By MacNicol & Associates In Morning Notes
April 5th, 2018
Daily Market Commentary
- Canadian stocks closed slightly lower on a roller-coaster day as investors evaluated and reevaluated a growing trade spat between the U.S. and China. The S&P/TSX Composite Index lost 16 points or 0.1 percent to 15,164.37, the lowest in nearly two months, after earlier falling as much as 1.3 percent. The rebound wasn’t as dramatic as the one in stocks south of the border, where the S&P 500 Index swung nearly three percentage points and closed higher.
- The Trump administration has softened a key Nafta demand for more North American content in car manufacturing — a potential olive branch on arguably the biggest sticking point as the U.S. pushes to reach a stopgap deal this month, according to three people familiar with the talks. The U.S. proposal would distinguish between different Nafta car parts by grouping them into five categories, some of which would have a lower requirement for North American content or none at all, said the people, who spoke on condition of anonymity because they’re not authorized to discuss the negotiations publicly.
- European stocks advance for the first time this week, following global peers higher, as traders grow more optimistic that the U.S. and China will step back from a full-blown trade war. The Stoxx 600 climbs 1.6% with mining, tech and autos leading gains. Representatives from China and the U.S. left the door open for a negotiated solution to trade disputes after tariff announcements from both sides rattled markets earlier this week.
- U.S. equity futures also advanced after the S&P 500 Index on Wednesday erased a loss to close up 1.2 percent. The dollar strengthened while safe-haven assets including the yen slipped. Stocks regained a measure of poise after representatives from the U.S. and China left the door open for a negotiated solution to avoid tariff proposals that aren’t set to take effect for several months.
- Asian equities rose following U.S. peers higher as fears of trade tensions between the U.S. and China eased. China and Hong Kong were closed for a holiday. MSCI Asia Pacific Index gained 0.6 percent to 171.89 as of 2:47 p.m. in Hong Kong, led by healthcare shares. Most of major markets from Japan to South Korea gained, except New Zealand. The Japanese yen weakened against the U.S. dollar for a third day.
- Oil held near $63 a barrel after U.S. crude stockpiles declined and trade tensions between the U.S. and China showed tentative signs of easing. Futures were little changed in New York. U.S. oil inventories shrank the most since January, according to government data Wednesday, in contrast to a forecast expansion. Risk assets, including equities, rallied as Chinese and American officials indicated they’re willing to negotiate on escalating frictions, helping to calm fears that a trade war could derail the strongest global growth in years.
- Gold drops as concern ebbs over a full-blown trade war between U.S. and China after both countries indicate they’re willing to talk.
- Euro-area economic momentum slowed to the weakest level in more than a year, adding to warning signs that the region’s upswing has passed its peak. A composite Purchasing Managers’ Index dropped nearly two points in March, the most since 2012, when the 19-nation bloc was mired in recession. Growth in manufacturing cooled to an eight-month low last month, and sluggish orders in the region’s largest economy suggest there’s little additional strengthening in store.
- Facebook Inc. said data on most of its 2 billion users could have been accessed improperly, giving fresh evidence of the ways the social-media giant failed to protect people’s privacy while generating billions of dollars in revenue from the information. The company said it removed a feature that let users enter phone numbers or email addresses into Facebook’s search tool to find other people. That was being used by malicious actors to scrape public profile information, it said.
- Spanish property company Hispania fell the most in almost two years after Blackstone Group LP offered to buy the company at a discount to its share price. A fund managed by the U.S. private-equity firm offered 1.9 billion euros ($2.3 billion) for the Madrid-based landlord, whose shareholders include Soros Fund Management LLC and Paulson & Co. Hispania had risen almost 11 percent in the past week on bid speculation. Bloomberg News reported Wednesday that Blackstone was considering an offer.
- Barclays Plc’s ratings were cut by Moody’s Investors Service, citing concerns about earnings at the investment bank after the British lender split its riskier trading activities from its retail operations. Barclays overall debt rating was cut to one level above junk by Moody’s on Wednesday, which said the bank will face “ongoing profitability challenges” on top of the negative impact of ring-fencing. The bank’s 1 billion euros ($1.2 billion) of 1.375 percent senior unsecured bonds were little changed on Thursday, largely because executives had flagged a likely downgrade earlier in the year, according to analysts at Investec Plc.
- The U.K. Financial Conduct Authority wants asset managers to disclose more information about how they measure their performance, ramping up pressure on active funds to justify their charges. Fund managers may have to explain why they compare themselves with particular benchmarks and also might need to provide an estimate of transaction costs for some products, the supervisor said in a statement on Thursday. That would allow retail investors to more closely compare funds across the industry.
