By MacNicol & Associates In Morning Notes
November 20th, 2017
Daily Market Commentary
- Canadian stocks rose for a second day but not enough to prevent a weekly decline, the first since early September. The S&P/TSX Composite Index gained 63 points or 0.4 percent to 15,998.57, but fell 0.3 percent on the week.
- After nine years, two presidential decisions, multiple lawsuits and environmental protests, TransCanada Corp. is about to learn whether it will receive the final state permit needed to build the Keystone XL oil pipeline. The company will find out today if its Keystone XL pipeline is finally, after months of indecision, able to traverse Nebraska when state regulators give a final thumbs up or down on whether the project is in the state’s interest. If it’s a yes, the decision could spur new legal action by foes; if no, the company may appeal in the courts. A third option, approval but with an adjusted route, could open further complications.
- Active managers have captured 18 percent of Canada’s ETF market compared with just 1 percent in the U.S., the result of a regulatory advantage that lets fund managers keep their strategies close to their vest. Actively managed exchange-traded funds make up C$26 billion ($20.3 billion) of Canada’s C$141 billion ETF market. In the U.S., active ETFs make up only $39 billion of the $3.25 trillion market.
- European stocks are little changed, while Germany’s DAX drops as Chancellor Angela Merkel’s attempts to form a new government falls apart. The Stoxx Europe 600 Index adds 0.1%, following its first back-to-back weekly decline since July, while the DAX slides 0.2%. The euro fell after the collapse of coalition talks late Sunday spurred concern about Merkel’s future and potential new elections.
- S&P 500 Index futures retreated 0.2 percent after U.S. stocks lost 0.3 percent on Friday. Strong earnings and solid global growth are balanced against lofty valuations in some markets, as well as the negative signal from the U.S. yield curve, where longer-dated Treasuries are yielding less of a premium over shorter ones.
- Asian equities fell as investors used declines in U.S. stocks amid uncertainty over the progress of tax changes as a reason to lock in profit ahead of year-end. The MSCI Asia Pacific Index fell 0.1 percent to 170.31 as of 4:21 p.m. in Hong Kong, with utilities and industrial companies’ shares the worst performing groups.
- Oil held above $56 a barrel after surging the most in almost two weeks as Saudi Arabia’s energy minister said OPEC should announce an extension to supply cuts when it meets at the end of the month. Futures were little changed in New York after rising 2.6 percent Friday. Oil inventories are unlikely to drain to average levels by the time the OPEC agreement expires at the end of March.
- Gold holds near 1-month high as investors track developments in Germany as Chancellor Angela Merkel fails in bid to form new govt. Holdings in exchange-traded funds backed by silver fell near lowest since April.
- Iron ore stockpiles amassed at China’s ports are on the rise again, hitting a three-month high and raising the possibility they could expand to a record by year-end, as curbs on steelmakers’ output crimp near-term demand while seaborne supplies increase.
- Volkswagen AG lifted its profit and revenue targets for 2020, giving its firmest sign yet that the world’s biggest auto maker is emerging from its diesel-emissions crisis faster than initially anticipated. VW shares rose as much as 3.9 percent after the German manufacturer said in an investor presentation it expects revenue to rise more than 25 percent through 2020, and said operating profit would increase 25 percent or more.
- Marvell reached pact to buy Cavium common stock in exchange for consideration of $40.00 per share in cash and 2.1757 Marvell common shares for each Cavium share.
- Global investment banking revenues may decline 9 percent this quarter on low volatility and a selloff of high-yield debt, analysts at JPMorgan Chase & Co. said. Revenues from trading fixed income, currencies and commodities are expected to decline 13 percent in the three months through December versus the same period last year, while banks’ equities businesses may drop 10 percent.
- German Chancellor Angela Merkel’s bid to form a new government failed, raising the prospect of fresh elections in Europe’s largest economy and casting doubt on the future of its longest-serving leader. A month of coalition talks collapsed in dramatic fashion just before midnight Sunday as disputes among a grab-bag of disparate parties over migration and other polices led the Free Democrats to walk out.
