August 1st, 2017


Daily Market Commentary



Canadian Headlines

  • Canadian stocks rallied as financials broke a three-day slump, offsetting losses in health care and tech companies. The S&P/TSX Composite Index rose 0.1 percent to 15,143.87. Financial stocks added 0.4 percent as Manulife Financial Corp. increased 0.9 percent and the Canadian Imperial Bank of Commerce gained 0.6 percent.
  • Free trade between Canada and Mexico is in part an accident of history: two nations, each the other’s afterthought, came together in their shared race to capitalize on the U.S. market. Now, after President Donald Trump threatened to leave the North American Free Trade Agreement, the pact’s junior partners are working more closely than ever to save it. Trump has called Nafta the worst trade deal in history and blames it for millions of lost manufacturing jobs. Canada and Mexico have overcome distance and patched over differences to become its last line of defense, and the real test is approaching.
  • Thomson Reuters Corp. reported second-quarter profit that beat analysts’ estimates as sales in its tax and accounting business rose and an annual price increase in its financial and risk arm bolstered income. Earnings excluding some items rose 28 percent to 60 cents a share, the Toronto-based company said Tuesday in a statement. That compared with the 52-cent average of analysts’ estimates compiled by Bloomberg. Revenue was little changed at $2.78 billion, matching Wall Street projections.
  • A battle over whether energy-company creditors should help pay for cleaning up thousands of abandoned oil wells in Canada may be heading to the country’s Supreme Court. At the center of the dispute is Redwater Energy Corp., a small publicly traded oil producer in Alberta that filed for bankruptcy in late 2015.
  • Air Canada today reported record second quarter 2017 EBITDAR of $670 million compared to the previous record second quarter 2016 of $605 million, an increase of $65 million and consistent with the forecast in Air Canada’s July 6 th, 2017 news release.  The airline recorded a second quarter EBITDAR margin of 17.1 per cent.
  • WestJet today announced its second quarter results for 2017, with net earnings of $48.4 million, or $0.41 per fully diluted share, as compared with the net earnings of $36.7 million, or $0.30 per fully diluted share reported in the second quarter of 2016, up 32.0 per cent and 36.7 per cent, respectively. WestJet achieved its 49 thconsecutive quarter of profitability and flew a record 5.9 million guests.



