December 24th, 2018
Daily Market Commentary
· Canadian stocks ended their worst week since August 2015 with another volatile day that started positive and ended with a significant decline. The S&P/TSX Composite Index fell 1.5 percent to 13,935.67 Friday, bringing its weekly loss to 4.5 percent. Higher-than-average volume as a result of expiring futures and options exacerbated the selling on the last full trading day before Christmas, as did the growing likelihood of a U.S. government shutdown. All sectors closed in the red, with technology and health-care stocks leading the decline. Cannabis company Aphria Inc. fell 7.4 percent and BlackBerry Ltd. lost 8.1 percent a day after better-than-expected revenue sent its shares higher.
· CellCube Energy Storage Systems Inc., a Canada-listed maker of batteries that can last for as long as two decades, said the cost of its technology may halve within four years, potentially boosting its uptake over lithium-ion units. Costs of its vanadium redox flow battery units, which can discharge power for four hours, will decline to $150 per kilowatt hour from $300, President Stefan Schauss said in a phone interview from Toronto this month. Batteries with eight hours of duration will slump to $100 from $200, he said.
· European equities retreated at the open as all sectors declined on a short trading day amid investor concern about growth and interest rates. The Stoxx Europe 600 Index dropped 0.4 percent. British bank HSBC Holdings Plc retreated 1 percent, while luxury-goods company LVMH lost 1.2 percent. European stocks are set for their worst year since the 2008 financial crisis. The Nasdaq on Friday plunged into a bear market, as the U.S. Federal Reserve played down volatility concerns and pledged to keep shrinking the U.S. central bank’s balance sheet. Concern around the Fed Chairman Jerome Powell’s future added to the turmoil.
· U.S. stocks futures rose, signaling the S&P 500 will rebound from its worst week since 2011 as investors speculated the sell-off went too far, too quickly. Contracts on the S&P 500 advanced 0.6 percent at 8:45 a.m. in London, extending their earlier gains and on track to halt the longest slide in a year despite European equities trading lower after the open. Dow Jones Industrial Average futures gained 0.5 percent, while Nasdaq 100 contracts climbed 0.8 percent.
· It’s the first day of the last week of 2018 and Asian stock markets aren’t getting up to much. The regional benchmark fell 0.1 percent as of 3:37 p.m. in Hong Kong, while China’s Shanghai Composite closed 0.4 percent higher and the Hang Seng Index pared more than half of its early morning slump, closing 0.4 percent lower. Japan, Indonesia and Philippine markets were closed for holidays.
· Oil extended declines as worries over rising U.S. supplies and the global economy overshadowed signals from OPEC that it may extend or even deepen its pledged output curbs. Futures fell as much as 1.9 percent in New York, with U.S. equity index futures also turning lower. Officials from Iraq, Kuwait and the United Arab Emirates agreed with Saudi Arabia’s expectation that the group will extend its cuts for another six months. They will have to contend with U.S. producers, which added 10 oil rigs last week, according to Baker Hughes data, even as the nation’s output stays near record high levels.
· Gold traded near the highest in six months as a partial U.S. government shutdown and global economic concerns spurred demand for a haven. Holdings in exchange-traded funds backed by bullion rose for an 11th day. The U.S. government shutdown could last into 2019, White House Budget Director Mick Mulvaney said on Sunday, as Republicans and Democrats remain at an impasse over President Donald Trump’s demand for billions of dollars in border-wall funding. Treasury Secretary Steven Mnuchin called the top executives from the six largest U.S. banks over the weekend after heavy losses in the stock market last week.
· Euronext NV is making a 625 million-euro ($712 million) takeover offer for Oslo Bors VPS Holding ASA after winning an auction by some of the Norwegian stock exchange operator’s biggest shareholders. The owner of stock markets in Paris and Amsterdam approached the board of Oslo Bors at the weekend after securing the backing of 49.6 percent of the firm’s shareholders, Euronext Chief Executive Officer Stephane Boujnahsaid in a telephone interview. The company is offering 145 Norwegian kroner ($16.53) apiece for the remaining shares, according to a statement Monday. That’s a premium of 32 percent to the Dec. 17 closing price.
· Mindbody Inc. entered into a definitive agreement to be acquired by Vista Equity Partners LLC in a deal valued at about $1.9 billion, the company said in a statement. Shareholders will receive $36.50 in cash per share, representing a 68 percent premium based on the closing price of Dec. 21.
· If the Treasury Secretary wants to keep tabs on the financial system when the market is tumbling, that’s fine. But the idea Steven Mnuchincan do anything to stop the worst market meltdown in a decade was met with skepticism among investors — and in some cases, concern. Mnuchin called top executives from the six largest U.S. banks over the weekend to check on their liquidity and lending infrastructure, he said Sunday on Twitter. On Monday he’ll convene a call with the President’s Working Group on financial markets, a panel created in the aftermath of the Crash of 1987.
· Oil has been very good to university endowments in Texas. It was so good in the year through June 30 that the University of Texas saw the value of its endowment reach $31 billion, surpassing Yale to become the second-largest endowment in U.S. higher education, according to data compiled by Bloomberg. The endowment was fueled by mineral rights from land it controls in the Permian Basin. It’s an area bigger than Delaware that has emerged in the past decade as the world’s fastest growing oil-producing region due to advances in hydraulic fracturing, or fracking. The state system shares the mineral rights revenue with Texas A&M University, which saw its endowment value surge to $13.5 billion.
· Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 10th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.08 billion in the week ended Dec. 21, compared with gains of $511.7 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $11.3 billion.
· Rescuers hunted for survivors and victims under the rubble of hundreds of hotels and houses flattened by a deadly tsunami along Indonesia’s Sunda Strait with authorities warning the death toll may climb from the 373 already confirmed. Most of the victims were local holidaymakers staying in the hotels and bungalows along the popular beaches in Lampung and Banten provinces, according to the National Disaster Mitigation Agency. More than 1,450 people were injured and dozens are missing after tsunami waves lashed the provinces late on Saturday, the agency said.
· China announced another round of tariff cuts, lowering import taxes on more than 700 goods from Jan. 1 as part of its efforts to open up the economy and lower costs for domestic consumers.
· The year-end rout in financial markets may get worse with S&P futures falling as much as 0.9 percent in a volatile morning session. Analysts and strategists say investor sentiment is weakening further amid the federal government shutdown, with no quick end in sight. The S&P 500 Index has fallen more than 12 percent just in December, on pace for the steepest monthly decline since October 2008, as fear of a possible slowdown in the new year gripped the market. Recent cautious commentary from economic bellwether FedEx Corp. stoked concerns, with warnings about slowing global trade and weakness in the European economy. Investors are also possibly pricing in the impact of a policy error by the Federal Reserve and a weak Chinese economy.
*All sources from Bloomberg unless otherwise specified