By MacNicol & Associates In Morning Notes
March 12th, 2018
Daily Market Commentary
- Nafta negotiations are weighing on companies’ investment plans and both Canada and the U.S. are hoping to make rapid progress in talks, according to Canadian Finance Minister Bill Morneau. “There are some businesses that are being cautious in investments because there is an expectation that Nafta could be slightly different tomorrow than it was yesterday,” Morneau said Monday in London. “What’s been clear from the American standpoint is they are anxious to have a conclusion to Nafta as near term as possible — we’re trying to work constructively towards that goal.”
- Canada’s most populous province is getting a taste of the anti-establishment populism that helped elect Donald Trump and lead voters to support Brexit. Doug Ford, brother of the late Toronto Mayor Rob Ford, was named leader of Ontario’s Progressive Conservative Party three months ahead of a general election. Ford, who had little support among current lawmakers, edged out attorney and former provincial lawmaker Christine Elliott in chaotic balloting on Saturday.
- European stocks advanced, tracking gains across Asian markets as trade-war concerns took a back seat to economic optimism following the U.S. jobs report Friday. The Stoxx Europe 600 Index rose for a sixth day, poised for the longest winning streak since October as utility companies set the pace.
- Strong economic indicators seem to have given fresh impetus to the nine-year-old bull market in global equities, which was roiled in recent weeks as President Donald Trump raised the prospect of a full-fledged trade war. With a slew of data due from China this week as well as readings on U.S. inflation and retail sales, investors will be looking for more reasons to keep the party going.
- Oil risks sliding back under $60 a barrel as a surge in U.S. shipments to Asia threatens to undermine a deal between OPEC and its allies, according to ING Groep NV. Signs of strength in the U.S. economy and data showing American explorers curtailed drilling activity is helping oil hold gains after its biggest jump in seven months. Futures in New York were little changed after surging 3.2 percent Friday, the most since July 25.
- Gold steady as investors weigh Friday’s better-than-expected payrolls data, which signal further strengthening of U.S. economy, with slowing wage gains that suggest muted inflation pressures.
- London house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines. Average prices fell to 593,396 pounds ($820,000) in January, an annual decline of 2.6 percent, according to a report published by Acadata on Monday. That’s the most since August 2009.
- U.K. Prime Minister Theresa May faces calls to crack down on Russian influence in Britain amid reports that investigators have linked Vladimir Putin’s regime to last week’s poisoning of a former spy in a city southwest of London. The Times and Telegraph newspapers reported that May could blame Russia publicly as early as Monday for the attempted nerve-gas murder of Sergei Skripal and his daughter Yulia. They remained in a hospital on Sunday, while May is drawing up plans to cancel the visas of Russians linked to Putin and impose sanctions, the papers said.
- Deutsche Bank AG plans to raise as much as 1.8 billion euros ($2.2 billion) in an initial public offering of its asset-management unit, a key pillar of the German lender’s turnaround strategy. The offering values the asset manager at as much as 7.2 billion euros, a valuation that would align it with its bigger peer Amundi SA. Nippon Life Insurance Co. agreed to acquire a 5 percent stake in DWS in the IPO at the issue price that will be set between 30 euros to 36 euros a share, Deutsche Bank said in a statement late on Sunday.
- Agricultural Bank of China Ltd. said it aims to raise as much as 100 billion yuan ($15.8 billion) in what would be the biggest-ever follow-on share offering by a Chinese company as it moves to replenish capital. China’s third-largest lender will sell up to 27.5 billion shares to seven state-linked entities including the country’s Finance Ministry, Central Huijin Investment Ltd. and China National Tobacco Corp., the Beijing-based company said after Monday’s market close.
- Dropbox Inc. aims to raise as much as $648 million in its U.S. initial public offering. The company is marketing 36 million shares range from $16 to $18 apiece, according to a filing with the U.S. Securities and Exchange Commission Monday. Dropbox, which was valued at $10 billion in its 2014 funding round, would be one of the biggest U.S. enterprise technology companies to list domestically in several years. First Data Corp. went public at a market value of about $14 billion in 2015 — the biggest such IPO in the past five years.
- Italian energy company Eni SpA won rights to pump oil at two blocks off the coast of Abu Dhabi and sold the Middle Eastern crude producer a stake in Egypt’s giant Zohr natural gas field, a deal involving combined payments of $1.8 billion. Abu Dhabi National Oil Co. awarded Eni a 10 percent share in the Umm Shaif and Nasr oil fields in the Persian Gulf for a payment of $575 million, the companies said. Rome-based Eni will also take a 5 percent stake in the Lower Zakum deposit for $300 million, they said.
