December 12th, 2017
Daily Market Commentary
- Canada’s equity benchmark edged higher as gains in commodity, health-care and technology stocks offset declines in most other sectors. The S&P/TSX Composite Index added 7 points or 0.1 percent to 16,103.51, the highest in more than two weeks. Health-care stocks jumped 2.9 percent as Valeant Pharmaceuticals International Inc. rose 4.3 percent to the highest in more than a year.
- Add Canadian Solar Inc. to the growing list of panel manufacturers looking to ditch public markets and go private. The company’s chief executive officer, Shawn Qu, said Monday he’s offering $18.47 in cash for all common shares that he and his wife don’t already own. In March, rival Trina Solar Ltd. finished a $1.1 billion privatization deal. JA Solar Holdings Co., the world’s third-biggest publicly traded solar manufacturer, agreed last month to be taken private.
- Heavy Canadian crude fell to a three-year low against benchmark prices Monday as bottlenecks on pipelines and rail networks crimped exports. Canadian crude’s discount to West Texas Intermediate futures has widened more than $10 since August as pipeline companies including Enbridge Inc. rationed space amid high Western Canadian inventories. Rail cars struggled to catch up on deliveries after line disruptions over the past two months.
- Canadian Finance Minister Bill Morneau agreed to share a greater portion of tax proceeds from sales of legalized marijuana with provincial governments, saying it will help them deal with added costs as the market starts up next year. Morneau and his fellow finance ministers announced a framework agreement Monday at the conclusion of a meeting in Ottawa, signaling they expect to reap an estimated C$400 million ($311 million) in annual excise taxes from marijuana sales, implying an estimated legal market of about C$4 billion. Sales taxes would also be collected.
- European stocks are little changed before U.S. and European central bank meetings this week that may provide clues on the path of global monetary policy. The Stoxx Europe 600 Index adds less than 0.1%, with a gain in technology and energy shares outweighing losses for miners and carmakers. Gemalto soars 34% after Atos offered to pay 4.3 billion euros for the company, lifting shares of peer Ingenico.
- Trading remained lackluster at the beginning of the week as investors awaited the year’s final central bank policy moves. The Federal Reserve is expected to raise rates at its meeting on Wednesday and the European Central Bank to reveal details of plans to taper asset purchases on Thursday. The Bank of England and Swiss National Bank also meet. Comments from officials on the outlook for 2018 will be in focus, as investors weigh the impact of coming policy normalization on global asset markets.
- Asian stocks declined, halting a three-day rally, as investors turned cautious ahead of key central bank meetings this week that may signal the outlook for interest rates next year. The MSCI Asia Pacific Index fell 0.2 percent to 170.16 as of 4:45 p.m. in Hong Kong, with information technology and consumer staples stocks leading declines. Japan’s Topix index rose for a fourth day, as banks advanced, while the Nikkei 225 Stock Average retreated from a 26-year high.
- Global benchmark Brent crude jumped above $65 a barrel for the first time in 2 1/2 years after one of the most important pipelines in the world was shut because of a crack. Futures rose as much as 1.6 percent in London, set for the highest close since June 10, 2015, after advancing 2 percent Monday. It will take about two weeks to repair the small hairline crack after it was discovered on the North Sea Forties Pipeline System during a routine inspection, according to operator Ineos.
- Gold edges up from lowest level in almost five months amid signs that it fell too far, too fast, while investors count down to Federal Reserve meeting this week.
- U.K. inflation unexpectedly accelerated to the fastest in more than 5 1/2 years in November, which will force Bank of England Governor Mark Carney to explain why price growth is so far above his policy target. The 3.1 percent rate was stronger than economists had forecast and the highest since March 2012. The Office for National Statistics said on Tuesday that the increase was driven by the cost of air fares and computer games.
- Bank of England Governor Mark Carney said the number of companies pledging to increase financial reporting standards to fend off risk from climate change has doubled in five months. Companies with a combined market capitalization of more than $6.3 trillion have thrown their weight behind Carney’s recommendations on climate change disclosure, up from $3.3 trillion in June when the report was first released, according to a statement Tuesday from a task force led by Carney.
- Walt Disney Co. may announce a deal as soon as this week to acquire a large piece of 21st Century Fox Inc., according to a person familiar with the matter, transferring legendary Hollywood properties to new owners. Comcast Corp., the other major contender for the Fox assets, said Monday it’s no longer in the running.
- Unibail-Rodamco SE, Europe’s largest commercial landlord, agreed to buy Australia’s Westfield Corp. for about A$21 billion ($15.8 billion) in the biggest property acquisition since 2013 as declining store sales push mall operators worldwide to merge. The Paris-based company offered a combination of cash and stock that values Westfield at A$10.01 per share, or about 18 percent more than Monday’s closing price, according to a statement Tuesday. The offer has been unanimously recommended by the board of Westfield, the biggest private sector mall landlord in London and the 12th largest U.S. retail property owner.
