By MacNicol & Associates In Morning Notes
December 22nd, 2017
Daily Market Commentary
- Canadian stocks closed at a record high for the second consecutive day, while the loonie and bond yields surged amid faster-than-expected inflation and retail sales growth. The S&P/TSX Composite Index added 23 points or 0.1 percent to reach 16,182.63 on lower-than-normal volume. Energy shares rose 0.7 percent as crude prices gained 0.5 percent and the discount for Western Canadian oil narrowed. Financials added 0.2 percent and materials edged up 0.1 percent. Paramount Resources Ltd. was the biggest gainer on the benchmark, rising 7 percent.
- Canada’s market for initial public offerings flourished in 2017 despite a drop in overall equity sales, as a lack of large transactions and fewer energy deals dragged down volumes. Total Canadian equity and equity-linked issuances fell 22 percent to about C$39.7 billion ($31 billion) through Dec. 21, down from a record C$50.7 billion last year, according to data compiled by Bloomberg. Despite the decline, 2017 totals remained above the previous five-year average of about C$37.5 billion, the data show.
- European stocks hold steady, while Spanish shares slide after pro-independence parties won back control of Catalonia in the country’s regional elections. The Stoxx Europe 600 Index is little changed, holding a weekly drop on the last trading day before the Christmas holiday. Spain’s IBEX 35 Index retreats the most among European equity benchmarks, heading for its worst daily drop in almost two months. Spanish banks CaixaBank and Banco de Sabadell were among the worst performers.
- Hong Kong equities climbed to mark their best week in two months as property companies led the advance on bets this year’s earnings will be strong. Shanghai’s benchmark snapped a five-week losing streak. Hang Seng Index added 0.7% at the close local time, taking this week’s rally to 2.5%, the most since five-day period ended Oct. 6. The Shanghai Composite Index edged 0.1% lower, marking a 1% gain since last Friday; its five-week slide was the longest since May
- The FTSE 100 Index delivered an early Christmas gift on Friday, with gains putting the British benchmark on course for yet another record close on the last day of trading before the festivities. Closing above 7,600 points for the first time on Thursday, the FTSE’s 3.8-percent rally this month — helped by renewed sterling weakness — is beatingeuro-area peers that remain in the red for December. That’s small consolation for investors as it’s still poised to end the year as the worst-performing major European index.
- Boeing Co. is considering a “potential combination” with Brazil’s Embraer SA, the companies said, setting the stage for a blockbuster deal that would expand the U.S. aerospace giant’s reach into the highly competitive market for smaller jets. The options include a joint venture that would enable the companies to cross-sell their complementary lineups of commercial jets and negotiate better deals with suppliers, said a person familiar with the matter. Such a partnership would stop short of a politically risky takeover by Boeing, said the person, who asked not to be named because the talks are private.
- Oil headed for the first weekly advance in a month as U.S. crude stockpiles fell to the lowest level in more than two years and the pace of production gains slowed. Front-month futures slid 0.5 percent in New York, trimming the weekly gain to 1.4 percent. Crude supplies slid last week to 436.5 million, the lowest level since October 2015, according to U.S. government data Wednesday.
- Gold heads for second weekly advance even as bond yields climb, with trading muted before holiday period. Bullion for immediate delivery little changed at $1,267.79/oz by 10:05am. Prices +11% this year after +8.1% in 2016
- The Senate gave final approval Thursday night to a short-term extension of federal funding to keep the government running for three more weeks while shoving a raft of fiscal and policy fights into the new year. The spending measure, which now heads to President Donald Trump for his signature, would maintain current levels of spending through Jan. 19 and provide $4.5 billion in emergency funding for missile defense work as well as other Pentagon expenses. It passed the Senate 66-32 after winning approval in the House 231-188.
- A U.S. lawmaker is calling for tougher scrutiny of billions of dollars of investments by HNA Group Co., including possibly revoking approval of earlier deals, adding to the headwinds the Chinese conglomerate is facing over what some regulators call an opaque ownership structure. Representative Robert Pittenger, a Republican from North Carolina, demanded attention to allegations by a U.S. company that HNA provided “knowingly false, inconsistent, and misleading information” about its ownership and links to the Chinese government during a review of a $325 million deal. Pittenger is one of the sponsors of a bill to help broaden the powers of the Committee on Foreign Investment in the U.S., known as CFIUS.
