By MacNicol & Associates In Morning Notes
February 1st, 2018
Daily Market Commentary
- Canadian stocks were little changed Wednesday, wrapping up their worst January since 2010. The S&P/TSX Composite Index slipped 4 points or less than 0.1 percent to 15,951.67, its lowest close since early December, as declines in energy and financials offset gains in most other sectors. The benchmark fell 1.6 percent on the month.
- Canada wants a Nafta deal as soon it can get one. Until then, every day of talks is better than the alternative. Chrystia Freeland, Canada’s Nafta chief, rattles off all the barriers that lie ahead. Canada and the U.S. are at odds on the very philosophies of trade, immigration, protectionism — and, of course, on the merits of Nafta itself, flawed and aged as it is, that Donald Trump has been threatening to kill.
- Sales of new condominiums in Toronto will probably drop in 2018 from last year’s record high as developers face rising construction costs and slipping investor demand, according to Urbanation Inc. A total of 35,074 new condos were sold across the Toronto region last year, 30 percent more than in 2016, a surge driven by investor purchases and openings of projects with 500-plus units, the research firm said in a report Thursday. Asking prices for available condos rose 35 percent in the fourth quarter from a year earlier, to an average of C$876 ($712) a square foot.
- European stocks recover from a three-day selloff, boosted by gains in banks, as investors assess a slew of earnings reports. The Stoxx Europe 600 Index rises 0.5%, with lenders rebounding from a two-week low. Nokia rallied after pledging to increase its dividend including in 2018 and saying it sees earnings in 2020 surpassing current predictions. Novo Nordisk falls after forecasting another year of muted growth and saying its finance chief and chairman are stepping aside.
- Investors are weighing the path of monetary policy at a time of synchronized global growth and rising corporate profits that’s pushed equity gauges to unprecedented levels and sent benchmark bond yields to the highest in almost four years. The U.S. Federal Reserve on Wednesday acknowledged stronger growth, expressed more confidence that inflation will rise to its 2 percent target, and set the stage for a March interest-rate increase.
- Asian equities rebounded from a three-day slide after the Federal Reserve signaled optimism in the U.S. economy. The MSCI Asia Pacific Index climbed 0.4 percent to 184.71 as of 4:54 p.m. in Hong Kong after rising as much as 0.7 percent. Japan’s Topix Index gained the most in four weeks as Fujifilm Holdings Corp. recovered from its biggest drop since July 2016.
- U.S. oil production surged above 10 million barrels a day for the first time in more than four decades, another marker of a profound shift in global crude markets. The milestone comes weeks after the International Energy Agency said the U.S. is poised for “explosive” growth in oil output that would push it past Saudi Arabia and Russia this year. New drilling and production techniques have opened up billions of barrels of recoverable U.S. oil in shale rock formations in the past 10 years, reversing decades of declining output and turning the nation into an exporter.
- Gold declines as investors consider implications for the dollar of Federal Reserve’s hawkish tone at its policy-setting meeting.
- Altria Group Inc. Chief Executive Officer Marty Barrington is stepping down this year, tasking his top deputy with steering the Marlboro maker through one of the most difficult transitions in tobacco-industry history. Barrington, who turns 65 this year, will retire in May after six years as chairman and CEO, Altria said on Thursday. Howard Willard, a 54-year-old who currently serves as chief operating officer, will then take the helm.
- DowDuPont Inc., created from the world’s biggest chemical merger, boosted the cost savings it expects to achieve and accelerated its planned split into three independent companies. The separations will be completed by June 1, 2019, DowDuPont said in a statement Thursday. That’s three months earlier than a forecast inOctober, when the company had disappointed some investors by extending its original timeline.
- The oil-price rally worked both ways for Royal Dutch Shell Plc as improved exploration and production lifted profit to a three-year high while refining and trading fell short of expectations as margins shrank. Crude’s surge raised adjusted profit at Europe’s largest energy company to $4.3 billion last quarter, the highest since 2014. While the bottom line was better than expected — and Shell is making as much money with oil at $60 a barrel as when it was $100 — cash flow was the weakest since 2016.
- Marathon Petroleum Corp. posted a $1.5 billion fourth-quarter gain from the U.S. corporate tax overhaul and plans to boost dividends by 15 percent. The Findlay, Ohio-based company said it will raise shareholder payouts to 46 cents a share, reported profit, according to a statement released Thursday. Marathon lifted profit to $2.02 billion, or $4.09 a share, from $227 million, or 43 cents a year earlier. Excluding the tax benefit, the per-share result was $1.05, better than the $1 average of 18 analysts’ estimates compiled by Bloomberg.
- Blackstone Group LP, the world’s largest private equity firm, said fourth-quarter profit rose 4.8 percent as holdings appreciated amid widespread market gains. The firm’s unrealized and realized gains, known as economic net income, rose as both private stakes and holdings in public companies gained. The results, which can be hard to predict given their weighting toward closely held assets, topped analyst estimates.
- Russia’s biggest surge in mom-and-pop traders since 2009 is helping along a shakeup at the nation’s second-largest lender. To meet the increasing retail-investor demand in stock and debt markets, VTB Bank PJSC is merging the brokerage business of its retail lender VTB24, with the investment consulting, brokerage and asset-management teams at its VTB Capital investment bank. The expanded investment-services unit will manage about 1 trillion rubles ($18 billion).
