October 16th, 2017

 

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks inched closer to an all-time high, touching their highest level in eight months as the telecom, energy and financial sectors boosted the benchmark. The S&P/TSX Composite Index rose 65 points or 0.4 percent to 15,807.17, the highest close since Feb. 22. The benchmark gained 0.5 percent on the week.
• After laying out the Trump administration’s most aggressive Nafta demands to date, chief U.S. negotiator John Melle was asked on Sunday how things are progressing. “Fabulous,” he said, smiling and shrugging before entering a negotiating room once more. The fourth round of negotiations is nearing an end amid rising tensions after the U.S. presented proposals that could be politically unfeasible for Canada and Mexico. U.S. industry and Congress, meanwhile, are mounting a more vocal defense for preserving regional trade ties as they sense the discussions could be in trouble.
• Bombardier Inc. is seeking investors for its aerospace businesses and considering a sale of some operations, people familiar with the matter said, as a turnaround plan at the Canadian planemaker faces pressure from potentially crippling U.S. tariffs on its marquee jetliner. The Montreal-based manufacturer is studying the disposal of assets including its Q400 turboprop and CRJ regional-jet unit, said the people, who asked not to be identified because the discussions are private. Airbus SE is among the suitors, they said, with one person saying Bombardier is also open to partnerships with other aerospace companies.
• Canada’s economy may be entering into a “sweet part” of the business cycle where it can run at a faster pace without triggering inflation pressure, Bank of Canada Governor Stephen Poloz said. Poloz, speaking to reporters Saturday in Washington, said there are signs investment could become a more important part of the growth story. Such spending not only fuels the expansion, but at the same time grows the economy’s production capacity and potentially helps to mitigate inflation, he said.

 

 

