By MacNicol & Associates In Morning Notes
October 11th, 2017
Daily Market Commentary
- Canada’s equity benchmark gained, briefly touching its highest closing level since February, while the loonie strengthened the most this month. The S&P/TSX Composite Index rose 42 points or 0.3 percent to 15,770.36. It earlier rose as much as 0.4 percent, nearing the all-time high reached nearly eight months ago.
- Canadian Prime Minister Justin Trudeau played up the similarities between President Donald Trump’s policy objectives and his own, saying before a White House meeting Wednesday the two leaders always managed to find common ground. Speaking at an event in Washington late Tuesday, Trudeau also reiterated his stance that adding “progressive elements” to trade deals, such as labor and environmental protections, would help reassure people the benefits of free trade will be more evenly distributed.
- Canadian oil-sands producers enjoying the strongest market for heavy crude since 2008 will soon face a renewed glut. Suncor Energy Inc. expects its Fort Hills oil-sands mine to begin producing by year end, reaching as much as 175,000 barrels a day within a year. The startup will roughly coincide with the completion of planned maintenance at Imperial Oil Ltd.’s Kearl mine.
- Vancouver’s million-dollar home prices aren’t just straining buyers, they’re holding back investment and businesses, said British Columbia’s finance minister, vowing to look at every option on the table to cool the market. Vancouver is ranked among global cities most at risk of a housing bubble for the second time this year as the cost of a typical single-family home surged to a record $1.6 million ($1.3 million), about 20 times the median household income.
- European stocks are little changed, while Spanish equities rally amid investor relief that Catalans put off an immediate declaration of independence. Stoxx Europe 600 Index rises less than 0.1%, as gains in banks and utilities offset a miner slump. The IBEX 35 Index climbs 1.3%, led by shares that had underperformed since Catalonia’s independence vote.
- In the U.S., investors will parse Wednesday’s FOMC minutes for further confirmation a December rate increase is on track. Ten-year U.S. Treasury yields nudged lower after President Donald Trump said Tuesday he plans to make changes to his tax plan within the next few weeks, while dismissing concerns that his public spat with Senator Bob Corker would scuttle an overhaul.
- Asian stocks climbed after the International Monetary Fundraised its forecast for global economic growth, with Taiwan’s equity benchmark climbing to a level last seen in 1990 and South Korea’s Kospi closing at a record. The MSCI Asia Pacific Index gained 0.2 percent to 165.07 as of 4:26 p.m. in Hong Kong, advancing for the fourth straight session to hold at its highest level since December 2007.
- Oil held gains near $51 a barrel as OPEC Secretary-General Mohammad Barkindo reiterated a rapid market re-balancing is under way, and as U.S. production was again disrupted by a storm. Futures added 0.8 percent in New York after advancing 3.3 percent in the previous two sessions. The global economic recovery has gained traction and oil de-stocking gathered momentum over the summer.
- Gold holds near highest level in almost two weeks as India gets ready for Diwali. Fed minutes due later Wednesday, which may provide clues on U.S. monetary policy.
- Iron ore’s getting hit from two sides at once. Weakening demand in China as steel mills follow orders to cut output to curb pollution over winter coupled with burgeoning supply from the top miners will probably hurt prices that have already sagged to the lowest level since June.
- China is moving forward with plans to issue its first sovereign bonds in dollars since 2004 in a deal that will put a symbolic seal of approval on the booming offshore Asian debt market. The Ministry of Finance is scheduled to meet with bankers in Beijing Wednesday to discuss the sale, according to people familiar with the plans. The deal is aimed for as soon as this month, according to the people, who asked not to be named as the specifics aren’t public. The MOF said in a statement it will sell $2 billion worth of notes.
- Bank of England Governor Mark Carney is ready to raise interest rates from a position of economic weakness rather than strength. The fastest inflation in four years has left the U.K. central bank preparing to hike next month for the first time in more than a decade, yet it’s not an accelerating economy fanning those price pressures.
