By MacNicol & Associates In Morning Notes
November 2nd, 2017
Daily Market Commentary
- Canadian stocks eked out a fourth straight record, as gains in energy offset declines in financials and industrials. The S&P/TSX Composite Index added 4 points or less than 0.1 percent to 16,029.33. Energy stocks rose 0.9 percent even as crude prices fell 0.2 percent, erasing earlier gains after a U.S. government report showed a smaller-than-expected decline in stockpiles.
- Bombardier Inc. will miss this year’s delivery target for its flagship C Series jets as Canada’s biggest aerospace company grapples with engine delays. Customers will receive only 20 to 22 of the new aircraft this year, down from an earlier plan for about 30, Montreal-based Bombardier said in a statement Thursday as it reported earnings. The company also announced that an unidentified European client intends to buy at least 31 C Series jets, which would mark the first major sale since April 2016.
- Canada’s largest housing market showed signs of life in October after months of cooling demand and declining prices, the Toronto Real Estate Board said. Home sales in Toronto rose about 12 percent from September, an above average move and one that points to “stronger fall market conditions,” the realtor group said Thursday. Transactions were still down 27 percent from a year earlier.
- Canada will admit almost 1 million new immigrants over the next three years in a bid to spur economic growth and innovation, and bolster the country’s aging population. The country will gradually increase immigration levels beginning next year, aiming to admit 310,000 new permanent residents in 2018, 330,000 in 2019 and 340,000 in 2020, according to a government press release.
- The Stoxx Europe 600 was little changed even as data showed euro-area manufacturing is expanding at one of the fastest rates since the start of the millennium. Real estate stocks and banks outperformed and travel and technology shares lagged.
- Stocks, including tax-news-sensitive banks, rose as a one-day delay in House tax writers revealing their bill isn’t shaking faith that legislators will ultimately succeed in passing at least some tax cuts, analysts say. S&P 500 up as much as 0.5% to a fresh high as a new month kicks off.
- Materials stocks led gains in Asia amid a surge in nickel prices this week to a two-year high. The yen strengthened against the U.S. dollar after Jerome Powell was said to be President Donald Trump’s pick to lead the Federal Reserve.
- Oil traded near $54 a barrel as traders remained cautious on how quickly a global oil glut is diminishing. Futures were little changed in New York after falling 0.2 percent Wednesday. Crude inventories fell by 2.44 million barrels for a fifth decline in six weeks, according to the Energy Information Administration. U.S. oil production rose a second week.
- Gold climbs for second day as President Donald Trump said to plan to nominate Federal Reserve Governor Jerome Powell as chairman of central bank, denting dollar as Powell has generally backed current Chair Janet Yellen’s cautious approach to withdrawing stimulus.
- Alstom SA and Siemens AG, the French and German manufacturers planning to combine their train making businesses, are among five bidders shortlisted for a 2.75 billion-pound ($3.6 billion) contract to supply models for the U.K.’s planned high-speed railway. Alstom, Siemens, Bombardier Inc., Hitachi Ltd. and Patentes Talgo SA will vie for the opportunity to build and maintain trains capable of traveling at 225 miles (360 kilometers) per hour on a new line connecting London’s Euston station with Leeds and Manchester, England.
- Royal Dutch Shell Plc has taken Exxon Mobil Corp.’s cash-flow crown, a year after completing the biggest deal in its history. Europe’s largest energy company vaulted ahead on this closely watched indicator of financial health in the first nine months of 2017, as assets acquired from BG Group Plc from Brazil to Australia churned out cash. For the year as a whole, Shell is on course to surpass its larger U.S. rival on the measure for the first time in about two decades.
- House Republican leaders plan to unveil a tax bill Thursday that would cut the corporate tax rate to 20 percent — though it may not stay there. The decision may come down to congressional scorekeepers who’ll assess the effect on the federal deficit. The bill would impose a tax of as much as 12 percent on multinational companies’ accumulated offshore earnings, a GOP lawmaker said — a rate that’s higher than either President Donald Trump or House Speaker Paul Ryan have proposed. It would phase out the estate tax over years, more slowly than either of them would prefer.
- Meantime, anything other than a rate hike from the Bank of England on Thursday would be a surprise to markets. Governor Mark Carney may signal even more tightening if the economy performs in line with new forecasts, but that’s unlikely, according to Bloomberg Intelligence. Officials will probably lift the growth outlook for 2018 and lower it for 2019. Inflation forecasts may be raised for this year and left unchanged for next.
- Emaar Properties PJSC is seeking to raise as much as $1.5 billion from the initial public offering of its United Arab Emirates development business in what would be the country’s biggest share sale since 2014. The developer of the world’s tallest skyscraper plans to sell 800 million shares in Emaar Development PJSC at a price range of between 5.7 dirhams ($1.55) and 6.9 dirhams per share, the Dubai-based company said in a statement to the bourse on Thursday.
