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Daily Scan: Nikkei hits seven-month low; World markets cut risk ahead of jobs report
Capital Markets
<p>Updated throughout the day</p> <p>September 4</p> <p>Good evening everyone. Risk was definitely off today as the world’s markets seem to be waiting with baiting breath for tonight’s non-farm payrolls report. A good reading here might seal the deal on a rate hike this month, while a bad one would surely push it off to a later date. The selling during the lower half of the session however seemed a little panicky, which could be attributed to Hong Kong’s terrible PMI reading earlier in the day but with the Nikkei hitting seven-month low, it might be something else altogether. Anyway, here’s how the major Asia-Pacific markets fared this week:</p> <p>Day<br /> Week</p> <p>Nikkei 225<br /> -2.2%<br /> -7%</p> <p>Hang Seng Index<br /> -0.7%<br /> -4.7%</p> <p>ASX<br /> +0.3%<br /> -4.2%</p> <p>The Chinese markets were closed Thursday and Friday; the Shanghai Composite lopped off 2.2% in its shortened week. European markets aren’t doing too well, despite Mario Draghi’s assurance that he’ll expand stimulus “if warranted.” The FTSE 100 retraced gains to fall 1.63%, the DAX – exacerbated by Germany’s surprise drop in factory order – slid 1.75%, while the CAC slumped 1.83%.</p> <p>Here’s what else you need to know:</p> <p>Hong Kong PMI falls to six-year low. Weak demand, lower output, as well as one the largest and fastest workforce declines since 2003 led the Nikkei Hong Kong Purchasing Managers’ Index to fall to 44.4 in August. That's well below its 48.2  reading in July and its worst showing since February 2009. Markit</p> <p>Japanese wages miss estimates – badly. Japan’s manufacturing industry may be growing at a fast clip, but its labor market is continuing to disappoint. Labor cash earnings for the land of the rising sun grew just 0.6% in July, far below an estimated climb of 2% and even more worrisome if you adjust for inflation. It is. however, the first real wage rise the nation has experienced since 2012. Silver linings, man. Financial Times (paywall)</p> <p>China swaps Australian mining for the country’s agriculture. After plunking ungodly amounts of money into the nation’s mining industry, China is now investing in Australian agriculture. Not only is China the No. 1  buyer of meats, wheats, and various other treats, it is now Australia’s largest investor in the agricultural sector, plowing as much as $450 million into the industry in 2014 alone. Wall Street Journal</p> <p>ECB ready to expand stimulus. European Central Bank President Mario Draghi says the bank is projecting slower than expected economic growth in the eurozone, and the ECB will “act if warranted.” Wall Street Journal (paywall)</p> <p>Debris found confirmed to be from missing MH370 flight. French investigators say they are certain that a piece of an airplane wing that washed up on a remote Indian Ocean island came from Malaysia Airlines Flight 370, which disappeared in March 2014 with 239 people on board. The New York</p>
Daily Scan: US stocks have mixed Thursday; Jobs data due out Friday
Capital Markets
<p>Updated throughout the day</p> <p>September 3</p> <p>Good evening,</p> <p>U.S. stocks had a mixed day, starting slow gains in the morning before fading in the afternoon. The Dow closed up 0.1%, as did the S&amp;P 500. The Nasdaq lost 0.4%. The Stoxx Europe 600 ended Thursday up 2.4%. Oil is sneaking its way back up before the holiday weekend, closing just short of $47/barrel. Wednesday afternoon, the Federal Reserve released the Beige Book, its survey of businesses. Bottomline: Things are looking good. Investors will be examining same-store sales today to measure just how robust the American consumer is. Of course, Friday brings the mother of all economic datapoints -- the monthly jobs report. Survey says: nonfarm payrolls in August will edge up to 223,000 from 215,000 in July. Stay tuned.</p> <p>Here's what else you need to know:</p> <p>The Reunion debris is definitely from missing flight MH370. French investigators have confirmed that the debris found on an island in July is without a doubt from Malaysia Airlines Flight 370. The French were the last group holding out on a certain confirmation of the debris. CNN</p> <p>Kentucky clerk headed to jail. Kim Davis, the Kentucky clerk refusing to give out marriage licenses since same sex marriage was legalized, was found in contempt of court and jailed Thursday. Her office will start processing paperwork for same sex marriage licenses Friday. USAToday</p> <p>Dewey &amp; LeBoeuf defense rests. The lawyers for three former Dewey &amp; LeBoeuf executives plans to formally rest Tuesday without calling a single witness. The lawyers will also renew a request to dismiss the case, which accuses the execs of defrauding lenders and creditors. New York Times</p> <p>U.S. government extends healthcare nondiscrimination to transgender people. Health insurers and medical providers must treat all