January 9th, 2020

Daily Market Commentary

Canadian Headlines

• Cenovus Energy Inc. is establishing ambitious environmental, social and governance (ESG) targets to guide performance in its four ESG focus areas: climate & greenhouse gas (GHG) emissions, Indigenous engagement, land & wildlife, and water stewardship. These targets reflect the company’s continued integration of sustainability into its strategy and business plan to help foster long-term resilience. Leading safety practices, strong governance and ongoing innovation remain foundational to Cenovus. The ESG targets are part of Cenovus’s focus on maintaining a low cost structure, growing free funds flow and shareholder returns, and continuing to strengthen its balance sheet as it implements the five-year business plan that was communicated at Investor Day in October.
• First Quantum Minerals Ltd. today announced that it is launching an offering of an additional $300 million principal amount of its Senior Notes due 2023 (the “Additional 2023 Notes”). The Company currently has $1.1 billion of Senior Notes due 2023 (the “Existing 2023 Notes”) outstanding and the Additional 2023 Notes will be offered under the same indenture as the Existing 2023 Notes.

World Headlines

• European shares opened higher Thursday, tracking gains in Asian markets amid easing geopolitical tensions. The Stoxx 600 Index rose 0.6% with almost all industry groups climbing, led by technology and banks. Energy was the lone faller among sectors following Wednesday’s decline in the crude price. Markets took encouragement from President Donald Trump’s announcement that Iran appeared to be “standing down” from further escalation of tensions between the two countries. The positive tone was reinforced by news that German industrial production rebounded in November after two months of declines.
• U.S. equity futures advanced on Thursday while stocks rose across Europe and Asia, extending a relief rally after America and Iran appeared to step back from a deeper military conflict. The yen and gold declined, oil steadied after a plunge and the pound retreated. S&P 500 contracts pointed to further gains on Wall Street a day after the underlying gauge climbed when President Donald Trump’s measured remarks on Iran suggested tensions were easing.
• Japanese stocks rebounded Thursday as investor concerns over geopolitical risk waned with the U.S. and Iran stepping back from a wider military conflict. Electronics and telecommunications boosted the Topix index the most, while energy stocks retreated. In a televised statement, President Donald Trump said he would impose new sanctions on Iran but offered Tehran a diplomatic opening. Risk sentiment improved following his comments, with U.S. stocks climbing and the yen weakening back through 109 against the dollar.
• Oil steadied after rapidly shedding all of its gains from the clash between the U.S. and Iran, as traders waited to see whether any further hostilities will disrupt exports from the Middle East. Brent held above $65 a barrel on Thursday, having tumbled 4.2% the previous day as President Donald Trump downplayed the impact of missile attacks on American bases in Iraq, allaying concerns that Washington and Tehran were headed for military confrontation.
• Gold dropped for a second day as the U.S. and Iran stepped back from a deeper military conflict, blunting the appeal of haven assets. The metal is heading back toward levels it was trading at before the U.S. killed top Iranian general Qassem Soleimani last week. President Donald Trump’s latest remarks suggested tensions were easing and stocks rose across Europe and Asia.
• Iron ore shipments from Australia’s leading port notched a full-year record after a bumper showing in December, with increased flows from the top exporter set to reinforce expectations that prices will decline over the course of 2020 as global market tightness eases. Futures sagged. Shipments from Port Hedland surged to 47.4 million tons in December, the second-highest monthly total ever. That took the full-year figure to 515.7 million tons, topping last year’s 508.5 million. The facility is used by miners including BHP Group and Fortescue Metals Group Ltd.
• Investments in U.S.-listed sector exchange traded funds swung to inflows last week following two weeks of outflows. Industrials sector ETFs led the inflows. Financial sector ETFs had the biggest change from the previous week. Net inflows to ETFs that focus on industry sectors totaled $5.43b in the week ended Jan. 8, including the effect of leveraged funds, compared with outflows of $1.72b the prior week
• 58 Home, owned by China’s Craigslist equivalent 58.com Inc., is close to completing a private fundraising en route to a U.S. initial public offering that could value the online services platform at as much as $2 billion, people familiar with the matter said. The business, known locally as 58 Daojia, is seeking funds to bankroll an expansion into China’s competitive online services arena. It’s now wrapping up a pre-IPO financing round at a valuation of more than $1 billion, the people said, requesting not to be named because the matter is private. Once that’s done, 58 Home intends to prepare for a U.S. debut in which it will seek a valuation of between $1.5 billion and $2 billion, one of the people said.
• China announced that Vice Premier Liu He will travel to Washington to sign the first phase of the trade deal with the U.S. next week, locking in Beijing’s commitment to a ceremony already announced by President Donald Trump. Liu, who has acted as Chinese President Xi Jinping’s top trade negotiator throughout the tariff conflict, will travel to the U.S. from Jan. 13 to Jan. 15 at the head of the delegation, Ministry of Commerce spokesman Gao Feng said Thursday in Beijing.
• The Boeing Co. jet that crashed near Tehran on Wednesday tried to turn back after takeoff, Iran revealed in an initial report as Ukraine said it’s examining scenarios including a missile strike and terrorism. Ukraine International Airlines Flight 752 disappeared from radar screens at 8,000 feet, and witnesses said they saw it on fire in the air, according to Iran’s Civil Aviation Organization. The flight-data and cockpit-voice recorders were damaged but their core memory appears to be accessible, the report said. The findings are the first officially released from a probe fraught with difficulty amid heightened U.S.-Iranian tensions. Ukraine added to confusion around the crash, saying it’s looking at whether the jet was downed by a missile or bomb after Iran had insisted it fell victim to a technical failure or engine fire.
