By MacNicol & Associates In Morning Notes
November 27th, 2017
Daily Market Commentary
- Trade will be high on the agenda when Canadian Prime Minister Justin Trudeau visits China next week in a bid to boost business ties with the world’s second-largest economy. The Dec. 3-7 trip comes as Trudeau wrestles with free-trade pacts in North America and with other partners in Asia. The visit is aimed at promoting a “progressive trade agenda and tourism initiatives that will create good, middle class jobs” and seeking greater cooperation on fighting climate change, according to a statement Sunday from Ottawa.
- Influential Federal Reserve policy makers are talking up the benefits of reviewing the U.S. central bank’s 2 percent inflation target and they see Canada’s approach as setting a good example. Over the past quarter century, the Bank of Canada has regularly reviewed its monetary policy guidelines in collaboration with the government. The process forces the central bank to assess its policy approach and ensures political buy-in.
- Civeo Corp., one of the world’s largest providers of worker accommodation to the resources industry, agreed to acquire Canadian oil sands housing owner Noralta Lodge Ltd. for C$367 million ($289 million). Houston, Texas-based Civeo said in a statement Monday it will pay C$210 million cash and issue 32.8 million shares to Noralta’s owners to finance the transaction. It will also issue non-voting convertible preferred equity to shareholders of Nisku, Alberta-based Noralta that’s initially convertible into 29.3 million common shares.
- European stocks drop, following a risk-off start to the week in Asia after global equities closed at a fresh record on Friday. The Stoxx Europe 600 Index slips 0.3%, with all but one of its 19 industry groups down.
- Investors are gearing up for a busy week, with President Trump scheduled to address Senate Republicans at their weekly luncheon Tuesday on taxes ahead of a potential vote on tax reform. Federal Reserve Chair Janet Yellen testifies before the congressional Joint Economic Committee in Washington, and the confirmation hearing for her nominated successor, Jerome Powell, begins. Adding to the mix are data on U.S. GDP, prices and jobs.
- Asia’s emerging-market currencies were mixed with the won falling and the Philippine peso rising before U.S. economic data and speeches by Federal Reserve officials this week. The MSCI EM Asia Index of shares fell, weighing on risk sentiment, while bonds dropped in China, India and Indonesia.
- Oil slipped from the highest close in more than two years after U.S. drillers expanded operations while OPEC and Russia prepare to discuss longer supply curbs. Futures slid 0.8 percent in New York after rising 1.6 percent Friday to the highest since June 2015. OPEC and Russia, a partner in the oil-cuts deal, have crafted the outline of an agreement to extend curbs to the end of next year.
- Gold trickles higher as investors await Republican vote on U.S. tax bill this week as well as GDP data, which may give some direction to the precious metal.
- The Senate tax bill is headed for a marathon debate this week with the aim to hold a floor vote as early as Thursday. Should it pass, Republican leaders will have to hammer out a compromise between different provisions in the House and Senate bills.
- Prime Minister Theresa May has a week to find a compromise on the conflicting Brexit demands from the north and south of Ireland, just as a political scandal threatening the Irish government could further undermine her chances of success. Irish Prime Minister Leo Varadkar wants written assurances that Brexit won’t mean a return to checkpoints and towers along what will become the EU’s new land frontier with the U.K. Northern Ireland’s Democratic Unionist Party, which props up May’s government, values its ties to mainland Britain more than an open border with the Irish Republic.
- Allianz SE offered to buy the remaining shares of Euler Hermes Group for about 1.85 billion euros ($2.2 billion) in a move to take full control of the world’s biggest trade credit insurer. Allianz plans to increase its stake in Euler Hermes through a simplified cash tender offer of 122 euros per share after it agreed to buy an 11.34 percent stake from existing shareholders
- Meredith Corp. agreed to acquire Time Inc. for about $1.8 billion in cash, swallowing the once-mighty home of Fortune and Sports Illustrated after the internet age wreaked havoc on even the most prestigious magazine titles. The $18.50-a-share offer will give Meredith, publisher of Better Homes & Gardens, a larger audience to compete with Facebook and Google in attracting advertisers. The acquisition also provides the billionaire Koch brothers, who agreed to support Meredith’s offer with an equity injection of $650 million, a stake in well-known media brands like Time magazine.
