By MacNicol & Associates In Morning Notes
March 13th, 2018
Daily Market Commentary
- Canadian stocks gained for a third day to the highest since Feb. 27 as Prime Minister Justin Trudeau said he’s “very confident” in a positive Nafta outcome. The loonie weakened slightly, down 0.2 percent, as commodities are pressured by higher U.S. sovereign yields ahead of U.S. Treasury auctions Monday and Tuesday. The S&P/TSX Composite Index gained 27 points, or 0.2 percent, to 15,604.79 at market close in Toronto. All sectors except financials and consumer discretionary gained; materials, energy and health-care companies gained most.
- Turning Canada’s heavy oil sands into a more marketable kind of crude is making a comeback, or rather half a comeback. Alberta’s government’s C$1 billion dollar pledge ($780 million) will help support the construction of smaller and cheaper varieties of upgraders. The so-called partial upgraders would process the sticky oil just enough so that it can flow freely through pipelines without adding ultra-light condensate. The government expects that as many as five private investors will infuse about C$5 billion in the sector.
- As Canadian marijuana growers rush to boost production before pot gets legalized, Quebec’s biggest cannabis company is looking at the province’s global convenience-store giant Alimentation Couche-Tard Inc. for a road map. Gatineau-based The Hydropothecary Corp. says it wants to follow the footsteps of Quebec leaders such as Couche-Tard, the owner of the Circle K chain, which started with one store outside Montreal and gobbled up rivals from Ontario to Norway. Hydropothecary secured about a third of its home market last month, when it signed a letter of intent with the province’s alcohol distributor to supply 20,000 kilograms (44,092 pounds) of cannabis products in the first year of recreational sales.
- Manitoba plans to offer tax relief as the Canadian province inches closer to its pledge to return to a budget surplus. The province will increase the personal basic exemption by C$1,010 ($787) on Jan. 1 and another C$1,010 the following year. The move will remove more than 30,000 Manitobans from the tax rolls by 2020 and result in C$218 in total tax savings for individuals, according to budget documents. The plan also raises the small business income tax threshold to C$500,000 from C$450,000, saving businesses up to C$6,000 a year, according the plan.
- European equities drifted higher after a mixed session in Asia and oil reversed a drop. The Treasury 10-year yield inched up to 2.88 percent after Monday’s auction broadly met expectations.
- U.S. stock futures climbed and the dollar strengthened ahead of a key inflation report that may affect the outlook for Federal Reserve policy tightening. All eyes will be on the U.S. inflation data as traders try to second-guess the path of monetary tightening in the world’s biggest economy. A figure that misses or meets estimates is likely to reaffirm the case for just three rate hikes this year and give the green light to fresh appetite for risk assets.
- Asia’s benchmark equity index rebounded with Japanese shares as investors turned their focus to U.S. inflation data expected later Tuesday — the last major piece of data that may give clues on the pace of policy tightening ahead of the Federal Reserve’s meeting next week. The MSCI Asia Pacific Index added 0.2 percent as of 4:22p.m. in Hong Kong for its fourth day of gains — after posting its biggest single day gain in 16 months Monday — with gauges of real estate and technology companies leading the advance.
- Oil fluctuated in New York amid concern that, while global demand is strong, it might not absorb swelling U.S. supplies. Futures added 0.3 percent after retreating 0.4 percent earlier. The U.S. government expects major shale regions to boost output by 131,000 barrels a day in April, spurring fears that surging supplies will undermine OPEC’s efforts to clear a glut. Sentiment is being soured further by a forecast increase in U.S. inventories, a third consecutive weekly gain.
- Gold heads for lowest close in almost two weeks as investors await U.S. inflation report. Haven demand falls as a gauge of European equities rises for a 7th day.
- Samsung C&T Corp., an affiliate of the world’s biggest smartphone maker, is in talks for a multi-year deal to buy cobalt from a Congolese miner, joining Apple Inc. in the global rush to secure supplies of the metal at the heart of the electric-car boom. Samsung C&T has approached Somika SPRL to buy cobalt produced at its Kisanfu mine in the Democratic Republic of Congo after only buying copper from the company for the past four years, according to people familiar with the situation. It’s unclear how much cobalt will be bought and Samsung still needs to complete tests on the shipping cost and potential users, said one of the people, who asked not to be identified because the talks are private.
- KKR & Co. is weighing a sale or an initial public offering for Cognita Schools Ltd., people with knowledge of the matter said. The asset could be valued at about 2 billion pounds ($2.8 billion) in a disposal, said the people, asking not be identified because they aren’t authorized to speak publicly. The private equity firm is talking with advisers about the dual-track process, which is still in the early stages, they said.
- Steinhoff International Holdings NV is seeking to boost the amount raised from asset sales to about $1.4 billion as the embattled global retailer strives to shore up its balance sheet. The owner of Conforama in France and Mattress Firm in the U.S. is selling about 3.8 billion-rand ($322 million) of shares in South Africa’s KAP Industrial Holdings Ltd., adding to disposals including stock in investment holdings company PSG Group Ltd. and a private jet. Steinhoff said Dec. 5 it had uncovered accounting irregularities and that Chief Executive Officer Markus Jooste quit, leading to a 90 percent plunge in the share price and emergency talks with lenders.
