August 4th, 2017
Daily Market Commentary
- Allianz SE and Canada Pension Plan Investment Boardhave agreed to buy a 20 percent stake in Spain’s Gas Natural SDG SA’s gas distribution business for 1.5 billion euros ($1.8 billion). Allianz, through its subsidiary Allianz Capital Partners, will commit 600 million euros in equity toward the investment, while Toronto-based CPPIB’s portion will be 900 million euros. The transaction is expected to be completed by January 2018, according to a joint statement. Gas Natural shares rose as much as 2.5 percent in Madrid.
- The U.S. lumber industry says it won’t accept the latest Canadian government proposal for a deal on softwood lumber, downplaying expectations any agreement is imminent. Canada’s ambassador to Washington said in an interview this week the sides are close to an agreement on a deal that would cap Canada’s share of the U.S. lumber market at 30 percent, but remained at odds over what will happen if U.S. producers can’t fulfill their 70 percent share.
- European stocks were little changed as investors awaited a monthly U.S. jobs report and assessed the latest development in the investigation into possible ties between Russia and Donald Trump’s presidential campaign. The Stoxx Europe 600 Index was steady at 378.78 at 8:30 a.m. in London. U.S. equities fell late Thursday after a report that Special Counsel Robert Mueller is using a federal grand jury in Washington to help collect information as he probes Russia’s meddling in the 2016 election and possible collusion by the president’s campaign associates.
- U.S. stock-index futures held steady, hours before the release of key jobs data that may provide clues on economic strength and the path of future interest rates. S&P 500 contracts expiring in September were at 2,473.25 as of 6:15 a.m. in New York, before the report that’s forecast to show payrolls grew at a slower pace in July.
- Asian stocks were mixed as investors weighed the latest corporate earnings against the latest development in the ongoing investigation of U.S. President Donald Trump’s ties to Russia, with jobs data from the world’s largest economy due later Friday.
- Oil is back down again this week following the year’s biggest rally as investor focus shifted to rising output from the U.S. and OPEC, and away from a seasonal increase in American fuel demand. Futures in New York were down 2.2 percent for the week after an 8.6 percent surge in the prior period. While U.S. government data on Wednesday showed crude stockpiles continued to decline, production expanded to the highest level since July 2015.
- Gold adopts a positive chart profile with bullish price-action seen overriding the overbought setup and trend-exhaustion warnings; scope to take out 1275 and reach 1281 post-event with bullish developments in long-end U.S. rates providing a tailwind.
- The main U.S. energy regulator can get back to the business of approving multibillion-dollar natural gas pipelines after the Senate moved to fill two of four vacancies at the long-crippled agency. Senators on Thursday confirmed the nominations to the Federal Energy Regulatory Commission of Robert Powelson, former chairman of the Pennsylvania Public Utility Commission, and Neil Chatterjee, a senior aide to Senate Majority Leader Mitch McConnell.
- Toyota Motor Corp. and Mazda Motor Corp. have agreed to buy stakes in each other and jointly build a $1.6 billion U.S. factory, as carmakers band together to share costs and investments in new technology. Toyota will acquire about 5 percent in Mazda, which will hold a 0.25 percent in the bigger automaker in a capital tie-up, according to a Japanese regulatory filing. The planned car plant will create about 4,000 jobs.
- Shares in Britain’s biggest housebuilders fell after Property Week reported the government could cancel a program that provides five-year interest-free home loans. A spokesman for the Department for Communities and Local Government said by email that its incorrect to infer from a review of Help to Buy that the government is considering canceling it early.
- Allianz SE agreed to buy the general insurance unit of LV=in the U.K. in a deal valued at as much as 1.02 billion pounds ($1.34 billion) as Chief Executive Officer Oliver Baete seeks to boost earnings through acquisitions.
- Grupo Lala SAB de CV agreed to acquire Brazilian cheese and yogurt maker Vigor Alimentos SA in a deal valued at 5.73 billion reais ($1.8 billion) to expand in Latin America’s largest dairy market.
- Royal Bank of Scotland Group Plc’s better-than-expected performance in the second quarter came from an unexpected source: its investment bank. Revenue at Natwest Markets, which houses the trading business, increased 17 percent to 472 million pounds ($620 million), beating the forecasts of analysts at Morgan Stanley and Jefferies Group LLC. The firm also said it’s picked Amsterdam as its post-Brexit European Union trading hub and was preparing to move 150 jobs to the Dutch city.
