By MacNicol & Associates In Morning Notes
December 1st, 2017
Daily Market Commentary
- Canadian stocks gained as energy shares surged the most in a year, offsetting a decline in the financial sector. The S&P/TSX Composite Index rose 100 points or 0.6 percent to 16,067.48. Energy stocks jumped 2.6 percent, the biggest gain since Nov. 30, 2016, as OPEC and its allies agreed to extend production cuts to the end of 2018.
- National Bank of Canada posted a strong fourth-quarter profit and, unlike its peers so far this quarter, raised its dividend. National’s profit climbed to $525-milliom, or a $1.39 a share, diluted, from $307-million or 78 cents a year earlier. (Globe and Mail)
- It’s a muted start to the month for European stocks, after they wrapped up November with their second-worst rout of the year. The Stoxx Europe 600 Index adds less than 0.1%, with gains in energy shares outweighing losses for retailers and financial firms. All eyes will be on a delayed U.S. tax-bill vote Friday, after a weak dollar pressured Europe’s exporters. Even so, the FTSE 100 and DAX are among the region’s best performers.
- The greenback is struggling after the U.S. Senate suspended voting on the tax bill until Friday as it emerged a key compromise to win a majority had collapsed, leaving Republicans scrambling to salvage the legislation. Markets have become sensitive to any progress on the reforms, which may give fresh impetus to the equity bull run into the final weeks of the year.
- Asia’s benchmark stock index was set to complete its worst week since December last year as investors weighed the fate of proposed tax cuts in the U.S. The MSCI Asia Pacific Index fell less than 0.1 percent to 170.34 as of 4:45 p.m. in Hong Kong. Tencent Holdings Ltd. was today’s biggest drag, dropping 3.3 percent amid concern a recent rally was excessive. Telecommunications services and information technology shares fell most among 11 subgroups.
- Oil extended gains following a third monthly advance after OPEC and Russia agreed to prolong production cuts through to the end of 2018 in their fight against a global supply glut. Futures added 0.6 percent in New York after rising 0.2 percent Thursday. The nine-month extension was strengthened with the inclusion of Nigeria and Libya, two OPEC members originally exempted from the curbs.
- Gold set for weekly decline as good economic data and the U.S. tax cut plan hurt demand for haven assets. Gold’s trading around the most expensive level relative to silver since April 2016. The yellow metal has dropped about 1 percent this week, while silver has lost 3.6 percent, the biggest weekly loss in almost five months. Silver tends to rise more than gold in a bull market for precious metals and fall more quickly in a bearish market.
- Iron ore stockpiles at China’s ports expanded to a record as steel mills in the top consumer are compelled to reduce output to ensure clean air during winter, paring demand at the same time that seaborne supplies are poised to increase.
- U.K. factories recorded their strongest growth in more than four years in November, with firms recording strong domestic and export demand. The picture in IHS Markit’s latest manufacturing Purchasing Managers Index follows a similarly upbeat report from the Confederation of British Industry, whose monthly factory-orders index is at the highest since 1988.
- The U.K. is pushing back against European Union demands to make a better offer on its divorce terms by Monday Dec. 4, amid signs that any breakthrough in Brexit talks is at risk.
- A second daily surge in Europe’s overnight benchmark rate, which banks use to provide loans to one another, sparked widespread speculation among traders about the trigger, though there were no signs of wider funding stress.
- U.K.’s Cineworld Group Plc is nearing an agreement to buy U.S. cinema operator Regal Entertainment Group for about $3.6 billion to tap into the world’s largest market, according to people familiar with the matter. Cineworld and Regal, controlled by billionaire Philip Anschutz, could reach a deal as early as Monday, the people said, asking not to be identified because the deliberations are private. Cineworld’s all-cash $23 a share offer has the backing of Anschutz, the people said. Talks, though advanced, could still fall apart, they said.
- Chancellor Angela Merkel and the leader of the Social Democrats, Martin Schulz, agreed to keep talking as they stepped up joint efforts to break an impasse over forming Germany’s next government. Merkel told her Christian Democratic Union party’s board during a call on Friday that she and Schulz would continue to hold discussions on a way out of the political stalemate, according to a participant. The talks will remain open as to what options are possible for the two parties to pursue, the person said, asking not to be identified because the discussion between the leaders was private.
- Banco Popular SA, the Spanish lender acquired for one euro earlier this year by Banco Santander SA, agreed to sell a U.S. unit to Banco de Credito e Inversiones to bolsters its balance sheet. Popular will sell its entire stake in Florida-based Totalbank for $528 million, the Madrid-based bank said in a Spanish regulatory filing on Friday. Popular will record a 170 million euro ($202 million) capital gain on individual accounts from the sale, with a positive impact of 60 basis points on its CET1 fully-loaded capital ratio, according to the filing. The sale will contribute 5 basis points to Santander’s CET1 ratio.
