August 15th, 2017
Daily Market Commentary
- Foreign Affairs Minister Chrystia Freeland laid out Canada’s core objectives for North American Free Trade Agreement negotiations that begin this week and signaled the country won’t accept “just any deal.’’ Speaking Monday in Ottawa, Freeland said she hopes the three sides — the U.S., Canada and Mexico — can keep what is good about the current agreement, while using the negotiations to modernize the pact.
- Gibson Energy Inc., a Canadian company that helps oil producers store and transport their products, should undertake a strategic review that would include a potential sale, according to its largest shareholder. Gibson should sell a refinery in Moose Jaw, Saskatchewan, exit most of its trucking business and reduce costs before hiring an investment bank for a possible sale, London-based M&G Investment Management said Monday in a letter to management. The unit of insurer Prudential Plc, with $366 billion in assets, owns about 19 percent of Gibson.
- European equities extended their rebound, mirroring a global recovery, amid easing tension between the U.S. and North Korea. Stocks fell last week amid an escalating war of words between the leaders of the U.S. and North Korea. A surge in U.S. stock volatility has made European derivatives look like bargains again. Euro Stoxx 50 Index options have become the cheapest since January 2016 relative to those on the S&P 500 Index.
- Traditional haven assets including gold and the yen slumped and core bonds across Europe declined with Treasuries as the prospect of war between the U.S. and North Korea receded. The dollar extended its advance as European stocks struggled for traction following Monday’s strong gains. The S&P 500 Index posted its first increase of least 1 percent since April as most investors put last week’s selloff behind them.
- Asian equities extended gains, tracking a U.S. equities rally overnight, as prospects of a war between the U.S. and North Korea receded. The MSCI Asia Pacific Index advanced 0.2 percent to 158.72 as of 4:33 p.m. in Hong Kong, set for a second day of gains as consumer staples and finance stocks rose.
- Oil halted losses below $48 a barrel ahead of U.S. government data forecast to show crude stockpiles extended declines during a period of strong seasonal demand, trimming a glut. Futures were little changed in New York after falling 2.5 percent Monday, the biggest drop in more than five weeks.
- Gold falls for second day after rally toward $1,300 falters. Tensions between U.S. and North Korea moved from center stage, reducing demand for havens, and dollar found support from Federal Reserve Bank of New York chief William Dudley.
- The U.K. government said it wants to maintain tariff-free, bureaucracy-light trade with the European Union for a period of up to two years after Brexit, a proposal cheered by British businesses but which is likely to raise eyebrows on the continent. Ahead of the publication Tuesday of the first of a series of new papers aimed at fleshing out its ambitions for future relations with the EU, Britain said it will seek to negotiate a “close association” with the bloc’s customs union after it leaves in March 2019.
- Oil output from major U.S. shale plays is poised to reach afresh record next month, further complicating OPEC’s efforts to support prices. The gain is being led by the oil-rich Permian basin of Texas and New Mexico, where production has risen steadily over the past two years. The Energy Information Administration projects Permian output to rise by 64,000 barrels in September, reaching a record of 2.6 million barrels a day.
- Intel Corp.’s Brian Krzanich joined Under Armour Inc.’s Kevin Plank in becoming the latest chief executives to quit President Donald Trump’s council of U.S. business leaders, as membership on the panel has become enmeshed in the country’s volatile politics after violent riots in Virginia over the weekend.
- Cerberus Capital Management and Advent International Corp. are considering bids to acquire the European oncology and pain treatments of troubled Israeli drugmaker Teva Pharmaceutical Industries Ltd., according to people familiar with the matter. The assets may be valued at $700 million to $1 billion, the people said, asking not to be identified because the deliberations are private. No final decision has been made and the two private-equity firms may still decide against a bid, the people said.
- Two of Australia’s largest liquefied natural gas exporters are writing down a combined $1.5 billion as their outlook dims on oil, which sets the selling price for most of their fuel sales. Just days after Origin Energy Ltd. slashed A$815 million ($641 million) from the value of its Australia Pacific LNG venture in Queensland, rival Santos Ltd. on Tuesday took a $870 million after-tax charge on the neighboring Gladstone LNG export facility.