patients equally, regardless of sex. Earlier this year, a study found that 42% of female-to-male transgender adults reported verbal harassment, physical assault, or denial of equal treatment in a doctor's office or hospital. Reuters</p> <p>Images of dead child put face to migrant problem. Photos of a 3-year-old Syrian Kurd boy who drowned near Turkey are tugging heart strings everywhere. The horrible images of the child show how desperate the migrant situation is, as thousands have perished this year alone. The boy's mother and 5-year-old brother also died, and his father is in the hospital. Wall Street Journal</p> <p>Donald Trump will sign GOP loyalty pledge. A Trump associate says that the presidential candidate will sign the pledge to endorse the Republican nominee, preventing a third-party run. The move will help put Trump on Republican primary ballots more easily, and will undermine his opponent's attacks on the possibility of him running as an independent. </p>
Time for Indonesia to walk the talk
Capital Markets
<p>It is crunch time for Indonesia’s reform-minded administration. The imminent award of a highly contested new railway contract and confusion about a big foreign investment in a factory are a test of its resolve to put words into action.</p> <p>Any day now, Indonesia will announce the winner of a race between China and Japan to build the first high-speed railway in Southeast Asia's biggest economy. It has been an “unprecedented battle”, writes Reuters, to build the 150-km (93-mile) link between the capital, Jakarta, and the textile hub of Bandung.</p> <p>But, the decision has already been delayed a week. Ominously, a cabinet member said that the two proposals will be examined by an independent consultancy – which indicates more foot-dragging. That would be a pity. As anyone knows who has tried to move around in Jakarta or anywhere else in the sprawling archipelago transportation is a headache for individuals and a pounding migraine for businessmen.</p> <p>Separately, there are mixed signals about whether or not Taiwan's Foxconn Technology Group, the world's biggest electronic components maker, will go ahead with plans to build a large factory in the country.</p> <p>One government official said that the Apple supplier had abandoned the project, another denied it; Foxconn hasn’t commented.</p> <p>This is depressing for foreign investors eager to take advantage of Indonesia’s vast potential. It has a population of more than 250 million that is getting richer. Protecting domestic industries seems to be President Joko Widodo’s priority</p> <p>“Jokowi” was elected last year amid a wave of optimism that he would clean up government, reduce poverty, cut red-tape to attract foreign businessmen and fix the country’s dilapidated infrastructure.</p> <p>So far he has upset human rights campaigners by executing drug peddlers and alienated regional allies such as Australia with gauche foreign policy stances.<br /> Photo: Oktaviono</p>
MBK set to out-bid rivals for Tesco Homeplus
Capital Markets
<p>The battle for Tesco’s loss-making Korean discount retail stores is reaching its climax. Private equity firm MBK is set to ink the $6 billion deal, seeing off rivals KKR, Affinity Equity Partners and Carlyle to complete the biggest-ever private equity buy-out in Korea.</p> <p>Tesco Homeplus insiders leaked the word that the MBK consortium, which includes the state-run National Pension Service, Singapore’s Temasek and the Canadian Pension Plan, is the preferred bidder, according to FinanceAsia.</p> <p>Tesco’s exit follows a disastrous year for its domestic supermarket operations in the UK where it has built a mountainous £21.7 billion ($33.2 billion) of debt and has been forced to make £7 billion of asset writedowns.</p> <p>However, it would be a landmark purchase for MBK after a series of hit-and-miss investments.</p> <p>The leading Korean firm, set up by former-Carlyle manager Michael Byungju Kim, won the auction for ING Life Insurance Korea in 2013 and in the previous decade for gained controlling stakes in Taiwan’s China Network Systems and Japan’s USJ. But it lost a fight with KKR and Affinity for Oriental Brewery in 2009 and it has struggled to make much of its holdings in clothing firm Nepa and cable TV company C&amp;M.</p> <p>Homeplus is Korea’s second biggest discount store chain after Shinsegae’s E-Mart with more than 900 outlets. But MBK faces a harsh environment to make this investment pay off.</p> <p>The country’s sluggish economy and government curbs on weekend opening hours to protect mom-and-pop businesses means it will struggle both to reverse the company’s operating losses and also pay back the chunky loans it has secured to make the acquisition</p> <p>Even more worrying is MBK’s exit strategy. Losses last year by Homeplus tend to confirm that the country is a rather unhappy place for foreign retailers. Walmart and Carrefour pulled out after years of dismal performance.<br /> Photo: lets.book</p>
Is "New Normal" Enough to Grow China's Economy?
