By MacNicol & Associates In Morning Notes
November 8th, 2017
Daily Market Commentary
- Canada’s stock benchmark continued its streak of record highs, rising for the eighth day in nine as energy and telecom stocks gained. The S&P/TSX Composite Index added 40 points or 0.3 percent to 16,131.79. Since the recent rally began on Sept. 8, the benchmark is up 7.7 percent.
- It was one of 2017’s mega mining deals. And then it wasn’t. West High Yield (W.H.Y.) Resources Ltd. — the tiny Canadian explorer that surged nearly 1,000 percent last month after announcing a pact to sell its main assets for $750 million — said the deal has collapsed. The buyer couldn’t come up with a deposit for less than 1 percent of the transaction value, or $500,000. “The purchaser failed to pay the deposit” by the Nov. 6 deadline, Calgary-based West High Yield, which trades under the ticker WHY, said in a statement late Tuesday. “The board of directors of the company decided to terminate the agreement.”
- Bank of Canada Governor Stephen Poloz said he’s confident inflation will return to his 2 percent target as the economy returns to normal, after spending most of the past few years below that mark. Most of the downside miss can be explained by “the surprising persistence of excess capacity in the economy, and the fact that inflation reacts to excess demand after a lag,” Poloz said Tuesday in a speech in Montreal.
- Canada’s most populous province expects the country to reap significant revenue from the sale of legalized marijuana, and is pushing for a bigger cut of the tax windfall. Ontario Finance Minister Charles Sousa expects strong demand when Canada legalizes recreational pot next year, but cautioned it must be cheap enough to undercut prices as low as C$8 per gram ($177 an ounce) on the illegal market.
- European stocks are little changed following their biggest slide in almost two weeks, as investors assess earnings reports. The Stoxx Europe 600 Index rises less than 0.1%, with gains held back by a drop in banking shares after Credit Agricole posted a slump in trading revenue. Royal Ahold Delhaize and HeidelbergCement are among shares rallying after reporting better-than-forecast profit.
- The dollar weakened and Treasury yields edged lower amid concern about the progress of U.S. tax reforms and as President Donald Trump arrived in China on a state visit. Investor focus has returned to geopolitics this week as Trump continued his tour of Asia with a central mission of rallying the world to stand up to the North Korean threat. Calling out by name Russia and China, he said Wednesday that all responsible nations must join forces to deny Kim Jong Un’s regime any form of support.
- A gauge of Asian stocks held steady at a decade high following a report that U.S. Senate Republican leaders are considering a delay in the implementation of a corporate-tax cut. The MSCI Asia Pacific Index rose 0.2 percent to 171.76 at 4:28 p.m. in Hong Kong after earlier rising to its highest since 2007 for a second day following little change in U.S. stocks on Tuesday.
- Oil steadied in New York before weekly data on crude inventories in the U.S., the world’s biggest oil consumer. Futures were little changed after slipping 0.3 percent on Tuesday, the first decline in four sessions. Crude inventories fell by 1.56 million barrels last week, while motor-fuel stockpiles gained 520,000 barrels, the industry-funded American Petroleum Institute was said to report.
- Gold remains pegged to its 100-day moving avg as a gauge of the metal’s price swings continues to fall. Options traders are turning more positive on platinum, this year’s worst-performing precious metal.
- The poorest households in Britain have been harder hit by inflation since 2005, according to the Office for National Statistics. Consumer prices including owner-occupiers’ housing costs have risen an average of 2.3 percent per year for low-income families, with the very poorest facing increases of 2.5 percent, according to a report published Wednesday. That compares with 2.1 percent for those on higher incomes.
- EON SE underlined its plan to focus on new investments after debt shrank and nine-month profit surged. Germany’s largest renewable energy generator reaffirmed its full-year target and pledged to unveil its growth strategy early next year, the Essen-based company said in an earnings statement on Wednesday. It reported an improved balance sheet bolstered by a nuclear-fuel tax refund of 2.85 billion euros ($3.3 billion).
- JD.com Inc. will buy $2 billion of U.S. goods, more than half of which is beef and pork, in a deal that coincides with President Donald Trump’s visit to China. JD.com, China’s second-largest online mall, will buy more than $1.2 billion of beef from the Montana Stock Growers Association and pork from Smithfield Foods Inc. over the next three years.
- There’s little doubt that American companies stand to reap a windfall if the Republicans pass tax cuts. Going by recent history, investors have a preference for what to do with the extra cash — more spending on plants and equipment and less on stock buybacks. So far this year, shares of companies with high capital expense layouts relative to market value are up 28 percent, more than double the return for those that spend the most on repurchases and dividends, according to data compiled by Goldman Sachs Group Inc. and Bloomberg. That’s the biggest outperformance since 2009.
- For Hannover Re, the world’s third-biggest reinsurer, it’s time to take profits in the stock market. The German company said on Wednesday that it sold its entire stock portfolio, worth about 953 million euros ($1.1 billion), to help pay for claims from hurricanes and earthquakes.
