By MacNicol & Associates In Morning Notes
December 7th, 2017
Daily Market Commentary
- Canadian stocks closed little changed, with declines in commodity stocks offset by increases in most other sectors, after a roller-coaster day that saw the benchmark swing a total of about 1 percent from losses to gains and back again. The S&P/TSX Composite Index slipped 5 points or less than 0.1 percent to 15,910.63. Energy stocks fell 1.1 percent as oil tumbled the most in two months, the result of a surge in U.S. gasoline inventories.
- Canadian Prime Minister Justin Trudeau said he would consider one-on-one talks with the U.S. on trade, if negotiations to update the North American Free Trade Agreement fail. The prime minister, who was in the southern Chinese city of Guangzhou to wrap up a five-day visit, said the 23-year-old Nafta “needs to be updated” and warned that canceling the pact would harm Canadians. His comments followed the unexpected breakdown in Canada’s efforts to launch free-trade talks with China, with officials saying the two sides would continue discussions.
- Since crude prices sank below $100 a barrel three years ago, investors in oil stocks have been sending one clear message to companies: Nowhere is this more apparent than in Canada, where the benchmark index’s top-performing, post-crash energy producer — Parex Resources Inc. — is a small company focused on extracting one commodity from one geographic region. Parex is one of only four stocks in the 50-company S&P/TSX energy index that have gained since July 30, 2014, the last day oil closed above $100 a barrel.
- European stocks are little changed following a two-day decline, with corporate news driving the biggest share moves. The Stoxx Europe 600 gains 0.1%. Technology shares rebound after investors resumed their profit-taking on Wednesday, while miners follow iron ore lower.
- The dollar advanced and Treasuries steadied as progress continued toward negotiating a final U.S. tax bill with Republican lawmakers. A bout of profit taking this week came to an end Wednesday as U.S. traders took advantage of the dip in technology stocks, this year’s biggest winners. Investor focus has also started to turn to efforts to avert a U.S. government shutdown Saturday and the latest progress on tax reform.
- Asian stocks rebounded, ending an eight-day slide after the recent rout in global stocks abated. The MSCI Asia Pacific Index added +0.4 percent to 167.88 as of 4:48 p.m. in Hong Kong. The measure rallied from a six-week low, with technology and consumer staple shares contributing to gains. Japan’s Topix index rose 1.2 percent, boosted by electronic companies and automakers.
- Oil held losses near $56 a barrel after falling the most in two months as U.S. gasoline stockpiles expanded more than expected, offsetting a third weekly decline in crude inventories. Futures were little changed in New York after tumbling 2.9 percent Wednesday, the biggest daily drop since Oct. 6. Motor-fuel stockpiles rose by 6.78 million barrels last week for a fourth weekly advance, according to Energy Information Administration data. That’s more than double the most bearish estimate in a Bloomberg survey. U.S. oil output increased to a record.
- Gold declines to lowest level in four months with Federal Reserve likely to increase rates at next week’s policy meeting, curbing demand for non-interest bearing assets.
- China’s foreign-exchange reserves increased for a 10th month in November amid continued stability in the yuan. The world’s largest foreign-currency stockpile climbed $10.1 billion to $3.12 trillion, the People’s Bank of China said Thursday, in line with estimates in Bloomberg’s survey.
- Germany’s Social Democrats are testing support for a renewed alliance with Chancellor Angela Merkel with a party convention vote that’s a crucial hurdle in her quest for a fourth term. Party leaders are asking delegates to back a proposal on Thursday to begin preliminary talks with Merkel without immediately setting a rerun of a “grand coalition” government as a goal. That’s because polls suggest most rank-and-file members don’t want to have the SPD serve as junior partner to Merkel’s Christian Democrat-led bloc for another four years.
- GVC Holdings Plc is in advanced talks to acquire U.K. bookmaker Ladbrokes Coral Group Plc for as much as 3.9 billion pounds ($5.2 billion), as gambling companies seek greater scale in a business that’s shifting online. GVC is offering 160.90 pence a share in cash and stock, plus a contingent value right worth as much as 42.80 pence a share, the companies said in a statement Thursday. That would represent a premium of 50 percent to Wednesday’s closing price for Ladbrokes.
