April 9th, 2019

Daily Market Commentary

 

  • Canadian Headlines
    • Canadian stocks rallied late Monday to close positive, extending gains made all last week. The S&P/TSX Composite Index rose 0.07 percent to 16,407.29. Energy and materials gained while health care dropped. Canadian pot stocks retreated after Cowen cut revenue estimates on the expectation that first-quarter growth will be modest. Separately, Justin Trudeau’s government is threatening to crack down on Google, Facebook Inc. and Twitter Inc., saying the tech giants aren’t doing enough to help fight meddling in the lead-up to Canada’s fall election.
    • Chinese investment in Vancouver commercial property from companies such as Anbang Insurance Group Co. has slumped amid a flood of regulations, with investors looking to Toronto instead. Asian investments in Vancouver fell to almost C$350 million ($260 million) in 2018, a drop from the C$1 billion-plus that hit the market in each of the two prior years, according to data from CBRE Ltd. In contrast, Toronto took in C$526 million of Asian investment last year, up slightly from 2017, including a C$256 million purchase of an office building by Chinese private investor Tigra Vista Inc.
    • Canadian spending on legal pot will increase ninefold to $5.2 billion by 2024, but the market’s potential continues to be hindered by a patchwork of provincial regulations, according to a new report. After becoming the first major economy to legalize recreational cannabis on Oct. 17, Canadian sales are expected to grow at a compound annual rate of 44 percent to $5.2 billion in 2024 from $569 million in 2018, Arcview Market Research and BDS Analytics said Tuesday. That’s down from a January forecastof $5.9 billion by 2022.

     

