December 6th, 2019

Daily Market Commentary

Canadian Headlines

• Canadian stocks fell along with U.S. equities, as investors weighed the chances that the U.S. will scrap a tariff hike on Chinese goods scheduled for Dec. 15. Tech stocks were the worst performers, while materials outperformed.

World Headlines

• European shares rose as investors remain focused on any trade talk developments ahead of the U.S. jobs report later on Friday. The Stoxx Europe 600 gained 0.3% as of 8:06 a.m. in London, ignoring news of German industrial production unexpectedly extending its decline. Banks were the best-performing sector, up 0.7%, while telecoms were the worst, down 0.1%. Phoenix Group Holdings Plc agreed to buy Swiss Re AG’s U.K. insurance unit, sending shares of the latter over 2% higher.
• Stocks climbed alongside S&P 500 futures on Friday as investors counted down to U.S. jobs data and watched for any further developments ahead of a looming tariff deadline between America and China. Treasuries edged higher. Contracts on the three main U.S. equity benchmarks also ticked higher after reports China is handling requests for tariff waivers on American soybeans and pork. The dollar drifted ahead of Friday’s employment report.
• Shares pushed higher in most major Asian markets including Hong Kong, Shanghai and Sydney, though stocks in India fell. Oil fluctuated as OPEC struggled to agree the details of an output cut. Stock investors have so far clung to optimism over trade despite whipsawing headlines as the U.S. and China work toward a deal before a Dec. 15 deadline for more tariffs. Prospects for an accord could either be helped or hindered by today’s jobs report, which will help show whether escalating levies have affected levels of employment in the world’s largest economy.
• Oil oscillated near $58 a barrel as the OPEC+ ministers met in Vienna to pin down the details of an agreement to adjust its official output target. Futures fell 0.1% in New York after gyrating throughout the previous session after six hours of fraught OPEC ministerial talks. While the Organization of Petroleum Exporting Countries is nearing a deal to reduce its official output target in line with recent production, ministers left the cartel’s headquarters on Thursday without cementing an agreement. Saudi Arabia will hold its oil output steady at current levels under the terms of the adjusted OPEC+ deal, said delegates Friday morning.
• Gold headed for a second weekly advance as developments in the trade war took center stage and traders wait for key monthly U.S. jobs data due later Friday. China said it’s in the process of waiving tariffs on imports of U.S. pork and soy by domestic companies, a procedural step that may also signal a broader trade agreement is drawing closer. President Donald Trump said talks are “moving along well”. Investors are keenly watching for further developments before a looming Dec. 15 tariff deadline. The market is also digesting more disappointing industrial data from Germany. The U.S. Labor Department’s jobs report will be scrutinized for clues on the outlook for monetary policy after the Federal Reserve paused interest rate cuts.
• Speaker Nancy Pelosi has set her party in motion on a rapid path to the impeachment of Donald Trump, a timetable that fits with both her political imperatives and those of the president. Judiciary Committee Democrats will be working through the weekend and by next Thursday could begin to draft the articles of impeachment that will shape the debate in a Senate trial that likely will be held next year. The next formal step is a hearing on Monday where counsels for both parties on the Intelligence and Judiciary Committees will lay out the findings of the investigations. As Democrats decide what to charge the president with, they could begin voting on specific articles as soon as Thursday, Judiciary committee officials said. The entire House could vote the following week, just before Congress is set to break for the holidays.
• It seems like only yesterday equity investors had pegged $1 trillion as the dividing line between run-of-the-mill large cap companies and freakishly huge ones. Saudi Aramco just took things to a whole new level. The oil producer’s initial public offering Thursday valued the company at $1.7 trillion. That may have trailed Crown Prince Mohammed bin Salman’s hoped-for $2 trillion valuation, but it gives the Saudi Arabian behemoth about a $600 billion lead on Apple Inc. and Microsoft Inc., the only two other companies in the world worth more than $1 trillion.
• Bank of America Corp. and Kotak Mahindra Capital Co. are among banks Indian billionaire Radhakishan Damani picked for another planned stake sale in Avenue Supermarts Ltd., owner of the DMart brand, said people with knowledge of the matter. Damani selected the banks as he prepares to pare his stake in India’s largest listed retail chain by selling about 5.2% next year, the people said, asking not to be identified as the discussions are private. Damani, who sold about 1% earlier this year, has to sell more shares before the end of March to meet a minimum requirement for public float, one of the people said.
• Donald Trump likes to boast that he has unwavering Republican support even as the House impeachment advances, yet that backing is softer than he suggests, creating a potential risk for the president heading into 2020. “We have tremendous support. Probably the most united that our party has ever been,” Trump said Tuesday at a news conference during the NATO summit in London. “I just had a 95 percent approval rating. It’s the highest in the history of the Republican Party.” There’s no evidence for that. Trump has consistently had support in the high 80s among Republicans — strong, but not a record for a president of that party. George W. Bush had an approval rating of 99% after the Sept. 11 attacks, and his father, George H.W. Bush, saw 97% approval ratings after the Gulf War.