- Sirius International Insurance Group Ltd., a unit of China Minsheng Investment Group, is seeking regulatory approval as it pushes ahead with the acquisition of one of Israel’s biggest insurance companies, according to people familiar with the matter. Sirius on Thursday submitted an application to get a permit from Israel’s capital market, insurance and savings department to complete the takeover of Phoenix Holdings Ltd.
- Bitcoin climbed past $7,000 for the first time, breaching another milestone less than one month after it tore through the $5,000 mark. Spot pricing for bitcoin climbed as much as 7.1 percent to a high of $7,045.46 before pulling back slightly to $6,977.40 at 9:27 a.m. in London. The cryptocurrency is up as much as 640 percent this year and is now worth more than $100 billion.
- HNA Group Co., which once symbolized China’s insatiable appetite for overseas assets, is offering to sell the country’s most expensive short-term dollar bond ever as it tries to refinance a wall of maturing debt amid government scrutiny. The company offered a 363-day bond at 8.875 percent, after initially marketing it for about nine percent, according to a person familiar with the offering.
- As Credit Suisse Group AG enters the final phase of a three-year turnaround plan — instigated when Thiam replaced Brady Dougan as chief executive officer in 2015 and faced calls to reshape the bank — the strategy to focus on wealth management is paying off. Net new money rose 8 percent to 10.4 billion francs ($10.4 billion) in the third quarter, while earnings at the international wealth management and Asia Pacific units are surging.
- A big drop in borrowing costs for Indian state lenders on perpetual bond offerings shows that the government’s surprise $32 billion capital pledge last week has finally managed to turn around market sentiment. Bank of India priced 5 billion rupees ($77 million) of Additional Tier 1 notes on Oct. 27, just three days after Prime Minister Narendra Modi announced a ten-fold increase in the amount it plans to inject into state-run banks.
- Chinese companies that supply Tesla Inc. fell Thursday after Elon Musk indicated his pioneering electric car firm won’t start making vehicles in the world’s largest auto market this decade. Beijing Zhongke Sanhuan High-Tech Co., which said last year that it signed a three-year agreement to supply parts to Tesla, closed down 2.6 percent in Shenzhen.
- After two rocky days in Congress, the social media giants face rising momentum for regulation of political ads to curb Russian election meddling, although some key Republicans remain skeptical and urged the companies to do a better job on their own. Facebook Inc., Twitter Inc. and Google again declined on Wednesday to endorse a bipartisan bill that would force them to join broadcasters in disclosing who pays for the political ads they carry — although Facebook Chief Executive Officer Mark Zuckerberg and Twitter’s top lawyer said they support some form of transparency rule.
- Policy normalization at some of the world’s biggest central banks may have some emerging-market investors nervous, but Europe’s largest fund manager is sticking to its playbook. Amundi Asset Management, which oversees the equivalent of $1.6 trillion, is continuing to bet on developing-nation dollar debt as policy makers from the U.S. to Europe start to wind in the easy money that has fueled the emerging-market rally. Despite the run-up in hard-currency bonds the past few years, the firm still sees value, particularly in Latin America.
- HelloFresh AG gained on its first day of trading in Frankfurt, a boost for the Rocket Internet SE-backed startup seeking to spur demand for meal kits that make cooking at home easier. HelloFresh, which sells its kits in 10 markets and remains unprofitable, rose as much as 4.4 percent in early Frankfurt trading, valuing the company at about $1.7 billion euros ($2 billion). It completed the IPO price at 10.25 euros, in the middle of its target range.
- Teva Pharmaceutical Industries Ltd. is making its boldest move in China with plans to set up a joint venture with Guangzhou Pharmaceutical Holdings Ltd. to make and sell the Israeli company’s generic drugs in the world’s second-biggest market for medicines, according to its partner.
- DowDuPont Inc. will begin cutting workers and closing offices and factories in its drive to eliminate $3 billion of annual costs at the newly created chemical giant. Most of the target will be achieved through global workforce reductions, consolidating plants, shutting assets and saving on purchases, DowDuPont said in a statement Thursday. The program will generate restructuring charges of $2 billion, including $180 million in the third quarter and $1 billion in the fourth quarter, the company said.
- Argentina started taking orders in a three part, 2.5 billion euro ($2.9 billion) bond sale on Thursday, seeking to capitalize on investor optimism toward a reform-minded government. The country is offering debt maturing in five years yielding around 3.625 percent, 10-year notes near 5.5 percent and 30-year securities at between 6.375 percent to 6.5 percent, according to a person familiar with the matter. Final pricing is likely to be set later on Thursday, the person said, asking not to be named because they aren’t authorized to speak publicly.
*All sources from Bloomberg unless otherwise specified