August 12th, 2019

Daily Market Commentary

  • Canadian Headlines
    • Barrick Gold Corp. Chief Executive Officer Mark Bristow says the global miner continues to target $1.5 billion of asset sales by the end of next year. Barrick is still engaged in selling its 50% stake in the Kalgoorlie mine to partner Newmont Goldcorp Corp., but it hasn’t received an offer from Newmont, Bristow said Monday in Toronto as the company reported its second-quarter earnings.
    • Canadian billionaire Jim Pattison — whose conglomerate owns businesses including supermarkets, fisheries and billboards — offered to take lumber producer Canfor Corp. private for about C$981.6 million ($742 million). Pattison’s Great Pacific Capital Corp., which already owns 51% of Canfor, proposed on Sunday to buy out the remaining shares for C$16 apiece, an 82% premium to the stock’s closing price on Friday. Vancouver-based Canfor said it has formed a special committee of independent directors to review the offer.
    • Air Canada will increase its purchase price to C$18 per share from C$13 per share, boosting the offer to approximately C$720 million, it says in statement.

     

  • World Headlines
    • A Chinese official said the city was at a “critical juncture” and that there were signs of “terrorism.” The change in mood wiped out the Stoxx Europe 600 Index’s jump of as much as 1%.
    • U.S. equity futures reversed an advance on Monday alongside European stocks as mounting unrest in Hong Kong weighed on investor sentiment. Treasuries and the yen extended gains while gold and the dollar both turned higher. Contracts for all three main U.S. equity indexes retreated after Hong Kong airport authorities canceled remaining flights for the day.
    • Japanese stocks advanced as technology shares gained following a surge in their U.S. peers and as investors took solace from efforts to stabilize the Chinese yuan. The Topix index had its biggest gain so far this month after U.S. stocks rallied, with the tech-heavy Nasdaq Composite gaining over 2%. Stocks that rely on domestic demand also rose in Tokyo after a report that Japan’s economy grewmore than expected in the second quarter.
    • Oil dropped as U.S. President Donald Trump said planned trade talks with China next month could be called off, stoking concerns the deepening dispute will damage global growth. Futures lost as much as 1.8% in New York, snapping a two-day gain, as a stronger dollar curbed the appeal of commodities priced in the U.S. currency. Trump’s threat to cancel negotiations came after the International Monetary Fund on Friday warned of downside risks to the Chinese economy if trade tensions escalate.
    • Gold holds near six-year highs as the U.S.-China trade conflict shows no sign of abating, spurring fears over global growth and currency volatility. President Donald Trump said Friday it would be “fine” if the next round of trade talks are called off. Money managers have raised bullish bets on bullion to the highest since 2016 amid haven demand as investors anticipate currency devaluations, easing monetary policy and headwinds to economic growth.
    • China’s credit growth tumbled to the second-lowest amount this year in July amid weak demand and seasonal factors, adding pressure on officials to ease policy settings. Aggregate financing was 1.01 trillion yuan ($143 billion) last month, compared with about 2.26 trillion yuan in June, the People’s Bank of China said Monday. The median estimate of economists was 1.63 trillion yuan. The slump in credit growth is further bad news for China as the trade and technology war with the U.S. worsens, and amid warnings that external demand may weaken. Even so, policy makers have shown little sign so far that they’re contemplating more aggressive monetary policy, as concerns over debt build-up and financial stability remain.
    • Three years into Commerzbank AG Chief Executive Officer Martin Zielke’s turnaround, the party’s over. Shares of the lender fell to a record low Monday, capping a roller coaster ride that saw the stock more than double after the CEO announced his plan, buoyed by expectations for higher interest rates and consolidation in European banking. Zielke has refocused the bank on lending to corporate and individual clients in Germany, turning it into a proxy for economic growth and interest rates in the region that attracted investors such as Cerberus Capital Management.
    • Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week. This was the fifth straight week of outflows. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $3.6 billion in the week ended Aug. 9, compared with losses of $3.39 billion in the previous week, according to data compiled by Bloomberg. This was the biggest weekly outflow in over a year. So far this year, inflows have totalled $4.07 billion.
    • Thomas Cook Group Plc fell the most in a month after the debt-laden travel giant said it needs more than $1 billion for a recapitalization meant to tide it through the winter, when fewer Europeans go on vacation. The U.K. tour operator has made “significant progress” toward finalizing a bailout including an added 150 million pounds ($181 million) from bondholders, it said in a statement Monday. That would be on top of a 750 million-pound package agreed with Cook’s main lending banks and Chinese investor Fosun.
