US Morning Briefing for the 13th of August 2019

Risk sentiment remains under wraps

The S&P 500 futures trade six points, or 0.2%, below fair value as geopolitical angst and economic uncertainty continue to dampen risk sentiment. 

In Hong Kong, flights were suspended for a second consecutive day as government protesters again filled the airport’s international hub. Hong Kong’s Hang Seng dropped 2.1% on Tuesday. In Argentina, a day after capital markets sold off after an upset in the primary vote, the sitting president said he believes he can still get re-elected despite the primary setback, according to Bloomberg

Similarly, the outlook in Germany remains gloomy. The August ZEW Economic Sentiment Survey hit its lowest level since late 2011 while the Current Conditions component was at its lowest level since mid-2010. Germany’s DAX is currently down 0.9%.

It’s fair to say that current global conditions have not been too conducive for risk assets, especially when the U.S. and China remain at odds over a trade deal. Gold, which is considered a safe-haven asset, is up another 1.4%, or $20.70, to $1537.90/oz. 

On the data front, investors will receive the Consumer Price Index for July (Briefing.com consensus 0.3%) at 8:30 a.m. ET. The NFIB Small Business Optimism Index for July increased to 104.7 from 103.3 in June. 

U.S. Treasuries are little changed after a curve-flattening trade yesterday. The 2-yr yield and the 10-yr yield are both unchanged at 1.58% and 1.64%, respectively. The U.S. Dollar Index is flat at 97.40. WTI crude is down 1.0% to $54.37/bbl. 

In U.S. Corporate news:

  • Advanced Auto Parts (AAP 130.50, -11.66): -8.2% after missing top and bottom-line estimates and lowering its full-year revenue and comparable sales guidance. The company also announced a new $400 million share repurchase authorization. 
  • JD.com (JD 28.51, +1.35): +5.0% after the Chinese e-commerce company beat top and bottom-line estimates and provided reassuring guidance. 

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended Tuesday on a lower note, with Hong Kong’s Hang Seng (-2.1%) approaching its low from January. Japan’s Nikkei -1.1%, Hong Kong’s Hang Seng -2.1%, China’s Shanghai Composite -0.6%, India’s Sensex -1.7%, South Korea’s Kospi -0.9%, Australia’s ASX All Ordinaries -0.3%.
    • In economic data:
      • Japan’s July PPI 0.0% m/m (expected 0.1%; last -0.5%); -0.6% yr/yr (expected -0.5%; last -0.1%)
      • Singapore’s Q2 GDP -3.3% qtr/qtr (expected -2.9%; last -3.4%); +0.1% yr/yr (expected 0.2%; last 0.1%)
      • Australia’s July NAB Business Confidence 4 (expected 3; last 2) and July NAB Business Survey 2 (last 3)
      • New Zealand’s July Food Price Index +1.1% m/m (last -0.7%)
    • In news:
      • China’s Hong Kong and Macau Affairs Office said that the situation in Hong Kong is at “a critical juncture.”
      • The People’s Bank of China fixed the yuan at 7.0326 per dollar, representing the ninth consecutive weaker fix.
      • Singapore reported weaker than expected GDP for Q2 and lowered its outlook for the year. Singapore’s government now expects growth between 0.0% and 1.0%, down from the previous forecast for growth between 1.5% and 2.5%.
  • Major European indices trade in negative territory. STOXX Europe 600 -0.6%, Germany’s DAX -0.9%, U.K.’s FTSE 100 -0.5%, France’s CAC 40 -0.5%, Italy’s FTSE MIB -0.5%, Spain’s IBEX 35 -0.5%.
    • In economic data:
      • Eurozone’s August ZEW Economic Sentiment -43.6 (expected -21.7; last -20.3)
      • Germany’s August ZEW Economic Sentiment -44.1 (expected -27.8; last -24.5) and Current Conditions -13.5 (expected -7.0; last -1.1). July CPI +0.5% m/m, as expected (last 0.5%); +1.7% yr/yr, as expected (last 1.7%)
      • U.K.’s June Average Earnings Index + Bonus +3.7% yr/yr, as expected (last 3.5%). July Claimant Count Change 28,000 (expected 32,000; last 31,400) and Unemployment Rate 3.9% (expected 3.8%; last 3.8%)
      • Spain’s July CPI -0.6% m/m, as expected (last -0.1%); +0.5% yr/yr, as expected (last 0.4%)
    • In news:
      • Germany’s DAX (-0.9%) displays relative weakness after the release of the August ZEW Economic Sentiment Survey, which hit its lowest level since late 2011 while the Current Conditions component was at its lowest level since mid-2010.
      • The Italian senate is expected to set the date for a no-confidence today. Lega would like to see the vote take place tomorrow while M5S and other parties prefer August 20.