- A sustained spike in mortgage-arrears data published by the Bank of England had left home loan providers in the U.K. puzzled. Turns out some lenders were entering incorrect data. The central bank has asked a number of mortgage providers to re-submit data for some home-loan statistics following a joint investigation with the Financial Conduct Authority, a person with knowledge of the matter said. It found some lenders were overstating arrears by including loans which should not have been added, the person said, asking not to be identified because the probe was confidential.
- Pearson Plc made good on a pledge to cut costs, slashing 3,000 jobs and cutting its interim dividend to preserve cash as it works on a turnaround of its struggling education business. The staff cuts, almost 10 percent of the company’s total work force, will have “a particular focus” on managerial positions and office locations will also be reduced, Pearson said Friday. It lowered its interim dividend by 72 percent to 5 pence a share, a move signaled last month but received nonetheless with disappointment from investors.
- Vietnam forecasts disbursed foreign direct investment to rise to a record this year as the government steps up efforts to attract factories to the Southeast Asian nation. Disbursed FDI will exceed $16 billion this year, Deputy Minister of Planning and Investment Dang Huy Dong said in an interview in Hanoi on Thursday. Pledged foreign investment will increase up to $28 billion, he said. That compared with last year’s $24.4 billion of pledged foreign investment and a record high of disbursed FDI at $15.8 billion.
- Vietnam National Petroleum Corp., the nation’s largest petroleum retailer, plans to sell a 30 percent stake to foreign investors as early as the end of this year to fund refinery projects, Chairman Bui Ngoc Bao said in an interview.
- Teva Pharmaceutical Industries Ltd.’s warning to investors that it may breach debt covenants if cash flow weakens triggered its biggest bond selloff on record. The drugmaker’s 700 million euros ($832 million) of notes due March 2027 fell 2.4 cents on the euro to 94 cents on Friday, the lowest since February and the largest decline since the bonds were sold, according to data compiled by Bloomberg. The Petach Tikva, Israel-based company’s 750 million euros of bonds maturing in October 2028 fell 3 cents to 88.5 cents, also in their biggest drop on record, the data show.
- The latest GDP results signal that the economy is on a steady trajectory at midyear, and this is likely to be reflected in the July jobs report. BI Economics is moderately more bullish than consensus toward the outcome for both payrolls and the unemployment rate. Unless wage pressures materialize to a greater degree, thereby compelling employers to increase productivity, the projected pickup for 2H GDP growth (2.6%) relative to 1H (1.9%) should translate into faster hiring gains.
- Vincom Retail, the Vietnamese mall operator backed by Warburg Pincus, is planning a domestic initial public offering that could become the country’s biggest-ever share sale from the private sector, people with knowledge of the matter said.
- Verizon Communications Inc. sold the biggest Kangaroo bond since Apple Inc.’s offering in 2015, after the cost for overseas borrowers to issue debt in Australian dollars declined this year. The biggest wireless carrier in North America priced A$2.2 billion ($1.75 billion) of bonds in four tranches Friday at levels that were “fair,” said Anthony Kirkham, Western Asset Management’s head of investments in Australia. The cost to sell corporate bonds over swaps in the Australian market is at its lowest since April 2015, and the Aussie dollar has strengthened 11 percent against the greenback this year.
- Blackstone Group LP and CVC Capital Partners Ltd. agreed to buy Paysafe Group Plc in a deal that values the payments-processing firm at about 3 billion pounds ($3.9 billion). Funds managed by the companies offered 590 pence a share in cash for each Paysafe share, according to a statement on Friday. Old Mutual Global Investors (U.K.) Ltd., Paysafe’s largest shareholder, and Threadneedle Asset Management Ltd. have said they will accept the offer, according to the statement.
- Japan Tobacco Inc. agreed to buy Indonesian cigarette company PT Karyadibya Mahardhika and its distributor for $677 million as it seeks growth in the world’s second-largest tobacco market. The agreement, which also includes net debt of $323 million, values the closely held company at about 1.95 times annual revenue, compared with the 6.6 times median for reported tobacco deals worldwide since the beginning of 2014, according to data compiled by Bloomberg.
- Constellium NV, the Dutch maker of aluminum products, is weighing options after drawing takeover interest, according to people familiar with the matter. Shares in the company, which listed on the New York Stock Exchange in 2013, rose as much as 11 percent Thursday to $9.20. It closed up 4.2 percent to $8.65. The stock had slumped more than 70 percent through Wednesday since its peak in 2014.
- The turmoil around the Affordable Care Act has created heartburn for health insurers. The industry is betting that a different government program will soothe its ills. Big insurers have retreated from Obamacare’s individual market, where fighting over the future of the health law has contributed to financial losses. They’re focusing instead on Medicare Advantage, a politically popular program that’s being embraced by a growing population of older Americans.
*All sources from Bloomberg unless otherwise specified