IB Traders’ Insight

View The Latest Videos View Videos

1 2 3 4 5 2 1817


Macro

GUOSEN Closing Bell (December 19)


MARKET

Chinese market slide further and the general benchmark index SHCOMP lost 2550 psychological level, while the vice-ministerial level talks between China and US continued. The Real Estate shares had boosted in early market by the signal of loosing control from Shandong province, but the sentiment faded quite soon. No sector gained, while Healthcare and Oil shares were the worst performers. Combined turnover for both markets was CNY 217.1 bn, down 5.53% dod.

 

 

Close

% Change

Vol (bn CNY)

%YTD

Shanghai

2549.56

-1.05

93.71

-22.91

Shenzhen

7418.69

-1.48

123.42

-32.80

CSI 300

3091.13

-1.19

67.87

-23.31

ChiNext

1268.81

-1.90

38.81

-27.61

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

 

 

 

 

Downward-leading

Healthcare

002252

Oil

600777

 

NEWS

*China and U.S. Talk on Trade Ahead of January Negotiations. China and the U.S. held vice-ministerial level talks on Wednesday to discuss the ongoing trade dispute as they move closer to meeting in January. The two sides spoke by phone according to China’s Ministry of Commerce. (Bloomberg)

 

FUND FLOW

Click here for more information about Guosen.

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 


22059




Macro

GUOSEN Closing Bell (December 18)


MARKET

China equities almost fell to the lowest level in a month and SHCOMP dropped to 2576 points. Valuations failed to stop the downtrend. Top officer’s softer tone failed to soothe investors and no new initiatives for reform measures were mentioned. Non-ferrous Metal and Agriculture sectors led the gains, while Real Estate and Construction Material shares were the worst performers. Combined turnover for both markets was CNY 229.8 bn, down 3.37% dod.

 

 

Close

% Change

Vol (bn CNY)

%YTD

Shanghai

2576.65

-0.82

99.31

-22.09

Shenzhen

7530.32

-0.82

130.61

-31.79

CSI 300

3128.43

-1.04

72.04

-22.39

ChiNext

1293.34

-0.45

39.85

-26.21

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

Non-ferrous Metal

600311

Agriculture

300268

Downward-leading

Real Estate

000979

Construction Material

603616

 

NEWS

*China Signals Earlier Date for Local Bond Issuance. China may allow local governments to issue bonds at an earlier-than-usual date next year, underlining the urgency to invigorate the country's slowing growth. The Ministry of Finance usually starts granting quotas for new local government bond issuance in April, after the National People's Congress (NPC) approves the figures at their annual sessions in March. But in 2019, such quotas are expected to be granted in the first quarter, according to a proposed meeting agenda on the NPC website. (Caixin)

 

FUND FLOW

 

Click here for more information about Guosen.

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

 


22041




Macro

Eurex: May Prepares For Deal Or No Deal


Morning Briefing December 19th 2018

Undoubtedly the main feature of Wednesday's session is the Federal Reserve's FOMC policy decision, with expectations still for a further 25 bps hike in the Fed Funds rate.

Wednesday's Three key data releases are German November producer prices at 0700GMT, UK November CPI at 0930GMT and the US Q3 current account data at 1330GMT. In October, producer prices rose in Germany by 0.3% m/m and 3.3% y/y respectively.

For the UK, CPI was 2.4% y/y in October. With the sharp decline in oil prices in November headline inflation could ease - analysts have penciled in a 2.3% outturn.

The US current account deficit in Q2 was USD101.5 bn and the MNI median for Q3 is an increase to USD124.5 bn.

At 1900GMT is the FOMC policy announcement and this is followed up with Federal Reserve Bank Chairman Jerome Powell holding a press conference following the policy announcement at 1930GMT.

Global Economic Trading Calendar

Markets

US TSYS: 10-year Tsy futures remain up 4 ticks on the session at 120-31+, holding above last week's highs despite dropping from session highs. 10-year cash yield briefly pierced the 2.8% level earlier but have recovered this level in line with the relief rally in US equity futures. - 2s-10s curve has dropped 1.1bps on the day coming off of yesterday's fresh 2 week highs, last at 16.1bps. a touch lower from yesterday's highs but remains near two week highs.
- Markets continue to price in a 2/3 chance of a Fed hike tomorrow but a dovish tone is expected.

