February 15h, 2019

Daily Market Commentary


Canadian Headlines

  • Facing bumper production in 2019, Agnico Eagle Mines Ltd.is giving more back to shareholders in the form of a 14 percent dividendhike — and says it likely won’t stop there. The Toronto-based miner is forecasting record gold output as it brings two major projects in Canada’s subarctic into production. With the major capital expense of those expansions behind it, and output costs set to fall, Agnico expects to generate positive free cash flow in the second half of the year, Chief Executive Officer Sean Boyd said Thursday in a phone interview.

World Headlines

  • European shares jumped and are set for the best weekly rally in three months, with U.S. futures turning positive, as trade talks continue next week. The Stoxx 600 Index rose 0.8 percent, as autos recovered from earlier losses and industrials, basic resources and banking shares led gains. Scout24 AG soared 13 percent as the German online classified ads company agreed to a higher bid from two private-equity firms.
  • S&P 500 futures fall as much as 0.5%, as Asian stocks retreated from their highest levels since October on resurfaced global economic growthconcerns after slowing factory inflation in China and lack of progress in trade talks.
  • Most stock markets in Asia fell as U.S. and Chinese officials familiar with the situation said the two countries have failed to narrow the gap around structural reforms to China’s economy that the U.S. has requested. China was among the biggest decliners after data showed a further slowdown in factory inflation, which could weigh on earnings growth. Hong Kong, South Korea and Japan’s Nikkei 225 Stock Average also slipped more than 1 percent.
  • Oil headed for its biggest weekly gain in a month as the OPEC+ coalition’s supply cuts and reduced output from the world’s biggest offshore field overshadowed renewed concern over the U.S.-China trade war. Futures in New York were steady on Friday, and have increased 3.3 percent this week. Russia said it would accelerate the output cuts it agreed to in a deal with the OPEC+ alliance, while Saudi Arabia was said to curtail supply from the Safaniyah field to repair a damaged power cable. Asian stocks fell Friday as the U.S. and China were said to have made little progress in trade talks.
  • Spot gold jumped after U.S. retail sales fell the most in nine years, a sign of slowing economic momentum that boosted the precious metal’s haven demand. The decline in overall retail sales, which missed all economists’ estimates, helped ease gold bulls’ concerns that the Federal Reserve may hike U.S. interest rates this year. Investors also are keeping tabs on the U.S.-China trade negotiations in Beijing on Thursday and Friday.
  • U.K. retail sales rose at their fastest pace in six months in January as consumers flocked to snap up cut-price clothing. Excluding auto fuel, the volume of goods sold in stores and online rose 1.2 percent from December, when they fell 1 percent in a Black Friday hangover, the Office for National Statistics said Friday. Total sales grew 1 percent. A 0.2 percent gain had been forecast on both measures.
  • Deere & Co., the world’s biggest tractor maker, reported first-quarter profit that trailed estimates by analysts amid higher costs for raw materials and customer concerns over tariffs and trade policies. The trade issues “have weighed on market sentiment and caused farmers to become more cautious about making major purchases,” Chief Executive Officer Samuel Allen said Friday in a statement. The shares fell.
  • PepsiCo Inc. warned that earnings will decline this year as it invests more to boost its businesses the day after a disappointing outlook from chief rival Coca-Cola Co. Adjusted earnings per share and revenue met analysts’ estimates in the fourth quarter. For this year, Pepsi forecast a 1 percent decline in core EPS, excluding currency shifts, along with a slowdown in sales growth.
  • President Xi Jinping said U.S.-China trade talks would continue next week in Washington, as the two sides race to reach a deal that would avert a tariff increase on Chinese goods after March 1. “Negotiations between both sides have achieved important progress in another step,” Xi said after a round of trade talks wrapped up in Beijing, according to China’s Xinhua News Agency. “Next week, both sides are going to meet in Washington. I hope you keep up the good work, and push for a mutually-benefiting and win-win agreement.”
  • Germany’s Scout24 AG received a $5.5 billion boost by two U.S. private equity firms as it battles Axel Springer SE and EBay Inc. for dominance of Europe’s online classifieds market. The sweetened 46 euro-a-share bid from Hellman & Friedman and Blackstone Group LP — which gives Scout24 an equity value of 4.9 billion euros — will help the company better challenge rivals and grow across Europe, Scout24 Chief Executive Officer Tobias Hartmann said.