U.S. equity futures:

  • S&P 500 Futures -5 @ 2875
  • DJIA Futures -52 @ 25815
  • Nasdaq Futures -21 @ 7546

Overseas: 

  • Europe: DAX -0.9%, FTSE -0.5%, CAC -0.5%
  • Asia: Nikkei -1.1%, Hang Seng -2.1%, Shanghai -0.6%

Commodities: 

  • Crude Oil -0.60 @ 54.33
  • Nat Gas -0.014 @ 2.091
  • Gold +21.40 @ 1538.60
  • Silver +0.38 @ 17.45
  • Copper -0.01 @ 2.57

U.S. Summary:

  • Earnings/Guidance:
    • Advance Auto (AAP) misses by $0.21, misses on revs; lowers FY19 revs and comp guidance; Q2 comps flat; announced new $400 mln share repurchase authorization
    • Avaya Holdings (AVYA) reports Q3 (Jun) results, revs in-line; guides Q4 revs in-line; guides FY19 revs in-line; says long term forecast should no longer be relied upon
    • Bloom Energy (BE) beats by $0.06, beats on revs
    • Brinker (EAT) beats by $0.02, reports revs in-line; guides FY20 EPS above consensus, revs above consensus; Q4 comps +1.2%
    • Covetrus (CVET) reports Q2 (Jun) results, misses on revs; lowers sales guidance
    • Elanco Animal Health (ELAN) beats by $0.02, reports revs in-line; guides FY19 EPS in-line, revs in-line
    • GDS Holdings (GDS) beats by CNY0.78, beats on revs; raises FY19 revs guidance
    • IAA (IAA) beats by $0.05, beats on revs; reaffirms outlook
    • II-VI (IIVI) beats by $0.01, beats on revs; guides Q1 EPS below consensus, revs below consensus
    • JD.com (JD) beats by RMB 1.76, beats on revs; guides Q3 revs in-line (midpoint above consensus)
    • JetBlue Airways (JBLU) reports preliminary traffic results for July 2019; reiterates Q3 RASM outlook
  • General News:
    • Hong Kong Airport has suspended flights for a second consecutive day amid protests, according to Guardian
    • PBOC spokesperson believes yuan is at an appropriate level and that disorderly capital flows are not likely, according to Reuters
    • Argentine President Mauricio Macri still believes he can get re-elected despite primary setback, according to Bloomberg
    • ADTRAN (ADTN) files to delay its 10-Q; working diligently on restating financial statements
    • Avaya Holdings (AV) says expects to conclude strategic alternatives process within the next 30 days
    • US Federal Court has ruled against American Airlines (AAL) mechanics union, according to Reuters
    • Barrick Gold (GOLD) is in talks with international investors to expand exploration and production, according to The Wall Street Journal
    • Exxon (XOM) considering sale of British North Sea assets, according to Reuters
    • Shutterfly (SFLY) Chief Technology Officer Satish Menon to resign effective Sept 6
    • UPS (UPS) announces CFO succession plan – Richard Peretz to retire and Brian Newman appointed CFO
    • Yum! Brands (YUM) CEO Greg Creed to retire at the end of 2019; co names COO David Gibbs as replacement
  • M&A:
    • Amazon (AMZN) is in discussions to purchase 10% stake in Future Retail Ltd, according to Bloomberg
    • Boxwood Merger (BWMC) and Atlas Intermediate Holdings announce business combination
    • CIT Group (CIT) to acquire Mutual of Omaha Bank for $1 bln, comprised primarily of cash and up to $150 million of CIT common stock
    • Constellation Brands (STZ) to divest Black Velvet Canadian Whisky and related assets for approx. $266 mln
    • Leon Cooperman is wavering in his support for New Media / Gannett (GCI) M&A deal, according to New York Post
    • Genworth Financial (GNW) to sell majority interest in Genworth MI Canada to Brookfield Business Partners (BBU) for CAD$48.86 per share, reflecting a total transaction value of approximately CAD$2.4 billion.
    • II-VI (IIVI) pushes out expectations for Chinese approval of its Finisar (FNSR) acquisition to the fall time frame from mid-year
    • Jazz Pharma (JAZZ) announces acquisition of Cavion, Inc. for total potential consideration of $312.5 mln
    • Sysco (SYY) acquires J. Kings Food Service Professionals; terms not disclosed
    • Verizon (VZ) plans to sell Tumblr to Automattic, according to The Wall Street Journal
  • Syndicate:
    • Akamai Tech (AKAM) proposes $1 bln offering of convertible senior notes due 2027
    • EVO Payments (EVOP) announces proposed offering of 4.0 mln shares of Class A common stock
    • Insight Enterprises (NSIT) prices offering of $300 mln aggregate principal amount of 0.750% Convertible Senior Notes due 2025 in a private offering
    • Portola Pharma (PTLA) announces $200 mln stock offering
    • Southern (SO) to sell 30 million equity units in public offering
    • UDR (UDR) prices underwritten public offering of 7.5 mln shares of its common stock for estimated proceeds of approximately $350 mln
    • Workiva (WK) files for Class A common stock shelf offering by selling stockholders; also announces public secondary offering of 1,287,038 shares of Class A common stock by selling stockholders; proposes private offering of $300 million of convertible senior notes
  • 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 up: DOYU +5.8%, GNLN +5.5%, VFF +4.9%, PAM +4.8%, BE +4%, CEPU +1%, ELAN +0.6%
  • Gapping down:  VCTR -21.2%, PTLA -3.8%, TME -3%, AAP -2.9%, BEST -2.9%, AKAM -0.9%, UDR -0.9%, PEGI -0.6%

