By MacNicol & Associates In Morning Notes
December 5th, 2017
Daily Market Commentary
- Canadian stocks declined the most in three weeks, reversing an earlier advance as falling commodity prices weighed on the materials and energy sectors. The S&P/TSX Composite Index slipped 0.4 percent to 15,969.03. Materials stocks fell 1.2 percent as gold prices retreated and copper prices were flat. Ivanhoe Mines Ltd. lost 3.9 percent.
- Canada’s largest housing market continues to see prices fall amid a widening pool of homes for sale, though there are signs the correction is beginning to lure in some new buyers. The Toronto Real Estate Board’s benchmark home price index fell for the sixth consecutive month, down another 0.4 percent from October. The index has fallen 8.8 percent since May — the largest six-month decline in the history of data back to 2000. For the first time since 2009, the average price of a home sold in Toronto — at C$761,757 ($600,991) in November — failed to surpass levels from a year earlier.
- Governor Stephen Poloz is expected to stay on hold at his last interest-rate decision of 2017, capping a year that saw the Bank of Canadastart the delicate process of raising borrowing costs to more normal levels. Investors are assigning a 20 percent chance of an increase at the decision Wednesday, with a statement to be released at 10 a.m. Ottawa time. Only four of 26 economists surveyed by Bloomberg News expect Poloz to increase his 1 percent benchmark rate, with all major Canadian banks expecting a pause.
- Roots total sales increased by 13.0% to $89.7 million from $79.4 million in Q3 2016. Sales in the Direct-to-Consumer (“DTC”) segment were $77.2 million, a 14.0% increase, as compared to $67.7 million in Q3 2016. The strong DTC segment results were driven by comparable sales growth of 10.1%, and the opening of four net new corporate retail stores since Q3 2016. We have also renovated or expanded five corporate retail stores since Q3 2016, including the expansion of our store within Yorkdale Shopping Centre, Toronto, Ontario, which became our first enhanced experience store in Canada.
- Canadians may soon be able to purchase medical marijuana through a major pharmacy chain’s website. Leamington, Ontario-based Aphria Inc. said Monday in a statement that it agreed to supply Shoppers Drug Mart, part of retail group Loblaws Cos. The weed is expected to be sold online as current Canadian regulations restrict the sale of cannabis in retail pharmacies.
- Bank of Montreal raised its quarterly dividend as it reported its fourth-quarter profit slipped compared with a year ago, hurt by reinsurance claims related to hurricanes Irma, Maria and Harvey. The bank says it will now pay a quarterly dividend of 93 cents per share, up three cents from the previous quarter. The increase in the payment to shareholders came as BMO reported its fourth-quarter net income fell to $1.23 billion or $1.81 per share, down from $1.35 billion or $2.02 per share a year ago.
- European stocks dipped, trimming the previous session’s sharp gains amid a renewed selloff in tech stocks globally and as weaker metal prices weighed on mining shares. The Stoxx 600 is down 0.1%, remaining in a range between its 50-DMA and 200-DMA started in mid-November.
- In the U.S., House and Senate lawmakers are poised to begin working on compromise tax-overhaul legislation — a key step in their drive to send a bill with tax cuts for corporations and individuals to President Donald Trump by the end of the year. A global stock rally that has led indexes to record highs has stalled so far this month as investors lock in profits in tech stocks, the year’s best performers, and switch to firms seen benefiting most from a potential reduction in the corporate tax rate such as banks.
- Asian stocks fell as a global rotation out of technology shares weighed on the regional equities gauge. The MSCI Asia Pacific Index dropped 0.1 percent to 169.57 as of 4:36 p.m. in Hong Kong after swinging between gains and losses at least 16 times. Declines in technology shares, poised for their longest string of daily losses since May 2016, offset an advance in consumer staples, industrial and utilities shares. Still, the regional information technology sub-index is set for its best year since 2009.
- Oil steadied near $57 a barrel before data on supply and demand in the U.S., the world’s biggest fuel consumer. Futures were little changed in New York after dropping 1.5 percent Monday, the most in three weeks. OPEC’s November output slid to the lowest in six months, led by declines from Angola and Kuwait, according to a Bloomberg survey. Inventories probably fell by 2.5 million barrels last week, a separate Bloomberg survey showed before an Energy Information Administration report Wednesday.
- Gold holds decline as investors weigh U.S. tax reform progress, failed Brexit talks between the U.K. and EU. Gold futures declined as the dollar climbed after Senate Republicans on Saturday approved a rewrite of the U.S. tax code, stoking optimism over President Donald Trump’s stimulus plans.
