April 4th, 2018
Daily Market Commentary
- Canadian stocks retreated as cannabis companies and gold miners fell, while the loonie was the strongest in nearly a month amid reports that the U.S. wants to announce a preliminary Nafta deal next week. The S&P/TSX Composite Index lost 33 points or 0.2 percent to 15,180.76. Health-care stocks tumbled 4.9 percent, the most in two months, as investors fled pot stocks. Canopy Growth Corp. lost 13 percent, Aurora Cannabis Inc. fell 11 percent and Aphria Inc. lost 11 percent.
- The high-end of Toronto’s housing market is bearing the brunt of declines from last year’s dizzying growth, with prices falling and unit sales slumping by almost half. Sales of detached homes in and around Canada’s biggest city fell 46 percent in March from the same month a year ago, while the average price fell 17 percent to C$1.01 million ($786,871), according to data released Wednesday by the Toronto Real Estate Board. That dragged down the average selling prices for all housing types by 14 percent from a year earlier to C$784,558, the biggest drop since 1991.
- Canadian cheese-maker Saputo Inc. won approval from Australia’s competition regulator for its A$1.3 billion ($1 billion) deal to buy the nation’s biggest dairy processor Murray Goulburn Co-operative Co. Saputo’s commitment to sell Murray Goulburn’s Koroit milk factory, located in the same area as the Canadian company’s existing Allansford plant, addressed the regulator’s concerns, according to a statement by Australian Competition and Consumer Commission.
- Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, sending U.S. stock futures tumbling and sinking European and Asian equities. Treasuries climbed while the dollar was steady, and gold jumped.
- Peace proved perishable again for investors after China retaliated to Donald Trump’s tariff proposal with its own levies on $50 billion of U.S. imports. Asian and Europe stocks fell and U.S. futures slid after China announced 25 percent tariffs on 106 U.S. products in a response to proposed American duties. Gold and the Japanese yen rallied.
- Asian shares extended declines after China announced tariffs on a new list of U.S. products. Losses widened among technology firms, while health-care, consumer and utility stocks advanced. The MSCI Asia Pacific Index dropped 0.6 percent to 171.05 as of 4:49 p.m. in Hong Kong after rising as much as 0.2 percent in the morning. India’s Sensex Index also erased its earlier gains and fell 1 percent. The MSCI Asean Index fell 2 percent. Stock markets in Australia and North Asia closed before news on China’s tariff retaliation came through.
- Oil fell after China said it would levy tariffs on $50 billion of U.S. imports in retaliation against measures by President Donald Trump, fanning concerns that economic growth and fuel demand could be hurt. Futures in New York slipped as much as 2.1 percent to the lowest intraday price since March 20. China’s Ministry of Commerce said it would levy 25 percent tariffs on imports of 106 U.S. products including automobiles and aircraft. That wiped out earlier support for prices as Organization of Petroleum Exporting Countries output dropped to the lowest in a year in March.
- Gold rallied, cutting Tuesday’s losses as the tit-for-tat trade war between the U.S. and China escalated, pushing the dollar and stocks lower.
- Euro-area inflation accelerated last month, buttressing the arguments of policy makers keen to phase out unprecedented stimulus. The inflation rate rose to 1.4 percent in March, the highest level since the end of last year. The reading is in line with the median estimate in a Bloomberg survey and up from 1.1 percent in February. The core rate remained unchanged.
- At least four U.S. pipeline companies have seen their electronic systems for communicating with customers shut down over the last few days, with three confirming it resulted from a cyberattack. On Tuesday, Oneok Inc., which operates natural gas pipelines in the Permian Basin in Texas and the Rocky Mountains region, said it disabled its system as a precaution after determining that a third-party provider was the “target of an apparent cyberattack.”
- Boeing Co., the biggest U.S. exporter, suffered a setback in China after the country proposed an additional 25 percent tariff on U.S. aircraft in a retaliatory move, giving rival Airbus SE a leg-up in a market set to the become the world’s biggest. In a tit-for-tat response to tariffs by President Donald Trump, China announced the planned levy on aircraft weighing between 15,000 kilograms (33,000 pounds) and 45,000 kilograms, which would include some variants of its 737 family of passenger jets. Single-aisle jets, dominated by Boeing’s 737 and Airbus A320 series, are likely to account for 75 percent of the global market in 20 years, according to Boeing’s estimates.
- Soybeans have finally entered the U.S.-China trade war. China’s Ministry of Commerce on Wednesday said it plans to impose 25 percent duties on imports of the commodity in addition to other U.S. agricultural produce including wheat, corn, cotton, sorghum, tobacco and beef. They’re among 106 products ranging from aircraft to chemicals targeted by Beijing in retaliation against proposed American duties on its high-tech goods.
