December 19th, 2018

Daily Market Commentary


Canadian Headlines

  • Canadian stocks closed higher but moderated earlier gains as crude prices tumbled more than 7 percent. The S&P/TSX Composite Index added 0.4 percent to 14,416.89, retreating from an intraday gain of 1 percent. Technology stocks led the increase, rising 2.5 percent as Shopify Inc. added 4.2 percent, rebounding from two days of steep declines. Materials added 2 percent, led by strong gains in gold stocks. The energy sector brought up the rear, falling 1.1 percent as oil prices tumbled below $47 amid economic worries and rising supplies.
  • Sun Life to merge Bentall Kennedy with GreenOak Real Estate and buy majority stake in combined entity, to be named Bentall GreenOak, according to a statement. Sun Life Financial to contribute interest in Bentall Kennedy, pay GreenOak shareholders C$195m in cash, in exchange for a 56% stake in Bentall GreenOak
  • Canada’s foreign service confirmed that a third national was being held in China, the National Post newspaper reported, citing a statement from Global Affairs Canada. An agency spokesperson provided no further details, and drew no link between the case and those of two other Canadians detained last week in China, the National Post said. The Canadian Embassy in Beijing referred questions of the third case to public relations staff in Ottawa, who didn’t immediately respond to a request for comment on Wednesday.