- A move under consideration by the Trump administration could ease tough fuel-efficiency standards set to take effect in 2021 on pickups, SUVs and other light trucks, the bulwark of U.S. auto industry sales and profits. For the 2021 model year, light trucks must average roughly 33 miles per gallon to comply with the current standards, a gain of more than 6 percent from model year 2020.
- Shares of China’s biggest banks rallied as brokerage reports fueled optimism that the lenders will beat estimates when they report earnings next week. Industrial & Commercial Bank of China Ltd., China Construction Bank Corp.and Bank of China Ltd. climbed more than 3 percent in Shanghai as of 11:40 a.m. local time on Tuesday, and their Hong Kong shares jumped. China Merchants Securities Co. said in a report that first-half profit growth is set to “significantly exceed market expectations.”
- The number of new taxpayers in India more than doubled in the past five months and about 3 trillion rupees ($47 billion) came back to the banks after the government’s cash ban brought more people into the fold of the formal economy, Prime Minister Narendra Modi said.
- Transocean Ltd. agreed to buy Songa Offshore SE in a deal that gives the Norwegian rig company an equity value of 9.1 billion kroner ($1.2 billion) to expand its fleet. Transocean is offering 47.50 kroner a share for Songa Offshore, representing a 37 percent premium to the five-day average closing price, the company said in a statement.
- South Africa’s High Court scrapped a bid by the nation’s anti-graft ombudsman to change the central bank’s inflation-targeting mandate. The Public Protector’s instruction that lawmakers should start a process to change the constitution and amend the Reserve Bank’s mandate is set aside, Judge Cynthia Pretorius said in a ruling.
- While the VIX is having its most volatile month since last September, it remains on track to record the smallest daily swings since 2009 over the full year. Back then, its annual average level was almost three times greater than in 2017. After posting the biggest three-day surge in two years, the CBOE Volatility Index slumped and recovered its annual loss.
- Danske Bank A/S is telling corporate clients to think hard about what to do with their excess cash before Dec. 31, because Denmark’s biggest lender doesn’t want it. After a world-record-setting half decade of negative interest rates, Denmark still has a few surprises up its sleeve that show how such a monetary regime works in practice. Though corporate clients need to pay to place their savings with the bank, Danske is struggling to deal with near-record amounts of deposits.
- Noble Group Ltd. may default on its debt as soon as the next six months, according to S&P Global Ratings and Moody’s Investors Service, which again cut their scores on the commodity trader while warning that planned asset sales may be insufficient to cover obligations. The ratings were cut two notches by S&P and Moody’s late on Monday, pulling them deeper into junk territory and closer to the likelihood of default.
- Danone SA became the latest European company to attract an activist investor as the French yogurt maker struggles to boost sales in an industry reeling with fickle consumer demand. Corvex Management, a New York-based activist fund run by Keith Meister, has built a stake worth about $400 million, according to people familiar with the matter.
- The U.K. government is preparing to complete the 2.3 billion-pound ($3 billion) sale of its Green Investment Bank to a group led by Macquarie Group Ltd. as soon as this week, according to people familiar with the matter.
- Stada Arzneimittel AG investors tendered their shares at a quicker rate on Monday, increasing the chances Bain Capital and Cinven will manage to push through their 5.4 billion-euro ($6.4 billion) takeover offer after direct appeals to hedge funds to accept.
- The cutthroat U.S. restaurant industry is getting increasingly aggressive about technology, enlisting Facebook Inc. and Amazon.com Inc. in their race to make it easier for customers to order and pay for their food. Last month, TGI Fridays began letting customers foot the bill using their Amazon accounts. And pizza chains are locked in an escalating battle to adopt new ordering methods — a contest that involves chat bots, voice-activated devices and social networks.
*All sources from Bloomberg unless otherwise specified