- Spain’s government sold a stake in Bankia SA worth almost $1 billion, days before Catalans go to the polls, in a sign concern is easing about the secession crisis that roiled the nation’s markets.
- India’s richest man is weighing an initial public offering of mobile operator Reliance Jio Infocomm Ltd., people with knowledge of the matter said, after a $31 billion investment spree that roiled the country’s wireless market. Reliance Industries Ltd., the conglomerate backed by tycoon Mukesh Ambani, is holding internal discussions about preparing to list Jio as soon as late 2018 or early 2019, according to the people. Jio, which hasn’t made a profit since its official launch last year, is targeting to improve its financial performance before any share sale, the people said, asking not to be identified because the information is private.
- Vietnam’s largest stake sale is drawing tepid response as Thai Beverage Pcl emerges as the sole bidder willing to fork out more than $2 billion for a stake in Saigon Beer Alcohol Beverage Corp. A unit of ThaiBev is the only investor to register to buy at least a 25 percent stake in Vietnam’s largest beer company known as Sabeco, according to the Vietnam trade ministry’s website. The closing date for registration for a stake of more than 25 percent was on Monday, though other companies can still bid for less than that amount at the Dec. 18 auction.
- Oasis Petroleum Inc. showed the shifting fortunes of U.S. shale basins as the explorer of the Bakken region in the upper Midwest agreed to pay almost $1 billion for land in the Permian play in Texas. The producer will use a mix of stock and cash to acquire 20,300 Permian acres from Forge Energy LLC, a closely held company backed by private equity firms EnCap Investments LP and Pine Brook Partners, according to a statement Monday. The deal is due to close by February 2018. Oasis meanwhile expects to sell $500 million in “non-core” drilling rights in the Bakken next year.
- Philippines lawmakers are set to pass a tax bill that’s expected to bolster state revenue by at least 130 billion pesos ($2.6 billion) a year in a boost to President Rodrigo Duterte’s $180-billion infrastructure program. Lawmakers agreed late Monday on the final version of a bill that will cut income taxes for 99 percent of workers while raising levies on fuel, coal, sugary drinks, mining and automobiles, Senator Sonny Angara said on Tuesday.
- Zurich Insurance Group AG’s decision to acquire the life-insurance businesses of Australia & New Zealand Banking Group Ltd. should help Switzerland’s biggest insurer fulfill its ambition to increase its dividend. Already famous as a dividend stock, Zurich signaled last month that it wanted to boost payouts to investors. The A$2.85 billion ($2.2 billion) deal for OnePath Life will be earnings-accretive from the start and increase the firm’s return on equity, the Swiss company said on Monday — potentially helping Chief Executive Officer Mario Greco realize his goal.
- Goldman Sachs Group Inc. will trade bonds, derivatives, equities and exchange-traded funds through a new type of venue in time for the start of Europe’s MiFID II laws, making the most wide-ranging announcement from a bank about its trading plans under the new rules. Goldman Sachs will operate as a so-called systematic internalizer from Jan. 3 when MiFID kicks in, enabling the bank’s trading partners to escape some of the regulation’s most onerous requirements, the bank said in an emailed statement on Tuesday.
- Atos SE made a 4.3-billion-euro ($5.06 billion) unsolicited bid for Gemalto NV with the backing of the French state’s investment bank, seeking to create a European leader in cybersecurity, digital technologies and payment services. Atos is proposing to pay 46 euros a share in cash, 36 percent above Monday’s closing price, the Bezons, France-based company said in a statement late Monday.
- Royal Bank of Scotland Group Plc is likely to leave its bonus pool little changed this year, according to people with knowledge of the matter, ending a spate of annual declines in payouts dating back to the financial crisis. A final decision on the discretionary awards hasn’t been made and will be taken in January, one of the people said, declining to be identified because the matter is confidential. Last year, the Edinburgh-based lender cut its compensation pool by 8 percent to 343 million pounds ($458 million), bringing the drop since 2010 to about 75 percent as RBS shrank its investment bank to reduce risk.
- Inditex SA, the world’s biggest clothing retailer, is seeking a buyer for 16 Zara stores in Iberia as online purchasing takes off in Spain. Inditex, owned and founded by Amancio Ortega, the world’s fourth-richest man, is seeking 400 million euros ($472 million) for the stores in a 20-year sale-and-leaseback agreement that would give the buyer the right to vacate the properties after five years, according to a person with knowledge of the matter. Fourteen of the units are in Spain and two in Portugal, the person said, asking not to be identified because the deal is private.
- California utility giant Edison International said it believes its power equipment is being probed as part of investigations into Southern California blazes that have destroyed hundreds of structures and forced thousands to flee. The California Department of Forestry and Fire Protection and the state Public Utilities Commission may now be looking at “the possible role” the company’s facilities played in igniting the fires, Edison said in a statement Monday. The probes also cover more locations as potential origin points of the blazes than identified last week.
*All sources from Bloomberg unless otherwise specified