January 17th, 2018


Daily Market Commentary


Canadian Headlines

  • Canadian stocks fell the most in a month as the recent rallies in metals and oil stumbled, pressuring mining and energy shares. The S&P/TSX Composite Index declined 0.5 percent to 16,298.88, the first drop in four trading days. Materials stocks fell 1.2 percent, the most in six weeks. Tahoe Resources Inc. lost 7.2 percent and Kinross Gold Corp. fell 4.3 percent.
  • Brookfield Asset Management Inc. and Onex Corp. are preparing an offer for IWG Plc that will value the commercial real estate company at about 2.7 billion pounds ($3.7 billion), people familiar with the matter said. Zug, Switzerland-based IWG, which owns office space and competes with New York-based WeWork Cos., said last month it had received an “indicative proposal” for a cash deal from the consortium. The group is lining up a firm offer of about 300 pence a share but not more than that, said the people, who asked not to be identified because the matter is private. A final decision hasn’t been made and plans for a bid could change, they said.



World Headlines

  • European stocks fall, mirroring a retreat on Wall Street and in Asia following recent sharp gains, while the tech sector bucked the trend after upbeat results from ASML. The Stoxx 600 index slips 0.3%, remaining in trading range started last week. Banks and mining stocks — among the biggest gainers recently — fall most on Wednesday.
  • Traders appear to be taking a pause, perhaps questioning the pace of gains in equity markets since the start of 2018. After sales updates from many retailers, the earnings season is ramping up, with money managers eager for good news to help maintain the rally. Meanwhile bond investors are mulling the potential for monetary policy in the U.S. to tighten faster than expected, and settling their nerves after last week’s selloff.
  • Asian stocks retreated from a record high as Japanese and Hong Kong shares fell, tracking a decline in U.S. equities overnight. The MSCI Asia Pacific Index dropped 0.1 percent to 182.58 as of 4:46 p.m. in Hong Kong, set for its first decline in four days. The benchmark is pulling back from a record, with healthcare and material sub-gauges leading the drop. Japan’s Topix index lost 0.2 percent after ending yesterday at a 26-year high. Vietnam’s VN Index dropped the most in two years.
  • Oil continued to slide from a three-year high on speculation that a record long position built up by money managers leaves prices vulnerable to a pullback. U.S. futures fell for a second day. Hedge funds increased their net-long position in WTI to an all-time high of 437,770 contracts in the week to Jan. 9, according to the Commodity Futures Trading Commission. Citigroup Inc. and UBS Group AG said prices will probably weaken this year as supplies pick up. Technical indicators also showed futures are overbought.
  • Gold inches lower for a 2nd day as dollar and bond yields rise and focus turns to Congressional talks to avert a government shutdown Friday.
  • Algeria’s state-run energy producer Sonatrach signed an agreement with oil-trading Vitol Group to ship crude to Italy to be processed and sent back as refined products, in the first deal of its kind to trim the country’s $2 billion annual bill for imported fuel. The arrangement will enable Algeria to stop buying refined fuels in three years — when the agreement expires and a new refinery in the North African nation is set for completion, Ahmed Fettouhi, Sonatrach’s vice president for downstream operations, said Wednesday in an interview in Algiers. The planned Hassi Messaoud refinery will have an annual processing capacity of 5 million tons of oil, he said, or the equivalent of about 100,000 barrels a day.
  • European Commission President Jean-Claude Juncker offered a new twist in his campaign to keep Britain part of the EU. A day after urging British Prime Minister Theresa May to reverse Brexit before it happens in March 2019, the head of the European Union’s executive arm said the U.K. can always re-apply for membership after departing. Juncker cited the EU treaty’s Article 49, which invites any European state that respects the bloc’s values to apply for accession and precedes Article 50 governing the process for leaving.
  • Melrose Industries Plc made a hostile 7.4-billion-pound ($10.2 billion) bid for GKN Plc, which spurned the approach, setting up a battle to win shareholder support for the deal or the aviation supplier’s own plan to break itself up. The offer values GKN at 430.1 pence a share in cash and stock, Birmingham, England-based Melrose said in a statement Wednesday. After rejecting an initial approach on the same terms last week and announcing a breakup plan, GKN reiterated today the offer undervalued the company.
  • India said it would cut back on planned additional borrowing for the current fiscal year, providing relief to the nation’s sovereign bond market battered by concerns about rising inflation and worsening public finances. The government will sell 200 billion rupees ($3.13 billion) of debt, down from 500 billion rupees extra announced less than a month ago, the finance ministry said in a statement Wednesday after a “review of trends of revenue receipts and expenditure pattern.” The reduction follows expectations of a higher dividend from the central bank, a finance ministry official told reporters in New Delhi asking not to be identified citing rules.