- DowDuPont Inc. said Andrew Liveris will step down as chairman, ending a career that saw him rise through the ranks of Dow Chemical Co. to chief executive and orchestrate the world’s largest chemical industry merger with DuPont Inc. The Australian-born 63-year-old will relinquish his role on April 1, to be replaced by current co-lead independent director Jeff Fettig, the Wilmington-based company said in a statement on Monday.
- While there’s no danger of the U.S. being unable to borrow as much as it needs, over the past two years, the drop-off has been unmistakable. Based on the number of bids that investors submitted versus the amount sold, average demand for 10-year notes has fallen to the lowest since October 2009.
- CEFC China Energy Co.’s planned $9 billion purchase of a stake in Russian oil giant Rosneft PJSC has been delayed, according to a Chinese rating agency, citing discussions with the Chinese company that’s recently come under scrutiny. A unit of the little-understood conglomerate informed China Chengxin International Credit Rating that there had been some delays in the transaction, the agency said in a March 8 note posted to a website affiliated with the country’s central bank.
- Spotify Technology SA plans to list shares on the New York Stock Exchange the week of April 2, according to people with knowledge of the matter, giving the company weeks to prepare for an unconventional debut. Spotify will deviate from decades of practice by not issuing any new shares or raising money in its initial public offering. Instead, existing stakeholders will offer their shares to investors, which is known as a direct listing. An active market for private stock sales over the past couple of years has helped the company establish a valuation higher than $20 billion, based on some of the transactions.
- Congressional Republicans created a juicy new tax break for business owners when they rewrote the U.S. tax code late last year. Three months later, hundreds of thousands of U.S. employers still don’t know if they qualify. The Internal Revenue Service has said it will provide guidance detailing exactly who’s allowed to take the so-called pass-through deduction. With billions of dollars at stake, business groups are lobbying for the agency to open the doors to the deduction as widely as possible.
- Melrose Industries Plc raised its hostile bid for GKN Plc by 9 percent in a last-ditch attempt to woo shareholders to its buyout proposal and reject a competing plan by the U.K. engineering firm to break itself up. The new, final offer of 467 pence a share is valued at 8.1 billion pounds ($11 billion), Birmingham-based Melrose said in an open letter to GKN shareholders Monday. While the shares advanced as much as 2.7 percent, GKN said its own proposal is worth more than 500 pence. It said Monday it will study the new offer.
- Kim Jong Un wants to sign a peace treaty after meeting with U.S. President Donald Trump, South Korean media reported, reviving a long-held goal of the North Korean regime. Kim is likely to raise the possibility of a peace treaty, along with establishing diplomatic relations and nuclear disarmament, during a meeting with the U.S. leader, the Dong-A Ilbo newspaper said Monday, citing an unidentified senior official in South Korea’s presidential office. Trump last week agreed to meet Kim, although key details of the summit have yet to be decided.
- Finnish nuclear-power generator Teollisuuden Voima Oyjsaid compensation for the decade-long delay of its third reactor was set at 450 million euros ($554 million). The settlement ends all legal actions related to the Olkiluoto-3 project between TVO and suppliers Areva SA and Siemens AG, including arbitration by the International Chamber of Commerce, TVO said Sunday. It draws a line under the dispute for the beleaguered Areva, whose losses from the project prompted a French government bailout and the breakup of its business last year.
- EON SE and RWE AG surged after their 22 billion-euro ($27.1 billion) bid to restructure the German energy industry and take control ofInnogy SE established a national champion to cope with Angela Merkel’s move to upend once-mighty utilities. With investors from Italy and France weighing their own offers for the operator of green power plants and grid networks, EON on Sunday announced a complex deal with Innogy’s main shareholder, RWE. The transaction, first reported by Bloomberg March 10, would solidify EON and RWE as the main German electricity and gas providers and keep Innogy out of the hands of foreign utilities that have made gains in scale over their German counterparts.
- U.S. arms exports surged 25 percent over the five years to 2017, according to data released on Monday by the Stockholm International Peace Research Institute. Extending its lead as the world’s biggest arms exporter, the U.S. accounted for 34 percent of total arms exports. Russia, the next biggest exporter, saw its arms sales fall 7.1 percent to 22 percent of global exports compared with the five years to 2012.
- Japan’s government said Monday that the names of Prime Minister Shinzo Abe, his wife and his finance minister were deleted from documents at the heart of a land scandal that erupted last year, a revelation that threatens to derail his administration and its economic strategy. Finance Minister Taro Aso apologized and said an internal investigation was ongoing as opposition lawmakers called for him to resign. He admitted that staff in his department tampered with the documents, but said all the blame rests with one of his subordinates who resigned last week. Abe also sought to limit the damage.
*All sources from Bloomberg unless otherwise specified