- China is injecting 60.8 billion yuan ($9.7 billion) into Anbang Insurance Group Co. as it attempts to contain the fallout after the company’s former chairman was accused of masterminding a multibillion dollar fraud. The move is aimed at ensuring Anbang’s solvency and protecting policy holders’ interests, the China Insurance Regulatory Commission said Wednesday. The government is trying to revamp and stabilize a company that burst onto the global scene in 2014 with the purchase of New York’s Waldorf Astoria hotel, but was seized by regulators in February.
- Meituan Dianping, the Chinese food review and delivery giant, is acquiring Mobike in a deal that values the three-year-old bike-sharing startup at about $3.4 billion, according to people familiar with the matter. Meituan has agreed to buy full control of Mobike, whose current chief executive officer will keep operating the business as an independent entity, Meituan said Wednesday without divulging details. The deal values the bike-sharing firm’s equity at about $2.7 billion, and Meituan will assume roughly $700 million in debt, said one of the people, asking not to be identified because the matter is private. Sixty-five percent of the purchase will be in cash, mostly to Mobike management, and 35 percent will be in stock so Mobike investors become Meituan shareholders, the person said.
- BlackRock Inc., the world’s largest asset manager, is seeking $2.5 billion for a private credit fund, according to a person with knowledge of the matter. The fund has raised $1.5 billion so far, according to the person, who asked not to be named because the information is private. The fund can either directly lend to businesses or invest in the credit of companies facing distress.
- UTAC Holdings Ltd., the Singapore-based chip testing firm backed by Affinity Equity Partners and TPG, is exploring options for a sale of its business after completing a bond restructuring, people with knowledge of the matter said. The company met potential advisers in recent weeks to discuss options that could include an initial public offering or sale, according to the people. Its owners could seek a valuation of about $1 billion including debt from any exit, the people said, asking not to be identified because the information is private.
- The Justice Department’s claim that AT&T Inc.’s proposed takeover of Time Warner Inc. will raise consumer prices is based on a study by a pay-TV competitor that was tweaked to boost the government’s case, defense lawyers suggested while grilling a witness for the U.S. Antitrust enforcers say the $85 billion deal should be blocked because it will hike costs for cable and satellite-TV subscribers by more than $400 million a year. That prediction, by University of California at Berkeley economist Carl Shapiro, was based in part on a study commissioned by Charter Communications Inc., which opposes the merger, according to evidence presented by AT&T on Tuesday in Washington.
- Boeing Co. is considering whether to convert used 777 passenger jets into freighters, seeking to capitalize as booming e-commerce sales spur new demand for air freight worldwide, people familiar with the matter said. While Boeing has studied retrofitting the used wide-bodies for more than a decade, the effort has taken on new life in recent months as air cargo finally emerged from its recession-era slump, said the people, who asked not to be identified because the matter is confidential. The new product would also fuel sales at a new global services division as Boeing works to more than triple the unit’s $15 billion in annual revenue over the next 10 years.
- Apple Inc. is working on touchless gesture control and curved screens for future iPhones, projects that may help the company differentiate its most-important product in an increasingly crowded market, according to people with knowledge of the matter. The control feature would let iPhone users perform some tasks by moving their finger close to the screen without actually tapping it. The technology likely won’t be ready for consumers for at least two years, if Apple chooses to go forward with it, a person familiar with the work said.
- Shari Redstone, whose family controls CBS Corp. and Viacom Inc., wants executives from both companies to run the combined entity after a merger, putting her at odds with a proposal from CBS, according to people familiar with the matter. Redstone won’t support combining the companies unless she’s confident the right management team, including Viacom boss Bob Bakish, is at the helm of the new business, said the people, who asked not to be identified discussing private information. CBS’s proposal, submitted privately this week to a group of Viacom board members, calls for Chief Executive Officer Leslie Moonves and his team to run the combined company, the people said.
- Elliott Management Corp., the sometimes-activist hedge fund run by billionaire Paul Singer, said it’s bought a more than $1 billion stake in several Hyundai Motor Group entities and is calling for a clearer plan to improve operations. The New York-based hedge fund praised the auto conglomerate for simplifying its ownership structure last month after drawing criticism from corporate-governance activists for years. Still, Elliott called the moves a “first step” and said it’s looking forward to meeting with management and stakeholders about the group’s issues.
- The Pentagon says it’s received 1,089 comments — including submissions from 46 companies — on its plans for a multibillion-dollar cloud computing contract in a sign of the intense interest and sharp debate over a winner-take-all award that competitors say will favor Amazon.com Inc. Industry comments and questions, but not the names of the companies making them, will be posted along with the Defense Department’s answers next week when a revised “request for proposal” is issued, according to a posting on a federal contracting website and a Pentagon spokeswoman. Comments also came from two trade associations and three government agencies.
*All sources from Bloomberg unless otherwise specified