By MacNicol & Associates In Morning Notes
April 6th, 2018
Daily Market Commentary
- Canada’s equity benchmark gained as Canadian crude prices rose to the highest since 2015, sending energy shares up the most since November. The S&P/TSX Composite Index added 192 points or 1.3 percent to 15,356.05, rebounding from three days of losses. Energy shares jumped 3.4 percent, with Suncor Energy Inc. up 4.7 percent and Canadian Natural Resources Ltd. gaining 4.1 percent.
- Senior ministers from the three Nafta countries are gathering in Washington amid growing signs of optimism that they could find common ground on the toughest issues. U.S. Trade Representative Robert Lighthizer will meet with his Mexican and Canadian counterparts Friday, the first such high-level trilateral negotiating session since March 5. Talks have warmed considerably, raising hopes of some kind of agreement in principle soon despite warnings that key gaps remain.
- WSP Global Inc., a Canadian builder that’s bought more than 100 companies since 2006, will consider selling bonds for the first time as it seeks its next deal. The engineering company would consider a “transformational” acquisition in such areas as infrastructure, transportation, environmental services or mining, said Chief Financial Officer Bruno Roy. WSP served as the structural engineer for London’s Shard tower and has a hand in the revamp of New York’s LaGuardia Airport, as well as construction of a $1 billion telescope in Chile.
- European equities decline for a third session in four days amid a renewed focus on trade tensions between the U.S. and China after notching their biggest gain in 21 months Thursday. The Stoxx 600 falls 0.5%, with automaker and mining shares leading declines. U.S. stock-index futures also drop. Defensive utilities shares are the only industry group in the green in Europe. Dufry AG rises 3.4%, among the best Stoxx 600 performers, after its dividend was seen to be at the upper end of expectations.
- U.S. equity futures pared losses after tumbling Thursday evening in New York as President Donald Trump ordered the U.S. Trade Representative to consider an additional $100 billion in tariffs on Chinese products. China said in response that it would counter U.S. protectionism “to the end, and at any cost.” S&P 500 Index futures fell as much as 1.6 percent, before trimming the drop to 0.7 percent. Futures contracts on the Dow Jones tumbled 1.9 percent and Nasdaq declined as much as 1.7 percent, before staging partial rallies.
- Oil headed for its worst week in more than a month after U.S. President Donald Trump called for tariffs on more Chinese goods, souring investor optimism that tensions between the world’s two largest economies will ease with negotiations. Futures fell as much as 1.1 percent in New York and are set for a 2.6 percent drop this week. Trump ordered his administration to consider levies on an additional $100 billion in imports from the Asian nation, spurring a flight from risk assets on concern a full-blown trade war will deter global economic growth. That was only a day after both American and Chinese officials signaled they’re willing to talk about the escalating conflict.
- Gold erased earlier gains as the dollar advanced after President Donald Trump ordered his administration to consider imposing tariffs on an additional $100 billion in Chinese imports.
- Zinc could jump to $4,000 in the next few months, the highest level in more than a decade, on strong Chinese demand and ore shortages, according to Japan’s top smelter, which increased its outlook for the year. The metal used to galvanize steel will probably average $3,200 a metric ton in the year that started April 1, more than the $2,800 estimated in January,Osamu Saito, general manager of metals sales at Mitsui Mining & Smelting Co., said in an interview in Tokyo. Zinc traded at $3,234 in London on Friday.
- China said it would counter U.S. protectionism “to the end, and at any cost,” as a war of words over President Donald Trump’s proposed tariffs on Chinese imports escalated. The statement from Beijing came after Trump ordered his administration to consider tariffs on an additional $100 billion in Chinese goods on Thursday, sending U.S. stock futures tumbling. The U.S. president cited “China’s unfair retaliation” in response to his list of proposed tariffs earlier this week covering $50 billion in Chinese products.
- Samsung Electronics Co. reported a 58 percent surge in profit, topping projections as demand for its memory chips remained strong enough to outweigh concerns about display supplies to Apple Inc. Operating income rose to 15.6 trillion won ($14.7 billion) in the three months ended March, according to preliminary results released Friday from the Suwon, South Korea-based company. That compares with the 14.5 trillion-won average of analysts’ estimates compiled by Bloomberg. Sales for the first quarter climbed to 60 trillion won, compared with the 61.3 trillion won average projection compiled by Bloomberg.
- Treasury funds have attracted the biggest inflows in more than two years in the strongest sign yet a risk-off mood is gaining momentum, according to Bank of America Merrill Lynch. Some $4 billion went into government/U.S. Treasury funds in the week through April 4, the bank said in a report, citing data from EPFR Global. Investors pulled out $7.2 billion from stock funds, including $9.9 billion from the U.S. and $2.4 billion from Europe, while Japanese and emerging-market equity funds saw inflows.