- The global economy will grow close to 4 percent this year and next, better than previously anticipated, according to the OECD, which added a warning that a trade war could roll back the gains seen in recent years. Upgrading its forecasts, the Paris-based group in part cited U.S. tax cuts for the better numbers. It sees the world economy expanding 3.9 percent in both 2018 and 2019, the strongest since 2011. That’s up from 3.7 percent and 3.6 percent respectively compared with its November projections.
- Tata Sons Ltd., the holding company for India’s biggest business group, raised $1.38 billion after upsizing its offering of Tata Consultancy Services Ltd. stock, people with knowledge of the matter said. Tata Sons priced its sale of Tata Consultancy shares at about 2,872 rupees apiece, the bottom of a marketed range, according to the people, who asked not to be identified because the information is private. It sold about 31.3 million shares, after originally offering 28.3 million shares to investors, one of the people said.
- President Donald Trump issued an executive order Monday blocking Broadcom Ltd. from pursuing its hostile takeover of Qualcomm Inc., scuttling a $117 billion deal that had been scrutinized by a secretive panel over the tie-up’s threat to U.S. national security. Trump acted on a recommendation by the Committee on Foreign Investment in the U.S., which reviews acquisitions of American firms by foreign investors. The decision was unveiled just hours after Hock Tan, the chief executive officer of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage what would have been the biggest technology deal in history.
- Airbnb Inc. lost a bid to temporarily block an ordinance in Santa Monica, California, that puts restrictions on home sharing in the Southern Californian beach community. A federal judge in Los Angeles denied a request by Airbnb and Homeaway.com Inc. for an order barring enforcement of the measure while the website operators challenge its legality.
- Volkswagen AG secured 20 billion euros ($25 billion) in battery supplies to underpin an aggressive push into electric cars in the coming years, putting pressure on Tesla Inc. as it struggles with production issues for the mainstream Model 3. The world’s largest carmaker will equip 16 factories to produce electric vehicles by the end of 2022, compared with three currently, Volkswagen said Tuesday in Berlin. The German manufacturer’s plans to produce as many as 3 million electric cars a year by 2025 is backstopped by deals with battery suppliers in Europe and China.
- General Motors Co. plans to start a pilot program this summer that will enable car owners to rent out their vehicles when they aren’t using them, according to people familiar with the matter. The tests will begin in early summer through GM’s Maven car-sharing unit, said the people, who asked not to be identified because the plans aren’t public. GM vehicle owners will be able to put their cars on Maven’s platform for other drivers to rent and share the revenue with the automaker.
- Blackstone Real Estate Income Trust Inc. just tripled its holdings of industrial properties, picking up 22 million square feet of buildings for about $1.8 billion. The Canyon Industrial Portfolio includes 146 warehouses and distribution centers concentrated in and around Chicago, Dallas, Baltimore, Washington, D.C., Los Angeles and South and Central Florida, according to a statement from Blackstone on Monday. Tenants include Amazon.com Inc., FedEx Corp.and Coca-Cola Co.
- China is giving its central bank the power to write the rules for the financial sector, as part of a sweeping overhaul aimed at closing regulatory loopholes and curbing risk in the $43 trillion banking and insurance industries. The China Banking Regulatory Commission and the China Insurance Regulatory Commission will be merged in the biggest industry overhaul since 2003. Some of their functions, including drafting key regulations and prudential oversight, will move to the People’s Bank of China, according to a proposal unveiled Tuesday during the National People’s Congress.
- EON SE will shed as many as 5,000 jobs in the deal to take over Innogy SE, a move that marks the biggest shakeup in Germany’s energy business in years. The transaction agreed with its rival RWE AG values Innogy at 22 billion euros ($27.1 billion) and will sharpen the focus of Germany’s leading two electricity and natural gas providers, according to a joint statement on Monday. EON billed itself as the first formerly-integrated utility to focus entirely on meeting needs of 50 million customers across Europe. RWE said it doesn’t expect any net job losses.
- China’s biggest food company is sounding the alarm bells over escalating trade tensions with the U.S., pointing to potential suffering for the global economy and blow back for both countries if agricultural goods are used as bargaining chips in the fight. Tit-for-tat actions on trade aren’t “going to be any good for the whole economy,” Cof co Corp. President Patrick Yu said in a Bloomberg Television interview at the state-run firm’s headquarters in Beijing. “It just creates a lot of conflicts and misunderstandings.
- With its earnings outlook improving and massive pipeline assets expected to be restructured, analysts are forecasting a rally inPetroChina Co.’s Hong Kong shares, which are still trading at 2008 crisis levels. Out of 22 analysts tracked by Bloomberg who follow China’s state-run global oil major, 14 recommend buying the stock and none call for selling. Consensus price target for the stock is about 27 percent higher than the current level, versus 15 percent for shares of comparable companies, according to data compiled by Bloomberg as of the close of trading Monday in Asia.
*All sources from Bloomberg unless otherwise specified