Honda Motor (NYSE:HMC) Q3 2026 Earnings call February 10, 2026 03:00 AM ET Company ParticipantsEiji Fujimura - Director and Managing Executive OfficerNoriya Kaihara - Director, EVP and Representative Executive OfficerNone - Translator 1None - Translator 2Conference Call ParticipantsNone - AnalystNoneI thank you very much for taking time out of your busy schedule to attend our briefing today. We would now like to start Honda Motor Co., Ltd.'s financial results briefing for the third quarter of fiscal year en ...

The flood of Chinese exports around the world helped the economy blow past President Donald Trump’s massive tariff hikes, while Beijing touts successes in AI, EVs, robotics and other emerging technologies. But that strength masks ongoing weakness among consumers and the property sector. China’s trade surplus jumped 20% to $1.19 trillion in 2025, marking the world’s largest ever, as shipments surged to the European Union, Africa, Latin America and Southeast Asia. Exports climbed 5.5% and accounted for ...

Group 1 - Ford is in discussions with Xiaomi to establish a joint venture for electric vehicle (EV) manufacturing in the U.S. [1]

Group 1: Market Overview - US stocks experienced a significant decline, particularly in the tech sector, with the Nasdaq Composite falling approximately 1.8% due to a tech-driven selloff and a notable drop of over 10% in Microsoft shares [1] - The S&P 500 and Dow Jones Industrial Average also saw losses of 0.7% and 0.2%, respectively, following a lackluster performance the previous day [1] Group 2: Company-Specific Developments - Microsoft reported higher-than-expected capital spending and a slowdown in cloud sales growth, leading to a deeper decline in its stock price [2] - Meta's shares rose over 7% following a strong quarterly revenue outlook, with plans to invest up to $135 billion in data center expansion to enhance its AI capabilities [2] - Tesla's stock fell more than 1.5% as the company shifted focus from electric vehicles to robotics, despite beating quarterly earnings expectations; however, it reported its first annual revenue decline [3] Group 3: Commodities and Economic Factors - Gold prices surged, briefly exceeding $5,500 per ounce, while crude oil futures climbed, with Brent crude surpassing $70 per barrel amid rising US-Iran tensions [4] - The Federal Reserve's recent decision to keep interest rates unchanged is influencing market expectations, with projections for two quarter-point rate cuts by year-end [5]

Market Overview - The market is starting slow but is expected to pick up pace throughout the day, particularly with large-cap tech earnings after the bell [1] - Mortgage applications data has come in soft, with a notable decline of 8.5% in overall applications, driven by rising mortgage rates [2][3] Mortgage Applications - The 10-year yield has fluctuated from 6.13% to 6.3% and back to 6.25% over the last 10 days, impacting 30-year mortgage rates which rose from 6.16% to 6.24% [2] - Refinances have seen a significant drop of 15.7%, indicating sensitivity to rising mortgage rates [2] Technology Sector - Positive news from Nvidia and China is expected to boost stocks like Nvidia, AMD, and Broadcom [3] - Memory stocks are also showing upward movement, contributing to a generally positive sentiment in the tech sector [4] Currency Impact - The US dollar is at four-year lows, which may benefit multinational companies by making US goods and services cheaper for foreign buyers [4][5] - Historical context shows that the dollar has traded lower in previous years, suggesting that a weaker dollar can have positive implications for exports [6][7] Earnings Reports - Major earnings reports from companies such as Microsoft, Meta Platforms, Tesla, and IBM are anticipated, with Microsoft showing a rally leading into its report [9][10] - There are questions surrounding Meta Platforms' spending and Tesla's future beyond electric vehicles, including potential developments in full self-driving and other technologies [11][12]