Capital Markets
<p>While the news headlines continue reminding us of China’s stock market woes, investors should dig deeper to understand the economic underpinnings that can spark growth in China—and, in turn, present opportunities for growth seekers.</p> <p>The Chinese economy recently entered a slowdown period, with reported economic growth rates falling to around 7% and as low as 5.3%, according to some economists’ calculations. While this may seem robust from a developed markets perspective, it is a far cry from the years of double-digit growth rates China had previously enjoyed. Slowing growth is problematic for the nation, as high rates of economic activity are needed to absorb the influx of labor into the country’s burgeoning cities and to use the massive production capacity China installed over the past decade.</p> <p>The Beijing government is acutely aware of the problem. When new leadership took over in 2013, it adopted the term New Normal to reflect the nation’s current economic reality and rejected calls for further stimulus measures. However, since late 2014, the slowdown of economic activities has intensified. The question for now seems to be, is New Normal enough? And if not, what are the long-term solutions for reigniting China’s economy?</p> <p>Assessing China’s short-term economic fixes—supportive, but not enough</p> <p>In recent months, Chinese policymakers have dramatically stepped up efforts to support the economy:</p> <p> The People’s Bank of China slashed the reserve requirement ratio for banks twice and cut interest rates several times.<br /> The central government injected fresh capital into the country’s three policy banks to support lending for infrastructure projects, trade, and agriculture.<br /> The Ministry of Finance launched a local-government debt swap program to replace high-cost bank borrowings with local-government bonds.<br /> In addition, housing policies were relaxed to support the slumping property market.</p> <p>Despite the Chinese government’s best efforts, the results of its policies are mixed. Economic growth continued to slow in early 2015. Major macroeconomic indicators, such as the Purchasing Managers’ Index, retail sales, and fixed investment, remained sluggish.</p> <p>Government officials also implemented a number of policies aimed at supporting the stock market, including the Shanghai–Hong Kong Stock Connect program, which expands foreign investors’ access to the domestic market and domestic investors’ access to Hong Kong–listed securities. It appears the government has been trying to use the stock market as a stimulus to channel savings into the corporate sector, and direct financing through the stock market was encouraged over indirect financing through the banks. This drove a massive rally in Chinese stocks through May 2015. But even then, the rally was due, in part, to a buying frenzy among local Chinese investors, and the stock market’s absence of fundamental drivers suggests that a substantial speculative element was at play.</p> <p>Today—without fundamental growth drivers in place—China’s markets have collapsed into bear-market territory, exposing the fragile foundations on which the recent bull market was built. Investors who follow China are likely to see a tug-of-war between speculative fervor and tepid fundamentals for some time.</p> <p>China’s long-term economic solution—focusing on the middle class</p> <p>The root cause for China’s slower growth is a decline in investment activity, primarily in infrastructure and property. Unsold apartments are piling up across the country, and municipalities have indigestion from a decades-long, debt-fueled spending binge in anticipation of growth that neve</p>
Daily Scan: Asia recovers without China, Europe rallies
Capital Markets
