By MacNicol & Associates In Morning Notes
March 5th, 2018
Daily Market Commentary
- The world’s biggest money manager is breaking from consensus, saying the Bank of Canada will increase interest rates only once more in 2018 — if that. While none of the 21 analysts surveyed by Bloomberg expects a hike at Wednesday’s central bank announcement, strategists and traders remain convinced that officials are on course to raise rates at least two, and potentially three more times before year-end.
- The latest Nafta negotiations were overshadowed by President Donald Trump’s planned steel tariffs and threats to retaliate by Canada and Mexico, with little major progress on a deal. Trump’s decision on tariffs unexpectedly came on Thursday in the middle of talks. On Sunday, Trump’s senior trade advisers said the president doesn’t want any nation excluded from the tariffs, set to be imposed as early as this week. Canada, the biggest supplier of steel and aluminum to the U.S., and Mexico, the No. 4 source of steel, have asked to be exempted, and both indicated they will strike back if Trump includes them in the stiff duties.
- For the past 18 months, Eddie Martin has been trying to find ways to keep the affordable homes he builds, well, affordable. About 40 percent of the Texas homebuilder’s framing lumber comes from Canada. The Trump administration slapped punitive tariffs on Canadian softwood timber last year, claiming the industry is unfairly subsidized. The move has driven lumber prices to near record highs.
- European stocks inch higher, while Italian shares decline after the country’s anti-establishment parties gained in Sunday’s elections. The Stoxx 600 adds 0.3%, while the FTSE MIB is down 0.7% but bouncing off a low hit in the first minutes of trading. The Stoxx 600 is stabilizing after sliding to an a one-year low on Friday after a U.S. announcement of tariffs on foreign metals.
- The threat of a global trade war loomed large over equities on Monday, with heavy losses across many Asian markets and U.S. futures trading lower even as European shares rose. The dollar edged higher and Treasuries gained, while Italian assets fell as the nation faced a hung parliament.
- Hong Kong’s Hang Seng Index tumbled the most since Feb. 9 amid concern about tightening measures, potential trade wars and a slowing economy as the annual National People’s Congress opened in Beijing. The gauge closed down 2.3 percent at 29,886.39, with 49 of its 50 members falling.
- Oil rose after its steepest weekly loss in a month as Libya was said to halt production briefly at its biggest field. Futures in New York climbed as much as 1.2 percent after a 3.6 percent decline last week. Production was said to have stopped at the Sharara field Sunday after a pipeline to the Zawiya refinery closed.
- Gold gains for second day as threat of trade war arising from U.S. President Donald Trump’s proposed tariffs on metals prompts investors to seek havens.
- Broadcom Ltd.’s hostile $117 billion bid for Qualcomm Inc.faces a major roadblock after the powerful Committee on Foreign Investment in the U.S. issued an interim order for the target to delay its investor meeting. CFIUS has imposed an order to investigate the proposed acquisition and delay the meeting for 30 days, according to an emailed statement Monday. Investors were scheduled to vote Tuesday on six Broadcom nominees, potentially giving it a majority of Qualcomm’s board.
- Amazon.com is in talks with banks about building a checking-account-like product to offer its customers, WSJ reports, citing unidentified people familiar with the matter.
- Deutsche Asset Management’s Christian Hille is tuning out achorus of warnings that Treasuries are in a bear market. In fact, he’s staked most of his $140 billion portfolio on a bet that the rise in yields has pretty much topped out, clearing the path for gains in risk assets.
- Chinese shadow banks account for about 15 percent by assets of the global market for risky non-bank lending, according to a regulator’s report. Non-bank financial firms in China accounted for $7 trillion of $45.2 trillion in global shadow-banking assets tied to the supply of credit that could pose systemic risks, the Financial Stability Board said in a report on Monday. China and Luxembourg provided data for the measurement for the first time.
- Five Star leader Luigi Di Maio said his party’s success in Sunday’s election gives him the right to govern Italy, challenging a competing claim from the anti-immigrant League. Five Star is set to be the biggest single party in the next parliament, while the League controls a center-right coalition that will command the largest number of lawmakers overall.
- U.K. same-day natural gas prices jumped to a record last week because of freezing weather and outages in infrastructure, spurring a boost in flows that ultimately kept the country’s pipelines filled. Power networks also successfully grappled with variable wind output and the halt of two nuclear reactors.
- Kazakhstan’s central bank lowered interest rates further as inflation slows and rising oil prices support the national currency, in a sign that stability has returned after last month’s market turmoil. The base rate was cut to 9.5 percent from 9.75 percent, according to a statement on Monday.
- China stepped up its push to curb financial risk, cutting its budget deficit target for the first time since 2012 and setting a growth goal of around 6.5 percent that omitted last year’s aim for a faster pace if possible. The deficit target — released Monday as Premier Li Keqiang delivered his annual report to the National People’s Congress in Beijing — was lowered to2.6 percent of gross domestic product from 3 percent in the past two years. The 6.5 percent goal is consistent with President Xi Jinping’s promise to deliver a “moderately prosperous” society by 2020.
- India’s benchmark equity index reopened after a local holiday Friday and clocked its steepest decline in over three weeks as investors weighed the potential impact of America’s plans to impose stiff tariffs on steel and aluminum imports. The benchmark S&P BSE Sensex fell for a fourth session, slipping 0.9 percent to 33,746.78 in Mumbai, in line with most Asian peers. This after the measure ended February with its worst monthly performance in two years.
- Japan’s aluminum industry is calling on President Donald Trump to rethink his plan to levy a 10 percent tariff on all imports of the metal, saying the action would hurt the country’s sales and could spill over into other industries, triggering a rise in global protectionism. “Our biggest concern is that individual producers in this country will lose business,” Yoshihisa Tabata, executive director of the Japan Aluminium Association, said in an interview in Tokyo on Monday. “What makes things worse is that this could push the world into protectionism, hurting the viability of broader industries that are based on international division of labor.” The group represents about 130 companies.
*All sources from Bloomberg unless otherwise specified