January 31st, 2018

 

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks posted their biggest two-day losing streak since May amid a broader global selloff that pushed the benchmark’s year-to-date decline to 1.6 percent, the worst performance in the developed world. The S&P/TSX Composite Index tumbled 139 points or 0.9 percent to 15,955.51, the lowest close in nearly eight weeks. All sectors but one fell, with health-care stocks posting the biggest decline, down 4.8 percent. Canopy Growth Corp. lost 7.9 percent.
• A group led by Blackstone Group LP agreed to buy a majority stake in Thomson Reuters Corp.’s financial and risk unit in a deal that values the business at $20 billion, sealing plans for the firm’s biggest buyout in a decade. Canada Pension Plan Investment Board and Singapore’s sovereign wealth fund, GIC Pte, will co-invest alongside Blackstone to acquire 55 percent of the business, according to a statement Tuesday. Thomson Reuters will retain a 45 percent equity stake. The unit, which provides data, analytics and trading to Wall Street and financial professionals around the world, doesn’t include the news-gathering operation.
• Rio Tinto Group has been accused by a Dutch non-profit group of avoiding about $700 million in taxes related to its Oyu Tolgoi copper mine in Mongolia. The company denied the allegations. Rio and its Canadian subsidiary Turquoise Hill Resources Ltd. used so-called mailbox companies in Luxembourg and the Netherlands to fund the development of the mine in Mongolia, the Centre for Research on Multinational Corporations said in a report Wednesday. The company avoided $470 million in Canadian taxes through the vehicles and $230 million in Mongolian taxes, the group known as SOMO said.
• President Donald Trump’s decision to impose tariffs on solar panels imported into the U.S. is likely to push developers to fund more projects in emerging markets in Europe and Asia, a Canadian industry executive said. While Trump’s decision earlier this month was aimed at promoting domestic manufacturing, its unintended consequence probably will be in choking off money for solar farms in the U.S. and steering that money abroad into markets that are more lucrative, said Michael Yurkovich, the president of Calgary-based Refraction Asset Management, which owns the solar-panel installer TIU Canada.
• Robotic vehicles may still be years from cruising America’s streets, but they’re already finding a home in Canada’s oil patch. Suncor Energy Inc. plans to roll out more than 150 autonomous haul trucks at its oil-sands mines in northern Alberta in the next six years, a move the company says will increase safety and improve efficiency while reducing costs. Canada’s largest oil company by market value has been studying theKomatsu Ltd. autonomous trucks for four years, and says the initiative will mark one of the largest investments in electric robotic vehicles in the world.

 

 

