By MacNicol & Associates In Morning Notes
November 10th, 2017
Daily Market Commentary
- TransCanada Corp. gave its strongest signal yet that it has enough demand from producers to fill the long-delayed Keystone XL pipeline with oil. Now the ball is in Nebraska’s court. While the company has long said it expected sufficient support from oil producers, TransCanada completed an open season for them to bid for space on the line last month, giving it hard data on demand.
- While Canada’s recent growth surge has been a welcome development, it’s bringing to light a new set of problems: the country may run out of workers to keep the momentum going. Participation rates — the proportion of the population either working or looking for work — are running up against historical highs in every age category except one: youth. And that’s exactly who policy makers are counting on to keep the nation’s expansion going. Historically low interest rates are generating such strong demand, the economy will need to draw in more young workers simply to keep up.
- Pacific nations are scrambling to agree on how to salvage a blockbuster trade pact after days of talks in Vietnam, with Australia confident of an outcome but Canada warning it wants a good deal over a fast one. Trade ministers meeting on the sidelines of the Asia-Pacific Economic Cooperation summit are due to present their proposal on the future of the Trans-Pacific Partnership to leaders on Friday afternoon. As of Friday morning there remained uncertainty as to whether an agreement had been reached, or would be reached, and what sort of statement the leaders might release.
- Canadian Prime Minister Justin Trudeau’s government will announce “next steps on the legalization, regulation and taxation” of recreational marijuana on Friday.
- European stocks are little changed as investors assess a three-day selloff that accelerated on Thursday. The Stoxx Europe 600 Index adds 0.2%, led by gains in miners — the worst performers yesterday.
- U.S. equity-index futures pointed to a lower open amid concerns that tax reform is encountering obstacles, while Treasuries fell and the dollar fluctuated. Global equities hit historic highs during the week as investors were encouraged by solid earnings and synchronized global economic growth, only to sell off sharply on Thursday as the U.S. Senate revealed that its tax plan would delay cuts to the corporate rate until 2019. The move fed growing pessimism about the prospects for meaningful U.S. fiscal reform, which had buoyed share prices in the U.S.
- Asian stocks fell, tracking weakness in U.S. equities after the U.S. Senate released a tax plan that would delay cuts to the corporate rate until 2019, defying President Donald Trump. The MSCI Asia Pacific Index dropped 0.4 percent to 171.21 at 4 p.m. in Hong Kong, trimming its weekly advance to 0.8 percent.
- Oil is heading for a fifth weekly advance as political upheaval in the world’s biggest crude exporter countered an expansion of U.S. output to the highest level in more than three decades. Futures were little changed in New York, up 2.9 percent for the week. Arrests on the weekend of senior Saudi Arabian officials in an anti-corruption probe is seen as consolidating power for Crown Prince Mohammed bin Salman, who supports extending OPEC-led output cuts.
- Gold heads for first weekly advance in four as U.S. equities drop after Senate reveals its tax plan would delay cuts to corporate rate until 2019.
- Republican tax writers in the House and Senate scoured the U.S. tax code Thursday and shook the couch cushions for loose change, as one member put it, in an all-day struggle to find ways to pay for the deep tax cuts their leaders and President Donald Trump have promised. By day’s end, the House Ways and Means Committee had hammered together a bill and sent it toward the House floor for a vote promised next week, while the Senate Finance Committee revealed a proposal it intends to mark up on Monday.
- The U.K. economy ended the third quarter on a mixed note, figures Friday showed. Industrial production rose a larger-than-forecast 0.7 percent in September, with output increasing across most manufacturing sectors, the Office for National Statistics said. But construction fell the most in 18 months and a narrowing of the trade deficit was not enough to prevent the shortfall widening in the third quarter.
- London Stock Exchange Group Plc said it will honor TCI Fund Management Ltd.’s request for a shareholder vote and let investors decide whether to keep Chief Executive Officer Xavier Rolet and oust Chairman Donald Brydon. In a statement Friday, LSE said it will publish a circular in connection with the request “as soon as reasonably practicable” and give notice of a meeting within 21 days. LSE will also ask shareholders whether to terminate its search for a new chief.
- The future of the Irish border erupted unexpectedly into Brexit talks this week, as the European Union made new demands on Britain that risk distracting from efforts to reach a breakthrough by year-end. The EU circulated a document to diplomats that called for Northern Ireland to maintain the rules of the customs union and single market after Brexit. It says there must be no hard border on the island, meaning regulations have to be the same on each side of the line that will become the U.K.’s land frontier with the EU after Brexit.
- China showed its appetite for big ticket investments in U.S. energy production and exports during President Donald Trump’s visit, but left the event with almost no binding deals. Agreements announced in Beijing on Thursday included nearly $84 billion in shale gas and chemicals in West Virginia, a $43 billion Alaskan LNG project and $11 billion in long-term supply of liquefied natural gas from the only mainland U.S. exporter. Ethane, turbines and next-generation nuclear reactors were also among the announcements.