Group 1: EU-India Free Trade Deal - The EU and India have finalized a free trade agreement after nearly two decades of negotiations, aimed at strengthening economic ties and countering U.S. trade policies under President Trump [1][2][3]. - European Commissioner President Ursula Vanderlayion referred to the agreement as "the mother of all deals," highlighting its significance [1]. Group 2: Market Reactions and Tariff Implications - The ongoing reliance on tariffs as a geopolitical tool by the U.S. suggests that trade policy volatility will continue to be a feature of the investment landscape [4][5]. - Markets are adjusting to the impact of tariffs, learning that they may not significantly affect growth or inflation as previously anticipated, partly due to strong U.S. profit margins [6][7]. - Recent tariff threats, such as the increase from 15% to 25% on South Korea, could have implications for sectors like automakers and pharmaceuticals, but markets have shown resilience [8][10]. Group 3: Earnings Reports and Investor Sentiment - Upcoming earnings reports from major U.S. companies, including Microsoft, Meta, Apple, and Tesla, are expected to be crucial for market direction, with a focus on earnings growth as a key driver for equity performance [11][12][14]. - There is a growing dispersion in the tech sector, with investors increasingly focusing on balance sheet strength, cash flows, and AI capital expenditures [12][13]. Group 4: Federal Reserve Outlook - The Federal Reserve's upcoming meeting is anticipated to focus on interest rate decisions, with no rate cuts expected in the near term, but potential for future cuts as inflation concerns ease [15][16][17]. - Discussions around productivity gains related to AI are expected to be a significant topic for the Fed, influencing future policy decisions [18][19]. Group 5: Airline Industry Insights - American Airlines reported a strong outlook for revenue growth, projecting a rise of 7% to 10% in the first quarter, despite challenges from recent storms [21][22]. - The airline industry is seeing a shift in consumer preferences towards premium services, with a focus on amenities and loyalty programs [26][27]. Group 6: Health Insurance Sector Challenges - UnitedHealth's recent performance reflects ongoing challenges in the managed care sector, with shrinking business segments and pressure from Medicare Advantage reimbursement rates expected to remain flat [40][56]. - The medical loss ratio (MLR) has been a significant concern, impacting profitability and investor sentiment in the health insurance industry [47][50]. Group 7: Boeing's Recovery and Future Prospects - Boeing reported a 57% increase in sales and generated cash for the second consecutive quarter, indicating a recovery in production and supply chain management [65][66]. - The company is working through challenges with its KC-46 tanker program, but overall, the outlook remains positive as production rates increase [70][77]. Group 8: Automotive Industry Dynamics - General Motors (GM) is positioned well in the U.S. auto market, benefiting from a strong demand for large SUVs and pickups, with a projected revenue increase [82][84]. - GM's strategy for electric vehicles (EVs) is evolving, with flexible production capabilities allowing for adjustments based on market demand [88][90].

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the **Chinese economy** and the **RMB (Renminbi) currency** dynamics, particularly regarding its appreciation and implications for economic rebalancing. Core Insights and Arguments - **RMB Appreciation and Economic Rebalancing**: The prevailing view that RMB appreciation will aid in rebalancing China's economy is contested. A significant appreciation could hinder the exit from deflation, negatively impact corporate margins, and slow wage growth. Sustainable rebalancing requires substantial fiscal easing to enhance consumption [2][6][34]. - **Current Macroeconomic Conditions**: The macroeconomic backdrop remains challenging, with a real GDP growth rate of 4.5% in Q4 2025, marking a three-year low. Deflationary pressures are expected to persist into 2026, indicating that significant currency appreciation is not warranted under current conditions [34][35]. - **Investor Sentiment**: There is a growing bullish sentiment among investors regarding RMB appreciation, driven by strong export performance. However, this optimism may not align with the economic realities that suggest a stable RMB is preferred by policymakers [6][7][16]. - **Trade Surplus and Currency Strength**: China's trade surplus has increased to 6.1% of GDP, up 1.6 percentage points over two years, driven by a rise in exports relative to GDP and a decline in imports. This strong external balance supports a modest appreciation of the RMB against the USD [16][19]. - **Historical Context**: The report draws parallels with Japan's experience in the 1990s, where significant currency appreciation exacerbated deflationary pressures and led to a loss of export competitiveness. This historical lesson suggests that RMB appreciation could similarly harm China's economic structure [41][50]. Additional Important Points - **Policy Measures**: The Chinese government aims to maintain the trade-weighted RMB index stable, with expectations of it remaining in the range of 98-99 by the end of 2026. There is no intent for sustained appreciation, as evidenced by the stable range maintained since 2016 [8][10]. - **Fiscal Policy Constraints**: Policymakers prefer investment-driven growth over consumption, viewing fiscal expansion for consumption as a temporary boost that increases debt burdens. This preference complicates efforts to achieve sustainable economic rebalancing [50][51]. - **Social Welfare Reforms**: While the 15th Five-Year Plan indicates a shift towards consumption, significant reforms are expected to be gradual due to their complexity. Targeted subsidies and social welfare improvements are anticipated, but addressing the core issues of social security for households will take longer [52][51]. - **Current Account Balance**: The current account surplus is projected to remain wide at 2.9% and 3.1% of GDP for 2026 and 2027, respectively, reflecting ongoing weak domestic demand and a high savings rate among households [28][27]. This summary encapsulates the critical insights from the conference call regarding the Chinese economy and RMB dynamics, highlighting the complexities and challenges faced in achieving sustainable economic rebalancing.