- The latest Nafta talks have proven far less dramatic than the fireworks of earlier rounds, though any deal remains far off as Mexico and Canada hold out hope the U.S. will soften its demands. The fifth round of talks, which began in Mexico City on Nov. 15 and wraps up on Tuesday, is the first held without the top trade chiefs from the three countries.
- The Trump administration is banking on the Federal Reserve not to squelch any bump in economic growth from the Republican tax plan. White House chief economist Kevin Hassett argues that the tax overhaul will boost productivity, allowing the U.S. economy to grow more rapidly without risking a damaging bout of higher inflation that would be an anathema to the Fed.
- Saudi authorities estimate they may be able to recover between $50 billion and $100 billion from settlement agreements with suspects detained in an anti-corruption crackdown that has implicated prominent princes, officials and billionaires, a senior official said.
- Alibaba Group Holding Ltd.’s $2.9 billion deal to buy a slice of China’s largest hypermart chain pits it against Wal-Mart Stores Inc. in the world’s largest retail arena. China’s biggest e-commerce company agreed to acquire 36 percent of Sun Art Retail Group Ltd., which operates about 400 hypermarkets under the Auchan and RT-Mart banners.
- China’s latest plan to rein in its shadow banking system is winning early plaudits from analysts, despite concern that it could fuel short-term market turbulence. The country’s financial watchdogs unveiled a proposal on Friday to overhaul regulation of asset-management products, which hold about $15 trillion and are seen as threats to stability in Asia’s largest economy.
- Embattled billionaire Patrick Drahi sought to shore up the plunging stock price at Altice NV, the phone and cable company weighed down by $50 billion in debt, assuring investors he won’t sell new shares to raise cash.
- Qualcomm Inc. investors want at least $10 more than the $70-a-share Broadcom Ltd. is offering. If history is any guide, they might get partway there. “We would be very interested in evaluating an offer that begins with an 8,” said Daniel O’Keefe, a fund manager of the $3.1 billion Artisan Global Value Fund, which owns Qualcomm stock. The board “should urge Broadcom to come back with a higher bid.”
- A unit of HNA Group Co. is seeking to extend repayment of theHK$3.5b bridge loan coming due on Nov. 24 to Feb. 2018, according to people familiar with the matter.
- Toshiba Corp.’s plan to issue 600 billion yen ($5.4 billion) of new shares battered its stock price Monday, but for bond investors it appeared to be a step in the right direction. The costs to protect the Tokyo-based company’s bonds against non-payment slid the most in nine months, hitting a new low for the year, according to credit-default-swaps traders and data provider CMA.
- Mom-and-pop investors haven’t been this crazy for Hong Kong initial public offerings since 2009. Hong Kong retail stock buyers placed orders for $163 billion worth of equity in this year’s major deals, according to data compiled by Bloomberg. That’s equal to more than three quarters of the territory’s monetary base. The most popular was China Literature Ltd., a local take on Amazon.com Inc.’s Kindle Store that’s risen 74 percent since it started trading this month.
- Reliance Communications Ltd., the Indian mobile phone operator that defaulted on dollar bonds last week in the highest-profile debt failure since the country’s new bankruptcy code was passed, faces risks of insolvency if it can’t sell its assets at high enough valuations, according to SC Lowy Financial HK Ltd.
- Abu Dhabi National Oil Co. will sell as much as a fifth of its fuel-distribution unit in an initial public offering just weeks after a wave of arrests in neighboring Saudi Arabia almost derailed the Middle East’s largest share sale. The state-owned crude producer will offer 1.25 billion to 2.5 billion shares of service-station business Abu Dhabi National Oil Co. for Distribution PJSC.
- Mediclinic International Plc dropped plans to buy the rest of Spire Healthcare Group Plc after its own investors and the U.K. private hospital operator spurned a deal that would have valued the target company at about 1.27 billion pounds ($1.68 billion).
*All sources from Bloomberg unless otherwise specified