June 24th, 2019

Daily Market Commentary

  • Canadian Headlines
    • Canadian equities ended their six day win streak as the market couldn’t shake off weakness from Canopy Growth Corp.’s disappointing earnings. The S&P/TSX Composite Index lost 0.3% to 16,525. Health care and consumer staples lagged while materials rose. Meanwhile, Bill C-69 passed Canada’s Senate last night. A broad range of social, economic, and health impacts will become part of the federal permitting plan for major industrial, transportation, and energy projects under the bill.
    • Barrick Gold Corp.’s troubled African unit, Acacia Mining Plc, posted an almost 5,000 word rebuttal to claims from its parent amid an increasingly bitter spat between the two companies. Barrick is seeking to buy out the remaining shares it doesn’t own in Acacia to end its troubled time as a listed company. Yet Barrick is refusing to offer any kind of premium and is also in control of negotiations with Tanzania, where Acacia has been in a dispute with the government. Acacia said on Monday that Barrick buying out its minority shareholders would be an attractive solution, but it disagrees with the valuation of its stock. It also said many of its problems with Tanzania, which have led to the collapse of its share price, were made worse by Barrick’s intervention in negotiations.

     

  • World Headlines
    • European shares were little changed at the open as investors await new steps on trade talks between the U.S. and China, while Daimler dropped after issuing its third profit warning in a year. The autos sector was the worst performing, dragged down by Germany’s Daimler AG, which fell 3%. Eurofins Scientific SE dropped 4% after the lab operator said its quarterly numbers may be materially impacted by a cyber attack earlier this month. The Stoxx 600 Index is heading to end the first half of the year with a 14% gain. Meanwhile, the U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet on the sidelines of the Group of 20 summit later this week in Japan.
    • U.S. equity futures climbed with Asian stocks on Monday while European shares slipped as investors weighed mounting geopolitical risks and geared up for the high-stakes meeting between Presidents Donald Trump and Xi Jinping later this week. West Texas oil advanced as the White House said it was planning fresh sanctions on Iran. S&P 500 futures pointed to an upbeat start to the week on Wall Street, though they came off their highs for the session.
    • Asian stocks advanced, led by health care and consumer discretionary firms, as investors awaited possible new sanctions against Iran and gauged the probability of a U.S.-China trade deal later this week. Markets were mixed in the region, with Australia climbing and Singapore retreating. The Topix reversed earlier losses to close 0.1% higher, with Sony and Daiichi Sankyo among the biggest boosts. The Shanghai Composite Index advanced 0.2% as U.S. and China trade teams prepared for a meeting between Donald Trump and Xi Jinping on the sidelines of the G-20 summit in Japan. The S&P BSE Sensex Index edged 0.2% lower, driven by Reliance Industries and Infosys, as India’s central bank deputy chief Viral Acharya asked to resign from his post.
    • Oil rose to the highest level in more than three weeks as political tensions between the U.S. and Iran continued to simmer, with President Donald Trump announcing plans for further sanctions against the OPEC member. Futures added as much as 1.4% in New York after surging 9.4% last week. Trump tweeted about the sanctions days after abruptly calling off planned air strikes against the Islamic Republic in retaliation for the shooting down of a U.S. Navy drone. Iran’s navy warned the downing of unmanned aircraft could be repeated if intrusions into its airspace continue, according to state news agency Tasnim.
    • The rally in gold is picking up fresh fuel from investors. Two key data points on Friday suggest speculators are adding plenty of cash to the rally, which could drive prices even higher. Gold has now surpassed $1,400 an ounce, reaching an almost six-year high.
    • Eldorado Resorts Inc. is buying Caesars Entertainment Corp. for about $8.58 billion in a deal backed by activist billionaire Carl Icahn that will create the largest U.S. gaming operator. The agreed equity value of $12.75 a share — in a mix of cash and Eldorado stock — represents a premium of about 28% to Caesars’s Friday closing price. Including debt, the deal is worth approximately $17.3 billion, the companies said in a statement.
    • Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week, ending seven weeks of outflows that reached $7.71 billion. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $287.9 million in the week ended June 21, compared with losses of $411.5 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $11.6 billion.
    • MSCI Inc. will probably upgrade Kuwaiti equities to its main emerging-market index this week, which could trigger $2.8 billion of inflows from passive funds, according to the head of the nation’s stock exchange. “We have ticked all the boxes that are required by MSCI,” Mohammad Al-Osaimi, the acting chief executive officer of Boursa Kuwait, said in an interview on Sunday. “We have also offered international investors additional services and products they were looking for and some changes in bylaws they requested. We have touched base with them on our roadshows. We saw a comfortable response.” The New York-based index compiler, whose emerging-market group of indexes has about $1.8 trillion of assets tied to it, will announce on June 25 whether it’s lifting the country from its current frontier classification. The decision will become public shortly after 10:30 p.m. Central European Summer Time.
    • China is allowing brokerages to issue more debt as officials seek to ease a funding strain spurred by the government seizure of a bank. At least five brokerages have had their short-term debt quotas increased by the People’s Bank of China in recent days, according to filings. GF Securities Co.’s was lifted by more than 70%, while others more than doubled, according to data compiled by Bloomberg.
    • Banco Santander SA agreed to pay Allianz SE 937 million euros ($1.1 billion) to dissolve an insurance joint venture in Spain, ending a distribution channel the German firm had held for almost a decade. Aegon NV and Mapfre SA are now set to become Santander’s insurance partners in Spain. Aegon is expected to purchase 51% in a joint venture that will sell life risk, health, accidents, home and other non-life products through Santander’s network. Mapfre is acquiring a 50% stake in a venture to sell car insurance and insurance for small- and medium-sized businesses.
