December 18th, 2017


Daily Market Commentary


Canadian Headlines

  • With CEO Hunter Harrison’s untimely death on Saturday, CSX Corp. lost the counsel of a railroading legend who added almost $17 billion in value in less than a year. Now, acting Chief Executive Officer Jim Foote will have to prove to investors that Harrison’s rapid transformation of CSX was deep enough to deliver lasting efficiency and profit. Adding to the challenge: Foote, 63, arrived at the company less than two months ago, one of several new faces Harrison brought aboard after purging longtime executives.
  • LaSalle Investment Management Inc., a real-estate investment firm with $58 billion under management, is launching its biggest Canadian real estate fund as investors seek a safe haven amid global turmoil. LaSalle’s fund is targeting assets of about C$750 million ($582 million) over the next three to six years. The Chicago-based company is finding interest in countries including Germany, the Netherlands, and U.K., and they’re not the only one tapping foreign demand. Conundrum Capital Corp., backed by Manulife Financial Corp., plans to launch a fund in the first quarter that could raise as much as C$500 million from investors for Toronto apartment buildings.



World Headlines

  • European stocks rise on speculation that U.S. lawmakers will pass tax-cut legislation before the end of the year. The Stoxx Europe 600 Index adds 0.9%, with all industry groups gaining. Region’s carmakers, construction companies and banks are among stocks seen benefiting from U.S. plans to reduce corporate tax rates.
  • Stocks kicked off the penultimate week of the year on a positive note after a Republican agreement on the shape of U.S. tax cuts aimed at boosting growth in the world’s largest economy. The dollar dropped and Treasuries headed lower.
  • Oil extended gains toward $58 a barrel as U.S. drillers targeting crude reduced the rig count for the first time in four weeks. Futures added 0.7 percent in New York after rising 0.5 percent Friday. U.S. explorers trimmed the number of rigs by four to 747 last week, according to Baker Hughes data. Hedge funds have boosted bets on rising prices to a record for Brent crude, while those for West Texas Intermediate remain near a nine-month high, exchange and government data showed last week.
  • Gold trades steady as investors weigh progress on U.S. tax cuts with relatively dovish comments from the Federal Reserve last week on monetary policy.
  • U.K. factories enjoyed another month of strong demand in December, with orders staying at their highest level in almost three decades. The Confederation of British Industry said its monthly factory index was at 17 for a second month, matching the highest level since August 1988. The measure for export orders slowed to 16, from 20 in November, but remained far above its long-run average.
  • Hershey Co. is near a $1.6 billion deal to buy Amplify Snack Brands Inc., according to CNBC, which cited unidentified sources familiar with the matter. The deal values Amplify at $12 a share, CNBC said, which would represent a 71 percent premium to Friday’s closing price of $7 a share. Amplify, based in Austin, Texas, has a market cap of $537 million and markets brands including SkinnyPop popcorn. Total debt as of Sept. 30 was $590.5 million, according to data compiled by Bloomberg.
  • The world’s biggest exchange just joined the bitcoin revolution. Bitcoin futures started trading Sunday night at CME Group Inc.’s venue, a week after Chicago rival Cboe Global Markets Inc. introduced similar derivatives on the volatile cryptocurrency. CME is a much bigger player in futures, so many traders expected it to make a bigger splash in the nascent space. CME got off to a faster start with more efficient pricing. Its most-active contract changed hands 221 times in the first hour versus 570 during Cboe’s debut.
  • President Donald Trump will declare China a “strategic competitor’’ to the U.S. in a speech that lays out an official national security strategy heavily influenced by his views on trade and economic relations, senior administration officials said.
  • Dana Gas PJSC received another set-back in the six-month old legal battle to invalidate its $700 million Islamic bonds. The English Court of Appeal refused the United Arab Emirates energy company’s application to appeal an order by the High Court in London that allowed bondholder BlackRock Inc. to join the case and for proceedings to continue in Dana Gas’s absence, according to a statement on Monday. Sharjah-based Dana Gas couldn’t participate in the trial due to a court injunction at home.
  • Thai Beverage Pcl is doubling down on Vietnam after it partnered with a local company to buy a $4.8 billion stake in the country’s largest brewer, a key step for the company controlled by billionaire Charoen Sirivadhanabhakdi as it seeks to dominate Southeast Asia’s beverage market.
  • San Miguel Corp. agreed to buy an AES Corp.-controlled Philippine power plant for $1.9 billion, increasing the energy portfolio of the South East Asian nation’s largest company as the U.S. firm sheds assets. San Miguel bought 51 percent of the Masinloc coal-fired plant from AES and the remainder from Thailand’s Electricity Generating Pcl in a deal valued at $2.4 billion including debt, the Philippine company said in a statement Monday. The sale includes a new coal-fired unit that’s under construction, as well as a related energy storage project, San Miguel said.
  • French aerospace specialist Thales SA knocked out Atos SE’s unsolicited attempt to buy Dutch cybersecurity provider Gemalto SA, outbidding the rival with a cash offer valued at 4.76 billion euros ($5.6 billion) that won backing from the target company. The offer for 51 euros a share comes less than a week after the 46-euro bid by Atos, which Gemalto rejected as “significantly” undervaluing the company. Thales received unanimous support for its overture from Gemalto’s board, gaining the upper hand with an offer 11 percent above its rival in the biggest bet yet for Chief Executive Officer Patrice Caine since he took over three years ago.
