January 9th, 2018

 

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks fell for a second day as soaring cannabis shares weren’t enough to offset declines in most other sectors. The S&P/TSX Composite Index lost 32 points or 0.2 percent to 16,317.65. Materials stocks were the biggest decliners, falling 0.7 percent as gold miners retreated. Eldorado Gold Corp. tumbled 6.3 percent and New Gold Inc. lost 5.4 percent.
• Loblaw Cos. Ltd.‘soffer of free $25 gift cards to make amends for fixing bread prices over 14 years is “a misleading and deceitful public relations” campaign designed to benefit the grocer, says a complainant seeking to launch a class-action lawsuit against the retailer. As a result, the complainant asked an Ontario Superior Court judge on Monday to prevent Loblaw from demanding that consumers who receive the gift card have the $25 deducted from any future legal settlement or award. The court reserved its judgment. (Globe and Mail)

 

 

World Headlines

• European stocks climb as traders assess strong economic data in Germany and a chaotic cabinet reshuffle in the U.K. that may bode ill for its government’s ability to navigate the next stage of Brexit talks. The Stoxx Europe 600 Index is up 0.2%, with all but two industry groups in the green, led by miners and telecommunications stocks.
• Asian stocks climbed for a sixth day, extending the best start to a year since 2006, on optimism corporate earnings and economic growth prospects in the region support valuations at the highest level in almost three years. Japanese shares rose after the market reopened from a holiday. The MSCI Asia Pacific Index added 0.1 percent to 180.12 as of 5:13 p.m. in Hong Kong, heading for a fresh record close with real estate and material companies leading the advance.
• Oil steadied near $62 a barrel on estimates that U.S. crude stockpiles declined for an eighth week as the rebalancing of global markets continues. Futures added as much as 1.3 percent in New York to the highest intraday level in almost three years. U.S. inventories probably fell by 3.75 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.
• Gold declines as dollar rallies and European and Asian equities build on gains following a new record for U.S. stocks amid optimism for global economic growth.
• The 10-year U.S. Treasury yield climbed to the highest in more than nine months on Tuesday following a surprise cut in purchases of long-dated Japanese government bonds by the Bank of Japan. Benchmark U.S. bond yields crossed 2.50 percent, levels last seen in March, after Japan’s action spurred speculation the nation’s central bank may soon exit its ultra-accommodative stance, even though BOJ watchers said the actions shouldn’t be misread as an imminent shift. A glut of looming bond supply from the U.S., the U.K., Japan and Germany also spurred investors to seek higher yields.
• Iron ore cargoes from Australia’s Port Hedland, the world’s biggest bulk export terminal, jumped to an all-time high of almost half a billion metric tons last year, offering fresh evidence of burgeoning global supply at a time when bearish forecasts for the commodity are stacking up. Exports from the port, which handles material for BHP Billiton Ltd., Fortescue Metals Group Ltd. and Roy Hill Holdings Pty, climbed 5 percent to 46.1 million tons in December to set a monthly record, according to Pilbara Ports Authority figures on Tuesday. For all of last year, shipments were 497 million tons, up from 479 million in 2016, according to Bloomberg calculations.
• Joblessness in the euro area declined to the lowest level since early 2009 last month as the labor market continued to benefit from a resurgent economy growing the fastest in a decade. The unemployment rate dropped to 8.7 percent in November from 8.8 percent the previous month, according to a report from Eurostat on Tuesday. The reading matches the median of 34 estimates in a Bloomberg survey.
• China’s central bank has made a change to the regime used to manage the yuan, effectively removing a component used by banks to calculate their submissions to the currency’s daily reference rate, according to people familiar with the matter. The People’s Bank of China recently told some lenders that contribute to the rate — known as the fixing — to adjust their use of the “counter-cyclical factor” in such a way that it would have no impact on the mechanism, said the people, who asked not to be identified as the details are private. They said the change has already taken effect.
• Aston Martin is targeting a valuation of as much as 5 billion pounds ($6.8 billion) in a potential initial public offering of the British sports car maker, according to people familiar with the matter. The manufacturer has held preliminary talks with advisers about a valuation including debt that would put it on par with Ferrari NV, said the people, who asked not to be named discussing private deliberations. Investors’ interest in an IPO this year could be bolstered by the planned expansion into the lucrative sport utility vehicle segment starting in 2019, the people said
