By MacNicol & Associates In Morning Notes
May 8th, 2018
Daily Market Commentary
- Canadian stocks closed at the highest since Feb. 1 but pared earlier gains as crude prices retreated back below $70 a barrel. The S&P/TSX Composite Index added 79 points or 0.5 percent to 15,808.63 after earlier rising as much as 0.8 percent. Energy shares, which had gained as much as 1.7 percent, ended the day up 0.4 percent.
- Lundin Mining Corp. and Euro Sun Mining Inc. said they’ve made an unsolicited C$1.5 billion ($1.2 billion) offer to acquire Nevsun Resources Inc. and were turned down. “We believe our proposal is extremely compelling and in the best interests of Nevsun shareholders,” Paul Conibear, Lundin’s chief executive officer, said in a statement Monday. The proposal would represent roughly a 29 percent premium on where Nevsun’s shares closed Monday at C$3.87 apiece in Toronto. Lundin said it had made numerous attempts to engage Nevsun, first approaching it in February, before submitting its latest proposal April 30. A representative for Nevsun wasn’t immediately available to comment.
- Quebecor reports a pact with Caisse de depot et placement du Quebec and Quebecor Media to repurchase all the share capital of Quebecor Media held by Caisse, representing an 18.47% stake in Quebecor Media.
- Lyft Inc. sat on the sidelines for years while Uber Technologies Inc. battled it out with Canadian regulators before the ride-hailing company expanded into the country. That strategy may have paid off. Lyft has signed up 10,000 active drivers in its first five months in Toronto, about a third of long-time rival Uber, which has been operating in the Canadian city for years.
- The OPEC of maple syrup has a plan to cover this year’s shortfall of the sticky breakfast staple. Output of maple syrup in Quebec, the largest global producer, is poised to fall as much as 27 percent to 110 million pounds (49,900 metric tons), according to the Federation of Quebec Maple Syrup Producers — a government-sanctioned sales agency that sets bulk prices for about 72 percent of the world’s syrup and limits farmer output through quotas. Production was hurt after below-average daytime temperatures resulted in less sap flowing from the province’s trees.
- European equities hold steady as the euro remains below $1.20 amid speculation the U.S. may pull out of a nuclear accord with Iran, with President Donald Trump scheduled to announce his decision on Tuesday. The Stoxx Europe 600 Index rises less than 0.1%, now in positive territory for the year. Shire climbs after Takeda reached an agreement to buy its rival for about 46 billion pounds. Deutsche Post slumps after reporting earnings that missed the lowest analyst estimate. FirstGroup falls after private-equity firm Apollo withdrew its interest in making an offer for the U.K. rail operator.
- Worries about pricey stocks and rising borrowing costs that have roiled developed markets are migrating to the developing world, where higher Treasury yields and a stronger dollar could sap demand for emerging-market assets. Trump’s foreign policies have further complicated the picture by stoking volatility in commodities. He’ll announce on Tuesday whether the U.S. will pull out of a nuclear accord with Iran, potentially disrupting supplies from OPEC’s third-largest producer.
- Asia stocks climbed for a second day with technology and financial shares driving the rally. The MSCI Asia Pacific Index rose 0.5 percent to 173.62 as of 4:53 p.m. in Hong Kong, following a 0.2 percent gain on Monday. Japan’s Topix added 0.4 percent with drug makers and banks leading gains, while South Korea’s Kospi gauge fell 0.5 percent after reversing an earlier advance. Hong Kong’s Hang Seng Index increased 1.4 percent.
- Oil retreated from the highest level since 2014 as investors weighed competing views on whether the U.S. will reimpose sanctions on OPEC producer Iran and the potential consequences of such a decision. New York futures slid as much as 1.3 percent, with U.S. President Donald Trump set to make a call on whether he’ll pull out of a 2015 deal between Iran and world powers that had eased sanctions on the producer in return for curbs on its nuclear program. In the previous session, prices briefly slid below $70 after breaching the level for the first time in 3 1/2 years following news that an announcement will be made at 2 p.m. Tuesday in Washington.
- Gold steady as investors await President Donald Trump’s decision Tuesday on whether the U.S. will exit Iran nuclear accord, potentially raising geopolitical tensions in Mideast and risking disruption to oil supplies.
- U.K. home prices plunged the most in almost eight years in April, adding to signs of weakness in Britain’s property market. Values dropped 3.1 percent from March to an average 220,962 pounds ($299,140), mortgage lender Halifax said in a report Tuesday. That’s the biggest drop since September 2010. While that figure can be volatile, the quarterly measure also showed a decline. It fell 0.1 percent, a third straight drop.
- With Donald Trump set to announce a decision today on whether to re-impose U.S. sanctions on OPEC member Iran, $200 billion in potential energy deals hang in the balance. That’s the investment Iran needs in oil, natural gas and petrochemicals, Oil Minister Bijan Namdar Zanganeh has said. Since sanctions were eased as of January 2016, France’s Total SA has been the only Western energy major to invest in Iran, pledging to spend $1 billion at the giant South Pars gas field. Chief Executive Officer Patrick Pouyanne says Total will withdraw from the project if it doesn’t get a waiver. Total would argue that the gas is for local consumption rather than for exports. If it left, its minority partner China National Petroleum Corp. would take over Total’s controlling stake, according to the head of Iran’s state oil company.
- Comcast Corp. is lining up financing for a potential bid for 21st Century Fox Inc.’s entertainment assets, countering a previously accepted offer from Walt Disney Co., said a person with knowledge of the situation. Comcast is talking to investment banks about obtaining bridge financing for an all-cash bid, said the person, who asked not to be identified because the deliberations are private. The move, previously reported by Reuters, threatens Disney’s $52 billion deal to purchase Fox’s film and TV assets. The prospect of a bidding war sent Fox shares up as much as 5.1 percent in late trading on Monday. It also further complicates a global game of M&A chess among media giants. Comcast has already made a 22 billion pound ($30 billion) offer to acquire the 61 percent stake in European pay-TV group Sky Plc that Fox doesn’t already own. Fox and Disney also are interested in buying the business.