- Uber Technologies Inc. lost an appeal over whether it should pay overtime and give vacation time to its drivers, a ruling that heaps yet more pressure on the ride-sharing company in one of its most mature markets. The original decision that gave U.K. drivers the right to more benefits was “neither inconsistent nor perverse,” Judge Jennifer Eady said Friday. The San Francisco-based company said the ruling was based on incorrect evidence and that it will appeal to higher courts.
- Walt Disney Co. is going to spend its way out of its problems. The world’s largest entertainment company, which reported lower profit Thursday, is already working on a new series of “Star Wars” films, movies that can cost $250 million each. The company will spend $1 billion more on its theme parks in the new fiscal year and plans to start making movies and TV shows for a new streaming service that will launch in 2019.
- Cathay Pacific Airways Ltd. is losing its decades-old membership of Hong Kong’s benchmark equity gauge as the city’s flagship carrier struggles to revive earnings. The airline, in which Qatar Airways Ltd. just acquired a stake, will be dropped along with Kunlun Energy Co. as part of Hang Seng Indexes Co.’s quarterly review. Country Garden Holdings Co., a Chinese property developer, and Sunny Optical Technology Group Co., an Apple Inc. supplier, will replace them on the 50-strong measure, effective Dec. 4, according to an announcement by the index compiler.
- Media executives dreaming of megamergers got a wake-up call this week: the Trump administration isn’t the rubber stamp they’d once thought it would be. In media circles, the Trump presidency was seen as ushering in a new era of consolidation, largely because Republican administrations are thought to be more business-friendly. Now, Washington is no longer considered a sure thing. In the first major test of its approach to merger reviews in the Trump era, the Justice Department has pushed back against AT&T Inc.’s $85.4 billion takeover of Time Warner Inc., throwing the deal into jeopardy.
- EasyJet Plc, Europe’s second-biggest discount airline, appointed former TUI AG executive Johan Lundgren as its new chief executive officer, choosing a travel-industry veteran to succeed its departing leader. Lundgren will succeed Carolyn McCall in the top post on Dec. 1, Luton, England-based EasyJet said Friday in a statement. McCall will remain with the carrier through the end of the year to help with the transition, it said.
- Billionaire Patrick Drahi reasserted himself at the helm of Altice NV, taking direct control of the phone and cable company he founded after a harrowing week that saw one-third of the company’s market value vanish. Chief Executive Officer Michel Combes resigned after a little more than a year in the job, the company said in a statement late Thursday. Dexter Goei will return as CEO, while remaining in charge of the company’s U.S. unit. Chief Financial Officer Dennis Okhuijsen will lead the European operations. They will report directly to Drahi, who becomes president of the board.
- State Bank of India rallied to more than a two-year high after the country’s largest lender by assets added fewer bad loans than analysts had forecast. Improving net interest margin and bad-loan ratio overshadowed a jump in delinquent-debt provisions, which led to a 38 percent slump in the September quarter profit. Shares jumped 6.4 percent to 333.8 rupees at the close in Mumbai, taking this year’s gain to 34 percent.
- Trinity Ltd. shares rose by the most in more than two years after China’s Shandong Ruyi Group agreed to buy a controlling stake in the owner of British bespoke suit maker Gieves & Hawkes for HK$2.22 billion ($284 million). A unit of Shandong Ruyi, which already controls French fashion retailer SMCP, will acquire 51.4 percent of Hong Kong-based Trinity, according to a statement to Hong Kong stock exchange on Thursday. Shandong Ruyi International Fashion Industry Investment Holding Co.’s subscription price of HK$1.2 a share represents a 102 percent premium to the average close of Trinity shares in the last 30 trading days.
- Vietnam will begin selling its stake in Saigon Beer Alcohol Beverage Corp. by December, said the country’s trade minister, in a first tranche that could fetch at least $2.9 billion. Prime Minister Nguyen Xuan Phuc approved the ministry’s plan to sell 36.8 percent to 53.6 percent of Vietnam’s largest beer company in the final months of 2017, Vietnam Industry and Trade Minister Tran Tuan Anh said in an interview Thursday.
- Nazir Razak, chairman of CIMB Group Holdings Bhd. and brother of Malaysia’s prime minister, is helping start a regional private equity fund that will seek as much as $1 billion, people with knowledge of the matter said. Nazir will keep his role at CIMB, Malaysia’s second-largest bank, while acting as one of the fund’s five partners, according to the people. He will be joined by Kenny Kim, who previously worked under Nazir as chief financial officer of CIMB, the people said, asking not to be identified because the information is private.
- Lone Star Funds agreed to buy Nordic distribution business Stark Group from Ferguson Plc for 1.03 billion euros ($1.2 billion) as the private equity firm adds to a growing portfolio of assets in building materials. Stark, which sells timber, tools and other materials to professional builders and the do-it-yourself market, generated 2.15 billion euros in revenue in the year through July, Zug, Switzerland-based Ferguson said in a statement on Friday. So-called trading profit stood at 65 million euros.
*All sources from Bloomberg unless otherwise specified