By MacNicol & Associates In Morning Notes
February 13th, 2018
Daily Market Commentary
- Canadian stocks rebounded from two weeks of steep declines, gaining the most since July 2016, but still lagged their U.S. counterparts. The S&P/TSX Composite Index added 207 points or 1.4 percent to 15,241.88. The gain was the biggest in 19 months but underperformed the 1.7 percent increase in the Dow Jones Industrial Average. Materials stocks saw the biggest gain, adding 3 percent as precious and base metals rose. Ivanhoe Mines Ltd. jumped 11 percent, the most since October.
- Mittleman Brothers has taken a stake in Aimia Inc. and says it may push for changes to the Canadian loyalty-card provider’s management or board as well as seek a sale of all or part of the company. The investment firm first disclosed in September a stake in Aimia, which runs Air Canada’s loyalty program Aeroplan. Last week, Mittleman said it had increased its ownership of Aimia to 10.6 percent at the end of January, and opened the possibility of pushing for changes at the company, according to an updated regulatory filing.
- European stocks dip in early trade, halting Monday’s rebound after a sharp two-week selloff, with a number of bond-proxy defensive sectors including utilities and telecoms underperforming, while autos fall after disappointing results from tyre maker Michelin. The Stoxx 600 is down 0.1% after gaining 1.2% in the previous session. The benchmark, which has lost 8.5% since Jan. 23, has fallen along with global stocks amid worries over a surge in bond yields.
- S&P 500 futures pointed to a retreat in U.S. stocks at the market open after two days of gains. Japan’s equities erased an earlier advance as the yen rallied to the strongest since Nov. 2016. The 10-year Treasury yield fell back after touching 2.89 percent. Commodities found support from the weaker dollar, with metals higher, and bullion set for back-to-back gains. The pound advanced as data showed U.K. inflation held at 3 percent in January.
- Asian stocks extended their recovery from their biggest weekly decline in more than six years even as Japan shares erased morning gains to close lower. The MSCI Asia Pacific Index rose 0.6 percent to 172.32 as of 4:36 p.m. in Hong Kong, advancing for a second day after last week’s 6.5 percent plunge. Most Asian equity benchmarks rose, with Hong Kong and China leading the gains. Japan’s Topix Index slid 0.9 percent as the yen strengthened against the U.S. dollar.
- Oil steadied near $59 a barrel in New York as the International Energy Agency warned that rising U.S. supply may counter OPEC’s success in clearing a glut. Production cuts by the Organization of Petroleum Exporting Countries and Russia have shrunk a surplus in oil inventories by about 80 percent, a report from the Paris-based IEA showed on Tuesday. Yet the decline in stockpiles will slow as climbing shale-oil output puts America on track to surpass both Saudi Arabia and Russia, the agency predicted.
- Gold advances for second day as dollar retreats, with signs equity markets starting to stabilize following last week’s selloff.
- Wednesday’s report on the U.S. consumer price index will be the most closely watched in recent memory, with investors seeking to understand the recent plunge in the stock and bond markets. They’ll probably need to look beyond the main numbers for the full story. The core CPI, which excludes food and energy, rose 1.7 percent in January from a year earlier, compared with 1.8 percent in December, according to the median projection of economists ahead of the Labor Department data. Viewed another way, though, inflation may be higher: A 0.2 percent monthly rise in the same index, as economists forecast, would result in a three-month annualized rate of 2.3 percent, according to analysts at Wells Fargo Securities. That would match the fastest pace since February 2017.
- U.K. inflation held at 3 percent in January as downward pressure from auto fuel and food prices was offset by the cost of attractions such as zoos and gardens. Consumer prices fell 0.5 percent from December, as they did in January 2017, the Office for National Statistics said on Tuesday. Annual core inflation accelerated to 2.7 percent from 2.5 percent.
- Walgreens Boots Alliance Inc. made an early overture to take over AmerisourceBergen Corp., the Wall Street Journal reported, sending shares of the drug distributor surging in pre-market trading. There was a high-level outreach several weeks ago by representatives of Walgreens Chief Executive Officer Stefano Pessina to those of AmerisourceBergen CEO Steven Collis, the newspaper said. No deal is imminent and there may not be one, the Journal said, citing people it didn’t identify.
- U.S. investment company J.C. Flowers & Co. is exploring the sale of a stake that could be worth more than 800 million pounds ($1.11 billion) in the U.K.’s Pension Insurance Corp., according to people with knowledge of the matter. The private equity firm is working with advisers to find a buyer for its 40 percent holding, said the people, asking not to be identified as the discussions are private. The search is still at an early stage and J.C. Flowers may opt to retain the asset, they said.
- Bitcoin is snapping its longest rally since December and retreating before a trendline set from its record high that month. The largest digital currency dropped 4.1 percent to $8,470 as of 10:35 a.m. in London, according to prices compiled by Bloomberg. Bitcoin had increased 24 percent over its five successive days of gains. The decline came as Japanese exchange Coincheck Inc., which lost about $500 million to hackers last month, has begun letting some users make withdrawalsagain in yen — the biggest currency used worldwide for trading of the digital token, according to Coincompare.com.
