Morning Brief

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Morning Quant Ride

Apr 19, 2018

Traders' Corner

Key Highlights

  • US equity futures declining following weak guidance from major global semiconductor companies
  • European equities mostly higher, Euro Stoxx 600 +0.08%
  • Asian equities advanced broadly, with Chinese stocks up sharply
  • Blackstone assets grow to a record USD$450bn at the end of 1Q2018
  • P&G is down 1.9% pre-market after reporting 2Q2018 results which beat Consensus and boosting FY2018 guidance
  • Bitcoin is up over 9% from last week as a rally in the cryptocurrency market is picking up momentum this month
  • The EUR/CHF pair hit its highest level since 2006, just under a 1.20 level. The Swiss Franc ended its peg against the Euro in 2015

US Equities Before the Open

US equity futures are pointing to a negative open this morning amidst weakness in global semiconductor stocks.  S&P500 e-mini futures -0.11%, Nasdaq 100 e-minis -0.17% and Dow Jones e-minis -0.07% are down in sympathy with disappointing 2Q2018 guidance from TSM, Lam Research and ASML over the past 24 to 36 hours.  Pre-market AMAT -1.0%, AMD -1.6%, LRCX -1.4%, and  NVDA -1.12% are all down.

Some pre-market highlights from this morning:

  • Alliance Data Systems reports earnings that are well ahead of Street estimates.  FY2018 guidance ahead of Consensus.  Alliance Data Systems isn’t trading pre-market this AM.
  • BB&T reports 1Q2018 eps that is ahead of the street.  The stock isn’t trading pre-market this AM.
  • Blackstone Group reports 1Q2018 earnings results well ahead of Consensus with total assets growing to a record USD$450bn.  Blackstone is trading up 2.78% pre-market.
  • P&G reports 1Q2018 EPS $0.02 ahead of Consensus.  Boosted FY EPS growth outlook for CY2018.  Pre-market, the stock is down 1.9%.
  • Philip Morris reports disappointing 1Q2018 sales with declining cigarette demand weighing on results. Pre-market, Phillip Morris down 3.8%.

Major companies reporting earnings over the next 24 hours include:

  • Citizens Financial Group
  • E-Trade Financial
  • GE
  • Honeywell
  • Regions Financial
  • Schlumberger
  • Stanley Black & Decker
  • Waste Management

US options, pre-market, are pointing to an end in the drop of risk premiums with the VIX currently at 15.71 after closing yesterday at 15.60.  OTM April 20 Puts on EEM, OTM April 20 Calls on SPY, OTM June 18 Puts and Calls on EEM, OTM January 19 Puts, and OTM September 18 Calls are the most heavily traded options this morning.

Cryptocurrency Morning Brief

Major cryptocurrencies continue to post gains and are moderately higher on the week. Bitcoin is at $USD8,230.55, +1.74% over the last 24-hours. Bitcoin is up 9.2% from last week. Stellar, Bitcoin Cash, NEM and TRON, are top performers; up 12.85%, 7.51% 7.07% and 7.19% respectively. The cryptocurrency Kraken has said they will not comply with the New York Attorney General and will not answer its regulatory questionnaire it has received. Taiwan Semiconductor Manufacturing Company (TSMC) reported strong first quarter earnings, driven by a growth in orders for cryptocurrency mining chips. Amazon Technologies, a subsidiary of Amazon Inc., has won a patent for a marketplace that offers data feeds. The patented marketplace includes bitcoin transactions. This data stream will publish or include global bitcoin transactions (or any cryptocurrency transaction).

EU at Midday

European equities are relatively flat, with the EuroStoxx 600 +0.08%. Regional markets are mixed with FTSE 100 +0.25%, the DAX -0.12%, and the CAC40 +0.10%. Industrials, energy, financials are the biggest outperformers in the Euro Stoxx 600, while utilities, telecommunications, and consumer staples are the biggest decliners. Notable movers included: Unilever -1.93%, LVMH Moet Hennessey -1.34%, Vivendi SA +2.34%, and siemens AG +1.32%. Market breadth for the Euro Stoxx 600 is negative with only 259 stocks in the black.

German Chancellor Angela Merkel is reportedly seeking to create a 'jumbo europgroup'. The new initiative would require EU finance ministers gather four times a year to review economic policy issues in the region.

Unemployment data for Netherlands in March was lower than expected (3.9% vs 4.1% consensus).

UK retail sales growth in March came in softer than expected on a y/y basis (+1.1% vs +2.3%), and lower than February retail sales growth (+1.5%).

Asia & Australia While You Were Sleeping

Japanese equities traded higher for the 3rd time this week with the Nikkei 225 +1.42%. All sectors were positive. Telecommunications, industrials and materials were the biggest gainers while healthcare and financials underperformed. Notable movers included: Dekna Co +4.38%, Tokai Carbon Co +4.20%, Ebara Corp +4.15%, and Honda Motor Co -1.06%. Market breadth was notably positive with 199 of 225 stocks in the black. Japan reported a March trade balance that nearly doubled estimates (¥797.3B vs consensus ¥499.2B). Export growth for March on a y/y basis was firmly weaker than expected (+2.1% vs +5.2% estimate). Imports for March declined y/y, bucking the consensus (-0.6% vs +6.3% expected). Japanese officials are pushing to ratify a new Trans-Pacific Partnership trade pact. The latest scandal in the Japanese government involved Administrative Vice Finance Minister Junichi Fukuda, who is accused of sexual misconduct. Fukuda has resigned from his position.