• The Bank of England is debating the merits of additional monetary stimulus and has plenty of room to act to prop up the economy, according to Governor Mark Carney. The pound fell. While the economy appears to be strengthening, he said there may be a need to do more to secure the recovery. His dovish tone comes as two members of the Monetary Policy Committee are already pushing for a interest-rate reductions. The comments surprised traders, and the pound weakened as much as 0.6% and traded at $1.3096 as of 10:36 a.m. in London.
• India’s plan to sell $14.7 billion of government-owned assets to plug its budget deficit is seen falling short by nearly half, according to people familiar with the matter. Receipts from disinvestment in the year to March are expected to be between 500 billion rupees ($7 billion) and 600 billion rupees against the target of 1.05 trillion rupees, the people said, asking not to be identified as the numbers are in the process of being finalized. Complex sale process for some of the assets means the government will run out of time this year, they said.
• Thailand’s central bank will take further steps to ease restrictions on capital outflows in coming months as it tries to curb gains in the baht, Governor Veerathai Santiprabhob said. The Bank of Thailand plans to increase the amount of proceeds exporters can hold overseas, liberalize foreign-currency deposit accounts and take steps to enable insurance companies to invest more abroad, Veerathai said in an interview Wednesday at his Bangkok office
• WeWork’s days of breakneck expansion are over, at least for now. New leases by the flexible office firm nosedived in New York and London, its top two markets, in the final quarter of last year, CoStar Group Inc. data show. It signed just 64,000 square feet (5,946 square meters) of space in Manhattan, the lowest in more than five years, while the 49,000 square feet in London was the least since the U.K.’s Brexit vote in the second quarter of 2016. The sharp brake on expansion followed the company’s decision to shelve a planned initial public offering in September last year and its subsequent rescue by major backer Softbank Group Corp., which agreed to take majority control of the company the following month.
• A quiet crisis is unfolding for U.S. hospitals, with bankruptcies and closures threatening to leave some of the country’s most vulnerable citizens without care. As a gauge of distress in the health-care sector has soared, at least 30 hospitals entered bankruptcy in 2019, according to data compiled by Bloomberg. They range from Hahnemann University Hospital in downtown Philadelphia to De Queen Medical Center in rural Sevier County, Arkansas and Americore Health LLC, a company built on preserving rural hospitals.
• Kohl’s Corp. reported a slight drop in holiday sales, reinforcing concerns that department stores lost ground despite robust growth in U.S. consumer spending. Shares fell as much as 9.4% in early trading. Same-store sales, a key measure of retail success, declined 0.2% in November and December, the company said in a statement. Kohl’s also said profit for fiscal 2019, which ends in February, will be at the low end of its previously announced range of $4.75 to $4.95 a share.
• President Donald Trump’s loyal political base is standing by his decision to kill a top Iranian general, polls show, even though the move may undermine a key 2016 pledge to end U.S. military involvement in the Middle East. In Michigan, where Trump edged Hillary Clinton by less than 11,000 votes in 2016, Brian Droscha, a Republican commissioner in Eaton County, says that he’s heard nearly unanimous praise for the Jan. 2 strike on Qassem Soleimani, who he called a “terrorist nut job.”
• It was both a great year for the U.S. jobs market, and the worst in almost a decade. The final jobs report for the year, due Friday, is forecast to show employers added 160,000 jobs in December — down from November’s 266,000 but still well above what’s needed to accommodate population growth. That would bring the 2019 total to 2.14 million, thanks to resilient consumers and a jump in government spending. The projected full-year figure would be about a quarter-million above what economists were expecting a year ago. But it’s also the slowest gain since 2011 and down from 2018’s more-robust 2.68 million. And both the 2018 and 2019 totals may be lowered in revisions due next month.
• Verizon Communications Inc. is eliminating traditional cable bundles and the handcuffs that often came with them, making it easier for households to switch video packages in the hopes they won’t cut the cord entirely. The telecommunications company will allow Fios customers to select their home internet speeds and television packages separately, at preset rates. Rather than locking customers into one- or two-year contracts, customers will be able to change either service monthly, if they wish. The changes do away with traditional bundle promotions that expire after a year or two, often leaving customers with much heftier bills. “We wanted to eliminate that pain point altogether,” Mr. Boulben said.
• Mexico closed 2019 with the second-lowest year-end inflation rate in at least five decades amid a stalled economy, solidifying bets the central bank will keep cutting interest rates in 2020. Consumer prices rose 2.83% from the previous year in December, the statistics agency reported Thursday, more than the 2.78% forecast in a Bloomberg survey of economists. Prices rose 0.56% from the previous month. Mexico’s central bank targets inflation at 3%, plus or minus one percentage point.
• Archer-Daniels-Midland Co., the agribusiness giant that helped draw the blueprint for the U.S. biofuel industry, is in advanced talks for a deal that could involve a sale or a joint venture for its ethanol dry mills. The 118-year old agricultural commodities company is currently in negotiations with fewer than five interested parties, Chief Executive Officer Juan Luciano said in an interview Wednesday at the company’s headquarters in Chicago. He declined to name the companies taking part in the discussions.

*All sources from Bloomberg unless otherwise specified