 12.8%; last 13.0%). July M2 Money Stock +8.1% yr/yr (expected 8.5%; last 8.5%)
    • New Zealand’s July Electronic Card Retail Sales -0.1% m/m (expected 0.0%; last 0.0%); +1.6% yr/yr (expected 2.2%; last 1.1%)

—Equity Markets—

  • Japan’s Nikkei: CLOSED
  • Hong Kong’s Hang Seng: -0.4%
  • China’s Shanghai Composite: +1.5%
  • India’s Sensex: CLOSED
  • South Korea’s Kospi: +0.2%
  • Australia’s ASX All Ordinaries: +0.1%

—FX—

  • USD/JPY: -0.5% to 105.15
  • USD/CNH: +0.1% to 7.1001
  • USD/INR: +0.6% to 71.29

Europe: DAX -0.2%, FTSE -0.5%, CAC -0.5%

Major European indices trade in negative territory. The Italian parliament is expected to schedule a confidence vote that is likely to lead to a dissolution of the current government. Deputy Prime Minister, Matteo Salvini, said he will cut taxes if Lega wins the election. Fitch affirmed Italy’s BBB rating with a Negative outlook.

  • Investors did not receive any economic data of note

—Equity Markets—

  • STOXX Europe 600: -0.3%
  • Germany’s DAX: -0.2%
  • U.K.’s FTSE 100: -0.5%
  • France’s CAC 40: -0.5%
  • Italy’s FTSE MIB: -0.1%
  • Spain’s IBEX 35: -0.8%

—FX—

  • EUR/USD: UNCH at 1.1195
  • GBP/USD: +0.5% to 1.2091
  • USD/CHF: -0.1% to 0.9715
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