January 15th, 2018
Daily Market Commentary
- The Bank of Canada is already well into the process of raising interest rates to more normal levels and another increase is expected on Wednesday, after the economy’s stellar performance last year. The big questions are how quickly do they continue moving up from here, how closely will they follow U.S. increases and where will rates settle. Markets are pricing in at least three more increases this year, which would bring the benchmark rate to 1.75 percent.
- European stocks fall after two weeks of gains, dragged lower by health-care stocks and automakers. The Stoxx Europe 600 Index is down 0.3%, with Roche among the biggest contributors to declines after it was downgraded at SocGen. Miners extend their ascent into an 8th day, poised for the longest rally since October
- Despite the U.S. holiday, the dollar dominated trading on Monday as it headed for a fourth day of declines, weakening against almost every major currency. The dollar remains under pressure after capping five straight weeks of declines, even against a backdrop of solid U.S. growth. Traders appear to be more excited by potentially hawkish policy shifts from central banks in Europe and Japan, by the improving political outlook in the euro area, and by the synchronized nature of global expansion that’s also propelling emerging-market economies.
- Asian stocks kicked off the third week of the year with gains across the region as Japanese shares rose, tracking record gains from U.S. equities on Friday as better-than-expected data boosted optimism for economic growth. The MSCI Asia Pacific Index added 0.5 percent to 181.85 as of 4:18 p.m. in Hong Kong, set for a fresh record close as finance and telecommunication companies led the advance.
- Oil traded near the highest close in more than three years as Iraq echoed a call by the United Arab Emirates and other producers that the OPEC-led output cuts should continue, despite recent price gains. Futures were little changed in New York after rising 4.7 percent last week. The curbs have contributed to stability in the market and should remain, Iraqi Oil Minister Jabbar al-Luaibi said Saturday. Yet, Brent crude at $70 a barrel may be giving fresh stimulus to U.S. shale-oil drillers to boost output, according to the International Energy Agency.
- Gold advances to highest in four months amid slump in dollar as investors shrug off data showing pickup in inflation and weigh risks surrounding talks aimed at averting U.S. government shutdown at end of week.
- Iron ore slumped after China’s top steel industry body described recent gains as irrational and urged mills in the world’s biggest user to maintain a “clear head” as the global market remains oversupplied. On the Dalian Commodity Exchange, the most active contract ended 1.4 percent lower to post a fourth day of losses, the longest streak since October.
- Ford Motor Co. will more than double spending on electrified vehicles, amplifying its investment in a segment that the auto industry sees growing from what’s now just a fraction of the market. The carmaker will shell out $11 billion bringing 40 electrified vehicles to market by 2022, Jim Farley, president of global markets, said during a presentation at the Detroit auto show. That’s up from the $4.5 billion that Ford said in late 2015 it would invest through the end of the decade.
- Airbus SE widened its order lead over U.S. rival Boeing Co.in 2017 after racking up a record year of sales that included the European planemaker’s biggest-ever deal. Toulouse, France-based Airbus booked contracts for 1,109 jetliners, or 52% more than in 2016, it said in a statement Monday. That extended the margin over Boeing to 197 planes after the U.S. company secured 912 net orders.
- A pickup in a key measure of U.S. consumer prices is setting up this week’s auction of inflation-linked Treasuries as a litmus test of investor concern over whether price pressures are finally turning higher. The U.S. will offer $13 billion of 10-year Treasury inflation-protected securities, known as TIPS, on Jan. 18, after the release of unexpectedly strong consumer-price figures last week. The report led traders to ramp up expectations that the Fed would follow through on its projection of three rate increases this year, and pushed two-year yields above 2 percent for the first time since 2008.
- Carillion Plc, a U.K. construction company with government contracts in everything from hospitals to the HS2 high-speed rail project, filed for compulsory liquidation after failing in a last-ditch effort to shore up finances and get a government bailout. The company employs 43,000 people worldwide, almost 20,000 of them in the U.K., and has as much as 1.5 billion pounds ($2.1 billion) in outstanding borrowings. It held talks with the government Sunday to ask for the 300 million pounds it needed by the end of the month to stay afloat, the Mail on Sunday reported.