- PepsiCo Inc.’s snacks are having to pick up more of the slack for its ailing beverages. The company posted sales and earnings that topped analysts’ estimates last quarter, helped by an uptick in volume at its Frito Lay business in North America. The snack growth helped offset continued declines at the Purchase, New York-based company’s drinks business. Still, a disappointing forecast suggests that PepsiCo has more struggles ahead.
- OPEC and its allies have almost achieved their goal of clearing an oil glut, but their efforts could be derailed by rising supplies from the U.S. and other rivals, the International Energy Agency said. Oil stockpiles in developed nations fell the most in more than six years in December as supply cuts by the Organization of Petroleum Exporting Countries and Russia took effect. The surplus is also being cleared by higher consumption, with the agency boosting its forecast for global demand growth in 2018 by about 100,000 barrels a day to 1.4 million a day.
- U.S. forces killed scores of Russian contract soldiers in Syria last week in what may be the deadliest clash between citizens of the former foes since the Cold War, according to a U.S. official and three Russians familiar with the matter. More than 200 mercenaries, mostly Russians fighting on behalf of Syrian leaderBashar al-Assad, died in a failed attack on a base and refinery held by U.S. and U.S.-backed forces in the oil-rich Deir Ezzor region, two of the Russians said. The U.S. official put the death toll at about 100, with 200 to 300 injured.
- As climate-change lawsuits against the oil industry mount, Exxon Mobil Corp. is taking a bare-knuckle approach rarely seen in legal disputes: It’s going after the lawyers who are suing it. The company has targeted at least 30 people and organizations, including the attorneys general of New York and Massachusetts, hitting them with suits, threats of suits or demands for sworn depositions. The company claims the lawyers, public officials and environmental activists are “conspiring” against it in a coordinated legal and public relations campaign.
- The North Atlantic Treaty Organization will make the U.S. and Germany the locations for two new military headquarters that mark the first upgrade of the alliance’s command structure since the end of the Cold War, according to officials. The U.S. will host a planned NATO command center focused on maritime security in the Atlantic and Germany will be the site of a center responsible for troop movements in Europe, the Brussels-based officials said on the condition of anonymity.
- Wells Fargo & Co. reckons it won’t suffer a consumer backlash from the unprecedented punishment the Federal Reserve leveled this month. The third-largest U.S. bank anticipates an increase in loans made to consumers to finance homes and other purchases even as an order from the government’s top banking regulator prohibits it from growing
- The Reserve Bank of India, the nation’s banking regulator, introduced a time line for the country’s banks to recast bad loans and scrapped previous methods, which could take an indefinite amount of time to resolve. The Reserve Bank of India, the nation’s banking regulator, introduced a time line for the country’s banks to recast bad loans and scrapped previous methods, which could take an indefinite amount of time to resolve.
- Private equity firm CVC Capital Partners is nearing a deal to acquire Repsol SA’s stake in Spanish gas distributor Gas Natural SDG SA, people familiar with the matter said. An agreement could be reached as early as this week, said the people, who asked not to be identified as the details aren’t public. Repsol’s 20 percent stake in Gas Natural, which also attracted interest from other potential suitors, is valued at about 3.7 billion euros ($4.55 billion). CVC is arranging financing for the transaction, the people said.
- HNA Group Co., the once-voracious hunter of global trophy assets, is seeking to sell more than $6 billion in properties worldwide as pressure intensifies for the Chinese conglomerate to speed up disposals so it can repay its debts. The group on Tuesday said it agreed to sell two plots of land in Hong Kong it bought less than a year ago for HK$16 billion ($2 billion) to the city’s second-richest man. HNA is also said to have been in talks to sell a pair of office buildings in London’s Canary Wharf district it bought for more than $500 million and offering a raft of properties in the U.S. valued at about $4 billion.
- The People’s Bank of China appointed JPMorgan Chase Bank N.A. as a yuan clearing bank in the U.S., the first non-Chinese lender for such a role globally and a further step to promote international use of the currency. The arrangement is made under the auspices U.S.-China strategic economic dialogue and in conjunction with the U.S. Federal Reserve, according to astatement posted on the People’s Bank of China website on Tuesday. Bank of China Ltd.’s New York branch already conducts such business in the U.S. and other Chinese lenders clear yuan payments in a number of countries.
- San Miguel Corp., the biggest Philippine company by revenue, has asked investment banks to pitch for a role in a planned sale of shares in its listed food business this year, people with knowledge of the matter said. The conglomerate is expected to appoint advisers as soon as the end of this month, according to the people, who asked not to be identified because the information is private. The offering of San Miguel Pure Foods Co. stock could raise around $1.5 billion, though the exact size is still under discussion, the people said.
*All sources from Bloomberg unless otherwise specified