Tuesday, May 5, 2015
- Chinese heavyweight automakers Dongfeng (OTCPK:DNFGY, OTCPK:DNFGF) and FAW Group are reported to be in talks on a merger.
- Both companies have fallen under the eyes of the government amid President Xi Jinping's effort to reel in corruption.
- A combination of the two automakers would create the 6th largest car manufacturer globally.
- The bear case on cable is all the way down to $1.39, says Morgan Stanley's Ian Stannard, with a lot of that downside assuming a government can't be formed quickly after the polls.
- He notes a "sense of urgency" thanks to the proximity of the financial crisis forced a coalition to be quickly put together after the 2010 election, but the parties this time are going to demand more.
- Recent polling certainly indicates a hung parliament, meaning either the Tories or Labor would have to reach an agreement with smaller parties in order to lead.
- The election is on Thursday.
- ETFs: FXB, GBB
- Adidas (OTCQX:ADDYY, OTCPK:ADDDF) reports sales rose 9% to €4.083B ($4.556B) in Q1 on a currency-neutral basis.
- Sales in Europe +11% to €1.143B ($1.276B).
- Sales in North America +7% to €591M ($659.6M).
- China was a bigger contributor during the quarter with the region seeing sales growth of 21% to €597M ($666.45M).
- Reebok sale were up 9% as training and studio products showed strong demand.
- Net profit came in at 221M ($246M) vs. €234M consensus estimate.
- Adidas earnings press release (.pdf)
- The German 10-year Bund yield was below 0.10% as recently as two weeks ago, but it's up another 11 basis points today to the relatively sky-high level of 0.50%, and dragging along the rest of Western bond yields.
- Italian 10-years are up 28 bps to 1.76%; Spain up 28 bps to 1.74%; U.K. up 14 bps to 2.0%.
- "The bond market meltdown goes on," writes SocGen's Kit Juckes, though he believes it to be more correction, rather than a trend change.
- In the U.S., the 10-year yield is up another three basis points to 2.18% - about its highest level of 2015.
- Previously: Bill Gross: Bunds are short sale of a lifetime (April 21)
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, BUNL, TENZ, ITLY, LBND, ITLT, GGOV, BUNT, DLBL, TYBS, VUSTX
- Amid local news reports of a number of Chinese brokerages tightening margin requirements, the Shanghai Composite reversed a higher open to close lower by 4.05% overnight.
- The market there is up about 80% since November, so these sorts of short-term panics shouldn't be too surprising.
- Particularly hard hit were banking shares (NYSEARCA:CHIX), with China Construction Bank, Bank of China, and Bank of Communications each lower by about 5%.
- ETFs: FXI, ASHR, EWH, CAF, YINN, PGJ, GXC, FXP, YANG, PEK, MCHI, XPP, YAO, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, EWHS, KBA, FCHI, FHK, AFTY
- Mondelez International (NASDAQ:MDLZ) and D.E. Master Blenders (OTC:DEMBF) land conditional approval from the European Commission on their proposed merger after agreeing to divest a few brands in certain regions.
- The newly-created Jacobs Douwe Egberts is expected to strike revenue of more than €5B ($5.56B).
- Pierre Laubies will be the pure play coffee company's CEO.
- The European Commission raised its euro-area growth forecast today as dwindling fears of deflation and monetary stimulus help the economy overcome pressure from the continuing crisis in Greece.
- While GDP in the 19-nation bloc is now forecast to increase 1.5% this year (up from a prediction of 1.3% in February), the European Commission slashed Greece's economic growth outlook to 0.5% in 2015, down from an earlier 2.5% estimate.
- Other GDP forecasts for 2015: Germany +1.9%; France +1.1%; Italy +0.6%.
- The euro is -0.3% to $1.1113.
- European stocks: FTSE 100 +0.6%; DAX +0.6%; CAC 40 +0.5%; Euro Stoxx 50 +0.4%.
- Indonesia's economy unexpectedly shrank for a second straight quarter as exports and government spending dropped, dealing a setback to President Joko Widodo as he seeks to bolster the economy.
- Coming in below forecasts for 4.9% growth, GDP grew 4.7% from the year-ago period in Q1 and lower than the 5% expansion seen in Q4.
- Widodo took office in October pledging to increase infrastructure spending, boost investment and achieve 7% expansion by 2017 in Southeast Asia's largest economy.
- ETFs: IDX, EIDO, IDXJ
- Asian stock markets retreated today after Australia's central bank cut interest rates for the second time in four months, lowering its cash-rate target to a record low 2.0% from 2.25%.
- Although the economy is showing signs of improvement, the new move will reinforce economic growth in the face of falling commodity prices and a China slowdown.
- The Australia dollar also fell sharply following the announcement, hitting $0.7801, before rebounding to $0.7906 (+0.9%).
- S&P ASX 200 -0.1%. Asia: Shanghai -2.8%; Hang Seng -1.3%.
- ETFs: FXA, EWA, AUSE, CROC, KROO, EWAS, GDAY, FAUS, QAUS
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