By MacNicol & Associates In Morning Notes
November 13th, 2017
Daily Market Commentary
- Brookfield Asset Management Inc. has bid more than $14 billion to acquire the stake it doesn’t already hold in mall owner GGP Inc., according to a person with knowledge of the matter. The Canadian investment firm made an offer of about $23 per share, the person said, asking not to be identified because the information is private. The price represents a premium of around 21 percent to GGP’s closing price Nov. 6, the day before Bloomberg News reported Brookfield had held discussions about taking the company private.
- New rules to protect taxpayers from bank failures may push investors out of a C$95 billion ($75 billion) corner of Canada’s corporate bond market, reducing liquidity and raising borrowing costs. Under a regime set to take effect in 2018, short-term bank-deposit notes typically sold to institutional investors will gradually be replaced by senior “bail-in” debt that can convert to equity in the event of a bank failure. The new instruments may be off limits to money-market investors who aren’t allowed to hold securities that risk being converted to equity.
- European stocks are little changed following their worst week in three months, while the U.K.’s benchmark gauge rallies on a weaker pound amid fresh political leadership challenges and Brexit concern. The Stoxx Europe 600 Index drops less than 0.1%, struggling to rebound from a 4-day selloff.
- Asian equities retreated, with industrial and material shares leading declines, after tax-cut pessimism weighed on U.S. equities Friday. The MSCI Asia Pacific Index declined 0.6% to 170.25 as of 4:39 p.m. in Hong Kong, falling for a second trading day.
- Oil traded near $57 a barrel as Saudi Arabia signaled it will raise security at its crude facilities after Bahrain blamed Iran for a fire on a pipeline that connects the two Arab allies. Iran denied it was involved. Futures were little changed in New York after falling 0.8 percent Friday. Prices still capped a fifth weekly gain last week, the longest run since October 2016.
- The biggest news in the gold market is there’s no news. The precious metal has fluctuated in a range of just 3.3 percent for more than a month. That’s the least over any comparable period since February 2013. It’s hugging its 100-day average, trading either side of the measure in 14 of the past 16 sessions, while volatility over the past 28 days is near the lowest in seven years.
- China’s sovereign bonds tumbled, pushing 10-year yields to a three-year high, as a debt slump that started in the U.S. and the U.K. spread to the world’s second-largest economy. Yields on notes due in a decade climbed five basis points to 3.98 percent in Shanghai, the highest since October 2014.
- The U.K. Labour Party accused Theresa May of lacking the support within her Conservative Party to deliver a Brexit that will protect jobs, offering her a cross-party deal that will only add to pressure on the embattled prime minister. Keir Starmer, the party’s Brexit spokesman, wrote to May on Monday telling her there was a “sensible majority” in Parliament to secure a two-year transition deal for after Brexit. That would allow Britain to stay inside the European Union’s single market and customs union after 2019 while it completes trade talks with the bloc.
- As Donald Trump pushes to overhaul U.S. trade ties abroad, negotiations with his two biggest export markets are resuming in hopes of finding new common ground on easier subjects — leaving the most contentious U.S. demands for later. The fifth round of North American Free Trade Agreement talks starts Wednesday in Mexico City, two days earlier than initially scheduled. It’s the first meeting since U.S., Mexican and Canadian negotiators extended talks to March and added more time between sessions, abandoning Trump’s previous deadline.
- The U.S. Justice Department is encouraging AT&T Inc. to address antitrust officials’ concerns about the $85.4 billion acquisition of Time Warner Inc. before the Nov. 23 Thanksgiving holiday or face a lawsuit to block the deal, people familiar with the matter said. The Justice Department wants to keep AT&T, the biggest U.S. satellite-TV provider, from gaining Time Warner cable networks like TNT and CNN and then withholding their programming from competitors such as Comcast Corp.
- Between the FAANG quintet and China’s rivaling BAT companies, gains in the world’s top technology shares are nearing a whopping $1.7 trillion in market value this year. That’s more than Canada’s entire economy, and exceeds the worth of Germany’s biggest 30 companies put together.
- Royal Dutch Shell Plc will raise $1.7 billion selling part of its stake in Australia’s Woodside Petroleum Ltd. as it continues to offload assets to cut debt following the record acquisition of BG Group Plc. Europe’s biggest oil company said in a statement that the sale of 71.6 million shares, or 8.5 percent, of Perth-based Woodside will be underwritten by two investment banks at A$31.10 a share. That’s a 3.5 percent discount to Woodside’s Monday close.
