August 17th, 2017
Daily Market Commentary
- Canada will probably be willing to loosen controls over dairy imports during North American Free Trade Agreement negotiations like it did in a trade deal struck with the European Union, said former Quebec Premier Jean Charest.
- Preferred shares have further room to gain in Canada as a revving economy keeps interest-rate hikes coming and credit quality strong, according to the manager of the best-performing fund in the sector. The Dynamic Preferred Yield Class Fund has returned 9.2 percent this year, according to data compiled by Bloomberg. That outpaces 26 similar mutual funds that have assets of more than C$500 million ($395 million) as well as the S&P/TSX Preferred Total Return Index which has gained 8 percent.
- European stocks halted their longest winning streak in a month, as traders weighed recent gains and odds fell of another U.S. interest-rate increase this year. The Stoxx Europe 600 Index dropped 0.2 percent at 8:25 a.m. in London. Banks declined from a one-week high, following bond yields lower.
- The VIX has lost most of last week’s surge, but signs of unease remain. Trading of bearish options on the S&P 500 Index jumped to a three-month peak on Wednesday, and the ratio of outstanding puts to calls climbed to its highest level since January 2016. Back then, equity losses were accelerating toward a two-year low. Things are different now — the S&P 500 is rebounding from last week’s drop and is just 0.5 percent away from a record. But investors are taking precautions, and here’s a factoid to prove it: the cost of tail-risk hedging as measured by the CBOE SKEW Index has jumped to its highest level since March 20.
- Asian shares outside Japan extended gains for a fourth day as U.S. Federal Reserve meeting minutes reduced the odds of another interest-rate increase. The MSCI Asia Pacific Index added 0.5 percent to 159.85 as of 4:28 p.m. in Hong Kong, set for its best week in about a month.
- Oil held losses near the lowest close in more than three weeks as investors weighed expanding U.S. crude output against an extended decline in stockpiles during a period of strong seasonal demand. Futures were little changed in New York after falling 4.2 percent the previous three sessions. U.S. production had its biggest weekly gain since the end of June, climbing to the highest level since July 2015.
- Gold climbs for second day, nearing $1,300 amid worries over U.S. political and economic policy after President Donald Trump disbanded his two business advisory councils as CEOs staged an exodus.
- Most industrial metals eased back after a rally that took zinc to the highest level in almost 10 years on signs of supply curbs and faster economic growth around the world. Zinc slipped 0.6 percent to $3,101.50 a metric ton by 10:56 a.m. on the London Metal Exchange after earlier touching $3,147.
- U.K. consumers are flagging, stripping the economy of its most consistent and important support over the past two years. From a slowdown in spending growth to switching to cheaper brands to save money, the impact of faster inflation on households is clear to see. According to separate reports on Thursday, annual growth in retail sales the quarter through July dropped to 1.8 percent, the weakest in almost four years, while households are ramping up efforts to save money at the supermarket.
- Air Berlin Plc’s insolvency could open the way for Deutsche Lufthansa AG to add new hubs for inter-continental flights while allowing short-haul discount specialist EasyJet Plc to boost its presence in the German capital. The ailing carrier’s Berlin and Dusseldorf bases provide Lufthansa’s lower-cost Eurowings arm with a chance to expand a long-haul network currently limited to Cologne-Bonn airport and a fledgling operation in Munich.
- Britain is considering allowing European Union citizens to travel freely to the country even after Brexit as Prime Minister Theresa May’s government draws up plans to manage immigration from the bloc.
- The $11.7 billion share sale by China’s second-largest mobile carrier signals the beginning of a government push to further privatize its bloated state-owned enterprises. Copycat deals similar to the one announced late Wednesday could follow as privatization emerges as a key theme in the government’s broader ambition to overhaul its SOEs — a sector that generates more revenue than the size of Japan’s economy.
- For a deal that’s been months in the making, the $11.7 billion share sale plan announced by China’s second-largest wireless carrier sure looked like a rushed job. That’s according to Francis Lun, Hong Kong-based chief executive officer of Geo Securities Ltd., after a series of gaffes by China Unicom (Hong Kong) Ltd. and Shanghai-listed China United Network Communications Ltd. undermined Wednesday’s disclosure that the Chinese carrier would bring in more than a dozen investors as part of a government push to privatize its state-owned enterprises.
- The Bank of Japan could trim its bond purchases again as early as Friday should the 10-year yield fall further, and the yen and stocks remain stable, money managers say. The 10-year yield dropped to 0.04 percent on Wednesday, its lowest since June 7, after the central bank offered to buy 30 billion yen ($273 million) less of debt maturing in five to 10 years at its regular operations.