- President Donald Trump will meet with congressional leaders from both parties Thursday to negotiate on a long-term budget deal as Congress prepares to pass a stopgap spending measure to avoid a U.S. government shutdown Saturday. The House is expected to vote on a two-week spending bill to keep the government open through Dec. 22, with Senate action coming by Friday. That measure is intended to buy time for Congress and the president to agree on overall levels for defense and non-defense spending for the next two years.
- General Electric Co. is planning to cut 12,000 jobs in its power business as the company’s new leaders look to slash costs and stabilize the beleaguered manufacturer. The reductions, accounting for about 18 percent of GE Power’s workforce, include both professional and production employees, the company said Thursday in a statement. The world’s largest maker of gas turbines said the unit needs to become leaner as customers turn away from fossil fuel-based energy sources.
- Bitcoin climbed as much as 14.9 percent on Thursday as it surged above $15,000, extending this month’s advance to more than 50 percent. The price of the cryptocurrency touched $15,242.99, a record, according to Bloomberg pricing. ASX Ltd., the main exchange operator for equities and derivatives in Australia, on Thursday said it will start using blockchain to process equity transactions.
- Steinhoff International Holdings NV extended a record rout as concerns over an accounting scandal outweighed its efforts to stay afloat by selling assets. The global furniture and clothing retailer said it was considering boosting liquidity by selling assets worth at least 1 billion euros ($1.2 billion). It confirmed that Chief Financial Officer Ben La Grange remains in his position, saying there’s no evidence he was involved in matters being investigated internally and by authorities in Germany, where the company has its primary stock listing.
- Indonesia’s central bank will bar financial technology companies from using digital currencies on their platforms as a global frenzy around bitcoin continues to lure more investors. The curbs, effective from Jan. 1, won’t apply to trading of digital currencies, Bank Indonesia Deputy Governor Sugeng told reporters in Jakarta on Thursday. The ban on use of virtual currencies for transactions is part of a new set of rules for fintech companies, which mandates digital payment system providers should seek a central bank license, he said.
- With at least $323 billion in infrastructure spending in the pipeline in Southeast Asia and potentially more expected over the next few years, 2018 could well shape up as the year of builders’ stocks from Indonesia to the Philippines that have been the laggards in a broader market rally this year. Governments are boosting spending on everything from airports to high-speed rails and ports to increase connectivity and boost economic growth in what promises to be a boon for the region’s construction companies. In one of the more ambitious programs in the region, Philippine President Rodrigo Duterte has earmarked an unprecedented $180 billion for infrastructure to keep driving one of the world’s best-performing economies over coming years.
- The world’s biggest banks may lose as much as 15 percent of their revenue from trading stocks in Europe as a result of new rules overhauling the industry that take effect next month, according to research firm Coalition Development Ltd. Total revenue from corporate and investment banking across Europe, the Middle East and Africa is forecast to slide 2.6 percent as a result of the revised Markets in Financial Instruments Directive, or MiFID II, including the slump in cash equities, the research shows. Fixed-income trading and banking, which account for the vast majority of revenue, will fall 4.2 percent and 1.7 percent respectively under the rules, Coalition said.
- Noble Group Ltd., the embattled commodities trader, faces several significant deadlines as it wrestles with a $3.5 billion debt restructuring. Once Asia’s largest commodity trader, Noble’s decline since 2015 has been marked by losses, concern it won’t be able to pay its debt and accusationsfrom long-time foe Iceberg Research that it inflated the value of some contracts. The next few weeks will be crucial, as Noble looks to push its debt restructuring through.
- China’s monetary authority met with policy lenders and big commercial banks this week to assess the bond market’s year-end supply and demand situation, according to people familiar with the matter. China Development Bank and Agricultural Development Bank of China said they may reduce their issuance plans, according to one of the people, all of whom asked not to be identified as they aren’t authorized to speak to the media. CDB said it will be flexible in its issuance based on market conditions, the same person said.
- It took more than a decade, but California has a new law requiring extensive labeling of ingredients in cleaning products, and it got support from what might seem the unlikeliest of advocates: product manufacturers themselves. Companies like Procter & Gamble Co. and Easy-Off maker Reckitt Benckiser Group Plc, after years of arguing the need to preserve their proprietary formulas in detergents and oven cleaners, came to the table with lawmakers and health and environmental groups and ultimately signed on.
*All sources from Bloomberg unless otherwise specified