- India’s lenders, already struggling with $210 billion of stressed assets, got a respite from the nation’s central bank as the regulator delayed implementation of tighter accounting norms by a year. Prime Minister Narendra Modi’s government is yet to finalize required changes in law for implementing IndAS — based on the IFRS9 standards created in the aftermath of the financial crisis — that was to be implemented from this month, the Reserve Bank of India said in a statement on Thursday. Moreover, many banks weren’t fully prepared to implement the new norms, according to the statement that announced the one year deferment.
- India’s central bank kept interest rates unchanged for the fourth straight meeting and cut its inflation forecast citing lower food prices, sparking a renewed rally in the bond market. Reserve Bank of India Governor Urjit Patel and his monetary policy committee retained the benchmark repurchase rate at 6 percent on Thursday, as predicted by all 42 economists in a Bloomberg survey. Five of the six-member MPC voted for the decision, while one sought a hike.
- Commodity trader Mercuria Energy Group Ltd. may leverage a stake in one of Australia’s largest ever energy takeovers to further its own ambitions to become a heavyweight liquefied natural gas trader. The Swiss company, one of the world’s biggest oil traders, may create a new partnership with Harbour Energy Ltd. to sell the U.S. group’s uncontracted LNG if a A$13.5 billion ($10.3 billion) offer to buy Adelaide-based Santos Ltd. is successful, according to consultancy Wood Mackenzie Ltd. Mercuria declined to comment.
- Hammerson Plc delayed its planned takeover of rival U.K. shopping-mall owner Intu Properties Plc after itself becoming a takeover target. The offer, which values Intu at about 3.5 billion pounds ($4.9 billion), would create Britain’s largest publicly traded landlord. Hammerson said it will instead await clarity from Paris-based Klepierre SA, which has until April 16 to make a formal offer for Hammerson.
- Fewer Spotify Technology SA holders sold shares in the company’s direct listing Tuesday than expected by advisers, potentially contributing to an initial shortage that drove the price up, people familiar with the matter said. Spotify’s stock opened at $165.90 at 12:43 p.m. in New York and climbed as high as $169 a few minutes later. Just 5.6 million shares changed hands at the opening price, or 5 percent of the total number potentially available to trade, according to data compiled by Bloomberg. About 30.5 million shares were traded before the stock closed 10 percent below its opening price at $149.01.
- Takeda Pharmaceutical Co.’s Christophe Weber is contemplating a deal for all of Shire Plc, saying size is not an obstacle to a “mindful” acquisition, according to analysts on a call with the CEO of the Japanese company. Weber hosted an analyst meeting on Thursday to discuss Takeda’s disclosure last week that it’s considering an offer for Shire, according to notes from UBS Group AG and Credit Suisse Group AG. Weber sees a deal, which could be worth as much as$50 billion, as an opportunity for accelerating Takeda’s growth, helping to transform Japan’s biggest drugmaker into a global leader, UBS wrote.
- Binani Cement Ltd. lenders will entertain a local tycoon’s last-minute $1.1 billion bid for the insolvent Indian company, people with knowledge of the matter said. The committee of creditors decided at a meeting Wednesday it would be willing to support the proposal, which would see Binani Cement sold to billionaire Kumar Mangalam Birla’s UltraTech Cement Ltd., according to the people. The banks plan to tell Binani Cement’s parent company that they could give their backing if it first obtains relevant approvals, the people said, asking not to be identified because the information is private.
- UBS Group AG’s Andrea Orcel is doubling down on a pledge to ramp up the Swiss bank’s presence in Wall Street dealmaking, vowing to recruit marquee bankers. Orcel, president of the firm’s investment bank, said in an interview that he’s pursuing “a very aggressive plan for the U.S.” — a region where the firm has sought to hire in recent years while struggling to win more market share handling mergers and acquisitions. The current strategy isn’t to make the business bulkier so much as to assemble leading teams for specific sectors, such as retail, software and aerospace, he said.
- UTAC Holdings Ltd., the Singapore-based chip testing firm backed by Affinity Equity Partners and TPG, is exploring options for a sale of its business after completing a bond restructuring, people with knowledge of the matter said. The company met potential advisers in recent weeks to discuss options that could include an initial public offering or sale, according to the people. Its owners could seek a valuation of about $1 billion including debt from any exit, the people said, asking not to be identified because the information is private.
- Vision-Box SA, a Portuguese maker of automated border control systems found at airports including London’s Heathrow, will start planning in 2020 for an initial public offering as it sees greater need for automation at flight terminals. “Airports can’t scale up at the speed at which passenger numbers are growing, not even if they build more terminals,” Chief Executive Officer Miguel Leitmann said in an interview in Lisbon. “So there has to be a level of automation. And that’s our market. The automation of U.S. airports is something that’s happening now.”
*All sources from Bloomberg unless otherwise specified