  • World Headlines
    • European shares gained and U.S. equity futures pared losses as investors appeared to shrug off threats from President Donald Trump for new tariffs on goods produced in the EU. Treasuries steadied alongside the dollar. The Stoxx Europe 600 Index climbed on below-average volume, with banks driving gains after Societe Generale said it planned to cut about 1,600 jobs in an effort to boost profits.
    • U.S. equity futures were steady and European shares climbed as investors appeared to shrug off threats from President Donald Trump for new tariffs on goods produced in the EU. Treasuries steadied alongside the dollar.
    • Japan’s Topix index inched lower, weighed down by shares tied to domestic demand, while investors awaited developments in U.S.-China trade talks. Retailers contributed the most to the Topix index’s decline, as Takashimaya Co.and Nitori Holdings Co. dropped after their profit forecasts missed expectations. Most other defensive groups also declined, including railway operators and utilities. Sony Corp.’s 9.3 percent gain after a report that Daniel Loeb’s Third Point is building a stake helped boost a gauge of electronics shares as well as the Nikkei 225 Stock Average.
    • Oil in New York held near the highest level since late October as an escalation of geopolitical tensions in Libya and Iran fanned concerns over supplies. Futures rose 0.5 percent in New York, after gaining 3.7 percent over the previous two sessions. Libya’s eastern-based warlord Khalifa Haftar struck the only functioning international airport in the capital, Tripoli, on Monday, sowing fears that his military campaign could tip the nation into chaos. Fellow OPEC nation Iran, already reeling from U.S. sanctions, had an elite wing of its military designated as a terrorist organization by the Trump administration.
    • Gold advanced for a second day after the European Union said it’s preparing retaliatory tariffs against the U.S. over subsidies to Boeing Co., damping risk appetite. Investors were also waiting for further news on progress in U.S and China trade negotiations. Platinum remains near highest level in 11 months. The industry doesn’t have the ability to quickly bring more platinum-group metals into production despite higher prices, according to the CEO of No. 1 producer Anglo American Platinum.
    • Principal Financial Group Inc. agreed to buy Wells Fargo & Co.’s retirement plan services unit for $1.2 billion as the bank streamlines operations in the wake of scandals. The business, which has $827 billion in assets under administration, includes operations in the U.S., the Philippines and India, Principal said Tuesday in a statement.
    • After being shunned by Wall Street and international investors last year, Saudi Arabia made a roaring comeback on Tuesday as oil giant Aramco received more than $100 billion in orders for its maiden global bond. The order book is set to be the largest ever seen in emerging markets, covering many times the $10 billion to $15 billion Aramco is expected to raise. It’s a sign of investors’ hunger for yield in a world where bonds from some developed nations have negative interest rates.
    • Theresa May meets her German and French counterparts to seek backing for a short Brexit extension, as talks with the Labour Party on ending the impasse at home continue. The EU is looking at ways to make sure that a delay won’t allow May — or any successor — to disrupt its business. Three EU officials said the U.K. is heading for a long extension.
    • Norwegian mobile operator Telenor ASA is buying a majority stake in Finnish phone company DNA Oyj for 1.5 billion euros ($1.69 billion), challenging rival Telia Co. for dominance in the Nordic region. Telenor will pay 20.90 euros a share in cash for the 54 percent of DNA held by Finda Telecoms Oy and PHP Holding Oy, the company said in a statement on Tuesday. It will also make a mandatory bid for the rest of the equity at the same price. DNA stock surged 7.6 percent to 20.94 euros as of 11:06 a.m. in Helsinki.
    • The Japanese government will sell up to 1.06 billion shares in Japan Post Holdings Co. as early as September, an official from the Ministry of Finance said Tuesday. The government will select about four underwriters in Japan and two overseas for the sale, the official said. It would raise about 1.36 trillion yen ($12.2 billion) at current market prices. The sale of the third and final tranche of Japan Post Holdings shares would lower the government’s stake to a legally required minimum of more than a third, the Nikkei reported earlier Tuesday, without saying where it obtained the information. Revenue from the sale would be used for rebuilding areas affected by a major earthquake and tsunami that devastated the nation’s northeast in March 2011, the Nikkei said.
    • Sony Corp. shares soared in Tokyo trading after a report that Daniel Loeb’s hedge fund Third Point is building a stake in the Japanese electronics giant as part of an effort to sway its corporate strategy. Third Point is aiming to raise between $500 million to $1 billion for a dedicated investment vehicle to buy more Sony shares, Reuters reported, citing people familiar with the matter, and it’s pushing the sprawling Japanese company to explore options for some of its business units. The hedge fund believes Amazon.com Inc. and Netflix Inc. may have interest in taking over the company’s movie studio. It’s also questioning how the semiconductor and insurance units fit with the organization, according to Reuters.
    • The Trump administration was barred by a U.S. judge from forcing Central Americans seeking asylum from persecution to wait in Mexico for months or even years while their applications are being processed. The ruling Monday by a federal judge in San Francisco is the latest setback for President Donald Trump in his crusade to curb immigration. His policies have been repeatedly stymied by judges since he took office in January 2017.