- Mick Davis is no longer being considered for the chairman job at Rio Tinto Group after facing shareholder opposition, according to a person familiar with the matter. As Xstrata’s chief executive officer, Davis led a team renowned for transforming the coal producer through about 40 deals worth $35 billion over 10 years from 2002. In contrast, Davis’s tenure from 2013 at his private equity vehicle X2 Resources didn’t yield any investments as volatile commodities prices made bidding for mining assets difficult.
- Statoil ASA boosted its position in the Norwegian North Sea with a $1.45 billion acquisition from Total SA. Statoil agreed to acquire Total’s interests in the Martin Linge field and the Garantiana discovery, becoming operator of both, the Norwegian state-controlled oil producer said Monday in a statement. Following the transaction, it will hold stakes of 70 percent and 40 percent, respectively.
- Mitsubishi Materials Corp.’s bond yields surged after the company said it falsified product data, and Japanese rating firms said they may consider a downgrade depending on the extent of the wrongdoing or its cost. Rating & Investment Information Inc. may cut the company’s A- credit score if either of two situations materializes: first, if it becomes clear that data falsification of a similar magnitude has been occurring regularly at places other than the three units that the materials maker has already said committed the wrongdoing.
- The holiday shopping season is off to a strong start and retailers hope to continue the momentum today — Cyber Monday — the biggest online spending day of the year. Amazon.com Inc. and Wal-Mart Stores Inc. are vying for holiday spending with competing deals on flat-screen televisions, toys and gadgets. Traditional retailers Macy’s Inc., Sears Holdings Corp. and JC Penney Co. have all shuttered stores, creating an opportunity for retailers to fill the void online.
- Bitcoin is showing no signs of slowing down, blowing past $9,500 a week after topping $8,000 and approaching its closest ever to five figures. The price of the largest cryptocurrency by market value is soaring as it gains greater mainstream attention despite warnings of a bubble in what not everyone agrees is an asset.
- China’s two biggest apps for Uber-like truck services, Huochebang and Yunmanman, have merged to create a new company that could dominate a vast but unruly sector. Wang Gang, a backer of Yunmanman’s and an angel investor in ride-hailing giant Didi Chuxing, will become the chief executive officer of the combined corporation, the two companies said. The new entity is valued at more than$2 billion and will seek new funding to sustain its pace of expansion, people familiar with the matter said, asking not to be identified because the information is private.
- The clash between OPEC and America’s oil industry is reaching a day of reckoning. The U.S. shale revolution is on course to be the greatest oil and gas boom in history, turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.
- Boris Collardi unexpectedly resigned as chief executive officer of Julius Baer Group Ltd. to become a partner at rival Pictet Group, triggering the search for a long-term successor. He will be replaced for now by Deputy CEO Bernhard Hodler. Collardi, 43, will join closely held Pictet as co-head of its global wealth management group as of mid-2018, the Zurich-based bank and Pictet said in separate statements on Monday.
- Pearson Plc agreed to sell its English language training business for about $300 million in cash, the latest disposal by Chief Executive Officer John Fallon as he shifts the struggling textbook publisher to digital education. The sale of Wall Street English to Baring Private Equity Asia Ltd. and Citic Capital Holdings Ltd. will let Pearson reduce its net debt by $100 million, the London-based company said in a statement Monday.
- Three of Africa’s largest telecommunication towers companies plan to pursue share sales in either London or New York early next year, taking advantage of high industry valuations to fund expansion, according to people familiar with the matter. Closely-held IHS Towers, targeting an enterprise value of $10 billion, plans to list in New York, said the people, who asked not to be identified as the information isn’t public. Helios Towers Africa LLP is looking at a valuation of at least $2 billion, while Eaton Towers Ltd. is aiming for about $2 billion, the people said. Both will list in London, while Eaton is also considering a secondary listing in Johannesburg, they said.
*All sources from Bloomberg unless otherwise specified