BUNDS: German bond futures are extending gains amid global upside pressures which are being driven by lower stocks and oil prices. The 10year is up 15 ticks on the day as the Dec 10 highs at 163.64 come into focus. - The 2s-10s curve resumed its broader weakening trend yesterday, closing at 84.7bps, as uptrend support from the 2015 lows comes into focus around 74bps.

JGBS: Japanese 10 year bond futures are lower on the day amid a bearish reversal which has seen prices fall as much as half a point after hitting as high as 152.84 in early trading before dropping back to 152.34 last. 10year cash yields sit at 3.7bps after recovering from session lows 0.9bps. - The bullish reversal in yields is occurring despite a drop in 10year breakevens which are looking to post their 13th consecutive decline. 10 year real yields have extended gains to their highest level since mid 2017, last at -27bps. - US-Japan 10 year spread has risen back from session lows, last at 278.1bps.

AUSSIE BONDS: Aussie 10 year bond futures are trading flat, giving up earlier gains after failing to break above the 97.62 level despite several tests. The near term correlation with the US remains elevate ahead of the US FOMC tomorrow. 10year cash yields are down 3.3bps at 2.386%, recovering from their lows but showing no sign of a bullish reversal. - The AU-US 10year spread remains stuck in the middle of its range trading at -42.5bps, while the 3s-10s spread sits at 46.7bps, reversing the gains seen earlier in the week. The short end of the curve has inverted as rate markets are now pricing in a greater chance of a cut than a hike in 2019, despite the probability of cut remaining very low for now.

STOCKS: Asian stocks have edged back up from early lows in a quiet session as markets await the US Fed's announcement tomorrow. - The Nikkei is underperforming, down 0.7%, dragged down by the energy sector, with the index holding below the 21000 level despite recovering early lows. - Aussie stocks have shed 0.4% but are holding above last week's lows for now. - US equity futures are up 0.4% from closing levels.

OIL: Both Brent and WTI are trading off yesterday's lows with Brent dealing at $56.53 and WTI at $46.38. Brent followed WTI to fresh ytd lows yesterday as both markets show no sign of ending their downtrends.

GOLD: Gold is testing its Dec 10 highs, currently dealing at $1250.7, up $1.3 on the day as the metal approaches the US' FOMC on the front foot. Bulls look for a close above the $1250 level and the 200-dma which sits at $1253.1. Yesterday saw some downside pressure resume in US real yields, providing some fundamental backing to recent gains.

FOREX: USD underperformed overnight ahead of the FOMC rate decision, with another Fed hike widely expected, amidst calls for a pause from U.S. President Trump. Implied probability of a 25bp hike tomorrow is 68.3%, according to a BBG model. - CAD also struggled, exposed to soft oil prices, which operated just above yesterday's/fresh multi-month lows overnight, with WTI gyrating around ~$46.3/barrel. - Kiwi outperformed and extended yesterday's gains, but NZD/USD failed to retake yesterday's high at $0.6880. - JPY oscillated as risk appetite struggled for clear direction, with the Nikkei 225 climbing from lows to highs ahead of lunch, only to slip back to the negative territory thereafter. The Nikkei 225 trades ~0.75% lower at writing, but U.S. equity futures are in the green. - Worth noting that G10 currency pairs operated within rather tight ranges.

Technical Analysis

BUND TECHS: (H19) DEC 10 HIGHS UNDER THREAT

German Bund futures look set to test the Dec 10 highs at 163.63 as the broader bullish trend rolls on. Above here extends the uptrend towards the Aug 17 highs on the continuation chart. To shift the outlook negative bears would need to break below the Dec 12 low/21-dma at 162.53/65, but momentum is looking increasingly bullish at present.

EUROSTOXX50: DOWNTREND WOULD INTENSIFY BELOW 3000

The 3000 level is now coming into focus as the downtrend threatens to intensify below this level. Rallies are becoming increasingly shallow warning off further losses towards the Dec 2016 lows at 2984.48. Bulls need to take out the 21-dma now at 3120.78 to improve the outlook, above which would allow a challenge of down trendline resistance to target the Nov 8 highs at 3230.00.