- The start of spring has heralded the return of liquefied natural gas to the U.K. As seasonal demand wanes in Asia, the key buying region for the fuel, cargoes from countries including Qatar and Russia have started arriving on British shores. In total 11 ships will unload from March 7 through Sunday, versus just seven in the four months through February. Recent imports included the inaugural cargo from the second U.S. facility to export shale gas. The Cove Point facility in Maryland is almost a third closer to Britain than Sabine Pass on the Gulf Coast, cutting transport costs.
- Asian dollar bonds handed investors the worst first-quarter returns in two decades in 2018, as rising short-term interest rates cause some investors to unwind bets. Dollar-denominated notes in Asia ex-Japan lost 1.3 percent in the three months through March 31, according to an ICE BofAML index, the biggest decline for the gauge since its inception in late 1996. The three-month London inter-bank offered rate reached 2.32 percent this week, following a 62-basis point advance in the first quarter.
- A top Deutsche Bank AG investor has reached out to Bank of America Corp.’s Christian Meissner as a potential replacement for Chief Executive Officer John Cryan, according to people familiar with the discussions. The approach was made in recent weeks, said the people who declined to be identified because the details are private. Meissner, who heads the U.S. firm’s global corporate and investment bank, is not currently interested in the Deutsche Bank role, the people said.
- Facebook Inc. is putting tighter controls on data flowing through its giant social network in response to the worst privacy crisis in its history. Rather than hurt the company, this will ultimately give Facebook and rival Google more power over a digital advertising market they already dominate, industry executives and analysts say. The crackdown started last week after revelations a consulting firm that worked on Donald Trump’s presidential campaign improperly accessed information on millions of Facebook users. The first victims were data brokers like Acxiom Corp. and Oracle Corp.’s Data Cloud that sell information marketers use to target ads on the world’s largest social network. Facebook is scrapping the targeting tool and will stop sharing anonymous information the brokers use to measure ad performance.
- An investor group including Kushner Cos. is set to receive a loan of about $600 million from JPMorgan Chase & Co. to build a residential tower in Brooklyn, New York. About 95 percent of the planned development project is owned by CIM Group, a private Los Angeles-based investment firm. The remainder is owned by Kushner Cos. and LIVWRK, a developer that has frequently partnered with the family company of Jared Kushner, son-in-law and senior adviser to President Donald Trump. The two smaller owners would reap half of the $23 million in fees for developing the building.
- China’s tariffs in one corner of the energy market signal U.S. shale fields may follow the nation’s farms as a target if a trade war escalates. Beijing on Wednesday took aim at America’s rural heartland by proposing levies on politically sensitive farm commodities such as soybeans, which were among 106 U.S. products targeted. The list also included petrochemicals and liquefied propane, indicating that the world’s biggest oil buyer is willing to use energy as a weapon to retaliate against planned American duties on its high-tech goods.
- Spanish Prime Minister Mariano Rajoy’s bid to put the Catalan independence push behind him and forge a working majority in parliament suffered a blow Thursday when a German court ordered former regional President Carles Puigdemont freed on bail. The court in Schleswig-Holstein declined to consider a Spanish judge’s request to have Puigdemont extradited on rebellion charges but said he might still be sent to Madrid to face trial for corruption. He was ordered to pay 75,000 euros ($92,000) in bail, the court said in a statement. German prosecutors earlier this week had backed the Spanish request.
- Eni SpA is in talks to sell a stake in its giant oil discovery in Mexico to Qatar Petroleum International, according to people with knowledge of the plans. The Italian oil major, which currently holds 100 percent of the offshore find in Campeche Bay and expects to start production in early 2019, would sell 20 percent to 35 percent to Qatar Petroleum, the people said, asking not to be named because the negotiations aren’t public. Eni is also in talks with other potential suitors, the people said.
- Coincheck Inc., the cryptocurrency exchange that lost about $500 million of customer deposits to hackers in January, was acquired by Monex Group Inc. in a deal that sent shares of the Japanese retail brokerage soaring to a five-year high.
- Chinese peer-to-peer lender Weidai Hangzhou Financial Information Service Co. is planning an initial public offering that could raise about $400 million, according to people with knowledge of the matter. Weidai, which means “microlending” in Chinese, aims to sell shares in the U.S. as soon as this year, the people said, asking not to be identified because the information is private. Customers can use Weidai’s platform to borrow money with their automobiles as collateral. The site also provides unsecured cash lending and financing for car purchases.
*All sources from Bloomberg unless otherwise specified