August 2nd, 2017

 

Daily Market Commentary

 

 

Canadian Headlines

• Profit margins slipped at CGI Group Inc. as the Canadian technology-services provider hired more people to develop products for clients that want more operations online. The margins declined a half percentage point from a year earlier to 9.8 percent, the Montreal-based company said in a statement Wednesday. Earnings, excluding some items, rose to 93 cents a share, compared with the 94 cents projected by analysts. Revenue topped estimates at C$2.84 billion ($2.26 billion).
• Cineplex Inc. says it earned $1.4-million in its latest quarter, down from a year ago, even as its revenue improved. The movie theatre company says the profit amounted to two center per diluted share for the quarter ended June 30 compared with a profit of $7.2-million or 12 cents per diluted share a year ago. (Globe and Mail)

 

 

World Headlines

• Mining and oil shares weighed on Europe’s benchmark equity index as crude fell for a second day and most industrial metals traded lower. The euro, coming off its best month since March 2016, reached a new two-and-a-half-year high against the ailing dollar.
• Asian stocks fluctuated, with technology shares buoyed by Apple Inc.’s forecast while raw-material producers followed commodity prices lower. The MSCI Asia Pacific Index fell 0.1% to 161.27 as of 4:38 p.m. in Hong Kong after swinging between gains and losses at least 20 times.
• U.S. oil traded near $49 a barrel as industry data showed crude stockpiles unexpectedly expanded, adding to a glut. Futures slid as much as 1.2 percent in New York after losing 2 percent Tuesday, the first drop in seven sessions. Inventories rose by 1.78 million barrels last week, the American Petroleum Institute was said to report.
• Gold traded near the highest price since mid-June as lingering weakness in the dollar enticed investors to increase holdings in exchange-traded funds for the first time in eight sessions.
• Iron ore’s rally to above $70 a metric ton is bringing out the naysayers. Prices that have already been very volatile this year are now at risk of declines should the advance spur an increase in mine supplies, according to India’s biggest steel producer.
• The White House is preparing to open a broad investigation into China’s trade practices, according to people with knowledge of the Trump administration’s plans, amid growing worries in the United States over a Chinese government-led effort to make the country a global leader in microchips, electric cars and other crucial technologies of the future.
• The yen fell to an 18-month low against the euro as improving corporate earnings boosted risk sentiment and Japanese stocks. Momentum funds have been constant buyers of the euro against the yen, which then triggered leveraged buy-stops for the dollar-yen pair at above 110.80.
• India cut interest rates to the lowest since 2010 to boost an economy struggling to recover from Prime Minister Narendra Modi’s cash clampdown. The benchmark repurchase rate was lowered to 6 percent from 6.25 percent, the Reserve Bank of India said in a statement in Mumbai on Wednesday. The move was predicted by 41 of 57 economists in a Bloomberg survey with the rest seeing no change. It retained its neutral policy stance.
• Europe’s oil industry is once again generating cash even as crude languishes at half the price of three years ago. Yet companies remain vulnerable to a renewed downturn. The region’s top three — Royal Dutch Shell Plc, Total SA and BP Plc — can now cover spending from cash flow with oil at $50 a barrel. But BP predicts prices will drop this year, while Shell talks of a “lower forever” view. A fresh slump could put dividends at risk, and investors know it.
• Wonder Woman’s big-screen heroics delivered big profits for Time Warner Inc. The parent of the Warner Bros. studios, CNN and HBO, which is awaiting approval to be acquired by AT&T Inc., reported second-quarter earnings that beat analysts’ estimates. The company’s Warner Bros. studio has seen box-office sales rise thanks to the summer superhero feature “Wonder Woman,” with domestic receipts up 9.6 percent this year.
• The Bank of England shouldn’t wait until Brexit has happened to raise rates, according to the National Institute of Economic and Social Research. While the central bank is likely to keep policy unchanged when it announces its latest decision and forecasts on Thursday, it will probably raise the benchmark rate by 25 basis points in the first quarter of 2018.
