April 20th, 2018
Daily Market Commentary
- Canadian stocks fell the most in nearly two weeks as technology shares came under pressure and a rally in oil prices faltered. The S&P/TSX Composite Index lost 76 points or 0.5 percent to 15,454.42, the first decline in six trading days. Tech stocks were the biggest decliners, losing 1 percent, after Taiwan Semiconductor’s disappointing forecast hit chipmakers.
- Allied Properties Real Estate Investment Trust is planning to spend about C$1 billion ($790 million) over the next five years to meet the frenzied demand for offices by tech workers in Canada’s biggest city. The office landlord and developer will commit a large chunk of that capital to The Well, 1.6 million square feet of office and retail space in Toronto, targeted for completion in 2021, Chief Executive Officer Michael Emorysaid. To help fund the project, he reiterated Allied aims to issue 10-year bonds in Canada, likely in the C$200 million range.
- Fairfax Financial Holdings Ltd., the investment firm run by billionaire Prem Watsa, signed an agreement to buy the Canadian unit of Toys “R” Us Inc. for about C$300 million ($237 million), a person familiar with the matter said. The so-called stalking horse bid allows other potential buyers to enter competing proposals by Monday, the person said, asking not to be identified because the matter is private. Fairfax would then have the option of either increasing its offer or walking away. Under the terms of the deal, Fairfax would receive a break fee of about 4 percent if another bidder is chosen, the person said.
- European stocks inch lower as traders assess earnings results from companies including Reckitt Benckiser Group Plc and Ericsson AB. The Stoxx Europe 600 Index slides 0.2%. Reckitt Benckiser falls after the company posted like-for-like sales for the first quarter that missed estimates, while Ericsson soars after posting results that were stronger than analysts had expected.
- The dollar extended its weekly gain as U.S. Treasury yields steadied, though they remained on track for the biggest one-week surge since February. Stocks struggled for traction along following a down session in Asia. While investors debate the cause of the decline in sovereign debt, bond market gauges showed an increase in expectations for U.S. inflation after the recent torrid gains in metals from aluminum to nickel. Trade remains in focus with the U.S. Treasury Department considering using an emergency law to curb Chinese investments in sensitive technologies.
- Asian stocks halted a two-day rally as Taiwan Semiconductor Manufacturing Co. led a slump in technology companies amid concern about waning demand for mobile phones. The MSCI Asia Pacific Index dropped 0.8 percent to 174.04 as of 4:12 p.m. in Hong Kong, trimming its weekly gain to 0.2 percent. Taiwan’s equity gauge slid the most since February after TSMC’s disappointing sales forecast. Stocks in China fell with those in Hong Kong and South Korea, while Japan’s Topix index edged higher.
- The oil stockpile surplus that’s weighed on prices for three years is all but gone, but instead of celebrating victory some of the world’s largest producers are finding reasons to continue cutting output. OPEC and Russia’s historic agreement has achieved impressive results, wiping out 97 percent of the targeted inventory surplus. Still, the curbs should continue because another important goal — boosting investment in oil and gas production — remains far out of reach, said Saudi Energy Minister Khalid Al-Falih. There’s nothing to fear from prices rising even further from their current three-year high, he said.
- Gold drops for second day and heads for first weekly decline in three as bond yields rise and dollar firms amid signs of easing political tensions between the U.S and Russia. Palladium prices pull back.
- Mark Carney wants investors to respond to the data when predicting U.K. interest rates. And if they don’t, the Bank of England governor is more than happy to nudge them. That seems to be the lesson of his latest comments, when he noted recent weak economic numbers and said that policy makers are conscious there will be other chances to raise rates this year. It was enough to send the pound tumbling and prompt a sharp reappraisal by investors on a May hike, which many had considered a sure thing.
- A routine payment went awry at Deutsche Bank AG last month when Germany’s biggest lender inadvertently sent 28 billion euros ($35 billion) to an exchange as part of its daily dealings in derivatives, according to a person familiar with the matter. The episode reflected the bank’s long-standing failure to overcome problems with its internal controls and processes and compounded a broader sense of disorder at the bank. Three executives including Chief Executive Officer John Cryan and IT head and Chief Operating Officer Kim Hammonds have been pushed out this month. Both had focused on improving the bank’s internal processes during their tenure.
- Deputy U.S. Attorney General Rod Rosenstein may have just saved his job — and that of the lead investigator into alleged Russian meddling in the 2016 election campaign — for now. Our Washington team exclusively reports that Rosenstein told President Donald Trump he isn’t a target of any part of Special Counsel Robert Mueller’s inquiry or a separate probe into his longtime lawyer, Michael Cohen. The assurance — volunteered during a White House meeting last week — helped dampen the president’s ardor to fire either man.
- The biggest U.S. banks reported record first-quarter profits on the back of their stock-trading units. Investors expecting the same from the Europeans may be disappointed. Equities revenue at the biggest U.S. banks surged by almost one-third as volatile markets triggered a feast of trading activity for lenders including JPMorgan Chase & Co. and Citigroup Inc. By contrast, Deutsche Bank AG,Credit Suisse Group AG, and Barclays Plc may report declines or low single-digit increases as they struggle to take on their rivals and deal with a declining U.S. dollar, analysts said.
- Cellnex Telecom SA, the Spanish wireless-tower company that plans to grow through acquisitions, is about to get a deep-pocketed investor to back its ambitions. Italy’s Benetton family, which has agreed to buy a 29.9 percent stake in Cellnex, wants the tower operator to grow via deals, according to people familiar with the matter. The Benettons are ready to support that strategy with a special focus on Italian assets, the people said, asking not to be identified because the plan isn’t public.