Analyst Research:

  • Upgrades:
    • CenterPoint (CNP) upgraded to Overweight from Equal Weight at Barclays; tgt lowered to $31
    • Chart Industries (GTLS) upgraded to Outperform from Mkt Perform at Raymond James; tgt $72
    • Exelon (EXC) upgraded to Overweight from Equal Weight at Barclays; tgt lowered to $52
  • Downgrades:
    • Aptinyx (APTX) downgraded to Underweight from Neutral at JP Morgan
    • NextEra Energy (NEE) downgraded to Equal Weight from Overweight at Barclays; tgt $218
    • Xcel Energy (XEL) downgraded to Equal Weight from Overweight at Barclays; tgt $64
  • Others:
    • Advanced Micro (AMD) initiated with Hold at Loop Capital
    • Intel (INTC) initiated with Hold at Loop Capital
    • Medallia (MDLA):
      • initiated with an Outperform at William Blair
      • initiated with a Buy at BofA/Merrill Lynch; tgt $50
      • initiated with a Buy at SunTrust; tgt $47
      • initiated with a Neutral at Credit Suisse; tgt $40
      • initiated with an Outperform at Wells Fargo; tgt $45
      • initiated with a Buy at ROTH Capital; tgt $52
      • initiated with a Neutral at Citigroup; tgt $40
    • Public Service (PEG) initiated with an Overweight at Barclays; tgt $63
    • Sempra Energy (SRE) initiated with an Equal Weight at Barclays; tgt $142

Upcoming Events:

  • Econ Data:
    • 06:00 ET: NFIB Small Business Optimism Index for July (Actual 104.7; Prior 103.3)
    • 08:30 ET: CPI for July (Briefing.com consensus 0.3%; Prior 0.1%)
    • 08:30 ET: Core CPI for July (Briefing.com consensus 0.2%; Prior 0.3%)
  • 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 -1.1%, Hang Seng -2.1%, Shanghai -0.6%

Equity indices in the Asia-Pacific region ended Tuesday on a lower note, with Hong Kong’s Hang Seng (-2.1%) approaching its low from January. Hong Kong’s airport is attempting to resume outbound flights today, despite continued protests. China’s Hong Kong and Macau Affairs Office said that the situation in Hong Kong is at “a critical juncture.” The People’s Bank of China fixed the yuan at 7.0326 per dollar, representing the ninth consecutive weaker fix. Singapore reported weaker than expected GDP for Q2 and lowered its outlook for the year. Singapore’s government now expects growth between 0.0% and 1.0%, down from the previous forecast for growth between 1.5% and 2.5%.

  • In economic data:
    • Japan’s July PPI 0.0% m/m (expected 0.1%; last -0.5%); -0.6% yr/yr (expected -0.5%; last -0.1%)
    • Singapore’s Q2 GDP -3.3% qtr/qtr (expected -2.9%; last -3.4%); +0.1% yr/yr (expected 0.2%; last 0.1%)
    • Australia’s July NAB Business Confidence 4 (expected 3; last 2) and July NAB Business Survey 2 (last 3)
    • New Zealand’s July Food Price Index +1.1% m/m (last -0.7%)

—Equity Markets—

  • Japan’s Nikkei: -1.1%
  • Hong Kong’s Hang Seng: -2.1%
  • China’s Shanghai Composite: -0.6%
  • India’s Sensex: -1.7%
  • South Korea’s Kospi: -0.9%
  • Australia’s ASX All Ordinaries: -0.3%

—FX—

  • USD/JPY: -0.1% to 105.16
  • USD/CNH: -0.1% to 7.0911
  • USD/INR: -0.1% to 71.23

Europe: DAX -0.9%, FTSE -0.5%, CAC -0.5%

Major European indices trade in negative territory. Germany’s DAX (-0.9%) displays relative weakness after the release of the August ZEW Economic Sentiment Survey (actual -44.1; expected -27.8; last -24.5), which hit its lowest level since late 2011 while the Current Conditions component (actual -13.5; expected -7.0; last -1.1) was at its lowest level since mid-2010. The Italian senate is expected to set the date for a no-confidence today. Lega would like to see the vote take place tomorrow while M5S and other parties prefer August 20.

  • In economic data:
    • Eurozone’s August ZEW Economic Sentiment -43.6 (expected -21.7; last -20.3)
    • Germany’s August ZEW Economic Sentiment -44.1 (expected -27.8; last -24.5) and Current Conditions -13.5 (expected -7.0; last -1.1). July CPI +0.5% m/m, as expected (last 0.5%); +1.7% yr/yr, as expected (last 1.7%)
    • U.K.’s June Average Earnings Index + Bonus +3.7% yr/yr, as expected (last 3.5%). July Claimant Count Change 28,000 (expected 32,000; last 31,400) and Unemployment Rate 3.9% (expected 3.8%; last 3.8%)
    • Spain’s July CPI -0.6% m/m, as expected (last -0.1%); +0.5% yr/yr, as expected (last 0.4%)

—Equity Markets—

  • STOXX Europe 600: -0.6%
  • Germany’s DAX: -0.9%
  • U.K.’s FTSE 100: -0.5%
  • France’s CAC 40: -0.5%
  • Italy’s FTSE MIB: -0.5%
  • Spain’s IBEX 35: -0.5%

—FX—

  • EUR/USD: UNCH at 1.1217
  • GBP/USD: UNCH at 1.2084
  • USD/CHF: -0.1% to 0.9675
Please follow and like us:
error