Market 'Schizophrenic' on China

Oops! The Shanghai index dropped over 4 percent overnight (to a 14-month low) as the Conference Board revised its China's April Leading Economic Index lower, to 145 versus the initial reading of 147.1. Apparently there was an error in the calculation, but it is fueling concerns of a China slowdown.

Also an issue in China: a lower price for the upcoming AgBank IPO. Agricultural Bank of China (AgBank), the biggest IPO of the year (about $20 billion), is reportedly setting a lower price for the Shanghai part of its IPO than announced for the Hong Kong part. The Hong Kong part was previously announced at $HK2.88 to HK$3.48 ($0.37-$0.45) a share; the Shanghai part will now reportedly price at 2.52-2.68 yuan ($0.37-$0.39).

AgBank is the last of the big Chinese banks to go public.

How schizophrenic is the market on China? A few months ago there was great worry about an OVERHEATING China, particularly in the property sector. The Chinese central bank raised interest rates, there was concern GDP might exceed growth of 10 percent. NOW, there is concern about a slowing China.


1) European banks are lower as the European Central Bank will not be offering banks another round of 12-month loans to replace those that are expiring this week. Banks are supposed to repay money borrowed a year ago by Thursday; this has created a short-term liquidity concern.

2) three months ago, there was was a hue and cry when the 10-year note yields passed 3 percent; this morning, the 10-year yield broke through 3 percent. This

3) electric car maker Tesla successfully priced its IPO, 13.3 million shares at $17, up from 11.1 million shares at $14-$16. So they raised $226 million, well above the $166 million that was the midpoint of the price talk.

4) 3M raised its Q2 sales guidance to $6.60 billion-$6.75 billion, above $6.56 billion consensus. The diversified manufacturer and Dow component sees organic sales growing a robust 16 percent to 18 percent, fueled by strong demand in emerging markets.

5) Micron drops 6 percent after despite its Q3 earnings and revenues beating estimates. Higher DRAM prices and a 21 percent jump in NAND flash volumes helped boost the memory chipmaker's top line above expectations.

However, on the earnings conference call, the company disappointed some analysts, cautioning Q4 DRAM bit growth would be only flat to up slightly from the recently completed quarter.

6) Barnes & Noble plunges 9 percent after reporting a bigger-than-expected Q4 loss (loss of $0.89 vs. loss of $0.81 consensus). Falling margins and weaker store traffic continued to plague the company. Revenues topped estimates as strong online sales (up 51 percent) helped offset continued same-store sales at the bookseller's retail stores (down 3.1 percent) — a trend that will continue in its new fiscal year.

Guidance for the current quarter also disappoints, with an expected loss of $0.85-$1.15 vs. loss of $0.44 consensus.

7) General Mills boosted its quarterly dividend by 17 percent to $0.28 per share. The consumer food company also announced a new 100 million share stock buyback program.

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