World Headlines

• European stocks are little changed after their longest weekly rally since 2015, while Spanish equities drop as Catalonia’s president defends his region’s claim to independence. The Stoxx Europe 600 Index adds 0.2%. The IBEX 35 falls 0.6%, down for a third day. Catalonia’s Carles Puigdemont didn’t give a clear reply to Spanish Prime Minister Mariano Rajoy as to whether or not he had declared independence in a speech last week, but called for dialogue and a meeting with the latter.
• Overall, S&P 500 earnings per share growth is projected to have slowed to 3.7 percent in the third quarter from a 14.4 percent average in the first half, with hurricanes contributing toward some of this weakness.
• Asian stocks rose for a seventh day, advancing after soft U.S. inflation readings tempered expectations of a Federal Reserve rate increase as a global equity rally powered on. The MSCI Asia Pacific Index rose 0.6 percent to 167.66 as of 4:32 p.m. in Hong Kong, extending gains from its highest level since November 2007.
• Crude extended gains from the highest close in two weeks as speculation mounted over potential output disruptions in a region that’s home to Iraq’s oldest producing oil fields. Futures in London rose as much as 1.7 percent after adding 2.8 percent last week.
• Gold climbs to highest level in almost three weeks as investors weigh U.S. inflation, which was below estimates, and drill by U.S. and South Korean navies amid signs the North’s preparing another provocation such as missile launch. Palladium rises above $1,000/oz for first time since 2001.
• Japan will likely resist any push by the U.S. for a bilateral trade deal in high-level talks that resume in Washington on Monday. Donald Trump has shown a willingness to play hardball on trade, tearing up one major agreement and successfully pressuring to renegotiate others. But in seeking to write a new deal, the U.S. may find it has less leverage over Japan than its other trading partners, especially if it focuses on remedying its broad trade deficit with big concessions from Tokyo.
• Li Ka-Shing’s CK Asset Holdings Ltd. sold its 75 percent holding in The Center to a Chinese-led group for HK$40.2 billion ($5.15 billion), a record for a Hong Kong office tower, the Hong Kong Economic Journal reported. The deal will be announced in the near future, the Economic Journal reported, without saying where it got the information. Some domestic investors are also part of the consortium, the newspaper said. Representatives at CK Asset didn’t immediately return calls seeking comment.
• As billionaire Arkady Rotenberg’s builders race to finish a bridge to Crimea, Vladimir Putin already has a new mega-project lined up for his childhood friend. The contract to construct a bridge to energy-rich Sakhalin Island — which Putin estimated may cost about 286 billion rubles ($5 billion) — will go to Rotenberg’s Stroygazmontazh, according to three people familiar with the plans. The largesse will come in handy as the company and its owner are were hit with Western sanctions to punish Russia for meddling in Ukraine. The Russian president is reviving a project almost seven decades after Josef Stalinembarked on building a link to the island, just north of Japan.
• Last quarter, General Electric Co. reported earnings of 28 cents a share. Also 13 cents a share, 19 cents a share and 15 cents a share — all at the same time. The numbers represent profit that includes or excludes certain items, such as pension costs and discontinued operations. While most big U.S. companies release adjusted earnings that deviate from generally accepted accounting principles, GE stands out for the sheer head-scratching complexity of its quarterly reports. It’s one of only 21 S&P 500 companies that release more than one adjusted EPS figure.
• Aramark, the U.S. facilities management services company that provides uniforms and food to schools and stadiums, plans to buy two closely-held competitors for $2.35 billion. Aramark, which went public in 2013, is buying Avendra LLC for $1.35 billion and AmeriPride Services Inc. for $1 billion, according to an Aramark statement Monday.
• Mark Carney is heading into a crucial week in the countdown to a possible Bank of England rate increase in early November. After the International Monetary Fund meetings where most central bankers fretted about weak inflation even amid robust global growth, the governor returns to an economy that’s almost the mirror opposite. While Brexit is weighing on U.K. businesses, price growth is above target — something for lawmakers to press him on at a hearing on Tuesday.
• Some European Central Bank policy makers see room for little more than 200 billion euros ($235 billion) of purchases under the institution’s bond-buying program next year, according to central-bank officials familiar with the matter. The ECB is likely to run out of available debt under current rules at just over 2.5 trillion euros, the officials said, asking not to be named as the matter is private. With purchases set to reach 2.28 trillion euros by the end of 2017, talks are focused on how to spread the additional capacity, they said.
• U.K. Prime Minister Theresa May will travel to Brussels on Monday to personally intervene in deadlocked exit negotiations with the European Union, a day after details emerged of cross-party talks to prevent her from leaving the bloc without an agreement.
• Irish authorities warned some of the worst weather conditions to hit the country in 50 years will endanger lives, as Storm Ophelia’s remnants batter the coast with “extreme” conditions. Met Eireann, the nation’s weather service, extended its most severe warning nationwide for the first time ever, with Ophelia expected to bring winds in excess of 80 kilometers an hour (50 miles per hour) to parts of western Ireland, with some of the strongest gusts rising above 150 kilometers an hour.
• Investors added more than $2.1 billion to exchange-traded funds that buy emerging market stocks and bonds, the most since April, in an eighth straight week of inflows. Deposits into U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $2.13 billion in the week ended Oct. 13, compared with $482.5 million in the previous period, according to data compiled by Bloomberg.
• The European Union urged the U.S. Congress to uphold the Iranian nuclear agreement, calling it key to global security, after PresidentDonald Trump threatened to walk away from the deal. EU foreign ministers including France’s Jean-Yves Le Drian said Trump’s refusal on Oct. 13 to certify the international accord aimed at preventing Tehran from developing atomic weapons was misguided. Trump asked the U.S. Congress to toughen the terms of the 2015 pact, saying it doesn’t do enough to contain Iranian ambitions.
• Crystal International Group Ltd., a garment supplier to Gap Inc. and Hennes & Mauritz AB, has set a tentative price range for a Hong Kong initial public offering that could raise as much as $574 million. The Hong Kong-based company plans to offer shares at HK$7.30 to HK$8.80 apiece when it starts taking investor orders Tuesday, according to terms for the deal obtained by Bloomberg.
• Catalan President Carles Puigdemont defended his region’s claim to independence as the Spanish government signaled it will move ahead with the process of suspending self-rule this week. In a letter to Spanish Prime Minister Mariano Rajoy, Puigdemont said his focus for the next two months will be dialogue and called for a face-to-face meeting as soon as possible, insisting the illegal referendum held on Oct. 1 gives his government a mandate to found a new republic.
• Bond yields in Japan may advance after the general election as the ruling coalition and the opposition parties signal a looser approach to fiscal discipline, according to investors.
• Bitauto Holdings Ltd.’s car-financing unit has submitted a listing application to the Hong Kong exchange for an initial public offering that could raise as much as $800 million, people with knowledge of the matter said.
• MTV owner Viacom Inc. and Charter Communications Inc. agreed to continue working toward a new programming agreement, according to a Viacom official, averting a blackout of channels including Comedy Central and Nick Jr. for Charter’s cable customers. The extension for the discussions is temporary, according to the official, who asked not to be identified discussing private matters. Charter didn’t immediately respond to requests for comment.

 

 

*All sources from Bloomberg unless otherwise specified