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Market Overview - Futures are higher, with S&P 500 futures up 0.3% and Nasdaq 100 contracts up 0.4%, driven by enthusiasm for technology stocks [1] - The Russell 2000 has outperformed the S&P 500 for ten consecutive sessions, showing a relative performance improvement of over 600 basis points this year [4] Corporate News - JB Hunt Transport Services Inc. reported a 4% decline in shares after quarterly revenue missed estimates, indicating ongoing weakness in freight demand [5] - Kraft Heinz shares fell 1.1% following a downgrade by Morgan Stanley to underweight [5] - Mosaic's shares dropped 6% due to a significant decline in North American fertilizer demand [5] - PNC Financial Services Group Inc. shares rose 3% after reporting a 9% increase in fourth-quarter revenue, surpassing analysts' expectations [5] - Regions Financial shares fell 4% after reporting lower EPS and total loans than expected, with a forecast of declining net interest income [5] Technology Sector - The Mag 7 stocks are mostly higher in premarket trading, with Nvidia up 0.8% and other tech firms like AMD and Microsoft also showing gains [3] - TSMC's strong earnings and capital expenditure forecast have fueled optimism regarding the AI boom [4] - OpenAI and Microsoft are facing legal challenges over claims related to funding and operational changes [3] Economic Indicators - The first week of the earnings season has seen 89% of the 28 companies reporting so far beating expectations, indicating a positive outlook for the broader economy [9] - US stock funds experienced inflows of $36.5 billion in the week ending January 14, reflecting investor confidence [10] - Yield premiums on corporate debt have narrowed significantly, with a record $435 billion in bonds issued in the first half of January [11] Central Bank Insights - Five regional Fed bank presidents indicated that the central bank is well-positioned to wait for further data before making rate cuts, with no changes expected at the upcoming meeting [12] - Fed officials have expressed a need to maintain a restrictive monetary policy to combat inflation [37] Global Market Trends - European stocks dipped slightly but are on track for their fifth consecutive weekly advance, with health care stocks outperforming [13] - Asian stocks rose, particularly in Taiwan, supported by TSMC's positive outlook for AI demand [15] - The Japanese yen strengthened as Finance Minister Katayama indicated readiness for potential currency intervention [16]

Core Viewpoint - China reported a record trade surplus of $1.189 trillion in 2025, driven by strong export growth and a strategic shift in focus to other markets due to U.S. tariff tensions [1][4]. Group 1: Export Performance - Outbound shipments increased by 6.6% year-on-year in December, surpassing economists' expectations of a 3.0% increase [4]. - Monthly export surpluses exceeded $100 billion seven times in the previous year, indicating resilience against U.S. trade policies [5]. - The auto industry saw a significant export increase of 19.4%, with pure electric vehicle shipments rising by 48.8% [7]. Group 2: Market Strategy - Chinese firms are shifting their focus to Southeast Asia, Africa, and Latin America to mitigate the impact of U.S. tariffs [2]. - Economists predict that China will continue to gain global market share, aided by the establishment of overseas production hubs for lower-tariff access to the U.S. and EU [6]. Group 3: Economic Implications - The record trade surplus raises concerns about China's trade practices and overcapacity, as well as the global reliance on Chinese products [3]. - Chinese leadership is increasingly aware of the need to balance exports with imports, as indicated by Premier Li Qiang's call for expanding imports [8].