By MacNicol & Associates In Morning Notes
December 4th, 2017
Daily Market Commentary
- Canadian stocks posted their biggest weekly drop in nearly three months, while the loonie rose the most since March on better-than-expected jobs and economic growth data. The S&P/TSX Composite Index lost 29 points or 0.2 percent to 16,038.97 Friday, bringing the total weekly drop to 0.4 percent, the most since early September. Technology and materials stocks were the biggest decliners on the week.
- Canada and China stopped short of launching free trade negotiations, agreeing instead to extend exploratory talks toward a deal. Prime Minister Justin Trudeau and Premier Li Keqiang canceled a joint press conference Monday, with each leader making a brief statement instead in which they pledged cooperation on climate change and clean growth. The two countries had been expected to kick off formal talks toward a free trade agreement, though officials had said right up until the last minute no decision had been made.
- Cascades today says it acquired four plants in Ontario to strengthen its position in the containerboard packaging sector and the purchase of a 33% ownership position in Tencorr Holdings.
- European stocks rebound from two-week low, led by a rally in banks and insurers after U.S. lawmakers passed corporate tax-cut legislation. The Stoxx Europe 600 Index rises 0.8 percent, after ending last week with a two-day rout. Financial firms rally on speculation that lower taxes in the U.S. will help boost their profits, while exporters also jump as the euro weakens against the greenback.
- The dollar made a strong start to the week, rising with Treasury yields and U.S. stock futures on the back of progress for the Republican tax-overhaul plan. The greenback recovered Friday’s losses and the yield on benchmark U.S. debt climbed back toward 2.4 percent after the Senate passage of corporate tax-cut legislation early on Saturday drew focus away from the investigation into connections between President Donald Trump’s aides and Russia.
- Japanese stocks fell as investors focused on an ongoing investigation into connections between Donald Trump’s presidential campaign and Russian meddling in the 2016 U.S. election. The Topix index retreated from the highest close in three weeks on Friday, as electronics makers and telecommunications shares were among the biggest drags on the benchmark. U.S. stocks fell on Friday after former national security adviser Michael Flynn pleaded guilty to lying to federal agents.
- Oil dropped below $58 a barrel as investors weighed an increase in U.S. drilling rigs against OPEC’s promise to extend output cuts through the end of next year. Futures fell as much as 1.2 percent in New York after adding 1.7 percent Friday. OPEC and its allies including Russia last week agreed to keep supply cuts in place and beefed up the extension with the inclusion of Nigeria and Libya. Executives from three of the biggest independent U.S. drillers said that while they won’t increase activity just because prices rise, they’ll still grow.
- Gold drops as the dollar climbs after Senate Republicans on Saturday approved a rewrite of the U.S. tax code, slashing corporate rates and providing temporary cuts for most Americans, stoking optimism over PresidentDonald Trump’s stimulus plans.
- Iron ore has rallied back into a bull market. Prices are surging as China’s crackdown on steel output this winter runs down inventories, helping mills’ profitability and stoking demand for high-grade ore even as investors discount signs of ample supply. Spot ore with 62 percent iron content jumped 3.7 percent to $72.68 a metric ton, the highest since Sept. 14, according to Metal Bulletin Ltd. That’s more than 20 percent up from the low hit in late October, meeting the common bull-market definition.
- CVS Health Corp.’s $67.5 billion takeover of Aetna Inc. will test the Trump administration’s approach to far-reaching corporate takeovers, just weeks after the U.S. government sued to block a major telecommunications merger. The health-care deal unveiled Sunday would create an industry giant with over $240 billion in annual sales with a hand in insurance, prescription drug plan administration, retail pharmacies and corner clinics. The companies said the combination will save $750 million in costs and bring consumers better, more efficient health care.
- Denmark’s biggest insurance company Tryg A/S has agreed to buy Alka in a deal worth 8.2 billion kroner ($1.3 billion) that it says will provide access to better digital solutions to keep customers happy. Tryg said the deal will deepen its presence in Denmark’s non-life market, which is its main business. The agreement includes excess capital of 2.5 billion kroner, valuing Alka’s operations at 5.7 billion kroner, Tryg said in a statement on Monday.
- Prysmian SpA agreed to buy U.S. rival General Cable Corp. in a $3 billion deal that strengthens its position as the world’s largest maker of industrial cables and extends a wave of consolidation in the market. Milan-based Prysmian will pay $30 a share in cash, it said in a statementMonday. That represents a premium of about 81 percent to the General Cable closing price of on July 14, the trading day before the Highland Heights, Kentucky-based firm said it was reviewing strategic options including a sale.
