Today's Trade: Asia shares mixed despite above-target China GDP
Compiled by Saxo Capital Markets (Australia)
Asian stocks were set for a mixed start to Tuesday trading as investors assessed early indications from America’s corporate earnings season and traders awaited a slew of data on China’s economy. The dollar fell against most peers.
Futures signaled a muted open for equity markets in Japan and Australia, while Hong Kong stocks pointed higher.
Transportation companies boosted major indexes Monday, as some strong corporate-profit reports helped investors look past simmering geopolitical tensions.
Old-economy companies, such as trucking firms and railroad operators, nudged the S&P 500 higher to help the broad index recoup the losses it suffered Friday.
Investors bought those industrial stocks after J.B. Hunt Transport Services reported stronger-than-expected revenue for the first three months of the year, suggesting that a key corner of the U.S. economy—the movement of goods—is humming along.
Investors are hoping the latest earnings season, which is expected to be one of the best in years, will help steady a stock market that has stalled and stumbled over the past two months.
The Dow Jones Industrial Average gained 212.90 points, or 0.9%, to 24573.04. The S&P 500 added 21.54 points, or 0.8%, to 2677.84, while the Nasdaq Composite rose 49.63 points, or 0.7%, to 7156.28.
The Dow Jones Transportation Average, an index of 20 of the largest U.S. airlines, railroads and trucking firms, climbed 2.3%, its biggest gain since March 9.
Shares of J.B. Hunt rose $6.98, or 6.2%, to $119.75, the most of any other stock in the S&P 500. Logistics firm C.H. Robinson Woldwide added 3.35, or 3.6%, to 97.62, while railroad operator Norfolk Southern gained 2.97, or 2.2%, to 136.48.
Stocks that are set to report earnings early Tuesday also traded higher: UnitedHealth Group added 6.04, or 2.7%, to 230.32, while Goldman Sachs Group gained 1.96, or 0.8%, to 257.88 and Johnson & Johnson rose 1.14, or 0.9%, to 131.76.
Pharmacy stocks also got a boost after investors got a signal that Amazon.com may not be getting into the business of selling pharmaceutical products. Shares of CVS Health added 2.67, or 4.2%, to 66.10, while Walgreens Boots Alliance rose 2.40, or 3.8%, to 66.22 after CNBC reported that Amazon put aside plans to get into the pharmaceutical space.
Shares of Amazon, meanwhile, rose 10.71, or 0.7%, to 1,441.50.
The expectations were for stocks to get an earnings boost coincided with investors already breathing a sigh of relief after missile strikes late Friday by the US, UK and France on Syria didn’t lead to a major escalation. A Pentagon official said that the single wave of strikes is complete for now, while in a Twitter post Saturday, President Donald Trump said “Mission Accomplished!”
In after market reporting, Netflix Inc. reported another quarter of blockbuster subscriber growth that exceeded its own forecast and expectations from Wall Street, illustrating the ongoing demand for a service that already reaches well over 100 million people globally.
Shares jumped 7% to $329.32 in after-hours trading despite a 1.2% decline during the regular session Monday amid concerns about whether the video-streaming giant could keep its growth streak.
The video-streaming giant added 7.41 million subscribers world-wide. Analysts expected Netflix to add a little over 6.5 million net new subscribers for the first quarter.
The company also expects to grow subscribers at a strong clip in the current quarter. Netflix forecast a net addition of 6.2 million users, compared with analysts’ expectations of 5.6 million. Overall for the first quarter, Netflix reported a profit of $290 million, or 64 cents a share, up from $178 million, or 40 cents a share, a year earlier. Revenue jumped 40% to $3.7 billion.
Earlier in the session, Bank of America Corp. said that a boost from the U.S. tax law and continued rising interest rates helped push first-quarter profit 30% higher, extending the string of better-than-expected results from the nation’s biggest banks.
Quarterly profit at the Charlotte, N.C.-based bank rose to $6.92 billion from $5.34 billion a year ago. Per-share earnings were 62 cents; analysts had expected 59 cents per share. Revenue came in at $23.13 billion, up from $22.25 billion a year ago. Analysts had expected $23.06 billion.