- Wall Street banks are known to fiercely compete for hedge-fund clients because of the lucrative trading profits they provide. The U.S. Securities and Exchange Commission is now investigating whether some banks crossed the line to win business by offering hedge funds bogus price quotes on hard-to-value bonds, said two people familiar with the matter. The SEC’s concern: As a reward for helping hedge funds make money — by submitting quotes at requested levels — banks got trades steered their way.
- The U.K.’s Cineworld Group Plc agreed to buy U.S. theater operator Regal Entertainment Group for about $3.6 billion to expand into the biggest movie market. The $23-a-share deal comes a week after the companies confirmed news reports of takeover discussions, jolting cinema-operator stocks. The price represents a 26 percent premium to Regal’s close on Nov. 27, the day before discussions became public.
- Special prosecutor Robert Mueller zeroed in on PresidentDonald Trump’s business dealings with Deutsche Bank AG as his investigation into alleged Russian meddling in U.S. elections widens. Mueller issued a subpoena to Germany’s largest lender several weeks ago, forcing the bank to submit documents on its relationship with Trump and his family, according to a person briefed on the matter, who asked not to be identified because the action has not been announced.
- European Union finance ministers will discuss U.S. legislation to slash taxes at a meeting in Brussels Tuesday and whether the new plan violates international trade rules. The centerpiece of the tax bill that passed the U.S. Senate over the weekend is a reduction in the corporate tax rate to 20 percent from 35 percent. The bill still needs to be reconciled with a version passed by the House of Representatives before it can be signed into law by President Donald J. Trump.
- Petroleo Brasileiro SA has signed a $5 billion loan agreement with China Development Bank as the oil producer looks for opportunities to stretch out its debt payment schedule. The 10-year loan will be disbursed in December and January, and Petrobras plans to pay off $2.8 billion it owes the development bank from a 2009 loan, it said in a filing Tuesday. The agreement will extinguish a 200,000 barrel a day oil supply deal at preferential terms with Unipec Asia Company, and Petrobras has signed a new 10-year contract to supply Unipec 100,000 barrels a day at market rates.
- U.K. Prime Minister Theresa May was confronted with a seemingly impossible choice after interventions from Scotland’s political leaders: rewrite her Brexit plans, tear up the United Kingdom or risk getting no deal with the European Union. Scottish First Minister Nicola Sturgeon called on the opposition Labour Party to work together to change the terms of Brexit. She seized the opportunity thrown up on Monday by May’s failure to bridge the gap between the demands on each side of the Irish border over future customs arrangements.
- China is set to extend a 10 percent tax rebate to buyers of new energy autos as manufacturers from BMW AG to Tesla Inc. vie for a greater share of the world’s biggest market for clean-fuel cars, according to people with knowledge of the plan. The rebate was due to expire at the end of this year and will now run through at least 2020, said the people, who asked not to be identified discussing private information. The Ministry of Finance didn’t respond to a fax seeking comments.
- 21st Century Fox Inc., the global film and TV company controlled by the Murdoch family, would prefer to sell some assets to Walt Disney Co. because it’s a better strategic fit and presents fewer regulatory hurdles, people familiar with the matter said. The family is holding talks with Disney, as well as Comcast Corp., about combining certain media businesses with the potential buyers, said the people, who asked not to be identified because the discussions are private. The assets would include the 20th Century Fox film and TV studio and Fox’s stake in the U.K. pay-TV provider Sky Plc, they said. They don’t include Fox News, the Fox broadcast network or the Fox Sports 1 channel.
- China’s frenzied construction of roads, bridges and subways is set for a major slowdown, adding a headwind to economic growth in 2018. The nation’s fixed-asset investment in infrastructure will grow 12 percent next year, according to the median estimate in a Bloomberg survey, down from almost 20 percent in the first ten months this year. All 18 economists in the survey anticipated a moderation, adding to reports by Morgan Stanley, Goldman Sachs Group Inc. and UBS Group AG predicting a similar trend.
- American Airlines Chief Executive Officer Doug Parker is investing more than $1 billion to mend tattered labor relations at the world’s largest carrier. A recent spat with pilots is prompting some analysts to question whether he’s getting his money’s worth. The aviators’ union warned last week that more than 15,000 flights were at risk of being scrubbed during the busy holiday season after a scheduling snag left many trips without crews. American promised extra pay for pilots willing to fly. As customer angst about potential cancellations mounted, the company further sweetened its offer before finally reaching a union staffing deal.
*All sources from Bloomberg unless otherwise specified