February 8th, 2019

Daily Market Commentary


Canadian Headlines

  • Canadian stocks fell for the first day this week as oil prices plowed lower as a White House adviser warned the U.S. and China are still far apart in trade talks. U.S. stocks also slid on Thursday. The Canadian benchmark fell 0.1 percent. Energy and consumer discretionary were the main laggards while real estate edged higher. Canadian crude also weakened after two critical oil pipelines remained partially shut amid an investigation into a possible leak in Missouri.
  • More than a century after steel and concrete became the standard for building high-rise buildings, the humble tree is making a comeback. Sidewalk Labs LLC, a unit of Google parent Alphabet Inc., is planning to use timber to construct all of its buildings for a mixed-use community along Toronto’s eastern waterfront. Meanwhile, Oregon became the first U.S. state to amended its building code to permit taller buildings made from timber.
  • Canadian crude weakened after two critical oil pipelines remained partially shut amid an investigation into a possible leak in Missouri. Heavy Western Canadian Select for March traded at $10.30 below the calendar average for West Texas Intermediate crude futures, compared with a $9.40 discount earlier Thursday, according to data from Net Energy Exchange. Prices weakened as shutdowns of TransCanada Corp.’s Keystone pipeline and Enbridge Inc.’s Platte line on Wednesday dragged on and threatened a pile-up of crude in Alberta.
  • The world’s largest crop-nutrient supplier has taken to hoarding key chemicals from China in case the trade war between Washington and Beijing gets even worse. Nutrien Ltd. has built up a “strategic inventory” of the chemical ingredients it imports from China. The move comes in case the U.S. decides to increase a 10 percent tariff on the Asian goods to 25 percent, Chief Executive Officer Chuck Magro said. Trade uncertainty is pressuring global crop prices, and the stockpiles will act as a “buffer” and help the company avoid hiking the prices it charges to farmers, he said.

World Headlines

  • U.S. equity futures and Asian shares fell as concern over economic growth and trade disputes pushed global stock markets toward their first weekly loss since December. European stocks were steady, while Treasuries and bunds edged higher.
  • Oil headed for its biggest weekly loss since December as concerns over economic growth from Europe to China reinforced fears that fuel demand may weaken. Futures declined in New York for a second day and have lost 5 percent this week. The trade dispute between the U.S. and China showed no signs of a resolution as President Donald Trump said he wouldn’t meet President Xi Jinping before a March 1 deadline to avert new American tariffs on Chinese imports. Meanwhile, the European Commission slashed growth forecasts for the euro area’s big economies.
  • Gold is poised for the first weekly drop in three weeks after the dollar strengthened and holdings of the metal in exchange-traded funds fell to lowest since Jan. 28. Gold swung between gains and losses Friday as investors weighed concerns over global economic growth and fears that the U.S. won’t reach a trade deal with China before further tariff hikes kick in. Palladium remains the main gainer among precious metals, after earlier touching the highest in three weeks.
  • The U.S. is now the only major equity region that investors continue to exit, as even unloved European stocks are seeing money return for the first time in months. U.S. stock funds saw outflows of $700 million in the week through Feb. 6, bringing the year-to-date total redemption to $41 billion, according to a Bank of America Merrill Lynch note, which cited EPFR Global data. European equity funds had their first inflow in 22 weeks, with about $200 million coming in.
  • The news just keeps getting worse for Italy. Its economy contracted by more than expected in 4Q to send the country into a technical recession and today’s industrial production data suggests that contraction may prove worse than the first estimate of GDP indicated.
  • German Finance Minister Olaf Scholz made it clear that the European Union is backing Ireland in the struggle to reach an agreement over the border with the U.K., the main sticking point for the British Parliament agreeing to the Brexit deal. Chancellor Angela Merkel’s Social Democratic finance minister used an appearance at Bloomberg’s European headquarters in London to lay out his government’s perspective on Brexit’s economic impact. With no breakthrough in sight seven weeks before Britain plans to leave the bloc, Scholz said the current impasse and the lack of clarity on London’s position makes him “nervous” that a disorderly Brexit may be hard to avoid.
  • Companies using a European initiative meant to facilitate trade with Iran face U.S. retaliation, President Donald Trump’s envoy in Brussels said in a warning that casts even greater doubts about the plan’s effectiveness in contending with U.S. sanctions. “Anyone actually using it to trade on anything other than humanitarian activity is going to be sanctioned by the United States,” U.S. Ambassador to the European Union Gordon Sondland said in a Feb. 7 interview. “We’ll find them and sanction them and they won’t be doing any business with the United States.”
  • The China slowdown sending tremors through the business world has resulted in the biggest record loss in India’s corporate history. Tata Motors Ltd. shares had their biggest drop in 26 years in Mumbai trading after the company unveiled a writedown in its luxury Jaguar Land Rover Automotive Plc unit. The shares plunged 17.6 percent, the most since February 1993, to 150.7 rupees after declining as much as 30 percent.
  • Sony Corp. is buying back as much as 100 billion yen ($910 million) of its own stock, the electronics maker’s first-ever large scale repurchase. The shares rose 4.1 percent in Tokyo on Friday after the company announced the buyback, which starts Tuesday and will last through March 22.
  • Tata Steel Ltd.’s quarterly profit surged as its strategy to expand in India through acquisitions paid off and cushioned the South Asian nation’s oldest maker of the alloy against weak product prices.
  • Kazakhstan has delayed IPO of national oil co. KazMunayGaz to after 2019, Reuters reports, citing two unidentified people familiar with the matter in the banking sector.
  • German Finance Minister Olaf Scholz signaled support for a “national champion” in the banking industry, amid speculation that the government is seeking to drive forward a potential merger of Deutsche Bank AG and Commerzbank AG. While he stopped short of explicitly spelling out a plan for Germany’s biggest lenders, Scholz’s comments at a Bloomberg event in London Friday are the clearest acknowledgment yet by a top official that the government is mulling all options.
  • A long-simmering feud between Donald Trump and Jeff Bezos took a bizarre turn after the multibillionaire accused allies of the president of brazenly trying to extort him. In a surprising move that lit up social media feeds worldwide, the Amazon.com Inc. founder and chief executive officer published a blog poston Thursday, alleging that the publisher of the National Enquirer tried to blackmail him with embarrassing photos of Bezos and a woman who wasn’t his wife — including sexually charged selfies.
  • Fear is turning into exuberance in credit markets. Demand for U.S. corporate bonds has surged after the Federal Reserve signaled that it’s done raising interest rates for now and eased investor concerns that rate hikes will choke off economic growth and crimp profits. High-yield bonds gained 5.3 percent this year through Feb. 6, the best start to a year since 2009, and saw the biggest fund inflows this week since July 2016.
  • President Donald Trump said he won’t meet Chinese President Xi Jinping before a March 1 deadline to avert higher U.S. tariffs on Chinese goods, intensifying fears the two won’t strike a deal before the end of a 90-day truce. Trump responded “No” and shook his head Thursday when reporters at the White House asked him if he would meet with Xi this month. Then he added, “Unlikely.” But the U.S. president said the two would “maybe” meet later.
  • Democrats have made an offer to Republicans calling for greater border security spending, Senate Minority Whip Richard Durbin says as lawmakers were meeting behind closed doors Thursday. “We made an offer to Republicans and we’re waiting to hear back,” says Durbin, top lieutenant to Senate Minority Leader Charles Schumer Durbin offered no details about the proposal but says Democrats also are trying to get disaster aid in the final package to wrap up FY19 govt spending, including more funding for storm-ravaged Puerto Rico.

*All sources from Bloomberg unless otherwise specified