Elsewhere, the Stoxx Europe 600 fell 0.4% to snap a two-session winning streak
Sources: Bloomberg, TradingFloor.com, WSJ.com, CNBC, AFR
Tuesday: Goldman Sachs, IBM, Johnson and Johnson, UnitedHealth, United Continental, CSX, Comerica, Northern Trust, Interactive Brokers, Prologis, Omnicom
Wednesday: Abbott Labs, American Express, Morgan Stanley, US Bancorp, Textron, Alcoa, Steel Dynamics, BancorpSouth, Umpqua Holdings, United Rentals, Universal Forest Products, Pier 1 Imports
Thursday: Novartis, Blackstone, Bank of NY Mellon, Danaher, Luxottica Group, Taiwan Semiconductor, KeyCorp, ETrade, Genuine Parts, Sonoco Products, BB&T, Philip Morris, Nucor, Pentair, Snap-On, Quest Diagnostics, Sky
Friday: Procter and Gamble, Honeywell, General Electric, Baker Hughes, Synchrony Financial, Manpower Group, Steve Madden, SunTrust, Schlumberger, Kansas City Southern, State Street, Stanley Black and Decker, Cleveland-Cliffs, Roper Industries
- S&P/ASX 200 Index futures unchanged at 5,820. Futures relative to fair value suggest an early decline of 0.1%.
- Bank of New York Australia ADR Index is down 0.2% to 272.3, BHP Billiton ADRs are down 1.1% to A$29.74 equivalent, a 0.8% discount to last Sydney close, Rio Tinto ADRs are down 0.1% to A$69.70 equivalent, a 10.6% discount to last Sydney close.
- Gold edged higher overnight as the dollar fell, but gains were muted as financial markets bet that air strikes on Syria would not escalate into a wider conflict. Prices have trended sideways since January, buoyed by geopolitical worries but capped by expectations for further U.S. interest rate hikes and strong technical resistance at $1,360-$1,365 an ounce - their January, February and April highs. U.S. gold futures for June delivery settled 0.2% higher at $1,350.60 an ounce. Forces from the United States, Britain and France targeted Syria with air strikes on Saturday, hitting what they said were three of its main chemical weapons facilities. Gold prices reached an early high of $1,348.69 on the back of the news, but struggled to maintain those gains on expectations the attacks would not mark the start of greater Western involvement in the conflict. Goldies in Toronto slipped 0.19%. Gold stocks: GOR, NCM, NST, AQG, EVN, KCN, RMS, RRL, SAR, SL.
- Oil prices retreated from a three-year high on Monday as geopolitical risks to supply receded. Light, sweet crude for May delivery fell $1.17, or 1.7%, to $66.22 a barrel on the New York Mercantile Exchange, snapping a five-session winning streak. Brent, the global benchmark, fell $1.16, or 1.6%, to $71.42 a barrel. U.S. crude prices closed at the highest level since December 2014 on Friday, ahead of U.S.-led military strikes in Syria. But prices reversed course Monday after relatively restrained airstrikes didn’t appear to escalate tensions with the Syrian regime and its allies such as Russia. Oil market observers are looking ahead to weekly data Wednesday on U.S. petroleum inventory levels from the Energy Information Administration. Oil stocks: WOR, WPL, STO, SEA, BPT, OSH, HZN, AWE, KAR, ORG, SXY.
- Iron ore was under pressure during the Asia trading session: Investors appeared cautious ahead of economic data, with steel futures falling sharply in China which weighed on the raw material market. News that Vale’s production fell in Q1 2018 failed to support sentiment. The iron ore exporter reported production fell to 82mt, down 4.9%. The most-active iron ore contract for September delivery on the Dalian Commodity Exchange settled 2.6% lower at 438.5 yuan ($US69.77) a tonne. Earlier in the session, it hit 435.5 yuan, its lowest since June 26. Spot iron ore tumbled 1.6% to $US63.93 a tonne. Iron ore stocks: FMG, BHP, GBG, GRR, MGX, RIO, BCI, SDL.
