By MacNicol & Associates In Morning Notes
November 22nd, 2017
Daily Market Commentary
- Canada’s stock rally appears to be back on track, with stocks rising the most in nearly two months as a global risk-on trade boosted equities around the world. The S&P/TSX Composite Index gained 72 points or 0.5 percent to 16,076.65, the highest close in eight trading days. Materials stocks rose 0.9 percent as copper added 1.2 percent, breaking out above a four-week downtrend.
- After three months of talks, the U.S., Canada and Mexico remain miles apart on a deal to update the region’s flagship trade pact. The Nafta round ended Tuesday in Mexico City with negotiators failing to finalize new agreements on even minor sections of the pact. In some of his bluntest remarks since the talks began, U.S. Trade Representative Robert Lighthizer said Canada and Mexico aren’t “seriously” engaging on some key areas to overhaul Nafta.
- Netflix Inc. is getting a taste of Canadian identity politics. Quebec’s political and media establishment is pummeling the American video-streaming company after it pledged to spend C$500 million ($392 million) filming in Canada — without committing to French-language content. The agreement with the federal government also sparked outrage and a campaign by the nation’s top broadcaster because it didn’t subject Netflix to a sales tax, which the province now wants to enforce on its own.
- European stocks hold steady, after their first back-to-back gains in two weeks, as investors await details of the U.K. budget. The Stoxx Europe 600 Index adds 0.1%, even as global equities head for a record high. Gains in energy shares and miners offset losses in travel and media stocks.
- Global stocks are adding to what’s been a stellar year for equity returns amid optimism about global growth and company earnings. The bond market has been showing fixed-income traders are more concerned that the U.S. economy may slow, with the gap between the yield on longer dated Treasuries and shorter-term bonds narrowing to levels not seen for 10 years.
- Asian stocks headed for a record close for the second time this month as the regional benchmark gauge surpassed its 2007 peak, led by energy and industrial stocks after U.S. equities continued their bounce from a two-week slide. The MSCI Asia Pacific Index rose 0.6 percent to 172.67 as of 4:37 p.m. in Hong Kong. The gauge passed its 2007 closing high on an intraday basis on Nov. 9 but didn’t hold the level.
- Oil headed for its highest close since June 2015 while trading volume surged after U.S. industry data showed crude stockpiles resumed declines and as investors await a decision by OPEC on extending output cuts. January futures rose as much as 2 percent in New York on volume almost seven times higher than the 100-day average.
- Gold climbs for a 2nd day as dollar weakens and investors await minutes from the Federal Reserve’s latest policy meeting for further clues on the central bank’s tightening path.
- The European Central Bank is assessing a key element of its stimulus plan that looks likely to gain in prominence next year. The ECB is reviewing its corporate-bond buying program, according to euro-area officials familiar with the matter. The study by the Market Operations Committee is largely looking at the effectiveness of the strategy, which has spent 126 billion euros ($148 billion) so far, and how it influences the supply of credit to the euro-area economy.
- The U.S. Treasury yield curve reached its flattest level of 2017 on Tuesday and technical indicators point to steepening. Yet the search for yield and the global savings glut could flatten the curve further.
- Hong Kong’s benchmark equity gauge rose above the 30,000 level for the first time in a decade as energy producers and Chinese developers climbed. The Hang Seng Index gained 0.6 percent to 30,003.49 at the close. Hong Kong Exchanges & Clearing Ltd. was the top performer on the day after Morgan Stanley raise its price target and turnover on the bourse climbed to a two-year high.
- London Stock Exchange Group Plc plans to ask its chief financial officer to take over if Chief Executive Officer Xavier Rolet suddenly leaves the company, according to a person familiar with the matter, as a battle over the top jobs at the exchange group intensifies. CFO David Warren, who has already been approved by regulators, would temporarily assume Rolet’s duties if needed, the person said. An LSE spokesman declined to comment.
- Federal Reserve officials have penciled in a gradual path for raising interest rates, but minutes of their last meeting may show increasing concern that the U.S. labor market is overheating. Scheduled for release at 2 p.m. in Washington on Wednesday, the minutes of the Federal Open Market Committee’s Oct. 31-Nov. 1 closed-door debate could harden investor expectations for a further tightening of monetary policy even though inflation remains below its 2 percent target.
- The appointment of Dara Khosrowshahi as head of Uber Technologies Inc. this summer was supposed to mark the beginning of a new chapter. The company had been racing from one disaster to the next, leading to boycotts, lawsuits, criminal probes, an executive exodus and an investor-led mutiny against the co-founder. Somehow, the new chief executive officer keeps finding more horrors at every turn. The latest is a cyberattack Uber had been concealing since last year that exposed personal data on 57 million customers and drivers globally. The company, which said it had paid hackers $100,000 to delete the data and keep quiet, disclosed the incident in a statement to Bloomberg on Tuesday, following an investigation commissioned by the board. The chief security officer and one of his deputies were ousted for their actions following the hack.