    • Spanish utility Iberdrola SA is selling a stake in a U.K. offshore wind farm to a unit of Macquarie Group Ltd. for 1.63 billion pounds ($1.96 billion) in a deal that highlights the widening appeal of renewable assets. Institutional investors are becoming more inclined to invest earlier in large offshore wind projects for the steady income from long-term power purchase agreements. For Iberdrola, the 40% stake sale in what’s expected to be world’s largest offshore wind farm will help it meet its target of delivering 10 gigawatts of offshore wind over the next few years.
    • Puerto Rico’s government-owned water utility and the federal government reached an agreement on nearly $1 billion of outstanding loans that will save the agency about $380 million in interest costs over the next decade. Aqueduct and Sewer Authority, which provides most of the drinking water for the bankrupt island, reach an agreement with the U.S. Environmental Protection Agency and the U.S. Department of Agriculture to modify existing loans made under different government programs, according to a federal board that oversees the commonwealth’s finances.
    • Nearly three decades after the fall of the Berlin Wall, Germany is moving to eliminate the so-called solidarity tax that helped finance reunification. The 5.5% income tax is to be abolished from 2021 for the vast majority of those currently paying it, Finance Minister Olaf Scholz said in Berlin on Monday. In 2018 the levy generated total revenues of 18.9 billion euros ($21.2 billion). Under the proposal, which still needs to go through parliament, 90% of current contributors will no longer pay what locally is referred to as the Soli. The announcement comes amid growing pressure for increased stimulus as Europe’s largest economy slows and risks entering a recession. The parties in Chancellor Angela Merkel’s coalition lost considerable support in opinion polls in recent months.
    • AMS AG re-entered the battle for Osram Licht AG with a 3.7 billion euros ($4.1 billion) offer, days after a major shareholder rejected a lower bid by rivals for the German light and sensor maker. Osram soared as much as 11% Monday, following the weekend approach from AMS that values the target at 38.50 euros a share. That compares with the 35 euros-a-share from private-equity firms Bain Capital and Carlyle Group, thrown into jeopardy last week when top investor, Allianz Global Investors, rejected it as too low.
    • The People’s Bank of China is “close” to issuing its own cryptocurrency, according to a senior official. The bank’s researchers have been working intensively since last year to develop systems, and the cryptocurrency is “close to being out,” Mu Changchun, deputy director of the PBOC’s payments department, said at an event held by China Finance 40 Forum over the weekend in Yichun, Heilongjiang. He didn’t give specifics on the timing. Mu repeated the PBOC’s intention that the digital currency would replace M0, or cash in circulation, rather than M2, which would generate credit and impact monetary policy. The digital currency would also support the yuan’s circulation and internationalization, he said.
    • Argentina’s President Mauricio Macri unexpectedly lost a primary vote by a landslide, foreshadowing a defeat in October’s presidential election and a possible return to the policies of his predecessor, Cristina Kirchner. Investors were bracing for a market sell-off after Sunday’s primary, effectively a test of national sentiment before the two-round presidential ballot. The scale of Macri’s defeat took pollsters by surprise, yet it reflects widespread public dismay at the country’s direction amid recession, austerity and inflation running at more than 50%.
    • The boards of CBS Corp. and Viacom Inc. negotiated late into the night, trying to hash out a price for the long-awaited merger, according to people familiar with the matter. The companies were aiming to strike a deal late Sunday in time to announce a merger by Monday, although the timing could slip into Tuesday, said the people, who asked not to be identified because the matter was private. The two sides have been negotiating the exchange ratio of the potential all-stock combination.
    • The world’s biggest crude producer will soon own a part of the world’s biggest oil refinery. Saudi Aramco will buy a 20% stake in the oil-to-chemicals business of India’s Reliance Industries Ltd., including the 1.24 million barrels-a-day Jamnagar refining complex on the country’s west coast, Reliance Chairman Mukesh Ambani said at the company’s annual general meeting in Mumbai. Reliance values its oil-to-chemicals division at $75 billion including debt, implying a $15 billion valuation for the stake.
    • PT Softex Indonesia, a sanitary product maker backed by CVC Capital Partners, has chosen arrangers for a proposed initial public offering that could raise about $500 million, according to people with knowledge of the matter. The Tangerang-based company has selected Citigroup Inc., Credit Suisse Group AG, PT Mandiri Sekuritas and UBS Group AG for its planned listing in Indonesia, said the people, asking not to be named as the discussions are private. Softex is aiming for a share sale in the first half of next year, they said.
  • *All sources from Bloomberg unless otherwise specified