- Aluminum prices extended last week’s run up Monday, continuing to get a boost from recent U.S. sanctions on Russian entities. Aluminum for delivery in three months on the London Metal Exchange climbed 5% to $2,399.00 a metric ton. Prices have climbed to their highest level since 2012 and last week staged their largest rally in more than 30 years, as Russia is one of the largest suppliers of the metal. The recently announced blacklisting April 6 would freeze U.S.-based assets of those sanctioned, constrain their ability to access Western financing and forbid American business transactions with those targeted. Front-month copper for April delivery climbed 0.8% to $3.0915 a pound. Tin was flat at $US21025, zinc gained 0.6% to $US3136.50, lead added 3% to $US2370 and nickel rose 2.8% to a two-month high of $US14,335 tonnes. Copper stocks: OZL, SFR; Nickel stocks: IGO, WSA; Aluminium stock: AWC.
- Bank of Qld 1H profit missed estimates despite lending growth: Total lending growth was A$671m vs contraction of A$157m yr ago. 1H net income was A$174m, net income GAAP est. A$187.7m (3 analysts). Cash profit came in at A$182m, Adj. net income est. A$190m (4 analysts) with interim div. A$0.38 VERSUS est. A$0.39.
- In other early releases: Cimin, our engineering and construction firm reiterated its 2018 net income target of A$720m-A$780m amid an extensive pipeline of projects. Cimic says identified more than A$110b of tenders in 2018, extra A$285b coming to market in 2019 and beyond. About A$65b of projects identified are public-private partnerships. Cimic 2018 adj. Net income est. A$770.4m (7 analysts, range A$745m-A$782m). 1 buys, 4 holds, 3 sells; avg PT A$42.86. Shares down 16.0% YTD vs ASX 200 Index down 4.1%. Whitehaven saw stronger-than-expected demand for met coal in 3q. Whitehaven coal sales, including purchased coal of 5.4mt in qtr. Oz Minerals C1 cash costs of $0.97/lb impacted by final stockpiling of open pit ore, higher processing TCRC and transport costs. Maintains 2018 copper output 100k-110kt, gold 120k-130kt; Prominent Hill on track for guidance, open pit closure completed as planned. Downer awarded contract for next phase of underground mine development at Carrapateena; valued at A$660m for 6.5yrs. 1Q copper output 27,466 tons. Gold output 30,873 ozs.
- Wesfarmers (WES AU): Is Said to Hire Macquarie for Coles Demerger: AFR
- AMP (AMP AU): Admits Lying to Regulator: AFR
- Alumina (AWC AU): Alcoa to Benefit, Century May Be Hurt on Alumina Rally: BI
- Fletcher Building (FBU AU): Seeks to Raise NZ$750 Mln in Rights Offer
- Scentre Group (SCG AU): Unibail-Rodamco’s EU2b Offer May Spur Real-Estate Hybrid Sales
- AACO (AAC AU): Downgraded to Hold at Bell Potter; PT A$1.32
- Perpetual (PPT AU): Upgraded to Buy at Bell Potter; PT A$47.50; Upgraded to Neutral at JPMorgan; PT A$45
- Pilbara Minerals (PLS AU): Raised to Speculative Buy at Canaccord
Tuesday: Bank of Queensland results
Wednesday: BHP & STO Q1 Prodn & Sales, Woodside AGM
Thursday: Sydney Airport report, Q1 traffic and revenue
FTSE China A50 index (CNJ8 or CHINA50APR18) is showing weakness as it declined for three consecutive days to print a fresh 6 months low. CN never looked strong since it failed at the double top resistance level 15,000 earlier this year. The monthly price actions do not look promising either as it is heading for the third negative months. The key resistance level should remain near 12,900-13,000 which coincides with the intersection of downtrend (from Jan 18 top 14,935) and 200 DMA. We could even argue that CN is also forming a head and shoulders formation thus we add bearish exposure as long as CN struggles below 12,900.