  • House Republicans are coalescing around a plan to try and force the Senate to accept a short-term spending bill this week that doesn’t address immigration issues and other demands from Democrats in order to avoid a government shutdown after Jan. 19. Speaker Paul Ryan and his leadership team late Tuesday released a stopgap spending bill to keep the government operating through Feb. 16, setting up a likely vote in the House Thursday.
  • Bank of America Corp. just joined a roster of big U.S. lenders suffering multimillion-dollar burns on their dealings linked to Steinhoff International Holdings NV. Fourth-quarter earnings were crimped by a $292 million charge, the Charlotte, North Carolina-based company said Wednesday in a statement announcing results. The costs were incurred in two divisions: global markets and global banking.
  • Nomad Foods Ltd. agreed to buy Goodfella’s Pizza for about 225 million euros ($275 million), ending the company’s dealmaking lull as it pushes ahead in consolidating frozen-food businesses. U.K-based Nomad, which began as an acquisition vehicle backed by entrepreneurs Martin E. Franklin and Noam Gottesman, is buying the frozen-pizza maker in an all-cash deal from a subsidiary of Boparan Holdings Ltd, according to a statement Wednesday. Nomad is adding Goodfella’s to a list of brands including Birds Eye, Findus and Iglo after more than two years without a deal.
  • Some investors have been betting recently that Japan’s central bank could start winding back stimulus this year. It shouldn’t, but even if it did, interest rates likely wouldn’t spike, and so the government could weather it without serious trouble refinancing its massive debt. So says Moody’s Investors Service, after a minor tweak last week in the Bank of Japan’s bond purchases emboldened investors to go against the consensus and speculate that monetary authorities could join global peers to start normalizing policy as soon as this year.
  • Ford Motor Co., the more than century-old company that was first to make cars for the masses, is calling off its pursuit of everyman sedan buyers. The company responsible for putting the world on wheels with Henry Ford’s then-innovative assembly line will pivot away from being a full-line automaker, shrinking its passenger-car lineup and shifting only to low-volume, high-margin models.
  • London’s Heathrow airport put forward proposals for a sloping runway and said the landing strip could be shortened as it seeks to cut 2.5 billion pounds ($3.4 billion) from the cost of expansion plans. Europe’s busiest hub also proposed the phased opening of new terminals and a number of alternative road links as part of a 10-week consultation aimed at reducing the expense of the 16 billion-pound project to a level where it could be funded without a significant hike in user charges.
  • Publisher and conference organizer Informa Plc is in talks to buy rival UBM Plc for about 3.5 billion pounds ($4.8 billion), reviving a tie-up abandoned a decade ago to unite two event-management heavyweights in a challenge to market leader Relx Plc. Informa would pay 1.083 shares and 163 pence for each UBM share, the companies said Wednesday in a statement. A deal would create a company with sales of more than 2.2 billion pounds and shake up the event-management industry centered in London, which both UBM and Informa have been consolidating.
  • Billionaire Wang Jianlin’s Dalian Wanda Group Co. is close to reaching an agreement to sell two Australian luxury property projects — one in Sydney and one on the nation’s Gold Coast, according to people familiar with the matter. The buyer is of Chinese origin, said two of the people, who asked not to be identified because discussions are private. A deal could be announced in the coming days, the people said. Beijing-based Wanda declined to comment on Wednesday.
  • Barclays Plc named Kathryn McLeland to run a newly combined treasury and investor relations unit as part of an internal reshuffle, according to people with knowledge of the moves. McLeland, who has been head of investor relations for five years, has assumed the responsibilities of Dan Hodge, who is now looking for another role within the bank, said the people, who declined to be named as the details are private. She reports to Finance Director Tushar Morzaria and previously worked in the investment bank’s financial institutions capital markets team for 11 years.
  • If you bought a Bitcoin in early 2017, when one cost less than $900, you could have a profit of more than 1,200 percent now. But you almost certainly didn’t do that. Perhaps you dipped in a toe in November or December, as the price hit headline-grabbing records—$10,000, then $15,000, then higher. If you were very unlucky and bought at the peak of about $20,000 on Dec. 17, you’d have lost more than 40 percent of your money as of Jan. 16, when the price was $11,200. More than $2,000 of that decline came in about 24 hours, after South Korean Finance Minister Kim Dong-yeonindicated the country may crack down on cryptocurrency trading to discourage speculation. It’s not every asset that can feel like it’s in a bubble and a crash at the same time.




*All sources from Bloomberg unless otherwise specified