<p>Updated throughout the day</p> <p>September 3</p> <p>It appears calm was restored to Asia today as China focused on marching bands and rolling tanks, allowing investors to focus on upbeat US data. Tokyo ended 0.48% higher and Seoul ended up 0.02%. There were also comfortable gains for Singapore and Taipei.</p> <p>European stocks are also rallying as future data points to Wall Street holding on to its gains from the previous day. The market will no doubt be encouraged by a report by Automatic Data Processing and Moody’s Analytics that shows private payrolls in the US increased by 190,000 jobs last month. That said US shares still sit 8.5% their record high touched in May. So we have a ways to go.</p> <p>Here’s what else you need to know:</p> <p>Didi Kuaidi driver faces staggering 100,000 yuan fine. Beijing’s recent crackdown on car-hailing apps hit a new low this week as a Guandong-based Didi Kuaidi driver got slapped with a tremendous 100,000 yuan fine for allegedly “engaging in illegal transport activities and reaping illicit profits.” South China Morning Post </p> <p>U.K. services PMI falls to 27-month low. While that definitely sounds bad, it’s not. The U.K.’s highly-important services sector growth came in at 55.6 in August – its lowest reading since April 2013 – but well above the threshold separating growth from contraction. However, if you couple it with last month’s manufacturing data, things start looking a bit disconcerting, as Markit’s Chris Williamson said: “the three PMI surveys collectively are pointing to the weakest monthly expansion since May 2013.” Markit</p> <p>Eurozone PMI climbs to 54.3. Despite all the fragility and nastiness surrounding it, the Eurozone economy proved to be more than resilient to the storms of summer. Business activity in the region surged at its fastest pace in over four years, taking the final Markit Eurozone PMI from 53.9 in July, to 54.3 in August. Surprisingly, Spain was the largest contributor of economic growth, posting its second-highest expansion reading for the past eight and a half years. Markit</p> <p>S&amp;P cuts Glencore outlook to negative. As if things weren’t bad enough for the once-mighty Glencore, the ratings agency Standard &amp; Poor’s decided to slash its credit outlook rating from stable to negative. The current and continuing slump in commodity prices, seemed to be the main driver behind the move. Financial Times </p> <p>Japan services PMI surges to 22-month high. “Delicate” may been a favorite word to describe Japan’s economy but you’d never think that just by looking at their services sector. The Nikkei Japan Services PMI came in at 53.7 in August, more than two points higher than its July reading and at its highest level in nearly two years. New service provider growth apparently climbed at a robust pace, while business sentiment strengthened once again to reach a two-year high. Markit</p> <p>Australian retail sales surprise to the downside. After climbing 0.6% in June, retail sales down under fell 0.1% in July, notching up its first fall since June 2014 and surprising analysts </p>
Daily Scan: Beige book suggests economy strengthening; stocks end on positive note
Capital Markets
<p>Updated throughout the day</p> <p>September 2</p> <p>The stock market clawed back some of its losses Wednesday after the royal rout on Tuesday. Both the Dow Jones Industrials and the S&amp;P 500 ended about 1.8% higher; the Nasdaq jumped 2.5%. Helping clinch the day's returns: The Federal Reserve's Beige Book -- a survey of local districts -- pointed to expansion, including "wage pressures" in several areas.  That report overshadowed the initial ADP jobs numbers, up only 190,000 jobs in August, falling short of the 215,000 expected in the private sector. Factory orders were up for the second straight month, boosting manufacturing 0.4%. Crude oil inventories grew by 4.7 million barrels last week. U.S. crude imports were up by 656,000 barrels/day. The supply numbers weren't as bearish as some had expected, plus the Beige Book report helped lift crude prices to $46.</p> <p>Here’s what else you need to know:</p> <p>Chinese naval ships off Alaskan coast. Three Chinese combat ships, a replenishment vessel, and an amphibious ship moving toward the Aleutian Islands. It's the first time Chinese ships have been spotted in the area. Wall Street Journal</p> <p>Hillz wins Puerto Rican support. New York City Council Speaker Melissa Mark-Viverito has endorsed Clinton for president, ahead of Clinton's first trip to Puerto Rico this weekend. Clinton supports the island declaring bankruptcy and restructuring its $58 million debt. CNN</p> <p>Obama winning Iran deal. Maryland Democratic Senator Barbara Mikulski is backing President Obama's nuclear