  • Tire manufacturer Bridgestone Corp. plans to buy back as much as 200 billion yen ($1.8 billion) of its stock to reward shareholders after giving a full-year operating profit forecast that trailed analysts’ estimates. The buyback amounts to as much as 7.6 percent of its shares, the Tokyo-based company said in a statement Friday. Chief Executive Officer Masaaki Tsuya has been speeding up product development for connected and intelligent cars, combining tires and sensors to collect road conditions and tire information such as the amount of wear.
  • Irish Prime Minister Leo Varadkar told German Chancellor Angela Merkel his government couldn’t accept the return of border controls on the island of Ireland even if the U.K. crashed out of the European Union without a deal, a person familiar with the matter said. At the chancellor’s request, the two leaders held a 40-minute call last month during which Merkel sought to better understand Varadkar’s stance on the question, according to the person, who asked not to be identified as the conversation was private.
  • Spanish Prime Minister Pedro Sanchez called a snap election, pitching the country into renewed uncertainty after a parliament veto of his budget laid bare the minority government’s inability to pass key legislation. Sanchez said on Friday that the vote will be held on April 28, when he’ll seek to renew his tenuous grasp on power and hold off the advances of three right-wing groups that could potentially form a governing alliance.
  • European car sales declined for a fifth straight month in January in a worrying show for the continent’s economies battling a technical recession in Italy, uncertainty over a snap election in Spain, and the U.K. coming no closer to a deal on Brexit. Passenger car registrations dropped 4.6 percent compared with last year to 1.23 million vehicles in the European Union and European Free Trade Association, the European Automobile Manufacturers Association said Friday. Sales declined in all of the region’s largest markets of Germany, France, the U.K., Italy and Spain, making European autos this month’s worst performers in the group of SXXP Europe indexes.
  • DSV A/S just announced it’s revised a bid for Panalpina Welttransport Holding AG to an all-cash offer. What the Danish freight forwarder left out was that the new bid doesn’t raise the $4.3 billion valuation of its Swiss rival. As it turns out, the new offer of 180 Swiss francs a share is worth roughly the same as the one DSV made in January. The reason is that DSV’s stock price has gained. The math: the old offer was comprised of 1.58 DSV shares and 55 francs for each Panalpina stock. DSV valued the total offer back in January at 170 francs, of which the stock component was 115 francs. Since then, DSV shares have appreciated so the stock component would now be worth 125 francs.
  • Dalian Wanda Group Co.’s flagship developer is staging a comeback on the global bond market for the first time since a 2017 crackdown by China’s government on debt-fueled acquisitions. Dalian Wanda Commercial Management Group Co. hired China CITIC Bank International as sole global coordinator to arrange investor meetings from Feb. 19 in Hong Kong and Singapore for a potential dollar bond sale, according to people familiar with the matter. Calls to Dalian Wanda’s spokesperson went unanswered.
  • Takeda Pharmaceutical Co. has filed to issue up to 500 billion yen ($4.5 billion) of notes in what would be corporate Japan’s biggest ever bond if done in a single tranche. The Osaka-based drug maker has taken on massive debt for its $62 billion takeover of Shire Plc, which vaulted it into the ranks of the 10 biggest drug makers by sales while more than doubling its borrowing level. Chief Financial Officer Costa Saroukos said at the company’s earnings presentation on Feb. 1 that management doesn’t intend to increase its debt load further, but may look to “optimize” the structure by refinancing certain borrowings.
  • North Korean leader Kim Jong Un was ready to accept the dismantlement and inspection of a high-profile nuclear plant, a South Korean presidential adviser said, suggesting a possible point of compromise in upcoming talks with President Donald Trump. Moon Chung-in, a special adviser for foreign affairs and national security, said in an interview Friday that the verified destruction of the regime’s Yongbyon nuclear complex was an achievable goal during Trump’s planned Feb. 27-28 summit with Kim. Moon said it was his “understanding” that South Korean President Moon Jae-in got Kim’s personal assurance on that when they met in Pyongyang in September.

*All sources from Bloomberg unless otherwise specified