By MacNicol & Associates In Morning Notes
November 23rd, 2017
Daily Market Commentary
- Canadian stocks posted a small loss on lower-than-normal volume as trading eased off ahead of the U.S. Thanksgiving holiday. The S&P/TSX Composite Index slipped three points or less than 0.1 percent to 16,073.58, the first drop in five trading days. Telecom stocks were the biggest decliner, losing 0.6 percent as Rogers Communications Inc. fell 1.6 percent.
- 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. He made clear the U.S. won’t accept a deal that doesn’t shift trade flows in the U.S.’s favor.
- The OECD warned that rising private debt loads in both advanced and developing economies pose a risk to growth as Canada, South Korea and the U.K. lead the world in household borrowing. “Household and corporate debt in many advanced and emerging market economies is high,” the Organization for Economic Cooperation and Development said Thursday in a pre-released section of a report to be presented next week. “While higher indebtedness does not necessarily imply that problems are just around the corner, it does increase vulnerability to shocks”
- Suncor Energy Inc., Canada’s largest energy producer by market value, sold a stake in a storage and processing facility in Northern Alberta for C$503 million ($396 million) and plans to use the proceeds to cut debt.
- U.K. insurance broker BGL Group Ltd., which owns price-comparison website comparethemarket.com, canceled plans to issue shares to the public, opting instead to sell a 30 percent interest to the Canada Pension Plan Investment Board. CPPIB will pay 675 million pounds ($898 million) for the minority stake, while BGL parent BHL will retain a majority interest, according to a statement. The deal is expected to close in April, subject to approvals.
- European equities fall as the dollar weakens against the euro after minutes from the Federal Reserve’s latest meeting showed some officials shared Chair Janet Yellen’s concern about soft inflation. The Stoxx Europe 600 Index drops 0.6%, with investor sentiment also damped by a sharp selloff in Chinese shares.
- The dollar’s retreat slowed after the currency tumbled on Wednesday in the wake of more dovish than expected Federal Reserve minutes. Bond strategists have a new favorite culprit for the relentless flattening of the U.S. yield curve: the stock market. The gap between short- and long-dated Treasury yields fell to a fresh 10-year low this week, extending the trend that has dominated the world’s largest bond market for weeks.
- Asian equities outside of Japan extended gains for a third day as traders looked past the high possibility of a near-term U.S. interest-rate increase and still see room for growth in stocks in the region. Japan was closed for a holiday.
- Oil held near a two-year high as U.S. crude inventories dropped, adding to optimism OPEC’s output curbs are working as the group prepares to meet and discuss extending its reductions beyond March. Futures were little changed in New York after gaining 3.4 percent over the previous two sessions.
- Gold pares earlier losses as traders weighed minutes of the latest Federal Reserve meeting and as U.S. markets close for the Thanksgiving holiday.
- The euro-area economy gathered pace in November to stay on track for its best annual performance since the financial crisis. Companies in the 19-nation region boosted hiring at the fastest pace in 17 years to work through their backlog of orders. A survey showed business confidence in France surged to the highest in almost a decade, while a gauge for manufacturing in Germany surged to its best reading since early 2011.
- The U.K. government plans to introduce a capital-gains tax on foreign buyers of commercial property, potentially disrupting the flow of money into London office buildings in the wake of Brexit. The tax would be levied on gains made by non-residents on sales of all types of U.K. real estate, extending existing rules that apply only to homes, according to a consultation document published alongside Chancellor of the Exchequer Philip Hammond’s budget on Wednesday.
- Germany’s biggest opposition party is ready to begin talks with Angela Merkel on a minority government, offering her a way to restore political leadership in Europe’s biggest economy. It’s the first sign the Social Democratic Party is ready to help the chancellor stay in office after her talks on forming a coalition with three other parties fell apart. SPD head Martin Schulz, who faces party pressure to go further and disavow his refusal to join a Merkel government, is meeting Germany’s president on Thursday for consultations on the way forward.
- Matthew Westerman, the high profile dealmaker brought in to overhaul HSBC Holdings Plc’s investment banking arm, is leaving less than two years after he was recruited from Goldman Sachs Group Inc. Westerman, who was named co-head of global banking in February 2016, agreed to depart Europe’s largest bank by the end of the month, people familiar with the departure said earlier Thursday.
