By MacNicol & Associates In Morning Notes
December 14th, 2017
Daily Market Commentary
- Canadian stocks closed at a record high as materials shares surged the most since August, led by gold miners. The S&P/TSX Composite Index rose 23 points or 0.1 percent to 16,136.59. Materials jumped 2.4 percent as gold and silver prices rose. The U.S. Federal Reserve said it expects to hike rates three times next year, easing fears of a faster pace of monetary tightening. Kinross Gold Corp. gained 6.8 percent and Goldcorp Inc. added 5.6 percent.
- Cenovus Energy Inc. says it is planning to cut about 15 per cent of its workforce as it looks to reduce costs next year. The company says it expects to find savings in areas such as drilling performance, development planning and optimized scheduling of oilsands well start-ups. The cuts come as Cenvous says it plans between $1.5 billion and $1.7 billion in capital spending next year, mostly in the oilsands.
- Online giants such as Alphabet Inc.’s Google and Facebook Inc. are facing off against Hollywood studios and record labels over how to update the North American Free Trade Agreement to protect copyright in the digital age. Silicon Valley is pushing for exceptions to copyright rules for online platforms and Internet service providers it says are needed to keep content flowing on the web. Meanwhile, the U.S. government seems to be taking positions favored by companies such as Walt Disney Co. and Time Warner Inc., which are lobbying for stronger protections for copyright owners.
- Clean energy is coming to Canada’s oil patch. The government of Alberta — home to the world’s third-largest oil reserves — on Wednesday auctioned off 595 megawatts of renewable energy capacity to be built in the province. That exceeded the government’s target of 400 megawatts. The process marks a major step for Alberta — Canada’s largest consumer of coal and its second-largest producer of the fuel — in its efforts to transition to all renewable and gas-fired generation by 2030.
- Stocks in Europe dropped as investors await the outcome of the last European Central Bank meeting of the year. Both the Stoxx Europe 600 Index and the FTSE 100 Index are down 0.2%, led by banks. The euro and the pound strengthened against the dollar late yesterday after Federal Reserve Chair Janet Yellen said low inflation could end up being “permanent.”
- The dollar halted a decline sparked by the Federal Reserve’s unchanged outlook for rate increases in 2018, while Treasuries fell. Meanwhile, the Fed stuck with a projection for three rate hikes in the coming year after raising its benchmark rate by a quarter percentage point. While the U.S. central bank lifted its estimate for growth in 2018 to 2.5 percent from 2.1 percent, it still didn’t see inflation accelerating.
- A benchmark of Asian stocks rose after the Federal Reserve raised its outlook for U.S growth while keeping its forecast for three interest rate increases in 2018. The MSCI Asia Pacific Index increased 0.1 percent to 171.01 as of 4:54 p.m. in Hong Kong, paring an earlier gain of as much as 0.5 percent as banks fell, offsetting gains in healthcare and materials stocks.
- Oil traded below $57 a barrel as the International Energy Agency said OPEC-led production cuts aimed at clearing a global glut may falter next year. Futures were little changed in New York after falling 2.4 percent the previous two sessions. While a glut in developed markets has shrunk, new supply from competitors including U.S. shale might grow faster than demand next year, thwarting efforts to drain what remains of a global surplus, the IEA said in its monthly report.
- Gold extends biggest daily advance in three weeks as Federal Reserve sticks to projection for three interest-rate increases in 2018, easing concerns that central bank may tighten at quicker pace amid signs of strengthening economy.
- Bank of England policy makers left interest rates unchanged on Thursday, moving into a holding pattern after November saw their first hike in a decade. The Monetary Policy Committee reiterated that “further modest increases” in the key rate would probably be needed over the next few years if the economy performed as expected, without providing additional detail on the timing. The rate was held at 0.5 percent, as predicted by all economists in a Bloomberg survey.
- Walt Disney Co. agreed to a $52.4 billion deal to acquire much of the global empire that media baron Rupert Murdoch assembled over three decades, from a fabled Hollywood studio to Europe’s largest satellite-TV provider to one of India’s most-watched channels. Holders of Murdoch’s 21st Century Fox Inc. will get 0.2745 Disney shares for each Fox share held, for assets including its film studio, a 39 percent stake in Sky Plc, Star India, and a lineup of pay-TV channels that include FX and National Geographic, Disney said in a statement.