• The results are in and so are some analyst views. A 1 trillion won ($937 million) fourth-quarter profit miss hasn’t convinced strategists covering Samsung Electronics Co. to change their bullish views on the stock. JP Morgan Securities and Daishin Securities were the first to publish reports after the earnings release Tuesday and both firms are standing pat — maintaining their buy ratings and target price
• U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks.
• A key OPEC minister has warned that the group risks overheating the oil market as crude prices head toward $70 a barrel. “Members of the Organization of Petroleum Exporting Countries are not keen on increased Brent crude prices above $60 a barrel because of shale oil,” Iran Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s news service Shana. Prices have climbed in recent days because of production cuts and increased demand for petroleum products due to cold weather, he said.
• India, the largest importer of Chinese solar equipment, proposed a 70 percent safeguard duty on cells and modules shipped from China and Malaysia, citing “threat of serious injury” to the domestic industry. Acting on an application by five local cell and module makers, the Directorate General of Safeguards, Customs and Central Excise made the proposal in a document dated Jan. 5. It recommended the levy remain in effect for 200 days.
• As commodity prices rise, investors are growing more confident in the outlook for energy companies. In December, the Energy Select Sector SPDR Fund exchange-traded fund saw the year’s lowest monthly notional short interest, or the volume of shares sold short that investors haven’t yet covered or closed out expressed as U.S. dollar short exposure. The shift aligned with a rise in oil and natural gas prices, which buoyed equities in the sector.
• Continental AG is in exploratory talks with advisers on what could amount to its biggest-ever overhaul and possible breakup of the German auto-parts supplier, according to people familiar with the matter. Under scenarios being discussed, Continental could create a holding company for its divisions and then list shares of the more profitable units, such as the tire business, or combine some operations with rivals, said the people, who declined to be identified because the matter is private. The review remains at an early stage, with no decision on whether the changes will be carried out, they said.
• The White House’s plan to bail out America’s coal country has been shot down — by the very energy regulators that President Donald Trump appointed last year. In an order Monday, the Federal Energy Regulatory Commission rejected U.S. Energy Secretary Rick Perry’s sweeping proposal to subsidize struggling coal and nuclear plants in the name of keeping power grids dependable. Instead, the commission asked grid operators to suggest their own ideas to make the system more resilient.
• Altice NV will spin off its U.S. cable-television business, letting billionaire Patrick Drahi maintain control of both companies while he pursues a turnaround plan for the debt-laden European operation. The stock jumped in Amsterdam. Altice’s 67 percent stake in Altice USA Inc. will be distributed to shareholders by the end of the second quarter, the companies said Monday in a statement. Drahi’s holding company will have at least 51 percent of the voting power of the U.S. company after the transaction. Before the spinoff, Altice USA will pay a $1.5 billion dividend to shareholders, meaning the parent company gets a $1 billion parting gift.
• Intel Corp. Chief Executive Officer Brian Krzanich prefaced his annual celebration of the future of technology with a warning. Software patches put in place to protect computers against a recently uncovered chip vulnerability will slow down machines, but have so far headed off any illicit efforts to obtain data, Krzanich said at the CES consumer electronics conference in Las Vegas on Monday. While Intel and others have previously downplayed the possible impact of the fixes, indicating that in rare cases computers might be slowed as much as 30 percent, Krzanich’s comments suggest that the problem may be more pervasive.
• Fitbit Inc. is considering developing a wearable device for children, according to people familiar with the matter, as the company struggles to revive demand for its fitness products by pushing into new hardware categories. The product was focused around health, a sector Fitbit has been increasingly focused on, according to one of the people. The line of gadgets for children has been in discussion internally for at least several months, said the people, who asked not to be identified because the matter is private.
• A military satellite launched by Elon Musk’s Space Exploration Technologies Corp. appears to have crashed into the sea following a malfunction in the latter stages of its ascent, representing a potential setback for the billionaire’s rocket program. The mission — referred to by the code name Zuma — took off from Cape Canaveral Air Force Station in Florida Sunday on a SpaceX Falcon 9 rocket. But the U.S. Strategic Command, which monitors more than 23,000 man-made objects in space, said it is not tracking any new satellites following the launch.

 

*All sources from Bloomberg unless otherwise specified