Looking at Coca Cola’s earnings number (a stock we own), it’s hard to find a more international company and thus one with a lot of FX exposure. The strong dollar clipped revenue by 800 bps. Of the 16% revenue growth ex FX (organic), 12 points of that was price and 4 unit case volume which is better than some of its peers.
Hong Kong’s September trade data was weak but not as bad as expected. Exports fell 9.1% y/o/y after a 14.3% drop in August and vs the estimate of down 14%. Exports particularly to China were down by 8.5% and fell by 25% to the US. Imports were lower by 7.8% y/o/y, better than the forecast of down 16.4% and after a 16.3% decline in the month before. A spokesman in Hong Kong said honestly, “Looking forward, Hong Kong’s export performance will remain under immense pressure, as elevated inflation in major advanced economies and more aggressive monetary policy tightening in response continue to dampen global demand.” After yesterday’s drubbing, the Hang Seng index was flat while the H share index rebounded by more than 1%. The yuan though continues to weaken. As for the Hang Seng, strictly on a valuation basis, it’s now one of the cheapest in the world at 8.5x earnings with a 4.4% dividend yield but we know it’s clearly cheap for a reason. As I said yesterday, China is going to need to economically grow in spite of Xi, not because of his policies.
CNY (the higher the weaker)
The German October IFO business confidence index was little changed at 84.3 vs 84.4 in September. The Current Assessment fell a touch while the Expectations component was down slightly. The IFO was pretty succinct today, “Sentiment in the German economy continues to be grim…The German economy is facing a difficult winter.” Europe is seeing some relief on the rate side as bonds are rallying while the euro is little changed. German power prices are up almost 2% today but just off the lowest since early August. They though are still 3.3x above where it was pre-invasion.
IFO
The October UK CBI industrial orders index was -4 vs -2 in September but better than the feared print of -12. The CBI said “It’s a tough time for manufacturers. Price pressures remain acute, availability of materials is still a big issue – and it is 49 years since manufacturing firms were this worried about being able to find workers with the skills they need. It’s really no surprise that sentiment has deteriorated further.”
With Rishi Sunak the new PM officially today, gilts are rallying for the 5th day in the past 7. The pound is also higher and I’ll reiterate again my belief that the pound and stocks in the UK are very cheap and attractive. We’ll see what the BoE does next week and the market is expecting 75 bps hike to 3%.
CBI
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.