World Headlines

• European stocks inch higher after a two-day selloff as traders assess earnings and eye Federal Reserve Chair Janet Yellen’s final meeting on interest rates before her term ends. The Stoxx Europe 600 Index rises 0.2%, heading for its best January in three years. Media shares lead gains, while Ericsson drags the tech sector lower after posting sales that missed analysts’ estimates. Capita heads for a record slump after suspending its dividend and saying it plans to raise more equity.
• The dollar fell after President Donald Trump’s State of the Union address offered few new clues on U.S. policy, and most bonds gained as the Bank of Japan increased asset purchases. The yield on the benchmark U.S. Treasury fell, fluctuating around 2.7 percent as the greenback retreated against almost every major peer.
• Asian equities extended declines for a third day as caution about the market’s vulnerability continued after the regional benchmark’s best start to the year since 2012. Japanese equities completed their biggest two-day loss in more than a year. The MSCI Asia Pacific Index slipped 0.2 percent to 184.18 as of 4:40 p.m. in Hong Kong, reversing an earlier gain of the same magnitude while its monthly advance held at 6 percent.
• Oil slipped for a third day in New York, continuing its retreat from a three-year high, on estimates that U.S. crude stockpiles increased last week. West Texas Intermediate futures fell 0.5 percent, bringing their monthly advance to 6.2 percent. Data from the U.S. Energy Department is forecast to show that inventories probably rose by 900,000 barrels to 412.5 million, according to a Bloomberg survey.
• Gold gains as dollar weakens and yields on U.S. government bonds retreat after President Donald Trump’s State of the Union address. Focus now on Federal Reserve meeting Wednesday for clues on monetary tightening.
• Inflation in the euro area slowed at the start of the year, highlighting the hurdles faced by the European Central Bank as it attempts to foster price growth in a region still beleaguered in places by high unemployment. Consumer prices rose 1.3 percent in January, the European Union’s statistics office said on Wednesday. The reading exceeds the median forecast of 1.2 percent in a Bloomberg survey but is below December’s rate of 1.4 percent.
• Siemens AG is riding a booming global economy that’s lifting orders for its factory, transport and energy equipment and giving Chief Executive Officer Joe Kaeser support in his mission to reshape Europe’s largest engineering company. Orders surged 14 percent in the fiscal first quarter, driven by demand for rail cars in the U.S., wind turbines and automation software used to keep production humming. Sales advanced 3 percent, the Munich-based company said Wednesday. The stock rose as much as 1.5 percent.
• H&M falls as much as 6.2% to the lowest in more than nine years as renewed concerns over the sales outlook and increased markdowns overshadow fourth-quarter earnings that beat estimates. A 1% gain in local-currency sales in the first two months of 1Q missed expectations. The retailer doesn’t expect to meet its sales growth target this year, saying the first quarter started weaker than expected.
• Royal Dutch Shell Plc agreed to sell its stake in a Thai natural gas field for $750 million to an arm of state-owned PTT Pcl, after a previous deal worth $900 million fell through. PTT Exploration & Production Pcl will increase its stake in the Bongkot field to 66.7 percent with the purchase of Shell’s 22.2 percent share, the Thai company said in a statement. France’s Total SA owns the rest. For Shell, the deal is part of its drive to divest $30 billion globally by this year following the $70 billion acquisition of BG Group Plc in 2015, which included the Thai field.
• Fujifilm Holdings Corp. is buying control of Xerox Corp. in a deal that creates an $18 billion company and marks the end of the independence of the iconic American corporate giant. Xerox, which has a market value of $8.3 billion, will first merge with a joint venture the company operates with Fujifilm in Asia, according to a statement Wednesday. Current Xerox shareholders will receive a cash dividend of $9.80 per share. In a complex transaction, Tokyo-based Fujifilm will ultimately end up owning 50.1 percent of the combined entity, which expands the joint venture to encompass all of Xerox’s operations.
• Tiny OPEC producer Qatar is paying the price for top member Saudi Arabia’s oil strategy in Asia. Oil exports from Qatar, one of OPEC’s smaller crude producers, to Japan last year slumped by almost a quarter to its lowest level since 1990, while shipments from giant supplier Saudi Arabia grew 8.1 percent, boosting its market share in the Asian nation to a record. Over in South Korea, imports from Qatar sank 26 percent to the least in seven years.
• America may never recover its glory as a manufacturing powerhouse, but the Brooklyn Navy Yard is doing what it can, transforming itself from a 20th-century warship builder to a 21st-century high-tech hub. Now it’s about to unveil a $2.5 billion building plan that would more than quadruple its current workforce. The navy yard’s ongoing expansion — which includes the reconstruction of Admiral’s Row, where naval officers once lived, and the creation of a waterfront office building that the co-working startup WeWork Cos. helped design — should raise the job count to about 20,000, from the current 7,000, according to the Brooklyn Navy Yard Development Corp.
• The U.S. Department of Justice and the Securities and Exchange Commission are investigating whether Apple Inc. violated securities laws concerning its disclosures about a software update that slowed older iPhone models, according to people familiar with the matter. The government has requested information from the company, according to the people, who asked not to be named because the probe is private. The inquiry is in early stages, they cautioned, and it’s too soon to conclude any enforcement will follow. Investigators are looking into public statements made by Apple on the situation, they added.
• Capita Plc slumped the most in 24 years after saying it would halt dividend payouts and sell shares to raise capital, triggering further concerns over the state of Britain’s outsourcing sector just two weeks after Carillion Plc collapsed. London-based Capita, whose customers include the U.K. government as well as firms like Telefonica S.A.’s O2 and retailer Marks & Spencer Group Plc, will seek to raise as much as 700 million pounds ($993.8 million) and plans to sell some non-core assets. The stock fell as much as 45 percent, the most since February 1994.
• China’s Great Fire Sale looks set to take off. HNA Group Co., the indebted Chinese aviation-to-hotels conglomerate, told creditors it will seek to sell about 100 billion yuan ($16 billion) in assets in the first half of the year to repay debts and stave off a liquidity crunch, according to people familiar with the matter, who asked not to be identified because the discussions were private. Under the proposal, about 80 percent of that would be executed in the second quarter, according to the people.
• Malvinder Singh and Shivinder Singh must pay Daiichi Sankyo Co. 35 billion rupees ($550 million) awarded in an arbitration over the sale of a drugmaker controlled by the brothers, an Indian court ruled. The verdict was pronounced by a single-judge bench of Justice Jayant Nath of the Delhi High Court on Wednesday. He rejected all objections raised by the Singh brothers and said the arbitration award is in line with Indian laws and policy. The ruling can still be appealed in a two-member panel of the Delhi High Court or the Supreme Court.
• Thai miner Banpu Pcl plans to spend $300 million over the next three years in the Marcellus shale, accelerating a shift toward cleaner fuels and adding to existing stakes in the largest U.S. natural gas deposit. The Bangkok-based miner also plans to invest around $1.3 billion to develop 800 megawatts of renewable power generation as it boosts clean energy to a quarter of its total by 2025 from 8 percent now. Banpu has already invested $522 million in six Marcellus shale facilities in Northeast Pennsylvania that can produce 201 million cubic feet of gas a day.
• ICICI Bank Ltd., the country’s second-largest private lender by assets, posted a smaller-than-estimated profit as provisions for bad loans rose and treasury income fell. Net income dropped 32 percent to 16.5 billion rupees ($259 million) or 2.55 rupees a share for the three months ended Dec. 31, from 24.4 billion rupees or 3.8 rupees a year earlier, the Mumbai-based lender said in a filing on Wednesday. That missed the 19.5 billion rupee average of 25 estimates in a Bloomberg survey of analysts.

 

*All sources from Bloomberg unless otherwise specified