World Headlines

  • European equities were little changed and Italian shares rose after Italy was said to be closer to a final deal with Brussels over its budget. The Stoxx Europe 600 Index added as much as 0.3 percent before trading steady. Healthcare stocks led the gainers, as GlaxoSmithKline Plc surged 5.2 percent after the company agreed to combine consumer health-care businesses with Pfizer Inc. Ceconomy AG tumbled 11 percent after scrapping its dividend.
  • U.S. stock-index futures rose as signs of progress keep emerging in the U.S.-China trade spat, while traders awaited the conclusion of the Federal Reserve’s policy meeting. European shares also climbed. Contracts on the S&P 500 Index expiring in March climbed as much as 0.7 percent after the equity gauge closed little changed on Tuesday. Futures on the Nasdaq 100 Index and Dow Jones Industrial Average also gained as much as 0.7 percent each.
  • Asian shares were mixed following a disappointing market debut for SoftBank Group’s Japanese telecom business. Crude oil held on to most losses after the biggest three-day slump since 2016 on slowing demand.
  • Oil traded near its lowest closing level in 15 months as fears over slowing global economic growth compounded concerns that the market faces a supply glut in 2019. Futures rose 0.8 percent in New York after tumbling 12 percent over the past three sessions, the biggest three-day slump since 2016. Chinese President Xi Jinping showed little sign of backing down in a trade dispute with the U.S. and the market braced for a Federal Reserve rate hike. Meanwhile, doubts persist over the effectiveness of output cuts pledged by the OPEC+ coalition, even as Saudi Arabia expressed confidence in a long-term reduction.
  • Gold holds a gain before the Federal Reserve’s final policy-setting meeting this year, with investors watching for clues on the path of interest rates in 2019. The Fed needs to deliver on a more dovish stance to avoid disappointing financial markets, according to Mark Haefele, chief investment officer for UBS Global Wealth Management. President Donald Trump issued a fresh appeal to the Fed to avoid making “yet another mistake” just hours before the central bank started its gathering.
  • Japan’s export growth slowed again in November, with shipments eking out a tiny gain, as weakening demand in China and trade-war risks cloud the outlook. The value of exports rose 0.1 percent from a year earlier, broadly in line with a median forecast for a 1.2 percent gain, according to the finance ministry. With the exception of a decline shipments in September, that was the slowest growth in two years.
  • General Electric Co. has filed confidentially for an initial public offering of its health-care unit, according to people familiar with the matter, moving ahead with plans to spin off its second most profitable business line. The industrial conglomerate is working with Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley on the planned listing, said the people, who asked not to be identified as the details aren’t public. A public filing is likely next spring, they said.
  • Romanian stocks plunged and bond yields jumped the most in three years after the government unveiled surprise measures to curb the budget deficit by raising 10 billion lei ($2.5 billion) of extra revenue, including via a levy on the foreign-dominated banking industry. Faced with a fiscal shortfall that’s in danger of breaching European Union limits, Finance Minister Eugen Teodorovici presented a package of what he called “bold” measures to boost revenue. The plan would also tax energy and telecommunications companies, cap natural gas prices and may revive a controversial initiative to overhaul the pension system.
  • The U.S. proposal to sell an advanced air defense system to Turkey is probably too little and too late for Ankara to abandon an arms deal with Russia that’s strained relations between the NATO allies. Turkey is planning to buy both Russian and U.S.-made missile-defense systems even if Washington agrees to sell Patriot batteries to Ankara, two Turkish government officials familiar with the country’s defense policy said Wednesday. It’s not clear the U.S. would agree to that. The U.S. State Department notified Congress on Tuesday that it has proposed selling Turkey the missile defense system, a gambit designed to get Ankara to halt the S-400 deal, which could compromise NATO technology. The Kremlin said the sale would be unaffected by Washington’s offer, and Turkey’s Defense Ministry declined to comment.
  • China and the U.S. held vice-ministerial level talks on Wednesday to discuss the ongoing trade dispute as they move closer to meeting in January. The two sides spoke by phone according to China’s Ministry of Commerce, and have held several rounds of talks in recent weeks, Treasury Secretary Steven Mnuchin told Bloomberg on Tuesday in Washington. They plan to hold a formal, face-to-face meeting in January to negotiate a broader truce in their trade wars but are unlikely to meet in person before then, Mnuchin said.
  • Paris judges overturned the 455,500-euro ($520,000) unfair-dismissal award Jerome Kerviel had won two years ago after they rejected the notion that Societe Generale SA knew the convicted trader had been amassing gigantic positions that caused the bank a 4.9 billion-euro loss. The Paris Court of Appeals dismissed Kerviel’s argument that Societe Generale had no valid grounds to fire him because supervisors knew he was entering fake trades to conceal his activities long before his record losing streak. Under French employment law, companies must act within two months of learning about violations or they become time-barred.
  • After last-ditch Cabinet negotiations, U.K. Home Secretary Sajid Javid will on Wednesday set out the government’s long-awaited immigration plans for post-Brexit Britain. The government will hold a 12-month public consultation before deciding whether potential migrants should earn over 30,000 pounds ($38,000) a year before they qualify to enter as highly-skilled workers after Britain leaves the European Union, Javid said on BBC Radio 4.
  • GlaxoSmithKline Plc paved the way for a split into two companies, agreeing to create a consumer-health joint venture with Pfizer Inc. to be listed on the stock market, sending the U.K. company’s shares to a 10-year high. Glaxo will have a 68 percent controlling stake in the new entity, with combined sales of $12.7 billion and led by Brian McNamara. The deal lets Pfizer exit its consumer business after a yearlong sale process failed to find a buyer.
  • India will use escrow accounts of five Iranian banks held with UCO Bank Ltd. to deposit money for oil purchases from the Middle East producer to overcome U.S. sanctions, according to people with knowledge of the matter. Iran will use part of the deposits for purchasing essential goods from India and to meet expenditure incurred by its diplomatic missions in the South Asian nation, the people said, asking not to be identified because the information isn’t public. All spending will be in Indian rupees.
  • For all the hand wringing over the end of ultra-loose monetary policy, the world just doesn’t seem able to shake its addiction to negative-yielding debt. Only two months ago, speculation was rife that the Bank of Japan would have to step in to stop yields from rising. Now, rates on benchmark bonds are poised to drop back below zero. In Germany there are no positive yields as far as seven years along the curve. And globally, bonds with negative yields total $7.9 trillion — close to levels seen at the start of the year — and up from the 2017 low of $5.7 trillion reached in October.
  • Facebook Inc. shares dropped following a New York Times report that the social media company allowed more than 150 companies access to more users’ personal data than it had disclosed. Facebook shares were down 1.3 percent in pre-market trading at 6:45 a.m. in New York Wednesday. Other major tech stocks were trading up by just under 1 percent. According to the report, the social network had allowed Microsoft Corp.’s Bing search engine to see names of virtually all Facebook users’ friends without consent, and allowed other companies to read Facebook users’ private messages.
  • FedEx Corp. shares remained under pressure Wednesday after its “jarring” cut to annual forecasts suggest concerns over slowing global growth may deepen next year, analysts at Morgan Stanley said. The courier slashed its outlook just three months after raising the view, reflecting an abrupt change in the company’s view of the global economy amid rising trade tensions between the U.S. and China. But the cuts were deeper than the Street expected, Morgan Stanley analyst Ravi Shanker wrote in a note.


*All sources from Bloomberg unless otherwise specified