August 9th, 2017
Daily Market Commentary
- The U.S. Food and Drug Administration’s proposal to strip cigarettes of their addictive properties has opened a new front in the international campaign to reduce smoking, with health authorities in at least four other countries studying the idea. After FDA Commissioner Scott Gottlieb suggested mandating drastic cuts in nicotine levels, public-health experts in New Zealand last week published an action plan recommending such reductions within five years. Canada and Finland say they’re looking into regulating amounts of the drug in tobacco products.
- Aimia Inc. bondholders are betting the loyalty-program company can ride out the short-term turbulence caused by the loss of its key partner. The Montreal-based company’s C$250 million ($197 million) of May 2019 bonds have bounced back from their initial drop after Air Canada, the country’s largest airline, said in May that it will withdraw from Aimia’s Aeroplan loyalty program and start its own rewards plan in 2020.
- European stocks fell, tracking a selloff in Asian shares amid escalating tensions between the U.S. and North Korea after the two countries exchanged threats. The Stoxx Europe 600 Index was down 0.5 percent at 8:19 a.m. in London, with all but one sector in red.
- The modest move in the face of rising geopolitical tensions underscores the quietude that has come to define the market. While many are warning that turmoil is poised to return, the S&P 500 is on course for its calmest month since August 1965, as it posts an average 0.18 percent daily move. The only other month with smaller swings was February 1964, after which the index went on to see its most placid year on record.
- Chinese stocks in Hong Kong posted their biggest drop in almost eight weeks, tracking regional markets lower amid growing tensions between the U.S. and North Korea. Wharf Holdings Ltd. soared to lead local peers higher on a $29 billion spinoff plan.
- Oil halted two days of declines as U.S. industry data showed crude stockpiles fell. Futures added 0.3 percent in New York after dropping 0.8 percent the previous two sessions. U.S. inventories slid by 7.8 million barrels last week, the American Petroleum Institute was said to report Tuesday.
- Gold saw its first back-to-back advance in two weeks, pushing up miners’ share prices amid tensions between the U.S. and North Korea, and as Indian buyers are said to have scaled up purchases.
- A worldwide glut of natural gas has buyers of the fuel driving hard bargains and pushing for shorter supply contracts. The only problem with that, according to their sellers: The market’s about to turn against them. Gas buyers have become too focused on the short-term, turning away from long-term contracts.
- With private equity firms sitting on a record amount of cash they’re struggling to invest, their clients are turning to exchange-traded funds for relief. BlackRock Inc. and State Street Corp., two of the world’s biggest providers of ETFs, say an increasing number of institutional investors are using their products to park money earmarked for private funds.
- Russia laid the groundwork for an operation that will reduce some of its closest and biggest dollar bond payments before the end of the year. The Finance Ministry has permission to swap up to $4 billion of debt maturing in 2018, 2028 and 2030 into new notes, according to a decree published on the government’s website on Tuesday. The price of the exchange won’t exceed the current market value, according to the decree.
- The Bank of England will strengthen its conflict-of-interest checks as part of its response to the controversy surrounding the resignation of former Deputy Governor Charlotte Hogg after just weeks in the role. Clarity about conflict-approval processes will be improved after a review found ambiguities in BOE policies as well as shortcomings in its systems that heightened the risk of inadvertent non-disclosure by its staff.
- Bank Indonesia plans to tap data from e-commerce and social media platforms to assist its policy making amid forecasts the nation’s digital economy will swell to $150 billion within less than a decade. The central bank’s road map for so-called big data includes setting up a statistics base by 2018 and building it up over the next few years.
- Wharf Holdings Ltd. soared to its highest level since listing in Hong Kong in 1986, after the developer said it plans to spin off and list HK$230 billion ($29 billion) of commercial properties including the landmark mall Times Square.
- SoftBank Group Corp. said it may sell as much as 1.5 trillion yen ($13.6 billion) in bonds as founder Masayoshi Son steps up his dealmaking. The Tokyo-based company’s registration will take effect Aug. 17 and the bonds may be issued in the next two years. SoftBank already carries one of the heaviest debt loads in Japan with 11.6 trillion in long-term debt at the end of June.