- Takeda Pharmaceutical Co. reached an agreement to buy larger rival Shire Plc for about 46 billion pounds ($62 billion) in a deal that transforms it into a top drugmaker in the lucrative business of rare diseases and boosts its heft in the U.S. The Japanese company capped a drawn-out pursuit by agreeing to pay Shire 49.01 pounds a share in cash and stock, based on Takeda’s closing share price April 23, according to a statement Tuesday. In pounds, that’s the same value as a preliminary agreement the companies reached last month.
- HNA Group Co. is planning to sell stakes in some units to a $1.5 billion fund that it’s setting up to help the embattled Chinese conglomerate pay off some debt, according to people familiar with the matter. The conglomerate’s Overseas Aviation and Tourism Industry Fund will buy minority stakes in group-controlled companies such as online travel agent Tuniu Corp. from HNA, according to the people, who asked not to be identified discussing a private matter.
- As the fastest U.S. inflation in a year converges on the flattest Treasury yield curve in a decade, long-dated debt is the last place many investors want to be. Instead, they are scouting for alternatives that offer the prospect of better returns in an environment of increasing price pressures. Pacific Investment Management Co. is shunning long-maturity Treasuries in favor of shorter tenors and Troy Asset Management is long U.S. inflation-protected debt, while Aviva Investors also favors such securities issued by Japan and France.
- New York Attorney General Eric Schneiderman said he’s resigning as the state’s highest law enforcement official, hours after a report in which four women accused him of physical violence. Schneiderman, who built his reputation as a courtroom foe of President Donald Trump, a tough enforcer of Wall Street and a self-styled advocate for women, announced his decision late Monday in response to a New Yorker article that outlined claims of abuse, including violent slapping and choking.
- Timbercreek Asset Management Inc., a Canadian real-estate investment firm with about $6 billion under management, is launching its biggest U.S. debt fund as it seeks to expand its global lending platform. Timbercreek is fundraising to attract as much as $1 billion for a fund in the U.S. that it expects to be active this year, said Bradley Trotter, head of global debt at the Toronto-based firm. The fund will target rental real estate developments and renovations, and be leveraged with an equal split of equity and debt, he said. The equity component will consist of owning limited partner units in the fund.
- Carl Icahn and Darwin Deason continued their efforts to shake up Xerox Corp., saying they would consider any cash bid for the company of at least $40 a share. The billionaire investors, in a combative letter to shareholders Monday, again pressed for Chief Executive Officer Jeff Jacobson to resign. They said they couldn’t see another offer materializing before he left.
- French Transport Minister Elisabeth Borne said concern is mounting about Air France-KLM Group’s French arm as a protracted labor dispute over wages hurts the airline’s competitiveness and ability to buy new planes. “I’m worried about the future of Air France,” Borne said on France Info radio Tuesday. The carrier “is less competitive than its partner KLM and other European airlines.” The government has waded into a tug-of-war between unions and management in recent days as a strike over pay continues and Chief Executive Officer Jean-Marc Janaillac prepares to quit over his inability to end the dispute. The carrier canceled about a fifth of its scheduled flights on Tuesday, the latest two-day walkout since February that is expected to crimp full-year earnings.
- Virgin Money Holdings U.K. Plc, soared after receiving a 1.6 billion-pound ($2.2 billion) preliminary offer from rival CYBG Plc, as potential consolidation among smaller banks accelerates. CYBG, which lends to consumers and small-medium enterprises, is eyeing the Richard Branson-backed bank to give it greater scale, potential cost savings and access to its presence on the high street. Virgin Money’s board is still reviewing the proposed deal while CYBG, formed from a split of National Australia Bank Ltd.’s U.K. assets, said there was no certainty a formal offer would be made.
- The U.S. and China are set to clash in Geneva on Tuesday as envoys from the world’s two largest economies address the World Trade Organization amid threats of a trade war. Chinese Ambassador Zhang Xiangchen will criticize Washington’s proposed tariffs on $150 billion of Chinese goods as well as levies on steel and aluminum that went into effect in March, according to an agenda of the meeting. Zhang’s U.S. counterpart, Dennis Shea, is expected to defend the measures and find fault with Beijing’s retaliation.
- Bayview Asset Management LLC, a U.S. investment firm, plans to sell about 2 billion euros ($2.4 billion) of unsecured Italian non-performing loans that it bought from Intesa Sanpaolo SpA and local banks, according to people with knowledge of the matter. The company plans to sell all of its unsecured debt in the country to focus on its main business of mortgage-backed securities, said the people, who asked not be identified because the matter is private. The portfolio, dubbed Project Diaz, will be put on sale this month, while the closing is expected by July, they said.
- The activist fund ValueAct Capital Management has amassed a $1.2 billion stake in Citigroup Inc., arguing that the bank long seen as trailing its sector is positioned for success by providing the “plumbing” multinational corporations need to operate.
- The Trump administration is preparing to battle California’s tough car pollution regulations using an approach that federal courts have already rejected. Federal regulators are drafting a proposal that takes aim at California’s cherished authority to set its own smog-busting rules. A leaked draft of the plan that is being finalized for submission to the White House shows that it wouldn’t outright revoke the state’s ability to set pollution standards, but it asserts that a 1975 law prohibits states from setting their own limits on greenhouse gas emissions.
*All sources from Bloomberg unless otherwise specified