By MacNicol & Associates In Morning Notes
October 12th, 2017
Daily Market Commentary
- Canadian stocks narrowed in on an all-time high, adding to a rally that has seen the country’s benchmark gain more than 5 percent in a month. The S&P/TSX Composite Index rose 30 points or 0.2 percent to 15,800.40, its highest close since Feb. 22. That was one day after the TSX hit its all-time closing high of 15,922.37.
- The challenge of deciphering Donald Trump’s intentions for Nafta were on full display Wednesday in Washington. There was Trump, who veered within minutes between killing the North American Free Trade Agreement, saving it or breaking it into two-way pacts. Then there was U.S. Commerce Secretary Wilbur Ross, who hours later repeated contentious proposals that some call poison pills. Meanwhile, Trump ally Newt Gingrich, who helped pass Nafta as House speaker in 1993, was advising observers to ignore the bluster and expect the pact’s salvation.
- Canadian grocer Metro Inc. agreed to sell most of its stake in Alimentation Couche-Tard Inc. for C$1.55 billion ($1.24 billion) to help finance its acquisition of pharmacy chain Jean Coutu Group Inc.
- European stocks are little changed as traders weigh minutes from the Federal Reserve’s September meeting for clues on the trajectory of interest rates and assess the political crisis in Spain. The Stoxx Europe 600 Index rises less than 0.1%. Miners are among the best performers among industry groups, tracking copper prices higher. Banks lead declines as bond yields retreat.
- The underperformance of equal-weighted indexes suggests U.S. stocks are vulnerable even though they’re trading at record highs, according to strategists at Lyxor Asset Management. This measure of participation in a market move equalizes the influence of the most valuable companies. By contrast, Europe’s share rally is broader, making it look more secure.
- Asia stocks advanced for a fifth day, sending the regional benchmark to a fresh 10-year high, after minutes of the latest U.S. Federal Reserve meeting boosted optimism that rate increases in the world’s biggest economy will remain gradual. The MSCI Asia Pacific Index rose 0.5 percent to 165.80 as of 4:40 p.m. in Hong Kong, heading for the highest close since November 2007.
- Oil slid as investors waited to see if U.S. government data will confirm that crude stockpiles rose last week, and as the International Energy Agency warned of a ceiling for prices next year. Futures lost 0.9 percent in New York after climbing 4.1 percent in the previous three sessions.
- Gold erased losses after the Federal Reserve released minutes of its latest meeting, signaling some policy makers are looking for stronger evidence of price gains before supporting a third interest rate hike this year.
- The global iron market is fragmenting as a new dynamic comes to the fore, with lower-grade ore increasingly shunned in favor of better-quality material as China presses home an aggressive anti-pollution campaign in the world’s largest user. While benchmark ore with 62 percent iron content dropped to $59.65 a dry metric ton on Wednesday, the lowest since June 23, material that has 58 percent content plunged to $35.98 a ton, the cheapest since January 2016.
- The European Union said talks hit a wall over what the U.K. owes when it leaves, increasing the chances of a messy departure as time is running out to clinch a deal. “No deal will be a very bad deal, huh? And to be clear on our side we will be ready to face any eventualities and all eventualities,” the EU’s chief Brexit negotiator, Michel Barnier, told reporters in Brussels on Thursday. The pound traded down by as much as 0.5 percent on the day.
- Bitcoin surged to a fresh record Thursday as the enthusiasm for cryptocurrencies showed little signs of abating. The world’s largest cryptocurrency rose as much as 7.4 percent and was trading 5.8 percent higher at $5,105 as of 9:59 a.m. in London, resuming gains after a one-day break. As recently as December, bitcoin was trading at less than $1,000 dollars.
- China is considering a prescription for nearly $4 billion worth of wasted electricity production looming over its push into clean energy. The world’s biggest investor in renewables plans an aggressive expansion into energy storage with an eye to making the technology widespread by 2025, according to a statement posted on the website of the National Development and Reform Commission on Wednesday.
- Deutsche Lufthansa AG expects to bolster its dominant position in Germany further with plans to assume more than half the operations of bankrupt Air Berlin Plc. Lufthansa will spend 1.5 billion euros ($1.8 billion) to assume 81 narrow-body aircraft and 3,000 of Air Berlin’s 8,000 employees, the carrier said, confirming comments by Chief Executive Officer Carsten Spohr in an RP Online interview.