- BlackRock Inc.’s quest to build scale by focusing on exchange-traded funds is reaping rewards. The world’s largest asset manager pulled in $52 billion in its iShares ETF business in the third quarter, helping the firm exceed analysts’ revenue estimates for the first time in four quarters. And showing just how much BlackRock is an industry juggernaut, total assets under management surged to almost $6 trillion.
- Spanish Prime Minister Mariano Rajoy stepped up pressure on Catalonia to halt its drive for independence, triggering the formal process that could strip the region’s separatist government of its existing powers and assert direct control from Madrid. Rajoy, speaking after an emergency session of his ministerial team on Wednesday, said the cabinet had agreed to issue a formal request to the Catalan government in Barcelona for confirmation of whether it has declared independence.
- House members are vetting a proposal to deal with a government-wide security-clearance backlog approaching 700,000 by letting the Pentagon conduct its own background checks. That option will be negotiated during talks to work out the final fiscal 2018 defense authorization (H.R. 2810). The Senate voted to transfer security clearance responsibility, a plan that isn’t part of the House-passed version.
- American Tower Corp. is close to an agreement to acquire communications infrastructure from Mexican company KIO Networks in a deal valued at about $500 million, according to people with knowledge of the matter.
- KKR & Co. offered 16 percent more for Hitachi Kokusai Electric Inc., the chip-systems maker parent Hitachi Ltd. is seeking to sell as part of its restructuring plan, as the buyout firm sweetened its April bid following a rally in the shares. The New York-based private-equity company will now offer 2,900 yen a share, up from 2,503 yen earlier, according to a statement from Hitachi to the Tokyo stock exchange.
- Bawag Group AG’s owners plan to offer as much as 2 billion euros ($2.4 billion) of shares in an initial public offering of the Austrian lender after attracting strong interest from potential investors, according to people with knowledge of the discussions.
- Steel demand in India is gathering speed amid an infrastructure building boom that’s set to more than double capacity of the nation’s mills, according to the government. India is in the midst of a wave of urbanization that is set to boost demand for everything from copper to iron ore to steel as the economy expands over the next two decades.
- Interoute Communications Ltd, a pan-European fiber carrier and cloud-services operator controlled by the Sandoz Family Foundation, has hired financial advisers to evaluate a sale, according to people with knowledge of the matter. Interoute is working with Credit Suisse and Evercore Inc. to explore a deal dubbed “Project Nitro,” said the people, asking not to be identified because the talks are private. The London-based company could be valued in a range of seven to 10 times earnings before interest, tax, depreciation and amortization, or as much as 1.65 billion euros ($1.95 billion), the people said.
- The fires ravaging Northern California stand to leave the area’s renowned wine industry with damage that will be felt long after the final flames burn out. At least four Napa Valley vineyards have been destroyed or significantly damaged, and the toll may be even worse in Sonoma County to the west. Though the majority of grapes have already been picked for the season, the smoke effects on those remaining may mean they have to be thrown out, diminishing this year’s vintage.
- China National Chemical Corp. is in talks with banks for a facility of about $5.5 billion to help refinance its loan related to the acquisition of Swiss pesticide maker Syngenta AG, according to people familiar with the matter.
- Noble Group Ltd., the commodity trading house battling for survival, is in advanced talks to sell its oil-trading unit to Vitol Group, according to people familiar with the matter. Noble Group announced a plan in July to sell its global oil business, which trades about 2.5 million barrels a day of crude and refined products, as it sheds assets in a bid to survive.
- BC Partners led an investor group that’s agreed to buy artificial hip maker CeramTec GmbH from buyout firm Cinven Ltd. in a deal that could value the German ceramics business at about $3 billion. The Public Sector Pension Investment Board and Ontario Teachers’ Pension Plan both hold a stake in the group, according to a statement from Plochingen-based Ceramtec on Wednesday.
*All sources from Bloomberg unless otherwise specified