- Honeywell International Inc.’s confidence in its aerospace business was reinforced by the unit’s expanding sales of jet engines and cockpit controls that boosted first-quarter earnings as the company raised its 2018 profit target. A drag on earnings as recently as last year, the aerospace business is taking off on higher demand for commercial aircraft parts and service, increased defense spending and a nascent rebound for business aircraft. Anticipating the turnaround, Chief Executive Officer Darius Adamczyk ignored pressure last year from activist investor Daniel Loeb to sell the business.
- Ericsson AB shares soared the most in more than 9 years after the Swedish maker of wireless networks posted first-quarter earnings that were stronger than analysts had expected, proof that the company is making progress in a protracted effort to reverse its fortunes. Ericsson’s closely watched gross margin — the share of sales remaining after production costs — rose to 35.9 percent on an adjusted basis, from 18.7 percent a year earlier. That was higher than the 32.7 percent analysts had predicted and lends credence to Chief Executive Officer Borje Ekholm’s expense reductions.
- It’s good to be back. Tata Consultancy Services Ltd. is on the brink of becoming India’s first $100 billion corporation in a decade, underscoring the growing importance of the technology sector to Asia’s third largest economy. India’s most valuable company gained more than 6 percent Friday afterunveiling better-than-expected earnings, taking its market capitalization to more than $98 billion. If it achieves that milestone, it could outstrip Goldman Sachs Group Inc. and join the ranks of the world’s 100 most valuable corporations. The last Indian name to cross that threshold — in 2008 — wasReliance Industries Ltd., the telecoms-to-energy conglomerate controlled by billionaire Mukesh Ambani.
- Asian technology stocks joined their peers in a global swoonafter a disappointing sales outlook from Taiwan Semiconductor Manufacturing Co., Apple Inc.’s main chip supplier, rekindled concerns that the smartphone industry’s best days may be behind it. TSMC fell 6 percent — its biggest loss since July 2013 — after predictingcurrent-quarter sales about a billion dollars less than analysts had projected. It also reduced its forecast for semiconductor market growth, to 5 percent from a previous 5 to 7 percent. That followed a report by the International Monetary Fund this week saying smartphone shipments declined for the first time, a reminder that the industry may have peaked.
- As Philippine stocks tumbled to a one-year low Thursday, some of the nation’s biggest money managers put cash to work, betting against the relentless selloff led by foreign investors that has wiped out over $30 billion in market value in about three months. Fund managers at Bank of the Philippine Islands and Rizal Commercial Banking Corp. added to holdings of domestic stocks as the Philippine Stock Exchange Index pushed its loss for the year to over 10 percent, the world’s worstperformer. While conceding that the country’s rising inflation may not have peaked yet, the managers expect it to moderate later in the year and remain within the central bank’s target.
- Barclays Plc Chief Executive Officer Jes Staley survived a year-long regulatory probe into his attempts to unmask a whistle-blower, escaping with a fine instead of losing his job. While the U.K. Financial Conduct Authority and Prudential Regulation Authority will impose a financial penalty on Staley for failing to behave “with due skill, care and diligence” in the scandal, they stopped short of the more serious charge that “he acted with a lack of integrity or that he lacks fitness and propriety to continue to perform his role as group chief executive officer,” the bank said in a statement on Friday.
- General Electric Co. maintained its 2018 profit forecast, defying Wall Street expectations of a cut, sending shares higher. Strength in aviation and health care are shoring up confidence in the outlook for adjusted earnings of $1 to $1.07 a share, GE said in astatement Friday, just two months after its finance chief said the company was headed toward the low end of the range. Even that would be above the 95-cent average of analyst estimates compiled by Bloomberg.
- China’s Silk Road Fund Co. is joining a group led byMubadala Development that will probably make a binding bid Thursday for Petroleo Brasileiro SA’s natural gas pipeline network in northeastern Brazil, said four people with knowledge of the matter. A consortium led by Sydney-based Macquarie Group Ltd. and another led by French utility Engie SA are also preparing binding bids before a deadline to submit proposals expires at the end of the day in Rio de Janeiro, the people said, asking not to be named because the discussions are private. Proposals may go as high as $8 billion including debt, according to the people.
- The world’s most widely traded currency pair is stuck in its deepest rut since 2014. With few signs it’s poised shake the malaise anytime soon, traders are being forced to get creative. The euro-dollar cross, which sees about $1.25 trillion of turnover a day, or a quarter of all global foreign-exchange volume, has been confined to a 4-cent range between $1.2155 and $1.2555 since mid-January. That’s the narrowest three-month band since 2014, according to data compiled by Bloomberg. With implied volatility approaching the lowest in more than three years, strategists see few catalysts for the pair until the second half.
- U.S. energy regulators embarked upon a wide-ranging review of how interstate natural-gas pipelines are approved, amid concerns that current guidelines have become outdated following the shale boom. The Federal Energy Regulatory Commission will examine the use of eminent domain, how the need for a pipeline is assessed and the extent to which greenhouse gas emissions should be taken into account in pipeline approvals. “Given the changes in landscape since it was first put into place, reviewing our certificate policy statement for any possible improvement is good regulatory practice,” Republican Commissioner Neil Chatterjee said at a commission meeting Thursday.
- Ion Group Investment Ltd. raised its offer for Fidessa Group Plc hours ahead of a takeover deadline, putting an agreed deal between the British computer-software provider and Switzerland’s Temenos Group AG at risk. Carlyle-backed Ion on Friday offered 1.5 billion pounds ($2.11 billion) for Fidessa, increasing the cash component to 38.703 pounds per share from 37.50 pounds. Shareholders will also have the right to dividends totaling 79.7 pence per share. Including dividends, Ion’s latest offer values the company at 39.50 pounds per share. Fidessa was up 1.4 percent to 40.50 pounds in London.
*All sources from Bloomberg unless otherwise specified