Eurex Futures Market Close

Eurex. An exchange for the better.

As one of the world’s leading derivatives exchanges we offer a broad range of international benchmark products.

For example, we operate one of the most liquid fixed income markets, provide the broadest range of equity index derivatives worldwide and are the platform of choice for European equity derivatives. In addition we cover derivatives on dividends, volatility and ETFs. All on one single platform.

Innovative and reliable technology supplies about 400 participants and 7,500 traders in 35 countries with access to more than 2,000 products across nine traditional and alternative asset classes.

For further information please visit www.eurexchange.com

MNI

MNI subscribers make critical decisions with deeper insight and greater confidence. Pinpoint information and market-moving interviews let them react instantly to market changes and more importantly, anticipate future market moves. MNI reporters are market professionals in the news business. They work like journalists but think like traders. When interviewing Fed officials, our reporters ask the same questions you would ask. They cover the angles you would cover. Write the way you read.

MNI’s news services are now available via the IB Trader platform. Please click here to view our provider page or contact MNI directly on sales@mni-news.com or +1 212 669 6400 for our Americas sales team and +44 207 862 7408 for our EMEA sales team.

This article is from Eurex Exchange and is being posted with Eurex Exchange’s permission. The views expressed in this article are solely those of the author and/or Eurex Exchange and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
 


22058




Macro

Interactive Brokers - Steve Sosnick: What Traders Should Look For from the Fed Meeting


Steve Sosnick, Interactive Brokers chief options strategist, discusses what traders should look for from the Fed meeting.

 

Produced on December 18, 2018

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


22056




Fixed Income

Interactive Brokers - Siemens Banks On Automation As Germany's Business Climate Darkens


German industrial manufacturing giant Siemens’ (FRA:SIE) focus on automation and emerging new technologies has helped it weather a recent downturn in national business sentiment.

Worries about the corporate German landscape have been intensifying, as companies have been growing increasingly dissatisfied with their current situation, according to the ifo.

The ifo said its business climate index in manufacturing fell “markedly,” amid business expectations that turned negative for the first time since May 2016.

Clemens Fuest, president of the ifo Institute, noted that manufacturers have scaled back their production plans, and while their assessments of the current business situation remain at a high level, they have deteriorated “slightly.”

The ifo manufacturing component plunged 16.4 year-on-year to a level of 14.8 in December and dipped 3.2 from the prior month. Overall, the ifo Business Climate Index fell to 101 in December from 102 in the previous month.

Siemens focuses on the digital world, while German engines sputter

Against this backdrop, shareholders appear to have grown somewhat nervous about Germany’s industrial sector.

The SPDR MSCI Europe Industrials UCITS ETF (SPYQ), whose top holdings include Siemens and courier service Deutsche Post (FRA:DPW), has seen its price plunge nearly 15.5% since roughly the start of 2018.

Meanwhile, Siemens’ stock has fallen by around 19.7% over about the same period, with its share price Tuesday trading at about €100.68.

Against this backdrop, the behemoth conglomerate said it has been busy reorganizing its operations, which is slated for completion by the end of the second quarter of fiscal 2019. As part of its new structure, its industrial businesses will be comprised of three operating companies, including gas and power, smart infrastructure and digital industries.

Siemens’ digital-related segments appear to be picking up the slack from other underperforming divisions.

The firm’s gas and power segment, for example, has been undergoing stress, which has been underscored in the latest quarter by broad-based revenue declines, along with a €301m severance charge and decreased demand for its turbine business.

Fitch Ratings analyst Çidem Cerit recently said she expects the power and gas segment to continue to lag “significantly” behind other divisions, due to structurally lower demand for its large gas turbines, as well as increased pricing pressure led by overcapacity issues in original equipment manufacturers (OEMs). However, Fitch noted that it anticipates the stressed profitability in that business will be mitigated by “a strong pickup in profitability in the digital factory and automation-related businesses.”

While profit in the gas and power division swung into negative territory in Q4 2018 from the same year-ago period, businesses such as building technologies (+18%), digital factory (+28%) and process industries and drives (+18%) were large gainers.