- Vantiv Inc., the largest U.S. merchant acquirer, agreed to buy e-commerce payments company Worldpay Group Plc for about 8 billion pounds ($10.4 billion). The deal values each Worldpay share at 397 pence and the combined payment processing firm will seek a secondary listing on the London Stock Exchange.
- Blackstone Group LP, Massachusetts Mutual Life Insurance Co. and GIC Pte, Singapore’s sovereign-wealth fund, agreed to buy Goldman Sachs Group Inc.’s remaining stake in Rothesay Life Plc. The deal values Rothesay Life at about 2 billion pounds ($2.6 billion), according to a person with knowledge of the deal, who asked not to be identified because the terms are private.
- After leading a brief revival in global inflation last year, China continues to help support whatever price gains still exist by slashing capacity at key commodity producers. Factory inflation in the world’s second-largest economy is holding up, rising at a pace of 5.5 percent for the past three months. Economists expect producer price index to increase 4.8 percent from a year earlier this quarter.
- Vietnam’s plan to sell its Saigon Beer Alcohol Beverage Corp. stake in tranches may help the government extract the best price after the brewer’s market value surged to $7 billion.
- Glencore Plc’s quest for a piece of Rio Tinto Group’s Australian coal business may not be over yet. The Swiss commodity giant’s planned partner to manage the assets, Yancoal Australia Ltd., faces a challenge from a minority shareholder concerned that its stake will be diluted by the $2.5 billion equity raising needed to fund the deal.
- Hitachi Kokusai Electric Inc. said KKR & Co. is reviewing a tender offer for the chip system-making unit of Hitachi Ltd. a little more than three months after announcing a bid that valued the Japanese company at $2.3 billion.
- A pair of highly anticipated government studies, one of them due to be released this week, could complicate President Donald Trump’s effort to roll back federal climate regulations, according to people on both sides of the debate over global warming. A National Oceanic and Atmospheric Administration-backed report summarizing the global effects of climate change in 2016 is scheduled for release Thursday. Its conclusion will be similar to previous years’ versions.
- Yandex NV picked Russia’s biggest lender Sberbank PJSC as a partner to develop its e-commerce business a month after merging its online-taxi business with Uber Technologies Inc.’s local unit. Sberbank agreed to invest 30 billion rubles ($500 million) in Yandex.Market, valuing the unit at $1 billion. Sberbank and Yandex will have equal stakes in the marketplace, while as much as 10 percent will be allocated for future incentive plans for the management led by Maxim Grishakov.
- Morgan Stanley beat Goldman Sachs Group Inc. to become the most profitable foreign securities firm in Japan last fiscal year after it boosted structured-product sales and managed the two biggest initial public offerings. Net income at Morgan Stanley MUFG Securities Co. rose 32 percent to 29 billion yen ($263 million) in the year ended March 31, the most among 10 large global banks that submitted annual financial statements, according to regulatory filings obtained or seen by Bloomberg.
- France’s 2018 budget will focus on cutting taxes to boost economic activity as the government seeks to cement its support among the business community, Prime Minister Edouard Philippe said. Preparing for the last cabinet meeting before the summer break, Philippe told RTL Radio he wants to lower levies that “hurt the competitiveness of our country.” Government ministries this week received letters setting out their spending limits for next year.
- Banco Santander SA agreed to sell a majority stake in 30 billion euros ($35 billion) of Banco Popular Espanol SA’s real estate assets to Blackstone Group LP, setting in motion Spain’s biggest-ever real estate deal.
- The Reliance Group has boosted the duration of its bond portfolio, moving about 70 billion rupees ($1.1 billion) from short-term funds to income funds at some of India’s top asset managers in anticipation of a fall in interest rates, people with direct knowledge of the matter said.
- Nearly six months after his turbulent elevation to run India’s biggest conglomerate, Natarajan Chandrasekaran is assembling a team of dealmakers to refocus some of the group’s biggest businesses, expand its financial services and consumer businesses and sell or merge dozens of smaller units, according to interviews with senior executives.
- India has tweaked the terms for sale of its shares in Hindustan Petroleum Corp. to the country’s biggest explorer to avoid a mandatory open offer to minority shareholders, according to people with knowledge of the plan.
*All sources from Bloomberg unless otherwise specified