- Tongwei Co. plans to spend 12 billion yuan ($1.8 billion) to build two solar-cell factories that would make the Chinese firm the world’s biggest manufacturer of products that generate electricity from the sun. The company’s Tongwei Solar Energy (Hefei) unit will set up one plant in the eastern city of Hefei and a second in the southwestern city of Chengdu, each with an annual production capacity of 10 gigawatts, its parent said in a Nov. 6 statement on the website of the Shanghai stock exchange.
- Donald Trump touched down in China to news on one of his favorite topics: the trade deficit. But it mightn’t be the news he’s wanting. For the first 10 months of the year, China’s trade surplus with the U.S. was$223 billion according to Bloomberg calculations based on data released by the General Administration of Customs on Wednesday — just before the U.S. president arrived in Beijing from Seoul. That pace should mean the full-year gap between China’s sales to the U.S. and its imports is about the same as in 2016, at around $250 billion.
- A unit of state-owned China Taiping Insurance Group is in advanced talks to acquire a newly built office tower in Hong Kong from Henderson Land Development Co., according to people with knowledge of the matter. China Taiping is negotiating to buy the building at 18 King Wah Road in North Point, said the people, who asked not to be identified because the deliberations are confidential. It’s not clear which unit of the Chinese insurer is buying the tower. The building is valued at about HK$10 billion ($1.3 billion), according to one of the people.
- Apple Inc., seeking a breakthrough product to succeed the iPhone, aims to have technology ready for an augmented-reality headset in 2019 and could ship a product as early as 2020. Unlike the current generation of virtual reality headsets that use a smartphone as the engine and screen, Apple’s device will have its own display and run on a new chip and operating system, according to people familiar with the situation.
- China’s overseas crude purchases retreated from near-record levels to the lowest in a year as oil refining was seen curbed by national holidays and the twice-a-decade Community Party gathering and as independent refiners burn through their quotas.
- Tencent Holdings Ltd. has taken a 10 percent stake in social media software maker Snap Inc. Snap said Tuesday it’s redesigning its mobile application to reach a broader audience and make more money from ads, as third-quarter financials showed sales growth keeps lagging investor expectation.
- Russia’s finance minister said Venezuela has agreed to his country’s terms for restructuring about $3 billion in debt and the deal will come soon. Russia had offered to reschedule debt payments over two stages, with payments on most of the state loan to be delayed to the second phase, Siluanov said late last month. He declined to give further details of each stage or the amount of money involved, saying calculation of the terms is for negotiation with Venezuela.
- Saudi Arabia’s anti-corruption purge and deepening feud with Iran have spurred a selloff across Gulf stock markets to the tune of almost $7 billion, a sign of the volatility to come as governments in the region push ahead with reforms. The decline cut the combined market capitalization of bourses in the six-nation Gulf Cooperation Council to $910.7 billion, the lowest level in a year.
- General Electric Co.’s new boss says he’ll unload $20 billion in assets. Wall Street wonders if that’s enough. With several divisions slumping and the stock dropping to a five-year low last week, Chief Executive Officer John Flannery is under rising pressure to shake up the 125-year-old manufacturer. One potential strategy to unlock value would be a portfolio overhaul, with analysts broaching the possibility of a more sweeping breakup.
- Cemex SAB, once billed as the Mexican company most likely to profit from U.S. President Donald Trump’s construction plans, is still waiting for the payoff. Trump’s goal of channeling $1 trillion to infrastructure spending over 10 years and build a wall along the Mexican border prompted Deutsche Bank AG to say in January that the new administration would represent “more fiesta than siesta” for Cemex.
- Bharti Airtel Ltd. fell as much as 6.7 percent Wednesday after Qatar Foundation was seeking to sell as much as $1.5 billion of the Indian wireless carrier’s stock.
- China’s dilemma of how to feed its booming population will partially be answered by fancier fertilizers, according to one of the world’s richest billionaires. EuroChem Group AG, owned by Russian commodities tycoon Andrey Melnichenko, is spending over $6 billion on two mines to produce potash, a reddish mineral found deep in the Earth that’s prized for its ability as a soil fertilizer.
- Humana Inc. is working to eliminate about 2,700 jobs, or 5.7 percent of its workforce, to cut costs and boost growth. The health insurer’s plan will include an early retirement program as well as involuntary job cuts, the Louisville, Kentucky-based company said in astatement on Wednesday. The company recorded charges with an estimated impact of $0.54 on earnings per share in the third quarter as a result.
- Amazon.com Inc.’s been plowing into industry after industry, and executives atop some of the biggest U.S. banks are hoping finance won’t be the next target for disruption. The tech juggernaut and others like it would have several advantages if they decide to edge into financial services, including strong funding and familiarity with their users, said Andy Cecere, chief executive officer of U.S. Bancorp, the nation’s fifth-biggest commercial bank.
- Chinese electric-car startup NIO is raising more than $1 billion in a new round of financing from investors led by Tencent Holdings Ltd. to develop affordable and connected battery cars, according to people with direct knowledge of the matter.
*All sources from Bloomberg unless otherwise specified