By MacNicol & Associates In Morning Notes
November 1st, 2017
Daily Market Commentary
- Canada’s equity benchmark posted a third consecutive record high and a third monthly increase, boosted by energy stocks as oil marked its best October since 2011. The S&P/TSX Composite Index added 23 points or 0.1 percent to 16,025.59. For the month of October, the benchmark rose 2.5 percent.
- Four of the top five gainers on the Bloomberg Commodity Index this year are metals, with aluminum, zinc, nickel and copper leading the pack with returns exceeding 20 percent. There was a further pop on Wednesday as nickel soared to the highest in more than two years on the London Metal Exchange, aided by enthusiasm about the demand that may come from electric vehicles. The surge — to as much as $12,780 a ton — comes during LME Week, the industry’s main annual gathering.
- Canada’s junk bond market is on track for record issuance this year as an increase in crude oil prices has boosted confidence among local energy companies and investors. New high-yield issuance in the Canadian dollar accelerated in recent weeks, taking the year-to-date total to C$3 billion ($2.3 billion), a record for this time of year.
- Stocks in Europe started the month on a positive note, with mining shares leading gains as nickel led a surge in industrial-metal prices. The Stoxx Europe 600 Index jumped to its highest level in more than two years, with most of the 19 industry sectors rising.
- Equities advanced from Tokyo to Sydney as technology stocks gained on a raised profit outlook from Sony Corp. U.S. equity-index futures climbed on optimism tax reforms are still on track, while the dollar and Treasuries were little changed as investors awaited the Federal Reserve’s policy decision and President Trump’s announcement of the next central-bank chair.
- Japan’s benchmark Topix index rose to the highest in more than a decade, buoyed by a weaker yen, as a surge in U.S. consumer confidence in October served as the latest confirmation of a global economic recovery ahead of a Federal Reserve policy decision on Wednesday.
- Oil rose above $55 a barrel in New York in the longest winning streak in three months as U.S. industry data showed both crude and gasoline inventories declined last week. Futures advanced for a fifth day, having added 5.5 percent since Oct. 25, while in London Brent crude rose to a new two-year high.
- Gold and silver rallied before the Federal Reserve ends a policy meeting on Wednesday, with investors waiting for signals on interest-rate increases. Platinum ETF holdings extended gains.
- House tax writers pushed back the reveal of their highly guarded, long awaited tax bill by a day, a sign that disputes among Republican lawmakers are threatening their effort to pass comprehensive legislation by Thanksgiving. If the bill is released Thursday, one day later than planned, GOP leaders will have just 10 official legislative days before the holiday to do nothing short of rewiring the U.S. economic engine. To succeed, they must gain the support of a caucus that’s grumbling about being left in the dark, avoid lobbyists’ attempts to sidetrack the bill and win House passage on the sort of timetable that’s usually reserved for emergency legislation.
- U.K. manufacturing strengthened in October and measures of prices and capacity indicated an inflationary buildup within the industry. IHS Markit said costs rose and firms increased selling prices at the fastest pace in six months. A measure of hiring jumped to the highest in more than three years and there were “capacity pressures” in the supply of raw materials, it said.
- Former Trump adviser George Papadopoulos made a significant claim in an email: Top Trump campaign officials agreed to a pre-election meeting with representatives of Russian President Vladimir Putin. The message, if true, would bolster claims that Trump’s campaign attempted to collude with Russian interests. But it’s unclear whether Papadopoulos, who pleaded guilty to lying to the Federal Bureau of Investigation, was merely boasting when he sent the July 14, 2016, email to a Kremlin-linked contact. There’s also no indication such a meeting ever occurred.
- Goldman Sachs Asset Management is betting against Treasuries, arguing that investors are underestimating the Federal Reserve’s intent to raise interest rates, regardless of who helms the central bank. The Treasury 10-year yield is set to climb toward 3 percent as the Fed may tighten three times in 2018 after a likely move in December.
- Russian President Vladimir Putin arrived in Tehran Wednesday for meetings with Iran’s top leaders as Moscow voices increasing criticism of U.S. President Donald Trump’s move away from the nuclear agreement with the Islamic Republic. Putin will hold talks with Iranian President Hassan Rouhani and SupremeLeader Ali Khamenei that will focus on the nuclear issue and their cooperation in Syria, as well as economic ties, the Kremlin said in an emailed statement. He’ll also take part in a three-way summit between Russia, Iran and neighboring Azerbaijan.
- SoftBank Group Corp. is waiting to hear back from Deutsche Telekom AG on an eleventh-hour bid to save a merger between Sprint Corp. and T-Mobile US Inc., as the chances for a deal dwindle fast, according to people familiar with the matter. The Japanese company is expecting Deutsche Telekom to make a final proposal this week that will include how many Sprint shares it’s willing to accept for each T-Mobile share.
- Blackstone Group LP acquired a group of Southern California warehouses and related properties from Principal Real Estate Investors, expanding its bet on growing web commerce and global trade. The New York-based private equity firm paid $500 million for the buildings, according to a person with knowledge of the transaction, who asked not to be named because the details are private. The properties total about 4 million square feet (371,600 square meters).
- Buyout firm Advent International is exploring strategic options for Dutch enterprise software company Unit4 NV, people with knowledge of the matter said. The private equity firm is working with an adviser on an auction process for the company, said the people, who asked not to be identified because the information is private. The business, which is attracting interest from other private equity firms, is expected to be valued at about 2 billion euros ($2.3 billion) in a sale, the people said. A deal might be completed by early 2018.
- Novo Nordisk A/S signaled that it expects another year of muted earnings growth as the world’s biggest maker of diabetes drugs fights to insulate newer therapies from the pricing pressures that have hit the U.S. market for insulin. Operating profit and sales are likely to climb by a “low to mid single-digit” percentage next year in local currencies, Bagsvaerd, Denmark-based Novo said in a statement on Wednesday.
- Cisco Systems Inc. is seeking a buyer for its video-software unit, according to people familiar with the process, part of an effort to sharpen focus on the fast-changing network-infrastructure business. The San Jose, California-based company is soliciting offers for NDS Group, said the people, who asked not to be identified because the process is private.
- China Literature, the online reading unit helping Tencent build an entertainment empire, raised $1.1 billion alongside existing investors in its Hong Kong IPO, according to people with knowledge of the matter.
- Oil explorers are neglecting their old hunting grounds in the North Sea, threatening to deepen an expected slump in Norway’s output in the middle of the next decade, the country’s industry regulator warned. Norway’s oil and gas production, which peaked in 2004, is already forecast to fall again after 2025 as old fields decline. But that estimate includes resources yet to be found, meaning without new discoveries it could be even lower.
- Motorcycle riders are keeping the cash counters humming at Honda Motor Co., while American car buyers are playing hard to get. The world’s biggest maker of scooters and motorcycles — some powered by engines as tiny as 0.1 liter — said customers in India are lining up in bigger numbers than ever before to buy its Activa and Dio scooters. So much so that Honda is boosting production capacity in the country to 12 units every minute.
- Novartis AG is considering a sale of its dermatology generics drugs business as the Swiss health-care giant seeks to shed some of its less profitable treatments and focus on growth areas such as cancer, according to people familiar with the matter. The business, which is mostly based in the U.S., could be valued at between $1 billion to $1.5 billion and attract both private equity firms and other drugmakers.
*All sources from Bloomberg unless otherwise specified