- Agricultural markets can stay depressed longer than farmers can keep their old tractors rolling — at least that’s if Deere & Co.is any guide. The world’s largest farm-machinery manufacturer on Wednesday reported its first increase in annual sales in four years. Deere also forecast another gain in fiscal 2018, as well as higher-than-expected earnings. The shares rose in pre-market trading.
- Pressure is mounting on Germany’s Social Democrats to join Chancellor Angela Merkel in a revived alliance and end the impasse threatening political stability in Europe’s largest economy. While Merkel has publicly stated she’s open to another election, her backers are betting that the SPD will abandon its aversion to a rerun of the “grand coalition,” according to people familiar with discussions in Berlin. That alliance of Germany’s two biggest parties underpinned two of Merkel’s three terms, including the last four years.
- Nippon Paint Holdings Co. made a surprise counter-bid for Axalta Coating Systems Ltd., derailing amicable merger talks between the U.S. company and paint maker Akzo Nobel NV as the Japanese firm attempts its biggest acquisition. There’s no guarantee a deal will be reached, Nippon Paint said in a stock exchange statement Wednesday without disclosing the financial terms of its offer. Axalta, whose shares gained to their highest level in more than two years in New York trading Tuesday, confirmed the bid. The Philadelphia-based company had a market value of $8.25 billion while Nippon Paint has a market capitalization of $10.3 billion.
- Anbang Insurance Group Co. has been asked by Chinese regulators to reduce its stakes in China Minsheng Banking Corp. and China Merchants Bank Co. to comply with new rules governing bank shareholdings, according to people familiar with the matter. The insurer will be allowed to own no more than 5 percent of the two lenders, said the people, who asked not to be named discussing private information. Anbang is Minsheng’s largest shareholder with a 15.5 percent stake and owns 10.7 percent of Merchants Bank, according to the lenders’ latest quarterly reports. Those stakes are worth about a combined $20 billion based on Wednesday’s market price.
- Rockwell Automation Inc. rejected Emerson Electric Co.’s $29 billion takeover proposal, saying the bid undervalued the supplier of controls for assembly-line operations. The offer, which Emerson announced publicly on Nov. 16, “presents significant long-term risk for Rockwell Automation’s shareowners, and would create a company that is not well-positioned to compete successfully in the evolving market,” the Milwaukee-based company said in a statement Wednesday.
- Petrobras plans to raise 4.95 billion reais ($1.5 billion) with an initial public offering of shares in its fuel distribution unit as part of the oil giant’s wider effort to reduce leverage. Brazil’s state-controlled oil company expects shares of BR Distribuidora, as the unit is known, to price between 15 and 19 reais, it said in a preliminary prospectus on Wednesday. Pricing will be set on Dec. 13 and shares are expected to start trading on Dec. 15, it said.
- Global A&T Electronics Ltd., a Singapore-based chip assembler that took on hefty debt a decade ago through a buyout by TPG Capital and Affinity Equity Partners, expects to file for bankruptcy protection in the U.S. after years of struggling with creditors following a contentious 2013 debt exchange. TPG and Affinity Equity Partners took the company, previously known as United Test & Assembly Center Ltd., private in a $1.77 billion leveraged buyout in 2007.
- Cirsa Gaming Corp. SA, the Spanish casino and bingo-hall operator owned by billionaire Manuel Lao Hernandez, is exploring options including an initial public offering or the sale of a minority stake amid interest from investors, according to people familiar with the matter. Other options could include an outright sale or merger of the business, the people said, asking not to be identified because the deliberations are private. Cirsa could fetch about 2 billion euros ($2.3 billion) in a potential sale, they said.
- Makan Delrahim was virtually unknown outside the insular world of antitrust law until he dropped a bombshell lawsuit this week to block AT&T Inc.’s megadeal to buy Time Warner Inc. The outcome is likely to establish him either as a bold enforcer or someone in over his head. Delrahim was working under President Donald Trump in the White House counsel’s office before he went to lead the Justice Department’s antitrust division in September.
- The hack of the U.S. Securities and Exchange Commission’s corporate-filing database likely involved Eastern European criminals who may have been perusing market-moving information stored in the regulator’s network for months, according to two people with knowledge of the matter. It was during a routine maintenance check of the SEC’s Edgar system that the agency discovered how long intruders might have had access to company secrets, said one of the people who asked not to be named to discuss findings about the 2016 hack that haven’t been disclosed.
*All sources from Bloomberg unless otherwise specified