All told, profit in Siemens’ industrial business rose slightly to €2.145bn from €2.137bn a year earlier.

The cost of connecting everything to everything

Spending on the industrial internet of things (IIot) is expected to ramp up considerably in the near term.

IIoT generally involves embedding technology in physical items and applications to enable intelligent communication between objects, the environment and people.

The International Data Corporation (IDC) recently said it anticipates spending on IIot will surge to a compound annual growth rate (CAGR) of 13.6% through 2022, when it could reach as much as US$1.2tn.

Carrie MacGillivray, IDC’s group VP of IoT and mobility, said that the IoT market is “at a turning point,” where projects are moving from proof of concept into commercial deployments. She continued that organizations are “looking to extend their investment as they scale their projects, driving spending for the hardware, software, services, and connectivity required to enable IoT solutions."

IDC added that it thinks manufacturing and transportation will each exceed US$150bn in expenditures in 2022, “making these the two largest industries for IoT spending.”

For its part, Siemens has been deploying IIoT in certain of its profitable divisions.

Activities in the company’s process industries and drives segment, for example, remain focused on the use of information and communication technologies to speed up its digital transformation of processes. The division is also involved in advancing simulation, digital twin technology and data analytics provided by digital consulting services.

Also, Siemens’ digital factory business centers on automation technologies used in manufacturing, such as for factories, which are supplemented in part by its cloud-based IIoT operating system MindSphere – connecting machines and physical infrastructure to the digital world.

The company argued that its digital factory will likely benefit from more surgical investment strategies in the wake of tighter monetary policies among some central banks, as well as from protectionist moves.

Siemens noted that the trend from globalization to regionalization is aimed at either protecting local economies or to better adapt solutions to local needs, and the trend towards digitalization “spurs companies to modernize their production performance to keep or increase their competiveness.”

Buoying the bottom line

Siemens’ focus on emerging new tech has generally helped keep its profitability stable and maintain its credit profile in the investment-grade sphere.

Fitch, for example, recently affirmed its ‘A’ rating on Siemens despite large M&A, including France-based Alstom, as well as amid continued pressure in its energy-related business segments.

The ratings agency expects the firm’s credit profile to remain in line with its ratings in the medium term,
with funds from operations (FFO) net leverage hovering below 1.5x, backed by moderate free cash flow (FCF) generation, as well as additional cash proceeds stemming from its healthcare IPO.

The market’s perception of Siemens’ creditworthiness also appears to be aligned with Fitch’s assessment, with spreads on the company’s five-year credit default swaps (CDS) having tightened by around 2bps over the past three months to a relatively low level of 26bps.

Some of its U.S. dollar-denominated bonds have also recently increased in price, with its debt due May 2045 having reemerged into premium territory. The notes have risen by about 2.1% to US$100.96 after falling from a high of US$105.098 set at the end of May.

The yield on the U.S. Treasury Bond has fallen roughly 23bps over the past 12 days to around 3.11%.

Overall, it is likely Siemens may weather Germany’s weakening economic conditions as it continues to capitalize on new technologies and automation efficiencies to drive growth.

Looking ahead to fiscal 2019, the firm said it expects a profit margin of between 11-12% for its Industrial business based on its current organizational structure, excluding severance charges. Moreover, it anticipates basic EPS from net income in the range of €6.30 to €7.00 – also excluding severance charges.

--

The author does not hold any positions in the financial instruments referenced in the materials provided.

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


22055




1 2 3 4 5 2 1817

Disclosures

We appreciate your feedback. If you have any questions or comments about IB Traders' Insight please contact ibti@ibkr.com.

The material (including articles and commentary) provided on IB Traders' Insight is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IB Traders' Insight or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IB Traders' Insight are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

Any information provided by third parties has been obtained from sources believed to be reliable and accurate; however, IB does not warrant its accuracy and assumes no responsibility for any errors or omissions.

Any information posted by employees of IB or an affiliated company is based upon information that is believed to be reliable. However, neither IB nor its affiliates warrant its completeness, accuracy or adequacy. IB does not make any representations or warranties concerning the past or future performance of any financial instrument. By posting material on IB Traders' Insight, IB is not representing that any particular financial instrument or trading strategy is appropriate for you.