- Noble Group Ltd., the commodity trader pushing to restructure about $3.5 billion in debt as soon as this week, said it closed the sale of its Noble Americas Corp. unit to Vitol SA at a lower price than estimated. The sale of the oil liquids business was completed on Friday for $400 million, which includes proceeds from an earlier disposal of its gas and power unit, the Hong Kong-based trader said in a statement early on Monday. That’s lower than the illustrative figure of $575 million estimated in October, and of the total sum, $122 million has been placed in escrow, it said.
- China’s central bank issued new policies aimed at steering funding to poor areas of the country, the latest step in Beijing’s “critical battles”. New loans in severely impoverished areas will grow at a faster pace than the provincial average by 2020, according to a notice jointly released Monday by the People’s Bank of China and three other financial regulators.
- Volkswagen AG, unveiling a version of the revamped Jetta sedan, said it’ll invest more than $3.3 billion in North America to help lift the brand out of irrelevance in the U.S. The spending through 2020 will mostly go toward new models, including two more planned sport utility vehicles designed to finally turn VW’s fortunes, after lingering at less than a 2 percent share in the world’s second-biggest car market. About $1.2 billion of spending will go to the U.S. directly, Volkswagen said Sunday in a statement ahead of the North American International Auto Show in Detroit.
- China is escalating its clampdown on cryptocurrency trading, targeting online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter. While authorities banned cryptocurrency exchanges last year, they’ve recently noted an uptick in activity on alternative venues. The government plans to block domestic access to homegrown and offshore platforms that enable centralized trading, the people said, without being more specific about how policy makers define such platforms.
- The United Arab Emirates said Qatari fighter jets intercepted one of its commercial planes, in what would mark an escalation in the feud straining ties among Gulf Arab monarchies. Qatar denied the incident took place. The plane was on a routine flight to Bahrain’s capital, Manama, the U.A.E.’s official news agency WAM reported on Monday. The act “is a flagrant threat to the safety of civil aviation and a clear violation of international law,” the agency said, citing a statement from the U.A.E. Civil Aviation Authority. It didn’t name the airline involved.
- A U.S. government shutdown could spook investors and is the biggest threat to the stock-market rally, according to Nobel prize-winning economist Joseph Stiglitz. Politicians are facing a Jan. 19 deadline to agree a new spending bill and avert a shutdown. President Donald Trump blew up negotiations on a potential immigration deal last week, pushing Republicans and Democrats to harden their positions and raising the risks that the standoff will sink the budget talks.
- Polyus Gold International Ltd. abandoned a sale of about 10 percent of Russian gold miner Polyus PJSC for almost $900 million to investors led by Fosun International Ltd. as the two sides failed to agree a way forward amid pending approvals from Chinese authorities.
- It was a few minutes before Indonesia Stock Exchange’s midday trading break when Issa Almawadi heard a noise so loud it sent him running out of the building as dust was filling the air. Almawadi, who works for online investment portal Bareksa.com, was fleeing the collapse of a mezzanine floor at Tower 2 of the bourse’s complex. He said in an interview that on getting outside, he joined others in hailing taxis to take those who’d been hurt, most of whom were women and students, to nearby hospitals.
- Xiaomi Corp. selected Morgan Stanley and Goldman Sachs Group Inc. among international banks for its planned initial public offering, a person with direct knowledge of the matter said. Credit Suisse Group AG and Deutsche Bank AG have also been chosen to work on the IPO that could see the company target a valuation of as much as $100 billion, the person said, asking to not be identified as the details are private. The Beijing-based company is still considering Chinese underwriters and is yet to decide on the timing and location of the share sale, the person said.
- Republican lawmakers held out hope that a deal can be reached allowing young undocumented immigrants to remain in the U.S., despite President Donald Trump saying the effort is “probably dead” amid growing tensions about keeping the government funded past Friday. Trump told reporters on his way to a dinner Sunday evening that “I don’t know if there is going to be a shutdown” at the end of the week.
*All sources from Bloomberg unless otherwise specified