    • Bristol-Myers Squibb Co. has struck an agreement with U.S. antitrust authorities to divest one of Celgene Corp.’s top drugs in order to close the companies’ planned $74 billion merger. Under an agreement with the Federal Trade Commission, Bristol-Myers will sell off the psoriasis pill to help appease regulator’s concerns, the company said in a statement. The divestiture is a blow to Bristol-Myers’ takeover of the Summit, New Jersey-based company. Otezla is a major product for Celgene, and brought in $1.86 billion last year. It has been growing rapidly and had as much as a decade of strong sales ahead, according to analysts’ estimates surveyed by Bloomberg. Now, a rival drugmaker will get the rights to the pill, potentially at a discounted price.
    • U.S. President Donald Trump has no plans to hold a trilateral summit with the leaders of North Korea and South Korea during a visit to the divided peninsula this weekend, an official from South Korea’s presidential office said Monday. Trump won’t hold what would be an unprecedented meeting with North Korean leader Kim Jong Un and South Korean President Moon Jae-in after arriving in Seoul on Saturday, said the official, who asked not to be named because the schedule had not yet been announced. Trump was considering making his first trip to the militarized border between the two countries, the Yonhap News Agency reported, citing a government official — a visit that would bring him to Kim’s doorstep.
    • President Donald Trump is threatening Iran with additional sanctions on Monday, but there’s not much left for the U.S. to target because most of the Islamic Republic’s economy has been crippled by earlier penalties. The U.S. is already sanctioning significant sectors including oil, banks and steel, leaving smaller targets including certain exports and government officials. Trump could also hit Iran’s central bank with secondary sanctions, at the risk of hurting humanitarian trade.
    • Turkish President Recep Tayyip Erdogan, weakened by an opposition party’s landslide victory in Istanbul’s repeat election, scrambled to reassert his standing as the country’s most dominant politician in half a century by refocusing attention on a crucial trip to Asia. In a spate of back-to-back Twitter messages after results came in Sunday night, Erdogan congratulated Istanbul’s new mayor, Ekrem Imamoglu, vowed to maintain an alliance with a key nationalist party, and pledged to promote Turkey’s interests at home and globally. He announced he’ll visit China and Europe after a meeting of the Group of 20 nations in Japan later this week.
    • A consortium led by Fosun International Ltd. is in talks to acquire a majority stake in GV Gold PJSC, a Russian gold miner backed by BlackRock Inc., according to people familiar with the matter. Fosun is considering teaming up with partners including Zhaojin Mining Industry Co. for a joint offer, the people said, asking not to be identified as the information isn’t public. A deal could value GV Gold at about $1 billion, they said. GV Gold, controlled by the owners of Moscow-based Lanta-Bank, mines at several Siberian deposits and has almost doubled output since 2016 to 304,000 troy ounces last year. BlackRock owns about 18% of the gold miner after a 2007 deal that valued the company at $500 million.
    • The U.K. offshore wind industry is to get a 100 million-pound ($127 million) fund to spur growth in the next decade. The Offshore Wind Industry Council, run by government and industry, will invest in companies along the whole supply chain and support companies wanting to export their services. The move is part of the U.K. government-backed sector deal that aims to encourage at least 30 gigawatts of offshore wind farms installed by 2050.
    • CVC Credit Partners LLP is joining the batch of money managers pooling more cash to invest in troubled credit. The firm raised $1.42 billion within 8 months, surpassing its original target of $1 billion for the Global Special Situations Fund II, according to a person with knowledge of the situation. Along with other investment vehicles across the platform, CVC now manages more than $4.6 billion dedicated to stressed and distressed credit investments, the person said, who asked not to be identified discussing the private matter. GSS II follows a predecessor fund, which raised $726 million in June 2016, said the person. The latest fund secured commitments from a mix of new and returning investors including pension funds, insurance companies and foundations.
    • Bitcoin traded above $11,000 for the first time in 15 months, recouping more than half of the parabolic increase that captured the attention of mainstream investors before the cryptocurrency bubble burst last year. “The bounce-back of Bitcoin has been fairly extraordinary,” said George McDonaugh, chief executive and co-founder of London-based blockchain and cryptocurrency investment firm KR1 Plc. “Money didn’t leave the asset behind, it just sat on the sidelines waiting to get back in.” Bitcoin surged as high as $11,251.21 on Monday, a 13% gain from late Friday that put it at the highest levels since March 2018. It was at $10,797.91 as of 1:28 p.m. in Hong Kong.
    • The U.S. and China are discussing arrangements for the meeting between Donald Trump and Xi Jinping on the sidelines of the Group of 20 summit, a senior Chinese trade official said, as Beijing warned about consequences of American trade measures. The trade teams were working to implement the decision by the top leaders, Vice Commerce Minster Wang Shouwen told a news briefing Monday in Beijing. Wang provided no specifics on what communications have occurred. “Compromise will be on both sides. It will be a two-way street,” he said, adding that any talks must be based on mutual respect, meaning “respect for each other’s sovereignty.”
    • Carrefour SA has agreed to sell an 80% stake in its China unit for 4.8 billion yuan ($698 million) in cash to local retailer Suning.com Co. as it rethinks its exposure in the world’s No. 2 economy after years of decline. The yielding of control comes after a long search for a partner for the French company’s struggling Chinese operations. Once the premier foreign supermarket chain locally, it failed to adjust to the onslaught of e-commerce in recent years and sales slumped.

*All sources from Bloomberg unless otherwise specified