• Jacobs Engineering Group Inc. agreed to buy CH2M HILL Companies Ltd. for $2.85 billion in cash and stock, adding a consulting company that’s worked on infrastructure projects including the 2012 London Olympics and an expansion of the Panama Canal.
• Thyssenkrupp AG is considering a radical breakup plan as a possible alternative to the proposed combination of its European steel operations with India’s Tata Steel Europe Ltd., according to people familiar with the matter.
• Saudi Arabia aims to sell about 5 percent of Saudi Aramco in an initial public offering next year, and stock exchanges from the U.K. to Japan are vying for what may be the world’s richest IPO. The Saudi crown prince, Mohammed bin Salman, will soon decide where to sell the company’s shares after government officials heard a presentation on the listing process last week.
• Commerzbank AG reported its weakest quarterly revenue since 2014 as it struggled to make money from new clients under a plan by Chief Executive Officer Martin Zielke to focus on the retail and corporate business. Revenue at Germany’s second-largest listed bank fell 7.7 percent to 2.07 billion euros ($2.45 billion), Commerzbank said Wednesday in a statement from Frankfurt, the lowest since the fourth quarter of 2014.
• Thailand’s swelling current-account surplus, low inflation and buoyant baht are exerting a magnetic pull on bond investors. Foreign funds pumped a net $1.2 billion into Thai debt over Monday and Tuesday, the biggest two-day inflow in a year. The nation reported a June current-account excess of $4.3 billion on Monday, almost double the median estimate.
• Bharti Airtel Ltd., India’s largest wireless carrier, is considering selling about a 3 percent stake in its tower unit through an institutional share sale, people with knowledge of the matter said. The shares are worth about 22.4 billion rupees ($350 million) based on Tuesday’s closing price.
• Kosmos Energy Ltd., an oil and gas producer that trades in New York, plans to pursue a secondary listing on the London Stock Exchange to diversify its shareholder base. The $2.5 billion explorer with operations from Suriname to Ghana hopes to get increased analyst coverage and thereby attract more investors. Bloomberg News reported the company’s intention to add a London listing last month.
• One of Europe’s biggest transport companies, DSV A/S of Denmark, is looking for sizable new targets just one year after buying UTi Worldwide Inc., its biggest takeover to date. Chief Executive Officer Jens Bjorn Andersen says size matters, with a value of at least $1 billion being the scale DSV is exploring.
• Deutsche Bank AG envisions shifting almost half its U.K. positions to the European continent over coming years as the lender’s Brexit plans take shape, people briefed on the matter said. Most of the 4,000 positions will move to Frankfurt and Berlin under the bank’s base case scenario, the people said, asking not to be identified discussing internal planning.
• Foxconn Chairman Terry Gou is considering tripling his U.S. investment budget to $30 billion, President Donald Trump said while outlining “off-record” remarks made by the billionaire founder of Apple Inc.’s biggest manufacturing partner. Foxconn Technology Group, the main assembler of the iPhone, unveiled last week plans to build a $10 billion display plant in Wisconsin, hiring as many as 13,000 people for a project Trump touted as a victory for his “America First” effort to brings jobs back to the U.S.
• Japan’s negative interest rates are turning into a positive in BNP Paribas SA’s eyes, as it joins other European banks in strengthening its markets business in the nation. France’s biggest bank has hired about 30 people in Tokyo since January in areas such as sales of structured products, and it plans to recruit more this year, people with knowledge of the matter said, asking not to be identified because the undertaking is confidential.
• China-backed Yancoal Australia Ltd. will raise $2.5 billion in equity to fund the purchase of Rio Tinto Group’s Australian coal assets, with its parent Yanzhou Coal Mining Co. tipping in $1 billion. Glencore Plc, which will jointly operate some of Rio’s Coal & Allied operations in the Hunter Valley with Yancoal, will contribute $300 million. Two Chinese investment groups, China Cinda Asset Management Co. and Shandong Lucion Investment Holdings Group Co., committed a further $1 billion to the entitlement offer.
• PharMerica to be bought by newly formed company controlled by KKR, with Walgreens Boots Alliance for $29.25/shr in cash.

 

 

*All sources from Bloomberg unless otherwise specified