North America

In the U.S.:

• Focus on a stimulus bill took a back seat again this week as states continue to grapple with how to implement President Trump’s executive orders. Some analysts now estimate talks to go well into September before any resolution or progress is made.

• August Flash Manufacturing PMI was 53.6, ahead of the 52.0 consensus estimate and Flash Services PMI was 54.8, ahead of the 51.9 consensus estimate. Both metrics surprised to the upside on improvements in sentiment and employment. 

• Weekly initial jobless claims were 1.106M versus last week’s revised 971K. The drop below 1M last week was short lived and led to renewed fear that the recovery is decelerating.

REIT Focus:

Store Capital Corporation (STOR) announced August rent collections of 86% with 93% of properties are now open in August. Management believes the high level of rent collections should allow the company to repay $450M of borrowings on its credit facility.

ASIA

In China:

• There seems to be some confusion on when Trump administration plans to meet with China over the Phase 1 trade deal. Although originally scheduled for August 15^th, the US has not announced a concrete date even though the commerce ministry in Beijing has said that bilateral talks would be held “in the coming days” to evaluate the agreement’s progress.

• Reuters reported that the US State Department notified Hong Kong that Washington has suspended or terminated three bilateral agreements following China’s imposition of a sweeping national security law. Follows US President Trump’s order last month to end Hong Kong’s special status.

In Japan:

• August flash manufacturing PMI was 46.6 versus July’s 45.2 reading. The slight uptick showed declines moderated in output, new orders, export orders, and employment.

REIT Focus:

A Bloomberg article discussed how Singapore’s mortgage rates could slide further as lending slows and pricing competition intensifies. Non-domestic banks may lead rate cuts, supported by lower funding costs as systemic deposits surge.

Europe

In Europe:

• The August Eurozone composite PMI reading hit a two-month low of 51.6 versus 54.9 in July. The data suggests that the increase in coronavirus infections across Europe has started to weigh on activity.

• The uptick in coronavirus cases have continued to increase across Europe. Cases in the UK, Germany, France, and Spain have been alarmingly rising over the couple of weeks.

• UK flash August PMIs surprised to the upside with the composite index reaching a nearly-seven year high of 60.3 versus July’s 57.0 reading. Services outperformed versus manufacturing as private sector output expanded after the Q2 lockdown period.

REIT Focus:

Late last week rumors circulated in the press that shopping mall giant Unibail-Rodamco-Westfield (URW) was considering raising as much as €3 bn of equity in a rights offering in the coming months to help strengthen its balance sheet. UK shopping center REIT Intu Properties failed in an attempted rights offering earlier this year and eventually fell into administration after failing to agree on covenant waivers with its lenders. Another UK shopping center REIT (Hammerson) is attempting a £825 mn rights offering together with asset sales to provide it with some breathing room as well. The shopping center industry has faced headwinds in recent years as the growth of e-commerce become a greater threat to brick and mortar retail. The current pandemic has only served to accelerate that trend and put shopping center landlords under greater pressure. URW responded to the market rumors this week with a press release that reiterated its previously communicated priority for deleveraging, starting first with asset disposals. While not specifically denying the rumors, the company indicated that the Supervisory Board and Management Board continues to weigh the merits of all potential strategies to strengthen URW’s financial profile and that no decision has been made yet on any of the available additional deleveraging options.

The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.