December 14th, 2018
Daily Market Commentary
- Canadian stocks lost their earlier gains and closed the session 0.2 percent lower, led mostly by two-day decline in pot stocks. The Horizons Marijuana Life Sciences ETF fell 8 percent in last two days, ahead of potential legalization in New Jersey on December 17. Aphria Inc. was among the worst performing pot stocks, with two-day slump of 14 percent. Canada’s mining sector received much investor attention after Paulson & Co. convinced shareholders of Detour Gold Corp. to overthrow the bulk of the Canadian miner’s board of directors, including its interim CEO, ending a nasty six-month proxy battle. Meanwhile Private equity firm Waterton Global Resource Management plans to nominate a majority slate of directors and propose a new CEO at Hudbay Minerals Inc. in an effort to improve its performance.
- Canada Goose Holdings Inc. is delaying the opening of its flagship store in Beijing, as escalating tensions between China and Canada triggered by the arrest of Huawei Technologies Co.’s finance chief threaten its ambitions in the world’s second largest economy. The Toronto-based maker of premium parkas said on its Weibo account late Friday that it was postponing the store’s debut, scheduled for Saturday in Beijing’s trendy Sanlitun district, “due to construction reasons.” The posting came after Weibo social media users threatened to protest the opening. The company has been targeted for a boycott of its brand on media platforms since Meng Wanzhou’s arrest, given its prominence as a Canadian label.
- The Stoxx Europe 600 Index headed for a weekly loss, led lower by carmakers after regional sales slumped in November for the third month in a row. Lackluster data also sent the euro down, as France’s “Yellow Vests” movement exacerbated a decline in the region’s PMI data to the lowest in more than four years. The pound slid after European leaders rebuffed Prime Minister Theresa May’s pleas to help her sell her Brexit agreement to a skeptical British parliament.
- U.S. stock index futures dropped for a second day as a lack of improvement in trade relations between the U.S. and China gave investors little reason to buy after equities languished in New York Thursday. March futures slid as much as 0.9 percent on the S&P 500 Index as of 6:43 a.m. in London as Asian markets extended losses. Apple Inc. said a Chinese ban on the sale of some models of the iPhone will force it to settle a long and bitter licensing battle with Qualcomm Inc., according to a recent legal filing. Futures on the Nasdaq 100 Index and Dow Jones Industrial Average declined 1.1 percent and 0.8 percent, respectively.
- Japanese stocks fell, with the Topix index completing a second week of declines, as concerns over a slowdown in the global economy and trade tensions weighed on market sentiment. The electronics group were the biggest drag on the Topix. Declines in SoftBank Group Corp., Tokyo Electron Ltd. and Fanuc Corp. — companies with the biggest weightings on the bluechip gauge — were exacerbated in part by the expiry of December options and futures contracts on the Nikkei 225 Stock Average in the so-called special quotation settlement.
- Oil traded below $53 a barrel in New York, little changed a week after OPEC and its allies announced substantial output cuts, as traders weighed an uncertain outlook for 2019. Saudi Arabia’s plan to slash exports to the U.S. next month is shoring up expectations that the Organization of Petroleum Exporting Countries and its partners will deliver on last week’s promise to curb production. Yet the outlook is clouded by booming American output, which veteran crude trader Andy Hall says is making it hard to predict the market’s direction.
- Gold headed for its biggest weekly drop in five weeks, as investors weighed easing trade tensions between the U.S. and China ahead of the U.S. Federal Reserve’s final policy meeting of 2018 next week. China will remove the punitive duty on automobiles imported from the U.S. for three months in an effort to defuse trade tensions with the world’s biggest economy. The dollar is poised to post its biggest weekly advance in in four months.
- China will remove the retaliatory duty on automobiles imported from the U.S. for three months in an effort to defuse trade tensions with the world’s biggest economy. The 25 percent tariff it imposed in a tit-for-tat measure will be scrapped starting Jan. 1, the finance ministry said Friday. Earlier this week, Bloomberg News reported that China was considering cutting the duties. The move comes two weeks after President Donald Trump and his Chinese counterpart Xi Jinping agreed to a truce in the trade war at their meeting in Argentina. Trump claimed he won a concession during trade talks with Xi and said China, the world’s biggest automobile market, would reduce and remove tariffs, a claim that Beijing didn’t immediately confirm.
- The U.K. has yet to leave the European Union, but many stock investors have already said goodbye. The nation’s equity funds have lost $9.8 billion in 2018, on course for the worst year of redemptions on record, according to a Bank of America Merrill Lynch note, which cited EPFR Global data. In the past week through Dec. 12, U.K. stock funds saw an outflow of $1.7 billion, Jefferies Financial Group Inc. said.
- As Huawei’s battles in the U.S. snare its founder’s daughter, a new front is opening up across the pond — in France. The country, which has safeguards in place for critical parts of its telecoms networks, is considering adding items to its “high-alert” list that tacitly targets Huawei. The tipping of France into unfriendly territory for Huawei comes as the Chinese company confronts bans in the U.S., Japan, Australia and New Zealand and Germany intensifies scrutiny.
- Apple Inc. will push a software update to Chinese iPhone users early next week, aiming to modify functions that a local court found had infringed on a pair of key Qualcomm Inc. patents. The U.S. company said it was taking that step to ensure it complies fully with the ruling, which resulted in sales injunctions against six older versions of Apple’s most important device. The iPhone maker said the planned update would address features covered by patents, which involve adjusting photographs and managing apps via a touchscreen.