- Global oil supply and demand estimates for 2018 indicate that inventories may not fall further, potentially capping prices, following a projected drop in stocks this year, the International Energy Agency said. Oil stockpiles will fall this year for the first time since prices slumped four years ago, declining by 300,000 barrels a day, as stronger demand and output curbs by OPEC and Russia whittle away a surplus, the IEA said Thursday in its monthly report.
- Big U.S. companies don’t know how American tax laws will be changed in the coming months, but they’re not waiting to find out. Comcast Corp., 3M Co. and Wal-Mart Stores Inc. are among the companies buying back bonds now in transactions that could save them millions of dollars if the latest proposed tax changes from the Trump administration and Congress end up becoming law.
- Asahi Group Holdings Ltd. is putting on the selling block a stake valued at $1.2 billion in China’s Tsingtao Brewery Co., as Japan’s largest brewer looks to Europe and abroad for growth. The company has started evaluating a potential transfer of all or part of its 20 percent stake in the Chinese brewery.
- Petroliam Nasional Bhd., the Malaysian state oil producer, plans to exit its stake in Iraq’s giant Majnoon oil field, people with knowledge of the matter said. Petronas, as the company is known, has decided to withdraw from its 30 percent participating interest in the project because it considers the returns to be too low, according to one of the people. The energy firm may soon hire advisers to help find an interested party to take up the holding, the person said, asking not to be identified because the information is private.
- Mainland Chinese company LVGEM (China) Real Estate Investment Co. will purchase a building from Wheelock & Co. for HK$9 billion ($1.2 billion), setting a record price per square foot for a commercial building in Hong Kong’s Kwun Tong area.
- What a difference a year makes at Air France-KLM Group: almost $4 billion in increased market capitalization. The carrier’s valuation has surged almost 190 percent since hitting a five-year low in September 2016. The Paris-based company’s shares are also the best performers among members of the Stoxx Europe 600 benchmark index this year, with a 20-times greater advance than index’s 7.9 percent gain.
- ContourGlobal LP plans to raise about $400 million in an initial public offering as it seeks to capitalize on companies buying electricity, including from renewable sources, in long-term contracts. The money will be raised by a private placement to institutional investors in the U.K. and elsewhere, ContourGlobal said Thursday in a statement.
- BMW AG is working on a deal that would bring manufacturing of the iconic Mini brand outside Europe for the first time, according to people with knowledge of the plan. The German company is discussing a possible outsourcing agreement with China’s Great Wall Motor Co. to produce the small car for export, said the people, asking not to be identified as the deliberations are private.
- Johnson & Johnson says a $417 million verdict in a talc powder cancer case should be thrown out because three jurors were excluded by fellow panelists from the decision-making process. The three were wrongly left out of deliberations on the fourth-largest U.S. jury award of the year because they didn’t agree with the other nine jurors that baby powder was the cause of a lifelong user’s ovarian cancer, the company said in a request for a new trial.
- James Murdoch is poised to gain the narrow backing of independent shareholders for his re-election as chairman of Sky Plc, according to a person familiar with the situation, overcoming opposition from investor groups that raised concerns about his role in light of a takeover bid from the Murdoch family’s 21st Century Fox Inc.
- HSBC Holdings Plc named John Flint as its next chief executive officer after new Chairman Mark Tucker opted not to break with tradition and tapped a long-serving insider to run Europe’s largest bank. Flint, currently head of retail banking and wealth management, HSBC’s largest division, will take over from incumbent Stuart Gulliver, according to a statement on Thursday.
- Serco Group Plc, one of the U.K.’s largest outsourcing services companies, is among bidders for Carillion Plc’s health-care facilities business, according to people with knowledge of the matter. The company is among several groups to hold talks with Carillion about the assets, said the people, who asked not to be identified because they weren’t authorized to speak publicly.
- Japanese Prime Minister Shinzo Abe looked set to retain his coalition’s dominant position in parliament after the Oct. 22 general election, according to a series of large opinion surveys carried out by domestic media. The main ruling Liberal Democratic Party is likely to win about 289 seats, according to Kyodo news, which polled 90,261 people on Oct. 10-11.
- CRH Plc is among companies considering a counterbid for PPC Ltd. that could trump an offer by Canada’s Fairfax Financial Holdings Ltd., according to people familiar with the matter, adding a potential new twist to the battle for South Africa’s largest cement maker.
*All sources from Bloomberg unless otherwise specified