- Indian airport operators surged after the country’s top court allowed them to use airport land for commercial purposes, rejecting the government’s objections. Private airport operators can now take advantage of a new civil aviation policy unveiled last year that liberalized norms, allowing commercial use of airport land, a two-judge bench headed by J. Chelameswar ruled, upholding a previous lower court order. The government policy initially excluded existing operators.
- The debate over Japan’s effort to allow casinos is going public as operators including MGM Resorts International and Caesars Entertainment Corp. look for clarity in a potential $25 billion market. Open hearings began on Thursday over recommended guidelines to govern major resorts in Japan that will feature everything from blackjack tables to entertainment. The government is currently weighing regulations that could impose curbs on the gaming industry as more than half of the country’s residents oppose casinos.
- Alibaba Group Holding Ltd.’s quarterly revenue beat analysts’ estimates, powered by Chinese consumers’ thirst for cheaper and higher quality goods online. Revenue at China’s biggest e-commerce company rose 56 percent to 50.2 billion yuan ($7.4 billion) in the three months ended June, the company said. That compares with the $7.2 billion average of estimates compiled by Bloomberg. It reported non-GAAP diluted earnings-per-share of $1.17, versus the $0.94 projected.
- In the energy business, it’s one of the biggest projects going today: construction of a 710-mile pipeline to transport natural gas from America’s most prolific shale deposit in the eastern U.S. to consumers in the Midwest and Canada. Even Blackstone Group LP has agreed to take a sizable stake. But it holds another, more dubious, distinction. The Energy Transfer Partners LP pipeline has racked up more environmental violations than other major interstate natural gas pipelines built in the last two years, according to a Bloomberg analysis of regulatory filings during that period.
- Investors are about to get their first look at Bill Ackman’s plans for improving the performance of Automatic Data Processing Inc., which the activist investor contends is losing ground to smaller rivals. Ackman will make his case for changes at the payroll and human resources outsourcer during a webcast Thursday morning.
- Pemberton Capital Advisors plans to raise at least 2.5 billion euros ($2.9 billion) for its fourth and biggest direct-lending fund, according to a person familiar with the matter. The London-based private lender is seeking to raise as much as 1 billion euros by November and more next year, said the person, who isn’t authorized to talk about it and asked not to be identified.
- Amazon.com will have to work hard to be as competitive in groceries as it has been in hard goods — or as disruptive as Wal-Mart was 15 years ago. Amazon’s shake-up potential is considerable, especially because it doesn’t seem to prioritize profit. Yet the growing popularity of e-grocery, with competitors Wal-Mart and Kroger active in the channel, mean rivals look better prepared to combat Amazon, playing to advantages in perishables and in small-store formats that are better suited to changing U.S. demographics.
- Standard Bank Group Ltd., Africa’s largest lender by assets, said first-half profit rose 14 percent after impairments dropped and costs were contained. Net income climbed to 12.3 billion rand ($937 million) from 10.8 billion rand a year earlier, the Johannesburg-based lender said in a statement on Thursday. Earnings per share excluding one-time items, known locally as headline earnings, advanced 11 percent to 7.56 rand beating the 7.44 rand median estimate of three analysts surveyed by Bloomberg.
- European stocks are offering the biggest discount on record relative to U.S. peers, according to one metric. Members of the Stoxx Europe 600 Index are trading at 1.8 times the value of their assets, almost half that of S&P 500 Index constituents, the largest gap since Bloomberg started tracking the data in 2002. World-beating gains in U.S. equities since the bull market kicked off in 2009 has widened the distance between the two, while recent volatility has also rendered its derivatives the most expensive in more than a year versus Europe.
- Vestas Wind Systems A/S fell the most in nine months after quarterly results missed estimates. It announced a plan to buy back 600 million euros ($706 million) of shares. Second quarter revenue and profit at the world’s biggest turbine maker fell below analyst estimates after it wrote down the value of test facilities. The stock dropped as much as 7.7 percent and traded at 577 kroner ($91.11) a share at 10:10 a.m. in Aarhus, Denmark, where the company is based.
- Novo Nordisk A/S said its experimental treatment semaglutide proved to be more effective than a competing therapy fromEli Lilly & Co. in controlling glucose levels and aiding in weight loss for diabetics. Patients treated with once-a-week versions of semaglutide, which belongs to a $5 billion class of treatments known as GLP-1, as well as metformin demonstrated a better response than those who received Lilly’s dulaglutide, sold as Trulicity, the drugmaker said in a statement late on Wednesday.
- After going missing for years, Polish retail investors have returned to the Warsaw stock market in force. While foreign investors still dominate turnover, individual Poles accounted for 18 percent of all trading in the first half of the year, the most since 2012 and a jump from 13 percent a year earlier, figures from the exchange show.
*All sources from Bloomberg unless otherwise specified