- Boeing Co. is poised to open its first 737 finishing plant in China, underscoring the company’s commitment to the world’s largest aircraft market amid simmering trade tension. The Chicago-based planemaker will inaugurate its completion and delivery center in Zhoushan, 90 miles southeast of Shanghai, on Saturday, after more than a year of construction. The facility marks a rare industrial foray outside of the U.S. for Boeing and a joint venture with state-owned planemaker Commercial Aircraft Corp. of China Ltd.
- Federal Reserve officials will pull the trigger on another interest-rate increase next week before slowing the pace of hikes in 2019 as risks to the U.S. economy mount, according to a new Bloomberg survey of economists. They expect the Fed will raise rates by a quarter percentage point at its Dec. 18-19 meeting while dialing back the number of moves next year to two, in March and September, from the three hikes economists saw in September. Median responses in the Dec. 7-11 poll also anticipate one additional hike in mid-2020 when the rate would peak in this tightening cycle at a target range of 3 percent to 3.25 percent.
- After flooding the U.S. market in recent months, Saudi Arabia plans to slash exports to the world’s largest oil market in the coming weeks in an effort to dampen visible build-ups in crude inventories. American-based oil refiners have been told to expect much lower shipments from the kingdom in January than in recent months following the OPEC agreement to reduce production, according to people briefed on the plans of state oil company Saudi Aramco. Saudi crude shipments to the U.S. next month could even test the 30-year low set in late 2017 of 582,000 barrels a day, down about 40 percent from the most recent three-month average, the same people said, asking not to be named as the information isn’t public. The final figure could still change, they added.
- Chinese officials are preparing to restart purchases of American corn as soon as January, according to people familiar with the matter who declined to be identified as the information is confidential. China may purchase at least 3 million tons of U.S. corn
- A deluge of misfortunes has left China’s equity investors with their biggest losses in years, wherever you look. Stung by everything from a national vaccine scandal to a decline in consumer spending, the Trump administration’s crackdown on Chinese tech and Beijing’s tightening grip on education, gaming and drugs, the country’s stock market has lost $2 trillion in value in 2018. Languishing in a bear market, all 10 industry groups on the CSI 300 Index are on track to drop 10 percent or more this year, one of the broadest sell-offs since the global financial crisis. There’s been nowhere to hide in a market already under pressure from slowing economic growth, record corporate defaults and China’s souring relationship with the U.S. on trade. Below is a look at everything that’s gone wrong for yuan-denominated shares this year, the first time they’ve featured on global equity benchmarks.
- In another boost to the nation’s dwindling dollar reserves, Pakistan on Friday received $1 billion from Saudi Arabia. South Asia’s second-largest economy is expecting its third and final $1 billion tranche from Riyadh next month to help ease Pakistan’s financial crunch, Abid Qamar, a spokesman for the State Bank of Pakistan, told Bloomberg by phone. Islamabad is looking to bridge a gap of at least $12 billion caused by its latest balance-of-payments crisis and is currently negotiating its 13th bailout since the late 1980s with the International Monetary Fund. Prime Minister Imran Khan has been loath to undertake reforms proposed by the IMF and since his election victory in July the former cricket star has shuttled between China, Saudi Arabia and the UAE in an effort to secure bilateral funding from those allied nations.
- Merck & Co. agreed to buy Antelliq Group, a privately held maker of animal-monitoring tools, in a deal that will bolster the U.S. drug giant’s animal-health business. Under the terms of the deal, Merck has agreed to pay 2.1 billion euros ($2.4 billion) in cash for substantially all of the shares of Antelliq, the companies said in a statement. Merck will also assume Antelliq’s debt of 1.15 billion euros, according to the announcement. Merck shares, which have risen 40 percent through Thursday’s close this year, were down about 1.7 percent in U.S. premarket trading.
- Bitcoin headed for its seventh weekly slump on Friday, with the largest cryptocurrency closing in on $3,000 — a level unseen since September last year. The largest digital currency was flat at $3,256 at 9:54 a.m. in London after slipping 5.4 percent Thursday, according to consolidated pricing compiled by Bloomberg. Bitcoin is down almost 4 percent from the previous Friday. The wider Bloomberg Galaxy Crypto Index is on a five-week losing streak.
- LVMH is betting $2.6 billion that consumers who spend $1,000 on a Louis Vuitton bag will splash out for a $2,000-a-night hotel on Italy’s Amalfi Coast. The French luxury giant agreed to buy Belmond Ltd., owner of New York’s ‘21’ Club and high-end resorts around the world. The transaction is LVMH’s largest since taking full control of Christian Dior for more than $7 billion last year and pushes the company further into services amid rising concern about the sustainability of the Chinese demand that’s driven fashion industry growth.
- China’s economy slowed again in November as retail sales and industrial production weakened, creating a challenging backdrop for policy makers who gather next week to set the tone for the year at their annual Economic Work Conference in Beijing. Industrial production growth decelerated to 5.4 percent, below all 38 economists’ estimates. Retail sales — formerly a pillar of support for the economy — posted the weakest performance since May 2003, rising 8.1 percent from a year earlier. Chinese stocks fell along with the currency as data signaled a deepening slowdown. It wasn’t all bad news though. Fixed-asset investment growth firmed, expanding 5.9 percent in the first eleven months of the year, and the surveyed jobless rate dropped marginally to 4.8 percent. That suggests stimulus to cushion the slowdown is beginning to take root.
*All sources from Bloomberg unless otherwise specified