- Akzo Nobel NV would consider a new round of negotiations on an all-share merger with Axalta Coating Systems Ltd. after rival suitorNippon Paint Holdings Co. failed in its attempted cash purchase of the U.S. supplier of car finishes, according to a person familiar with the matter.
- An Indian overseeing committee has approved a proposal submitted by a group of lenders, led by State Bank of India, to restructure an 82.85 billion rupees ($1.3 billion) debt of Bajaj Hindusthan Sugar Ltd. As per the plan, the company’s debt of 47.89 billion rupees will be considered as “sustainable”, while the rest will be treated as “unsustainable”, India’s top sugar maker said in a statement to stock exchanges on Friday. A loan is considered as sustainable when a company is able to service it from its cash flow.
- China’s securities watchdog said it’s given mutual funds guidelines for investing in Hong Kong stocks, just days after reports it was cracking down on flows into the market triggered an equity selloff there. The China Securities Regulatory Commission issued rules on the registration and inspection process of mutual funds that trade Hong Kong equities via so-called stock connects from the mainland, spokeswoman Gao Li said at a briefing in Beijing Friday. The guidelines further clarify rules around funds’ investment allocations, the disclosure of information and employee arrangements, she said, without providing specifics on the rules.
- Nissan Motor Co. is seeking compensation from India, saying the government failed to keep its end of the bargain on promised tax breaks after wooing the Japanese automaker to set up a factory in the South Asian country. The Yokohama-based carmaker has started international arbitration against the Indian government, a Nissan spokesman said Friday. The company wants $770 million in payments and damages, Reuters reported Friday, citing a person familiar with the matter. Nissan sent a legal notice to Prime Minister Narendra Modi last year after making repeated requests, the report said.
- The two biggest utilities in the U.K. could be ripe for takeovers as shares have slumped under the pressure of political intervention and increasing competition in the energy retail market. If bids were to emerge for Centrica Plc and SSE Plc, private equity funds would be the most likely suitors, according to analysts from RBC Europe Ltd. to Agency Partners Ltd. Centrica, which last week had its biggest one-day decline in two decades, is the biggest loser on the nation’s main stock index this year after a 38 percent slide. SSE has plunged 12 percent.
- Toshiba Corp. and Western Digital Corp. are close to settling their legal dispute under an agreement that the U.S. company will drop efforts to block Toshiba’s $18 billion sale of its flash-memory business in exchange for the extension of their joint venture agreements, according to people familiar with the matter.
- On the surface, Thursday’s OPEC meeting was a no-drama success. The group of oil nations agreed to extend year-old production cuts through the end of 2018 to help boost prices, no small achievement. Yet as smooth as the gathering seemed to go, the deal actually left all the big questions unanswered, meaning that the real drama will commence next year.
- Federal Reserve Bank of Cleveland President Loretta Mester brushed aside concerns over a flattening yield curve while expressing some worry over elevated stock market valuations, saying both were reasons for continued interest rate hikes.
- Broadcom Ltd. isn’t planning to increase its $105 billion offer for Qualcomm Inc. ahead of a proposal next week to replace directors on its board, according to people familiar with the matter. Broadcom doesn’t anticipate increasing its $70-a-share offer until closer to Qualcomm’s board meeting in March, said the people, who asked not to be identified because the matter is private. Broadcom plans to nominate directors to Qualcomm’s board ahead of a Dec. 8 deadline, the people said.
- Deutsche Lufthansa AG offered concessions in an attempt to allay European Union concerns that its takeover of most of the assets ofAir Berlin Plc could harm competition and increase the price of German flights. The European Commission confirmed on Friday that Lufthansa had put forward a package of so-called remedies, automatically extending the regulator’s deadline to rule on the deal to Dec. 21.
- A fund managed by BlackRock Inc. agreed to buy 752 megawatts of operating U.S. wind farms from the U.K. private equity company Terra Firma Capital Partners Ltd. The seven power plants were developed by Terra Firma wind company EverPower Wind Holdings Inc., according to a statement Friday. The London-based private-equity firm is also seeking to sell EverPower’s 3-gigawatt portfolio of projects under development. With this deal, BlackRock Real Assets has invested about half of a $1.6 billion fund dedicated to renewable-energy assets. It has almost $5 billion under management and is looking to add to that portfolio.
*All sources from Bloomberg unless otherwise specified