- Centrica Plc plunged the most in 20 years after Britain’s biggest energy supplier to homes warned profit would be lower than expected as an increasing number of customers are leaving. The utility is grappling with government efforts to cap some household energy bills, and announced this week that it will voluntarily phase out its most expensive tariffs.
- Telecom Italia SpA plans to hire advisers to explore a spinoff of its landline network, a move that would address government concerns about main shareholder Vivendi SA’s influence over an asset viewed as in the national interest, people familiar with the matter said. The carrier would keep control of the network, and a sale of a minority stake would raise cash to help Telecom Italia reduce its debt pile, said the people, who asked not to be named because the discussions are private.
- South Korean conglomerate Lotte Group and French carmaker PSA Group have separately discussed proposals to invest as much as $6 billion combined in India, a move that would boost Prime Minister Narendra Modi’s attempts to attract foreign capital in Asia’s third-largest economy, a person with direct knowledge of the matter said. Lotte may invest between $3 billion and $5 billion in the next five years, the person said asking not to be identified as the proposals are preliminary. The South Korean firm intends to invest in retail, chemicals, food processing and real estate, as well as develop railway platforms in the country, the person said. Separately, PSA, the maker of Peugeot and Citroen cars, plans to spend about 1 billion euros ($1.2 billion) to build a car factory and an engine plant in southern India, the person said.
- China’s deleveraging campaign is finally starting to bite in the nation’s corporate-bond market, a shift that will make 2018 a clearer test of policy makers’ appetites to let struggling companies fail. Yields on five-year top-rated local corporate notes have jumped about 33 basis points since the month began, to a three-year high of 5.3 percent, according to data compiled by clearing house ChinaBond. Government bonds, which have far greater liquidity, had already moved last month as the central bank warned further deleveraging was needed.
- Two units of Mitsubishi Materials Corp. falsified data on products that may have been delivered to more than 250 customers in order to satisfy quality standards and internal specifications. Mitsubishi Cable Industries Ltd. rewrote information about seal materials, while Mitsubishi Shindoh Co. Ltd. rewrote data related to the tensile strength and hardness of brass-strips used for vehicle terminals, according to a statement to the Tokyo stock exchange Thursday.
- Owners of AmGeneral Insurance Bhd., Malaysia’s top auto insurer, are exploring a potential sale that could value the company at about $800 million, according to people with knowledge of the matter. Kuala Lumpur-listed AMMB Holdings Bhd., which owns 51 percent of the insurer, picked JPMorgan Chase & Co. to advise on a possible deal, said the people, who asked not to be identified because the process is private.Insurance Australia Group Ltd., owner of the remaining stake, is working with Deutsche Bank AG, the people said.
- South Korean conglomerate Lotte Group and French carmaker PSA Group have separately discussed proposals to invest as much as $6 billion combined in India, a move that would boost Prime Minister Narendra Modi’s attempts to attract foreign capital in Asia’s third-largest economy, a person with direct knowledge of the matter said. Lotte may invest between $3 billion and $5 billion in the next five years, the person said asking not to be identified as the proposals are preliminary.
- Billionaire Elon Musk’s giant battery being built in the Australian outback will be energized in coming days and begin testing, indicating Tesla Inc. is on track to meet a 100-day self-imposed deadline to install the system. Tesla power packs have now been fully installed on a site near a wind farm north of Adelaide and will be tested to ensure the battery meets standards laid down by the energy market operator, the South Australia state government said in a statement Thursday.
- Israeli drugmaker Teva Pharmaceutical Industries Ltd., saddled with debt that’s almost three times its market value, is considering another round of sweeping job cuts, according to a person with knowledge of the matter. The firm plans to fire at least 10 percent of its U.S. employees and 25 percent of its Israeli workforce, the local business daily Calcalist reportedThursday, without saying where it got the information. The world’s largest maker of generic medicines hasn’t made a final decision regarding the number of positions that will be eliminated, the person said, declining to be identified as the discussions are confidential.
- Australia is concerned that China’s military expansion in the South China Sea will lead to clashes in Asia and wants the U.S. to remain involved in the region, according to a new policy paper released by the government. The power balance would shift to Beijing should the U.S. withdraw its political, economic and security ties, according to the foreign policy white paper, the first in 14 years. Prime Minister Malcolm Turnbull called the document “clear-eyed and hard-headed” and said Australia would seek a bigger role in shaping regional affairs.
*All sources from Bloomberg unless otherwise specified