  • Statoil ASA will buy a 25 percent stake in the Roncador oil field offshore Brazil from Petroleo Brasileiro SA for as much as $2.9 billion, upping a bet on the Latin-American country as its biggest growth-engine after Norway. Statoil will make an initial payment of $2.35 billion and as much as $550 million in contingent transfers for the Campos Basin field, which still holds recoverable resources of more than 1 billion barrels of oil equivalent after producing since the 1990s, Statoil said in a statement Monday.
  • South Africa’s ruling African National Congress started counting the votes in the election of a new leader to replace President Jacob Zuma in a close race between his former wife and his deputy. The vote ended Monday at a national conference in Johannesburg following a bitter dispute over a decision to exclude almost a 10th of the original 5,240 delegates who the party ruled weren’t properly accredited. Balloting started after the ANC had earlier announced a postponement of the vote, which was originally scheduled to begin Saturday.
  • In the wildest dreams of wireless engineers, the mobile network of the future controls our cars, lets our refrigerators talk to the grocery store to order more milk, and provides fast, reliable broadband connections to our homes so we can sever ties with cable companies. But it’s going to cost the mobile-phone companies, chipmakers, device manufacturers and software developers about $200 billion a year in research and capital spending to get to that point, with engineers laboring to work around interference from trees and rain and provide a strong enough signal to handle so much demand.
  • Indian Prime Minister Narendra Modi’s party is set to return to power in his home state, an election that’s considered a bellwether before the national vote in early 2019. The Bharatiya Janata Party had won or was leading in 99 seats in the 182-seat Gujarat legislature as of 3:40 p.m. local time, according to the Election Commission of India. That’s more than the 92 needed for a majority though this would be the BJP’s lowest tally in more than two decades. The main opposition Congress party had won or was ahead in 77 seats.
  • Citic Bank Corp. said a unit of HNA Group Co. is having difficulty repaying certain short-term debts, just over a week after the Chinese conglomerate said it won’t default in the coming year. HNA Aviation Group Co. has had trouble paying bankers’ acceptances — debt instruments that mature in the short term — and Citic Bank is working with HNA Group to try to resolve the situation, the Chinese lender said in a statement sent exclusively to Bloomberg News this weekend. The group has several bonds and loans from multiple banks maturing at similar times, causing a “temporary liquidity” issue, Citic Bank said.
  • China is planning to tell local governments to stop offering subsidies for electric cars and other new-energy vehicles, people familiar with the matter said, a move that could undermine demand for autos made by companies including BYD Co. and BAIC Motor Corp.
  • Adani Enterprises Ltd. will build Australia’s largest coal mine by itself after canceling a planned A$2 billion ($1.5 billion) deal with Australia’s Downer EDI Ltd. to help construct the Carmichael project in Queensland state. Adani and Downer mutually agreed to cancel all letters of award for work on the mine first made three years ago, Adani’s Australian unit said in a statement Monday. The decision was partly triggered by the state government’s veto of A$900 million in potential federal funding for a new rail link, which is needed to carry coal from Carmichael to the coast for export, Adani said.
  • Pinnacle shareholders to get $20.00 per share in cash and 0.42 shares of Penn National common stock for each Pinnacle share.
  • Vonovia SE agreed to buy Buwog AG for about 3.3 billion euros ($3.9 billion) in the latest in a wave of takeover bids in the rental-property industry. The deal would give Germany’s biggest residential landlord an additional 49,000 apartments in its home country and Austria. Vonovia offered 29.05 euros in cash for each Buwog share, 18 percent more than the price at last week’s close, the Bochum-based company said in a statement Monday. The bid will formally be made in February and Vonovia will know by mid-March if it’s successful, Chief Executive Officer Rolf Buch said in an interview.
  • Oracle Corp. agreed to buy Aconex Ltd., an Australian company that makes cloud-based collaboration software for construction projects, for A$1.56 billion ($1.19 billion) cash as it pushes deeper in to new markets to gain more customers. The deal values Aconex at A$7.80 per share, 47 percent more than Friday’sclosing price. Aconex shares surged 44 percent to A$7.63 at 11:09 a.m. in Sydney trading Monday.
  • Toyota Motor Corp. pledged to offer more than 10 purely electric cars by the early 2020s as the Japanese manufacturer races to catch up with rivals in the global shift toward battery-powered autos. The mass-market Toyota and luxury Lexus brands will also offer electrified options across the entire lineup by about 2025, partly by increasing the number of dedicated hybrid, battery-powered and fuel-cell models as well as by adding alternative powertrain options to existing vehicles, the world’s second-biggest carmaker said Monday. By 2030, Toyota aims to sell 5.5 million electrified vehicles — including 1 million wholly battery- or hydrogen-powered cars — accounting for half of its projected deliveries.



*All sources from Bloomberg unless otherwise specified