- Bitcoin plunged by as much as a fifth on Friday as the frenzy surrounding digital currencies faced one of its biggest tests yet. The world’s largest cryptocurrency sank as much as 21 percent, briefly trading below $13,000, as this week’s selloff entered a fourth day with increasing momentum. Other cryptocurrencies also tumbled, with bitcoin cash crashing 32 percent and ethereum losing 25 percent over the past 24 hours, according to coinmarketcap.com.
- Iron ore’s getting into the Christmas spirit. Futures rallied to the highest in three months, helping shares of the world’s largest mining company jump to a 2015 high, as steelmakers in China replenish stockpiles to prepare for a rebound in demand after a winter clampdown on output eases. In Singapore, SGX AsiaClear futures climbed as much as 2.7 percent to $73.94 a metric ton, and traded at $73.68 at 3:49 p.m., set to close at a September high.
- GVC Holdings Plc agreed to buy U.K. bookmaker Ladbrokes Coral Group Plc for as much as 4 billion pounds ($5.4 billion) as gambling companies seek greater scale in a business that’s shifting online. Investors will receive as much as 207.2 pence for every Ladbrokes share, the companies said in statements Friday. That would be 19 percent higher than Thursday’s closing price. Ladbrokes shares rose as much as 0.9 percent in early trading Friday, while GVC fell as much as 1.6 percent.
- India’s benchmark equity indexes climbed to new peaks on optimism the federal budget will boost infrastructure and rural spending while providing tax relief to citizens. The S&P BSE Sensex rose 0.6 percent and the broader NSE Nifty 50 Indexgained 0.5 percent in Mumbai, capping a third consecutive week of gains. Sixteen out of the 19 sectoral sub-indexes compiled by BSE Ltd. advanced, with a gauge of software exporters gaining the most.
- Indian conglomerate Adani Enterprises Ltd. needs as much as A$3 billion ($2.3 billion) in debt financing to help start producing Australian coal from one of the world’s largest mines, after major banks from Sydney to New York said they don’t want to lend to polluting fossil-fuel projects. The company is seeking A$2 billion to A$3 billion from lenders, including from banks in China, for the first phase of developing the Carmichael mine and a rail line in Australia’s northeastern state of Queensland, according to a person with knowledge of the matter. In addition, the firm plans to inject as much as A$3 billion in equity funding for the project, the person said, asking not to be identified because the details are private.
- A picture of inflation-squeezed consumers and Brexit-wary companies emerged in the U.K.’s latest overview of its economy. Annual growth in the third quarter slowed to 1.7 percent, slightly higher than previously estimated but still the weakest pace in 4 1/2 years, the Office for National Statistics said on Friday. The economy expanded an unrevised 0.4 percent from the second quarter, well below the rates seen before the European Union referendum 18 months ago.
- Deutsche Telekom AG agreed to acquire Liberty Global Plc’s Austrian division in a deal with an enterprise value of 1.9 billion euros ($2.3 billion), giving the German phone giant a landline business to complement its wireless network in the neighboring country. The Bonn-based company is making the deal through its T-Mobile unit. The valuation is equal to 6.8 times the acquired business’s estimated 2018 earnings before interest, taxes, depreciation and amortization, Deutsche Telekom said Friday. A completion of the deal is subject to regulatory approval, which isn’t expected until the second half of 2018.
- Italian consumer confidence rose to the highest in almost two years, as campaigning heats up for elections early next year. Household sentiment increased to 116.6 in December from a revised 114.4 the month before, statistics agency Istat said Friday in Rome. The median in a survey of 13 analysts called for this month’s household gauge to be 114.6.
- Spanish bonds dropped, dragging down Europe’s periphery, after separatists won back control of Catalonia’s parliament and opened the door to further political uncertainty in the nation’s largest regional economy. The yield on 10-year securities rose to a one-month high following the vote, where pro-independence parties won 70 seats in the 135-strong assembly.
*All sources from Bloomberg unless otherwise specified