April 3rd, 2019

Daily Market Commentary


  • Canadian Headlines
    • Canadian stocks rebounded from an intraday decline, closing higher for a second day as the benchmark approaches a fresh record. The S&P/TSX Composite Index gained 0.2 percent to 16,263.87, about 300 points below its all-time closing high last July. Consumer staples led the way, rising 1 percent as grocery retailer Metro Inc. added 2 percent to a record high. Materials rose 0.5 percent, led by gold stocks. The precious metal advanced for the second time in three sessions as some weak economic data points boosted demand for safe havens.
    • Prime Minister Justin Trudeau has expelled his former attorney general from the Liberal caucus — a risky bid to cauterize a scandal that has hammered the party’s popularity for the past two months. During a special meeting of lawmakers began Tuesday night, Trudeau announced he had ejected both Jody Wilson-Raybould and her ally Jane Philpott, another former minister, from the Liberal caucus. Wilson-Raybould said in a tweet Trudeau had also barred her from seeking re-election this fall under the Liberal banner.
    • Toronto’s housing market was little changed in March as sellers stayed on the sidelines. Home sales in Canada’s biggest city totaled 7,187 in the month, one sale shy of the same month a year ago, the Toronto Real Estate Board reported Wednesday. Benchmark prices, which adjust for the type of home sold, rose 2.6 percent to C$779,100 ($584,164) from the same period last year. New listings declined 5.1 percent to 13,996 over the year. The average price was C$788,335 in March, up from C$781,192 in February.