deal with Iran. Mikulski is the 34th vote, making it impossible for the GOP to kill the deal in Congress. Politico</p> <p>Lego is world's biggest toy maker. The Danish Lego had a 23% sales increase for the first half of 2015, while Mattel was hit with a 5% drop. "The Lego Movie" as well as special sets for Star Wars, Jurassic Park, and others have boosted the toy maker to world domination. Financial Times (paywall)</p> <p>Trouble ahead? China cracks down on "grey market" margin lending. Beijing is putting the kibosh on the non-bank market, estimated to be 1 trillion yuan ($160 billion). The goal may be to stop stock manipulation but the result could be a liquidity crisis. Reuters (h/t Quartz)</p> <p>Beijing wouldn't let the stock market rain on its parade. That parade, of course, has long been in the making to mark the end of World War II. A stock market slump just wouldn't do. So Beijing worked its magic, turning a 4.7% collase on the Shanghai Composite into a 0.2% barely-there loss. Ditto the more volatile Shenzhen Composite, which trimmed its 4.8% drop to down 1.98%. Hong Kong’s Hang Seng Index and Japan’s Nikkei Average meanwhile, slipped 1.18% and 0.39% respectively.</p> <p>China sharpens the competition to the World Bank. Sources say the Asian Infrastructure Investment Bank will not ask borrowers to privatize or deregulate -- unlike the World Bank. The </p>
UBS: What traders should be watching in September
Capital Markets
<p>In a new report, UBS analyst Julian Emanuel previewed what U.S. equity investors can expect during the month of September. According to Emanuel, it’s likely going to be a bumpy ride.<br /> August Recap<br /> The month of August was one of the most eventful months in recent years. Emanuel pointed out that the stock market has been particularly scary during the late-summer months since 2007.</p> <p>In 2007, it was the Great Quant Meltdown; in 2011, it was the U.S. Debt Ceiling crisis; in 2012, it was the European Crisis; in 2013, it was the Taper Tantrum and now this year it has been China’s currency devaluation.</p> <p>On top of China concerns, the S&amp;P 500 now faces pressure from the Federal Reserve, which indicated its continued willingness to raise interest rates at the August Jackson Hole event.</p> <p>Related Link: The Bull Case For Bearish China ETFs<br /> September Market-Movers<br /> Read more at Benzinga.</p> <p>&nbsp;</p>
Daily Scan: China rules the markets, even on a day off
Capital Markets
<p>Updated throughout the day</p> <p>September 2</p> <p>Good morning.  We present you with the China edition of the Daily Scan. These days, China rules the U.S. and European markets almost more than local data. That should make for an interesting Federal Reserve policy meeting later this month. Still, it is jobs' weeks and let's gather up some energy to pay attention to what's going on in our own back yard. U.S. stocks were climbing their way back up Wednesday morning after falling Tuesday. The Dow and Nasdaq both gained about 1% by midday. The S&amp;P 500 climbed 0.76%. The initial ADP report shows that businesses added 190,000 jobs in August, falling short of the expectations of 215,000 jobs added. Factory orders are up for the second straight month, boosting manufacturing 0.4%. Crude oil inventories grew by 4.7 million barrels last week. U.S. crude imports were up by 656,000 barrels/day. Also on the calendar: the Fed's Beige Book report on how different economic districts are faring (2 p.m.).</p> <p>Here’s what else you need to know:</p> <p>Chinese naval ships off Alaskan coast. Three Chinese combat ships, a replenishment vessel, and an amphibious ship moving toward the Aleutian Islands. It's the first time Chinese ships have been spotted in the area. Wall Street Journal</p> <p>Hillz wins Puerto Rican support. New York City Council Speaker Melissa Mark-Viverito has endorsed Clinton for president, ahead of Clinton's first trip to Puerto Rico this weekend. Clinton supports the island declaring bankruptcy and restructuring its $58 million debt. CNN</p> <p>Obama winning Iran deal. Maryland Democratic Senator Barbara Mikulski is backing President Obama's nuclear deal with Iran. Mikulski is the 34th vote, making it impossible for the GOP to kill the deal in Congress. Politico</p> <p>Lego