- KazMunaiGas Exploration Production JSC announced a share buyback of as much as $2 billion, which could pave the way for an initial public offering of its parent, Kazakhstan’s state-owned oil and gas producer. The London and Astana-listed exploration and production unit offered to buy back its outstanding global depositary receipts for $14 each, a premium of almost 24 percent to their 30-day weighted average price, KMG EP said Monday in a statement. If the buyback gives parent KazMunayGas National Co. at least 75 percent of the voting rights, it will make the same offer for common shares. Should both legs of the buyback be successful, KMG EP said it will consider delisting.
- Xiaomi Corp., the Chinese smartphone maker that was once the most valuable startup in the world, is in talks with investment banks about a possible initial public offering and seeking a valuation of at least $50 billion, according to people familiar with the matter. The Beijing-based company is considering an offering as soon as next year with banks suggesting Hong Kong as the most likely destination.
- China is planning to extend a tax rebate on the purchase of new-energy vehicles after the incentive helped the country become the world’s biggest market for clean fuel automobiles, according to people with direct knowledge of the matter. China’s government will continue to exempt the 10 percent purchase tax on new-energy vehicles at least through 2020, the people said, asking not to be identified discussing information that’s private. The current tax rebate policy is due to expire at end of this year. The Ministry of Finance didn’t immediately respond to a fax seeking comments.
- Toys “R” Us Inc. plans to shut at least 26 U.K. stores as the retailer goes through bankruptcy proceedings in the U.S. The closures, starting in spring 2018, will pare rents on warehouse-size stores and let the company focus on better-performing small shops and online operations, according to an emailed statement on Monday. The U.K. arm will pursue a Company Voluntary Arrangement, a type of court-led insolvency proceeding.
- Rio Tinto Group named industry veteran Simon Thompson as chairman after shareholders rejected a plan to install a renowned dealmaker — reinforcing an industry-wide investor drive for higher returns and caution over project spending. Thompson, 58, a Rio director since 2014 and previously an executive director at Anglo American Plc, will succeed Jan du Plessis from March 5, London-based Rio said Monday in a statement. Du Plessis, who’s held the post since 2009, is stepping down after taking up the same position at BT Group Plc.
- Greece’s economy expanded for a third straight quarter for the first time in more than a decade, providing a foundation for the country’s attempts to exit its bailout program next year. Gross domestic product grew 0.3 percent in the three months through September after expanding a revised 0.8 percent in the previous quarter, the Hellenic Statistical Authority said in a statement on Monday. From a year earlier, GDP grew 1.3 percent.
- The owner of Godiva chocolates hired four advisers for an initial public offering of its Turkish discount-grocery unit that could raise about $800 million, according to people with knowledge of the matter. Istanbul-based retailer Sok Marketler Ticaret AS is expected to be valued at about $2.5 billion, said two people, who asked not to be identified because the plan isn’t public. That compares with an estimate last month of more than $3 billion. No final decisions have been made and the valuation may change because it is still early in the process, the two people said.
- SG Holdings Co. is set to complete Japan’s biggest initial public offering this year after pricing the listing at the top of the targeted range. Based on the IPO price of 1,620 yen per share, the company will raise up to 127.6 billion yen ($1.13 billion) from the IPO. The shares will debut on Tokyo’s exchange on Dec. 13. That would beat the share offering of conveyor-belt sushi restaurant operator Sushiro Global Holdings Ltd. in March that raised 69.5 billion yen.
- Chinese manufacturer Yue Yuen Industrial Holdings Ltd.will vie with regional buyout firms in the final bidding for Trimco International Holdings Ltd., a Hong Kong-based maker of garment labels that could fetch about $500 million, people with knowledge of the matter said.
- Repsol SA is considering options including a potential sale of its $4.4 billion stake in Spanish gas distributor Gas Natural SDG SA, people familiar with the matter said, a move that could help the country’s biggest oil firm raise cash and invest in areas such as renewables. The deliberations, which are preliminary, include a partial or full sale of the 20 percent stake in Gas Natural to one or several investment funds, the people said, asking not to be identified as the matter is private. No final decisions have been made, and Repsol may also decide to retain the stake, the people said.
*All sources from Bloomberg unless otherwise specified