    World Headlines

    • European equities advanced and mining shares led the gains on optimism the U.S. and China will come to a trade agreement. The Stoxx Europe 600 Index added 0.4 percent. Arcelormittal rose 2 percent. The Financial Times reported that while the U.S. and China are still at odds on implementation and enforcement of a deal, most other roadblocks have been cleared. Lloyds Banking Group Plc climbed 2.3 percent and Banco Santander SA added 1.8 percent after the Spanish lender said will target progressive cost savings of 1.2 billion euros ($1.35 billion) a year and will invest more than 20 billion euros in technology.
    • Stocks advanced globally and bonds retreated as upbeat economic reports from China to Europe and renewed hopes for a Sino-U.S. trade deal attracted investors to riskier assets. The euro strengthened for the first time in seven sessions. U.S. equity-index futures rose and the Stoxx Europe 600 index jumped, led by miners, as a string of economic data from Italy to Germany eased concern over the euro area’s growth outlook.
    • Japanese shares climbed after a Financial Times report spurred speculation the world’s two largest economies have come close to a trade deal. The Topix gained, recovering from a 0.3 percent drop. The U.S. and China have yet to agree on what happens to existing U.S. duties on Chinese goods and terms of an enforcement mechanism to ensure China keeps to the trade deal, the FT reported, citing people briefed on the talks. However, the two sides have resolved most of the issues surrounding the deal, the FT said. The yen slipped and futures on the S&P 500 Index added 0.4 percent.
    • Oil rose to almost $70 a barrel in London, a level last breached in November, as global crude supplies tightened while hopes for an end to the U.S.-China trade impasse lifted financial markets. Brent crude’s rapid recovery this year — with the biggest quarterly gain in almost a decade — is a victory for the production cuts of OPEC and its allies. Yet by preventing the re-emergence of a supply glut, the group has stoked the ire of President Donald Trump and heightened the risk of legal moves against the cartel in the U.S. Rising prices may also influence White House decision-making on sanctions against cartel-members Iran and Venezuela.
    • Gold steady as investors await the outcome of the latest round of U.S.-China trade talks in Washington in which both governments are pushing for an agreement to end their protracted dispute. Traders were also weighing the outlook for the economy after the World Trade Organization slashed its global trade growth projection for 2019, while orders placed with U.S. factories for business equipment fell in February for the third time in four months.
    • Brookfield Asset Management Inc. is planning to buy a commercial property site in Shanghai for around $2 billion, according to people familiar with the matter. Brookfield Strategic Real Estate Partners III is considering buying three office towers and a retail mall at Greenland Huangpu Center from a unit of Greenland Hong Kong Holdings Ltd., the people said, asking not to be identified because the details aren’t public. A transaction of that size would rank among the biggest commercial property deals in China by a foreign firm. Singapore’s CapitaLand Ltd. and GIC Pte spent 12.8 billion yuan ($1.9 billion) in November for Shanghai’s tallest twin towers, located along the city’s North Bund. That was Shanghai’s largest commercial property deal involving a foreign investor, according to CBRE Group Inc.
    • Donald Trump is being left out of his attorney general’s deliberations over how much to release publicly from Robert Mueller’s investigation — including matters the president could say he has the authority to keep private. Attorney General William Barr hasn’t discussed any part of Mueller’s report with the White House, according to a Justice Department official, but plans to rely instead on his own judgment in deciding whether some details in the report should be withheld under executive privilege.
    • Chinese Vice Premier Liu He will resume negotiations with his U.S. counterparts in Washington on Wednesday as both governments push for an agreement to end their protracted trade dispute. The latest round of talks follow discussions last week in Beijing, where Liu met with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. Outstanding issues include protection for intellectual property and how to enforce any broader trade agreement.
    • UniCredit SpA is nearing an agreement with U.S. authorities over allegations that the bank provided dollar-clearing services to Iranian clients in violation of U.S. sanctions, people with the knowledge of the matter said. The deal would cost the Italian lender about $900 million but spare it from criminal prosecution, the people said. A settlement of that size would be one of the largest for violations of U.S. sanctions laws, exceeded only by agreements reached with Societe Generale SA, Commerzbank AG, HSBC Holdings Plc and BNP Paribas SA. Among them, only BNP Paribas admitted guilt. The others entered into deferred-prosecution agreements.
    • A faulty sensor on a Lion Air 737 Max that’s been linked to the jetliner’s deadly crash last October and a harrowing ride the previous day was repaired in a U.S. aircraft maintenance facility before the tragedy, according to investigative documents. Accident investigators in Indonesia, home of Lion Air, and the U.S., where Boeing Co., the plane’s manufacturer, is based, have been examining the work that a Florida repair shop previously performed on the so-called angle-of-attack sensor, according to briefing documents prepared for Indonesia’s parliament.
    • Hundreds of thousands of jobs have disappeared on Wall Street since the 2008 financial crisis and some of the biggest banks haven’t stopped cutting. Still, some firms managed to reverse the trend and are slowly boosting staff levels. While 802,000 positions were eliminated by the 16 largest firms in the U.S. and Europe following the meltdown, 76,000 new ones have been created at nine of those companies, according to data compiled by Bloomberg. JPMorgan Chase & Co. and BNP Paribas SA have almost reversed all their post-crisis job cuts.
    • Bayer AG’s top executives have mounted a campaign to reassure its staff and shareholders that the company can contain fallout over its newly acquired weedkiller Roundup, as a public reckoning before investors looms at the end of the month. Chief Executive Officer Werner Baumann held a conference call with employees around the world on Monday, assuring them that the 155-year-old German company will weather the challenge despite its second loss in U.S. courts, according to people familiar with the situation.
    • Banco Santander SA pledged to cut 1.2 billion euros ($1.4 billion) of annual costs and ramp up investment in digital and its prized Brazilian business as the Spanish lender seeks to revive its moribund share price. The Spanish banking group plans to achieve the cost cuts over three to four years while investing 20 billion euros in digital and technology, according to its new business plan. The company also raised a profitability target in Latin America, its most lucrative region in recent years.
    • PG&E Corp., the bankrupt California power giant facing $30 billion in wildfire liabilities, is nearing a deal with a group of investors that includes naming Bill Johnson as chief executive officer and overhauling its board, according to people familiar with the matter. PG&E is nearing an agreement with the group — consisting of Knighthead Capital Management, Redwood Capital Management and Abrams Capital Management — to hire Johnson, the outgoing CEO of the federally operated power agency Tennessee Valley Authority, said the people, who asked not to be identified because the matter is private. The deal, which would also keep three current directors and nominate 10 others for the board, could be announced as soon as Wednesday, the people said.
    • Dubai’s biggest bank may save as much as $700 million in a deal to buy Turkey’s Denizbank AS after the lira slumped and economic growth stalled since the agreement was announced 10 months ago. Emirates NBD will pay 15.48 billion lira ($2.75 billion) for Sberbank PJSC’s wholly-owned Turkish unit, according to a statement. That compares with $3.45 billion if accrued interest, as required under the initial agreement, was added to the transaction, implying a potential saving of about $700 million, said Jaap Meijer, the head of research at Arqaam Capital Ltd.
    • Roche Holding AG extended its $4.8 billion bid for Spark Therapeutics Inc. by about a month to allow U.S. regulators more time to review and clear the deal. The offer period had been set to close Wednesday but now will close May 2, after the company withdrew and refiled the takeover documents, Roche said in a statement early Wednesday. The transaction terms are unchanged at $114.50 a share.
    • The South African government’s support for a political movement some 4,500 miles away could complicate a $1.1 billion deal. Moroccan billionaire Othman Benjelloun on Tuesday spoke out against South Africa-based Sanlam Ltd.’s acquisition of insurer Saham Finances SA, saying South Africa has chosen the wrong side in a territorial dispute. South Africa supports a group called the Polisario Front, which has been seeking self determination in the Western Sahara territory since 1991. Morocco also claims ownership of that sparsely populated desert region.
    • Britain’s Brexit turmoil inflicted further damage on the economy last month as the nation’s huge services sector shrank for the first time in more than 2 1/2 years. With Parliament gridlocked and Britain’s short-term future increasingly uncertain, companies and households held back spending in March, IHS Markit said Wednesday. Its Purchasing Managers’ Index indicates that the economy shrank last month and stalled over the first quarter, with a risk that the slump deepens in the coming months.
    • Chicago made history Tuesday, electing former federal prosecutor Lori Lightfoot its first black, female mayor as the city struggles with gun violence on its streets and looming fiscal woes. Lightfoot, who also will be the first openly gay leader of the nation’s third-most-populous city, soundly defeated Cook County Board President Toni Preckwinkle, 74 to 26 percent with nearly all precincts reporting, according to city election board returns. Lightfoot had never held elective office and will replace Rahm Emanuel, who chose not to run for a third term.
    • Cryptocurrency traders may not know what caused the abrupt surge in Bitcoin on Tuesday, but they’re going along for the ride anyway. The biggest virtual currency climbed to a fresh 2019 high on Wednesday, building on a spike yesterday that many market participants struggled to explain. Bitcoin increased as much as 5.9 percent to $5,087.54, according to Bloomberg composite pricing. Rivals coins including Bitcoin Cash and Ether also advanced. It later retreated back below $5,000.
    • Ford Motor Co. is introducing more than 30 vehicles with designs and features targeted at Chinese consumers over the next three years as the U.S. automaker sharpens its focus on the world’s biggest auto market after steep losses. The company is establishing an innovation center in China focusing on mobility and technology to meet the local customers’ needs, as well as a design center that will take Chinese aesthetics into account, Ford said in a statement Wednesday. Its China team will share locally developed products and technologies with the global crew, and will take the lead in designing and developing a worldwide model.

*All sources from Bloomberg unless otherwise specified