- Denmark’s TDC A/S agreed to buy the Nordic entertainment and studio businesses of Modern Times Group AB for 19.55 billion kronor ($2.48 billion) to gain TV stations and an online streaming service that competes with Netflix Inc. With the MTG assets, TDC will also become more expensive to potential bidders, including Sweden’s Telia AB, a company that has recently been linked again to takeover speculation around the Danish carrier. Shares of the Danish company slumped the most in two years.
- China’s banking regulator has told lenders in Shanghai to increase their scrutiny of loans for mergers and acquisitions to ensure the funds aren’t used to buy land, according to people familiar with the matter. A significant portion of M&A loans in Shanghai have been used for deals involving land as the main underlying asset, the China Banking Regulatory Commission’s Shanghai branch said in a notice issued in recent days, according to the people, who asked not to be identified as they’re not authorized to speak publicly. The regulator requested banks to strictly comply with current policies on M&A loans and other real estate lending policies.
- The Dutch mining regulator recommended cutting production at Europe’s biggest natural gas field by 44 percent to prevent earthquakes in the north of the country, a move that caused prices for the commodity to jump the most in six weeks. Staatstoezicht op de Mijnen told the government that ministers should restrict output at the Groningen field to 12 billion cubic meters (423 billion cubic feet) “as soon as possible,” according to a statement on Thursday. Economic affairs minister Eric Wiebes has said he will decide on the field’s future by the end of March.
- German banks may face a hit of 1.9 billion euros ($2.4 billion) from their involvement in a dividend-stripping practice that has recently come under scrutiny, the country’s financial market regulator estimates. The amount reflects the exposure of 24 banks involved in the transactions, known as Cum-Ex, calculated by regulator BaFin based on figures provided by the lenders. As part of a parliamentary inquiry, BaFin provided the information to German lawmaker Gerhard Schick, who confirmed the figures to Bloomberg.
- BHP Billiton Ltd., seeking to accelerate the sale of its U.S. shale unit, is prepared to offer the assets in as many as seven packages, including three in the prized Permian Basin, according to people with knowledge of the producer’s plans. The world’s biggest miner continues to favor a sale of the portfolio to a single buyer, the people said. It values the assets at $10 billion or more, though the Melbourne-based company could also consider a swap of onshore U.S. acreage for offshore wells in the Gulf of Mexico, according to the people, who spoke on condition of anonymity as the details are private.
- Nokia Oyj said the end of a network slump is in sight, forecasting a pick-up in demand from wireless carriers a year out. The stock jumped the most since May after Nokia told investors that profit will start to exceed expectations in 2020. That forecast overshadowed a warning that earnings this year will be lower than analysts estimated as Nokia invests in new 5G network technology ahead of expected orders from phone operators.
- United Parcel Service Inc.’s profit forecast fell short of Wall Street’s expectations as the company ramped up investment to handle the surge in e-commerce and an additional pension expense. Capital expenditures will rise to as much as $7 billion this year, up from $5.2 billion in 2017, the courier said in a statement as it reported earnings. Most of the spending will go to new technology, aircraft and automated capacity.
- Chinese real estate tycoon Cai Kui’s family office is in advanced talks to buy a U.S. hotel portfolio from MassMutual for as much as $800 million, a person with knowledge of the matter said. Hong Kong-based Junson Capital, which manages the wealth of the Longfor Properties Co. co-founder, plans to buy seven to eight hotels from MassMutual, according to the person. The assets are mostly boutique hotels, as well as a few resort properties, said the person, who asked not to be identified as the information is private.
- Lenovo Group Ltd. posted a surprise loss after taking a $400 million charge due to U.S. tax reforms as its mobile business continues to struggle with shrinking revenue. The world’s second-largest PC maker reported a $289 million net loss in the three months ended December. That compares with the projection of a $124.5 million profit, according to the average of analysts’ estimates compiled by Bloomberg.
- CNH Industrial NV, once part of carmaker Fiat, will work to strengthen its balance sheet this year before considering whether to separate its Iveco truck business from the company’s more profitable tractor division, Chief Executive Officer Richard Tobin said.
- Daimler AG expects profit growth to come to a sudden halt this year, highlighting how the car industry has shifted into an intense investment mode to rebuild around a future of electric and autonomous driving. The German automaker issued a muted 2018 forecast with quarterly resultson Thursday, showing the strains of the spending demands at its Mercedes luxury-car unit. While new technologies are inflating research and development budgets, materials costs are also mounting.
- ConocoPhillips has begun deploying the spoils of the oil price rally, announcing a dividend boost and share buybacks along with a $400 million expansion in Alaska in its fourth-quarter earnings report. The world’s biggest independent oil explorer said it would increase a previously announced share repurchase by a third, to $2 billion, and also raised its quarterly dividend by 7.5 percent, in a statement released Thursday. The Houston-based company said the U.S. tax overhaul passed last year also contributed to a big jump in earnings after a loss last year.
*All sources from Bloomberg unless otherwise specified