• In a small step toward returning Boeing Co.’s 737 Max to service, U.S. regulators are revising requirements for how airlines must operate the plane if equipment breaks down. The U.S. Federal Aviation Administration on Thursday issued proposed new rules for airline operations on the Max that adapt to the fixes being finalized for the grounded jetliner. The public will have 30 days to comment on the document, which was posted on the FAA’s website.
• Netflix Inc. is plowing 30 billion rupees ($420 million) this year and next to produce more local content in India, one of the biggest and most-crowded markets for the world’s largest paid streaming-service provider. “You’ll start to see a lot of stuff hit the screen, big investment,” Chief Executive Officer Reed Hastings said at an event in New Delhi on Friday. “We’re really trying to invest in that becoming more Indian in the content offering.” The Los Gatos, California-based company is jostling with other giants such as Walt Disney Co.-owned Hotstar and Amazon.com Inc. Prime for a slice of the growing market as more Indians use smartphones to view videos. The companies are offering relatively cheaper packages to lure paying subscribers in a country used to free YouTube offerings.
• Economists project nonfarm payrolls climbed by about 183,000 last month, one of the highest estimates this year ahead of a jobs report, while unemployment remained near a half-century low and wage gains stayed solid. Such a figure in Friday’s Labor Department data would reflect a temporary boost from General Motors Co. autoworkers returning from a strike. While gains have broadly moderated from last year’s robust pace, the labor market still isn’t close to signaling recession, a fear that confronted investors earlier this year but has since faded.
• China is in the process of waiving retaliatory tariffs on imports of U.S. pork and soy by domestic companies, a procedural step that may also signal a broader trade agreement with the U.S. is drawing closer. China’s finance ministry said it has started to process the applications after the firms purchased a certain amount of U.S. goods based on its needs. The ministry is working to waive the tariffs resulting from the trade war on those goods, it said in a statement on Friday.
• Morgan Stanley’s drive into a lucrative niche in the foreign-exchange market has hit a major road block. The firm has more than doubled its activity since 2016 to overtake rivals such as Goldman Sachs Group Inc. in the bazaar for currency-linked derivatives known as FX options. Now, Morgan Stanley is probing whether traders improperly valued the esoteric securities, concealing as much as $140 million in losses, Bloomberg reported last week, citing people familiar with the matter.
• China’s leaders vowed to avoid systemic financial risks next year and keep growth in a “reasonable range,” state-run Xinhua News Agency reported, citing a Poliburo meeting in Beijing on Friday, as the economy stutters with its slowest growth in decades. The monthly gathering of the 25-member Politburo, chaired by President Xi Jinping, came ahead of a key planning meeting known as the Central Economic Work Conference, which will decide targets for 2020, including how much the government should spend and what the growth rate should be.
• The future of the U.S. wireless industry hinges on a court battle kicking off Monday in federal court in Manhattan, a case that could end with T-Mobile US Inc. buying Sprint Corp., and Dish Network Corp. getting the go-ahead to enter the market. U.S. Judge Victor Marrero will weigh arguments from a group of states that say he should block the $26.5 billion Sprint deal because it will raise prices on consumers by eliminating competition between the two carriers. T-Mobile says the opposite: By combining with Sprint, it can reduce costs and lower prices. A win for the companies would create a new wireless giant that would overtake AT&T Inc. to become the No. 2 carrier in terms of monthly regular subscribers behind Verizon Communications Inc. A loss would leave Sprint a distant No. 4 in the market, weighed down by a debt load that threatens to cripple the company.
• Phoenix Group Holdings Plc agreed to buy Swiss Re AG’s U.K. insurance unit ReAssure Group Plc, extending an acquisition streak with its largest-ever deal. The transaction values ReAssure at 3.25 billion pounds ($4.3 billion) and will see Swiss Re receive 1.2 billion pounds in cash and shares in the U.K company, according to a statement from Zurich-based Swiss Re on Friday. Bloomberg had reported on Thursday that the two firms were in talks on a potential deal.
• Petrofac Ltd., the U.K.-listed oilfield service provider, is weighing a sale of its Malaysian assets for about $300 million, according to people with knowledge of the matter. The company has started gauging interest from potential investors on the planned divestment, said the people, asking not to be named as the discussions are private. The assets that could be on sale include a stake in an offshore oil field development known as PM304, one of the people said.
• Jeremy Corbyn’s red bus pulled into the small car park at the community center. It was greeted by cheers from a crowd of about a hundred people who had been unable to get into the building because it was full. They’d waited in the drizzle anyway. As the Labour Party leader walked through them, they chanted his name. He turned and gave a brief speech before continuing inside. Then, jacket removed, sleeves slightly rolled up, he was in his element. “We are told it’s too expensive, it’s unaffordable, you can’t achieve this, that or the other,” Corbyn said of his plans to nationalize the railways, ramp up welfare spending and even hand out free broadband for every home.

*All sources from Bloomberg unless otherwise specified