    • Wireless companies are ramping up hiring as they roll out 5G service in cities across the U.S. Job listings related to the fifth-generation mobile-phone service increased 12 percent in the past three weeks, according to data from the job search engine LinkUp. Carriers and their suppliers are in a rush to introduce the next-generation wireless technology, which boasts fast connection speeds of up to 1 gigabit per second. Just last week, Verizon Communications Inc. became the first U.S. carrier to offer 5G phones, with service in two cities.
    • Societe Generale SA said it plans to cut about 1,600 jobs after a slump in trading revenue pushed Chief Executive Officer Frederic Oudea to intensify efforts to boost profit at the investment-banking unit. The reductions include close to 1,200 positions at the global banking and investor solutions division, which houses its trading activities, a trade union representing SocGen’s French employees said earlier, citing a briefing by the bank. About 750 jobs will disappear in France, SocGen said, without giving further details on where it plans to make the cuts.
    • For decades, there was just one way for China’s car market: up. Once the trend abruptly reversed 10 months ago, the free fall in the world’s largest market has shown no signs of easing. Retail sales of sedans, sport utility vehicles, minivans and multipurpose vehicles continued their plunge in March, dropping 12 percent to 1.78 million units, the China Passenger Car Association said Tuesday. That follows an 18.5 percent drop in February and 4 percent decline in January.
    • Global energy giants Exxon Mobil Corp. and Total SA have reached an agreement with the government of Papua New Guinea that moves forward their efforts to double gas exports from the Pacific Nation. The Total-led Papua LNG venture and the government signed a deal that includes the fiscal framework for the project, a key step for the companies to begin engineering and design work and reach an expected final investment decision by 2020, the partners, including Oil Search Ltd. and state-owned Kumul Petroleum Holdings, said Tuesday.
    • The world’s largest oil company is moving into the world of liquefied natural gas, offering to supply Pakistan with cargoes of the fuel even though it doesn’t produce any, according to a Pakistan government official. Saudi Aramco Products Trading Co., the merchant arm of Saudi Aramco, has expressed interest in selling LNG cargoes on a spot or short-term basis to Pakistan, Nadeem Babar, head of Prime Minister Imran Khan’s task force on energy reforms, said by phone. Aramco will send a delegation to Pakistan this week to discuss the proposal further, he said. An Aramco spokesperson declined to comment.
    • Felda, a Malaysian state agency overseeing farmers, will ask for about 6 billion ringgit ($1.5 billion) from the government to help turn itself around, according to a person familiar with the matter. The agency will include the request in its long-awaited white paper when it is tabled in parliament on Wednesday, said the person, who asked not to be named as the bill hasn’t been publicly presented. If approved, the funds would likely be disbursed in stages, the person said.
    • The European Union is preparing retaliatory tariffs against the U.S. over subsidies to Boeing Co., significantly escalating transatlantic trade tensions hours after Washington vowed to hit the EU with duties over its support for Airbus SE. The two sets of planned punitive measures are the latest twists in a 14-year-old dispute that the U.S. and EU have fought at the World Trade Organization, with each side accusing the other of illegally subsidizing their main aircraft makers. President Donald Trump’s administration on Monday said it would impose tariffs on $11 billion in imports from the EU because of the European aid.
    • QuadReal Property Group Ltd. is in advanced talks to invest $1 billion in T5 Data Centers LLC, according to people familiar with the matter. Proceeds from the Vancouver-based investor will be used to buy and build new data centers, according to the people, who asked not to be identified because the matter is private. The negotiations are ongoing and it’s not assured a deal will be reached, one of the people said. A representative for QuadReal, the real estate investment arm of British Columbia Investment Management Corp., declined to comment. QuadReal oversees about C$27.4 billion ($20.6 billion) of the company’s C$145.6 billion in total assets under management. Representatives for T5 didn’t respond to requests for comment.
    • Wynn Resorts Ltd. is in talks to buy Australian billionaire James Packer’s Crown Resorts Ltd. for A$9.99 billion ($7.12 billion) as the Las Vegas casino empire looks for growth in Asia amid a slowdown in the gambling enclave of Macau. The proposed deal, which values Crown at A$14.75 per share, 26 percent more than Monday’s closing price, will also allow Packer to divest his single largest asset, completing a remarkable corporate retreat for a titan who’s been beset by political trouble and mental health issues in recent years.
    • Ford Motor Co. is saying not so fast to General Motors Co.’s claim to total U.S. truck sales leadership. In the first quarter, Ford delivered more F-Series pickups than GM sold Chevrolet Silverado, Colorado and GMC Sierra and Canyon trucks. GM has tallied up its total volume from its four models the last few years and stacked them up against Ford’s F-Series to claim superiority, including during an investor day in January.
    • China signaled its intent to ban cryptocurrency mining, dealing a fresh blow to an industry buffeted by tumbling virtual currency prices, stiff competition and waning investor interest. The National Development Reform Commission, the country’s powerful economic planner, this week listed crypto-mining among a plethora of industries it intends to eliminate because they “seriously wasted resources” or polluted the environment. The agency is seeking public feedback on the guidelines and indicated that the crypto-mining ban could take effect as soon as they’re formally issued. The consultation period ends on May 7.

*All sources from Bloomberg unless otherwise specified