is world's biggest toy maker. The Danish Lego had a 23% sales increase for the first half of 2015, while Mattel was hit with a 5% drop. "The Lego Movie" as well as special sets for Star Wars, Jurassic Park, and others have boosted the toy maker to world domination. Financial Times (paywall)</p> <p>Trouble ahead? China cracks down on "grey market" margin lending. Beijing is putting the kibosh on the non-bank market, estimated to be 1 trillion yuan ($160 billion). The goal may be to stop stock manipulation but the result could be a liquidity crisis. Reuters (h/t Quartz)</p> <p>Beijing wouldn't let the stock market rain on its parade. That parade, of course, has long been in the making to mark the end of World War II. A stock market slump just wouldn't do. So Beijing worked its magic, turning a 4.7% collase on the Shanghai Composite into a 0.2% barely-there loss. Ditto the more volatile Shenzhen Composite, which trimmed its 4.8% drop to down 1.98%. Hong Kong’s Hang Seng Index and Japan’s Nikkei Average meanwhile, slipped 1.18% and 0.39% respectively.</p> <p>China sharpens the competition to the World Bank. Sources say the Asian Infrastructure Investment Bank will not ask borrowers to privatize or deregulate -- unlike the World Bank. The White </p>
Daily Scan: Chinese shares trim losses; S&P 500 futures on the rise
Capital Markets
<p>Updated throughout the day</p> <p>September 2</p> <p>Good evening everyone. Despite a rough and tumble ride to the finish, there was just no way Beijing would let the stock market rain on their parade. The Shanghai Composite closed down 0.2% after falling as much as 4.7% earlier in the day while the Shenzhen Composite trimmed its 4.8% drop to finish the session down 1.98%. Hong Kong’s Hang Seng Index and Japan’s Nikkei Average meanwhile, slipped 1.18% and 0.39% respectively.</p> <p>Here’s how the major European markets are faring:</p> <p> CAC 40: -0.11%<br /> FTSE 100: -0.01%<br /> DAX: -0.09%</p> <p>With Europe retracing losses, the futures market is signaling an upbeat open for the U.S. S&amp;P 500 minis are currently trading 0.61% higher, while contracts on the Dow as well as the Nasdaq point to a 0.58% and 0.63% climb at the open respectively. The upcoming ADP employment change and QoQ labor costs could easily throw a monkey wrench to that rally though.</p> <p>Here’s what else you need to know:</p> <p>“I am not sorry,” says North Korea. The hermit state has denied  Seoul’s claims that Pyongyang’s recent expression of “regret” after a marathon negotiations amounted to an apology for a land-mine explosion that maimed two South Korean soldiers. Japan Times</p> <p>U.K. construction hits longest growth period. The U.K.’s construction sector notched up its 90th month of growth today as the Markit/CIPS UK Construction PMI came in at 57.3 for August. The reading is slightly higher than July’s 57.1 showing and, as Markit notes, is well above the 50 threshold separating contraction from expansion. Markit</p> <p>Argentina calls for the head of HSBC chief. Argentina's central bank has ordered HSBC to replace its chief executive in the country within 24 hours, accusing the bank of failing to prevent tax evasion and money laundering. The bank was accused of helping clients hide money in Swiss bank accounts. BBC</p> <p>Streaming service Netflix launches in Japan. Netflix has partnered with Japanese mobile carrier SoftBank in a joint bid to tap some 36 million households with high-speed Internet access as part of global push. Channel News Asia</p> <p>Australian GDP growth falls. A slowdown in Australia’s mining and construction sectors dragged the June quarter’s GDP growth down to 0.2%, a substantial decline compared to last year’s 2% climb. A drop in exports also played a hand in the fall, though domestic final demand as well as the nation’s financial, transport, and health industries all helped buoy GDP from sinking lower. Australian Bureau of Statistics</p> <p> Thailand arrests “main” bombing suspect. Police hunting those responsible for the shrine bombing that killed 20 people in central Bangkok two weeks ago arrested a second foreign suspect on Tuesday, Prime Minister Prayuth Chan-ocha describes the man as the main person in the bombing. South China Morning Post (paywall)</p>