World Headlines

  • The Stoxx Europe 600 Index was again poised to end its losing streak, heading for the first gain in four days after companies including BP Plc reported. The oil giant beat estimates, and was the biggest contributor to the advance.
  • The U.S. dollar traded sideways after Monday’s drop, as investors digested the latest developments in Washington. As economic data largely supports the global growth story and company earnings in many cases beat estimates, investors would be forgiven for diving further into a bull market that’s propelled equity markets the world over to unprecedented levels. But with valuations well above average, monetary policy poised to turn hawkish and a U.S. administration mired in controversy there remains a degree of caution in markets.
  • Asian stocks headed toward the highest level in almost 10 years as continued rallies in commodities and oil boosted raw-material producers. The MSCI Asia Pacific Index rose 0.6 percent to 161.25 as of 4:54 p.m. in Hong Kong, the highest level since December 2007. PetroChina Co. and China Petroleum & Chemical Corp. climbed after West Texas Intermediate crude traded above $50 a barrel for the first time since May.
  • Oil held gains above $50 a barrel before U.S. government data forecast to show crude stockpiles extended declines, trimming a glut. Futures rose as much as 0.5 percent in New York after climbing 9.6 percent the previous six sessions. Inventories probably fell by 3.3 million barrels last week for a fifth weekly drop.
  • Gold’s march higher is starting to draw skepticism from buyers of options and exchange-traded funds. Investors in bullion-backed ETFs are pulling out their money, with total assets falling by 1.2 percent over a seven-day stretch.
  • Iron ore futures in China held near the highest level since March, with investors on the Dalian Commodity Exchange shuffling positions amid a contract rollover as the commodity’s most-active price shifts forward by four months to January.
  • The euro-area economy expanded apace in the second quarter, a sign the bloc’s upswing is becoming increasingly robust and self-sustaining. Gross domestic product in the 19-country region rose 0.6 percent in the three months through June, after increasing 0.5 percent at the start of the year. That’s in line with the median estimate in a Bloomberg survey of economists.
  • Wall Street regulators have agreed to rewrite the Volcker Rule, according to three people familiar with the matter, moving to loosen industry-despised restrictions that were central to the U.S. response to the financial crisis. The five agencies that wrote the original limits on banks investing with their own capital have decided to begin working together on a revision, said the people, who requested anonymity because the discussions aren’t public.
  • Deutsche Bank AG signed an agreement with Land Securities Group to move its U.K. headquarters to a building being constructed at 21 Moorfields in the City of London financial district. The lender will lease at least 469,000 square feet (43,570 square meters) of the 564,000 square-foot building for 25 years if planning approval is secured, Land Securities said in a filing on Tuesday.
  • Pfizer Inc.’s sales dropped for the third quarter the row, which is likely to reignite pressure on the New York drugmaker to make a deal to return to growth. Sales declined 2 percent to $12.9 billion in the second quarter, Pfizer said Tuesday in a statement. That fell short of the $13.1 billion average of estimates compiled by Bloomberg.
  • Banks may need to find $30 billion to $50 billion of additional capital to support new European units in the aftermath of a hard Brexit, and some smaller firms may abandon their operations on the continent altogether as profitability plunges, according to Oliver Wyman Inc.
  • India is poised to reject Shanghai Fosun Pharmaceutical Group Co.’s proposed $1.3 billion takeover of an Indian drugmaker, according to people familiar with the matter, scuppering the biggest-ever Chinese acquisition in the country.
  • SoftBank Vision Fund, the technology investor founded by Masayoshi Son, is in talks to invest directly in India’s Flipkart OnlineServices Pvt, according to people familiar with the matter, after talks to fold SoftBank-backed Snapdeal into Flipkart fell apart. The fund is looking at putting between $1.5 billion and $2 billion into the largest Indian e-commerce operator within the next two months.
  • A private gauge indicates that India’s manufacturing output slid to the lowest since the financial crisis as the roll out of a new nationwide sales tax disrupted supply chains across the country. The Nikkei India Manufacturing Purchasing Managers’ Index was at 47.9 in July, lowest since February 2009.
  • PSA Group completed the acquisition of General Motors Co.’s money-losing European division, kicking off one of the auto industry’s most complex turnaround efforts amid mounting political pressure to tighten emissions rules in the region.
  • 1Malaysia Development Bhd., the embattled state investment company, said it failed to make a $603 million payment to Abu Dhabi’s sovereign wealth fund because of a delay it faced in receiving the money. Payments to International Petroleum Investment Co. would have been made from proceeds of a 1MDB rationalization plan, and funds that were expected to arrive last month have been delayed till August.
  • Sony Corp.’s turnaround is right on track. The Japanese electronics and entertainment company posted quarterly profit that topped analyst estimates, thanks to demand for smartphone camera chips, a healthy music business and brisk sales of PlayStation 4 consoles and games. Operating profit was 157.6 billion yen ($1.4 billion) in the fiscal first quarter that ended in June.
  • SoftBank Group Corp. has as much as $65 billion in financing lined up as Chairman Masayoshi Son weighs whether to make a formal takeover offer for Charter Communications Inc., according to people familiar with the matter.
  • UniCredit SpA is seeking to sell non-performing loans with a face value of about 1 billion euros ($1.2 billion) as Italy’s biggest bank works on improving its asset quality, according to people with knowledge of the matter.
  • Mitsubishi UFJ Financial Group Inc.’s trust banking arm is seeking acquisitions abroad and has 1 trillion yen ($9 billion) to spend as it seeks to become one of the 15 biggest asset managers worldwide.
  • Ferrari NV is considering adding a roomy four-seat “utility vehicle” as part of a major expansion push beyond its traditional supercar niche in a bid to double profit by 2022, people familiar with the matter said. The final five-year plan under Chief Executive Officer Sergio Marchionne, who’s set to retire in 2021, will target boosting annual deliveries beyond a self-imposed limit of 10,000 cars, which allows the company to operate with less-stringent fuel-economy rules.



*All sources from Bloomberg unless otherwise specified