- U.K. Prime Minister Theresa May is headed to a European summit that was set to approve the breakthrough victory in Brexit talks she celebrated last week. Instead, she arrives after a serious defeat at the hands of her own party. Lawmakers voted 309 to 305 on Wednesday evening to change her government’s planned legislation so that it guarantees they will get a “meaningful vote” on the final deal to leave the European Union at the end of negotiations in 2019.
- Atos SE is pressing forward with its unsolicited bid to buy Gemalto NV even after the security-software maker’s board unanimously rejected the 4.3-billion-euro ($5.1 billion) offer. Atos’s offer “significantly” undervalues the company, Gemalto said in a statement late Wednesday in which it also cited doubts about strategic rationale, uncertainty about integration and insufficient guarantees that a deal would go through to the end. Atos in response reaffirmed it wants to do the transaction and maintained its terms, effectively giving its approach a hostile turn.
- China’s central bank edged borrowing costs higher after the Federal Reserve’s decision to tighten monetary policy. Hours after the Fed’s quarter percentage-point move, the People’s Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility, though making smaller adjustments than the U.S. central bank. China also boosted rates on another policy tool, the standing lending facility, according to two people familiar with the matter, who asked not to be named as they’re not authorized to talk to media.
- Steinhoff International Holdings NV revealed that its accounting errors stretch back into 2016, highlighting the extent of wrongdoing at the clothing and furniture retailer that’s led to an unprecedented stock slump over the last week. Earnings for this year and last will have to be restated, the South African retail giant said in a statement late Wednesday, prompting the shares to slide anew. The issues relate to “the validity and recoverability of certain Steinhoff Europe balance-sheet assets,” it said. The announcement comes days before Steinhoff is due to meet with banks to navigate a way out of its crisis, which has wiped more than 10 billion euros ($11.8 billion) off the value of the company.
- Danske Bank A/S has agreed to buy the Danish pension operations of SEB AB as Denmark’s biggest lender expands its asset management business. Danske’s Danica unit will pay 6.5 billion kroner ($1 billion) for the SEB assets, according to a statement on Thursday. SEB said the deal helps it reduce its exposure to market risk and improve its capital ratio. The deal marks the first major purchase by Danske since it bought Sampo in 2006.
- Royal Dutch Shell Plc picked its joint venture with Brazilian sugar and fuels giant Cosan SA as the winning bidder for its refining and products distribution assets in Argentina, according to three people with direct knowledge of the talks. Raizen Combustiveis SA, a 50-50 partnership between Cosan and Shell, is currently negotiating the final details of the deal worth between $1 billion and $1.1 billion, said two of the people, who asked not to be named discussing ongoing talks.
- Deutsche Bank AG is selling its Polish retail operations to Banco Santander SA’s local subsidiary for 305 million euros ($360 million), part of Chief Executive Officer John Cryan’s plan to raise additional capital through asset sales.
- Indonesia’s central bank left its benchmark interest rate unchanged as expected, saying eight rate cuts since the start of last year was sufficient to drive a recovery in Southeast Asia’s biggest economy.
- Kare Schultz, Teva Pharmaceutical Industries Ltd.’s new chief executive officer, announced plans to slash a quarter of the embattled drugmaker’s workforce and suspend its dividend to pare costs, pacify lenders and ease its debt burden. The goal is to reduce expenses by $3 billion by the end of 2019, the company said in a statement on Thursday.
- State Grid Corporation of China is in talks to acquire a 20 percent stake in Germany’s 50Hertz Transmission GmbH, one of Germany’s biggest electricity networks, in a potential 800-million euro ($946 million) deal, people familiar with the matter said. State Grid is in discussions with IFM Investors to buy half the Australian fund’s 40 percent of 50Hertz.
- Building the $27 billion Yamal liquefied natural gas project meant shipping more than 5 million tons of materials to construct a forest of concrete and steel 600 kilometers north of the Arctic circle, where temperatures can drop to -50 degrees celsius and the sun disappears for two months straight. Yet those challenges weren’t as tough as the U.S. sanctions imposed in 2014, forcing a complete refinancing just as construction was about to start. Jacques de Boisseson, head of the Moscow office of French energy giant Total SA, which has a 20 percent stake in Yamal LNG, said there were “various moments” when he thought the project may never happen.
*All sources from Bloomberg unless otherwise specified