Chinese and Hong Kong equities advanced as the Hang Sang Index advanced 0.74% and the Shenzhen Composite 1.08% higher. Industrials, energy, and financials were the biggest outperformers, with telecommunications and consumer discretionary disappointing. Notable movers included: AIA Group +2.37%, Galaxy Entertainment +2.35%, Geely Automobile -2.46%, and AAC Technologies -2.01%. Market breadth for the Hang Sang was positive as 35 stocks advanced, to only 15 declines. New home prices rose 0.4% m/m in March, against a 0.2% m/m rise in February. The Chinese central bank lowered its reserve requirement rate (RRR) yesterday, down to 16% for major banks and 14% for small banks.

Indian equities moved modestly lower, with the Sensex -0.18% and the Nifty 50 -0.21%, snapping 9 consecutive sessions of positive trading. In the Sensex, 11 of 19 subsectors were lower. Notable movers included Axis Bank -2.60%, Mahindra & Mahindra -1.28%, ITC Ltd +2.82%, and Tata Steel +0.95%.

Australian equities closed higher as the ASX 200 gained 0.35%, contrasting yesterday’s flat trading. Energy, consumer discretionary, and consumer staples stocks outperformed, but telecommunications, financials, and healthcare underwhelmed.  Notable movers included: Wisetech Global +6.89%, Credit Corp Group +4.46%, Sims Metal Management +4.44%, and CYBG PLC -6.65%. Market breadth was decidedly positive with 135 of 200 stocks higher today. The IMF has lifted its projection for Australia’s 2018 GDP to 3.0% from 2.9%. Further forecasts expect Australian CPI to increase to 2.2% in 2018, up from 2.0% in 2012.

Latin American Equities

Latin American equities posted strong gains yesterday. Brazil’s Ibovespa was +2.01%, Argentina’s Merval was +0.41% and Mexico’s Mexbol is +0.32%. Brazil will have an IPO aftermarket close today as NotreDame Intermedica will price its shares with the estimated range at 14.5-17.5 reais. Brazil’s CNI Industrial Confidence measure for April will be released today. Mexican Economy Minister Guajardo will meet with USTR Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland today to discuss progress on NAFTA talks. Four companies will be reporting earnings today out of Mexico; Hotelero Santa Fe (HOTEL), Kimberly-Clark Mexico (KIMBERA), Qualitas Controladora (QCCPO), and Unifin (UNIFINA).

Rates & FX

Global bonds are selling off moderately today with noticeable moves in Europe and Australia. The UK 10-Year Yield is higher by 5.7bps at 1.470% and the German 10-Year Yield is higher by 3.9bps at 0.566%. US bonds are following with the US 10-Year Yield higher by 1.9bps at 2.891%. The US 2-Year yield is up 18bps since April 2nd while the US 10-Year is up 14bps over the same time. The difference between the US 2-Year Swap and the US 2-Year Note is now at 29bps as the front end in the yield curve continues to flatten. The USD$ slightly lower at 89.56, down 5bps. Notably, the EUR€/CHF hit a recent high of 1.1977. This is the highest level for the pair since the Swiss National Bank (SNB) ended its peg to the Euro in 2015. USD$/JPY¥ is flat before the US equity open today at 107.36. The USD$ is slightly lower against the AUD$ despite weak economic data last night out of Australia. Australia’s currency has found support with the recent rally in the global commodity markets.


Precious metals are mixed today. Gold is down 11bps, silver is up 6bps finding support above $17/ounce, platinum was is 50bps, and palladium is up 44bps. Aluminum continues to rally sharply as it was up 5.49% overnight, now at USD$2,537/contract. Sanctions on United Rusal Co continue to push the aluminum contract higher as Rusal supplies ~6% of the world’s aluminum. WTI continues to rally and is up 57bps at USD$68.86/barrel. Oil inventories from developed nations were a little over 10mm barrels above their five-year average at the end of last month, down from 340mm barrels at the start of 2017.

Stocks Trending in the News

Amazon Inc (AMZN) has announced that subscriptions for its Prime premium service have exceeded 100 million, largely due to expansions into overseas markets.

Debenham (DEB.LN), a UK retail operator, announced that its CFO Matt Smith has left the company to join rival retailer Selfridge & Co.

Facebook (FB) has announced a project to begin designing proprietary microchips, which would allow the company to expand its hardware product offerings.

Netflix (NFLX) is reportedly considering the acquisition of movie theaters in the New York and Los Angeles area in an attempt to develop a deeper distribution channel for its original content.

Proctor & Gamble (PG) has reportedly agreed to purchase Merck’s (MKGAY.GR) consumer health unit for $4.2 billion.

Qualcomm’s (QCOM) acquisition bid for Chinese firm NXP Semiconductors (NXPI) has hit another snag as Chinese regulator are reportedly requesting further concessions from Qualcomm.

Quest Diagnostics (DGX) reported 1Q 2018 EPS that slightly outperformed estimates ($1.52 vs $1.50 expected).

Takeda Pharmaceuticals (4502.JP) has confirmed its £46.50/share acquisition bid for UK healthcare firm Shire Plc (SHP.LN)

Unilever (ULVR.LN) plans to repurchase up to $7.4 billion worth of outstanding shares, while also raising quarterly dividends to 8%.

WW Grainger (GWW) adjusted its FY 2018 EPS forecast to a range of $14.30 to $15.30, ahead of consensus of $13.86.

The Morning Recap