- Alibaba Group Holdings Ltd. is seeking to raise $5 billion to $7 billion of dollar notes after an absence of two years from the bond market, according to people familiar with the offering. China’s biggest company by market value has hired Citigroup Inc., Credit Suisse Group AG, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley for the note offering, people who are not authorized to speak publicly and asked not to be identified said.
- Europe is no longer the sick man of the world economy. The 19-nation euro-zone bloc is already enjoying the strongest growth in a decade and now economists at Credit Suisse Group AG and Oxford Economics are declaring that it’s heading toward a golden period of low-inflationary expansion. The turnaround is striking for a region that plunged from the global financial crisis into its own sovereign debt turmoil, record unemployment and near-deflation that threatened the very survival of the currency union.
- OPEC boosted forecasts of demand for its crude in 2018, signaling that the rebalancing of the global market could gather pace. The Organization of Petroleum Exporting Countries raised estimates for the amount it will need to pump to meet demand next year by 400,000 barrels a day to 33.4 million a day, according to a monthly report from the group. As that’s about 670,000 a day more than OPEC produced in the third quarter, global inventories would diminish further in 2018 if the group and its allies continue to keep supplies restrained.
- Bitcoin extended a two-day slump as the cancellation of a technology upgrade prompted some users to switch out of the cryptocurrency, spooking speculators in an asset that’s surged more than 500 percent this year. While the cryptocurrency earlier plunged as much as 15 percent from Friday, it pared its drop to just 1.5 percent at 11:06 a.m. in London, as evidence emerged that bearish investors started to cover their short positions.
- American Tower Corp. agreed to buy mobile-phone towers from Vodafone Group Plc’s Indian business and Idea Cellular Ltd., boosting its infrastructure in the country by a third, as the merging carriers sell off assets to raise cash for debt repayment amid a scathing price war. The Boston-based real estate investment trust agreed to pay 78.5 billion rupees ($1.2 billion) for about 20,000 towers owned by the carriers in a deal that is expected to be completed in the first half of 2018.
- General Electric Co. cut its dividend for just the second time since the Great Depression as its new boss grapples with one of the deepest slumps in the manufacturer’s history. The quarterly payout will drop 50 percent to 12 cents a share, the Boston-based company said in a statement Monday. GE last reduced the dividend in 2009 as it struggled with fallout from the financial crisis.
- Abu Dhabi’s state fund is looking to expand its energy investments, with $5 billion spent in the past few months in nations that can offer low costs such as the U.S., according to the head of Mubadala Investment Co.’s oil and chemicals projects.
- A group of activists is trying to put a stop to Norway’s Arctic oil exploration and forcing the country to defend itself in the first court case of its kind. Greenpeace and a Norwegian group, Nature and Youth, say Norway’s decision to award 10 Barents Sea exploration licenses in 2016 to Statoil ASA, Lundin Petroleum AB, Chevron Corp. and others, breaches the country’s constitution. Drilling in these areas, which include new acreage bordering Russian waters, is incompatible with Norway’s commitment to fight climate change under the 2015 Paris Agreement and poses a threat to the environment.
- Investors pulled $1.3 billion from global exchange-traded funds that track high-yield bonds last week as doubts mount about the sustainability of a rally that has compressed yields to multi-year lows. Funds that track dollar debt led losses, with the iShares iBoxx High Yield Corporate Bond ETF, ticker HYG, shedding $726 million for the week and the SPDR Bloomberg Barclays High Yield Bond ETF, ticker JNK, suffering its biggest daily loss in five years on Friday.
- Inmobiliaria Colonial Socimi SA is making a bid for Axiare Patrimonio Socimi SA, a competitor in the Spanish property market, that values the company at about 1.5 billion euros ($1.8 billion) and will expand Colonial’s office portfolio in Madrid.
- Uber Technologies Inc. approved SoftBank Group Corp.’soffer to buy a multibillion-dollar stake in the ride-hailing company, setting the stage for one of the largest private startup deals ever. The agreement lets SoftBank and other firms invest up to $1 billion in Uber and proceed with a tender offer in coming weeks to buy up to $9 billion in shares from existing investors. The deal could still fall through if there aren’t enough interested sellers. The deal also includes Uber governance changes.
*All sources from Bloomberg unless otherwise specified