January 22nd, 2018
Daily Market Commentary
- Canadian stocks rose the most since the first trading day of the year as industrials got a boost from strong railway earnings. The S&P/TSX Composite Index added 69 points or 0.4 percent to 16,353.46 Friday. The benchmark gained 0.3 percent on the week.
- Nafta talks are entering a pivotal moment as the U.S. turns up the pressure on Canada and Mexico to radically alter the trade pact in favor of American interests. In the run-up to the sixth round of talks that are now underway in Montreal, there has been plenty of saber-rattling and posturing from the three countries. But through it all, a somewhat consistent pattern emerged: U.S. President Donald Trump kept threatening to withdraw from the pact while Canada and Mexico suggested they’d bring fresh thinking to the table to try to resolve some of the touchiest issues.
- Ocado Group Plc has licensed its grocery-delivery technology to Canada’s Sobeys Inc. as the U.K. online retailer’s five-year efforts to offer its services to supermarkets build momentum. Sobeys will use Ocado’s technology to create an e-commerce platform and to run an automated warehouse in the Toronto area and a fleet of delivery vans. Sobeys will gain exclusive rights to the system in Canada and will pay an undisclosed fee upfront, the Hatfield, England-based company said in a statement Monday. Its shares rose as much as 13.1 percent in London.
- European stocks are steady, taking a pause from their recent rally, with UBS falling 3.2% after reporting mixed earnings, starting a buyback program and saying it will create a unified global wealth management unit. The Stoxx 600 is little changed, after reaching its highest level since August 2015 on Friday.
- The greenback edged lower as the disruption to federal services dragged into a third day. Equity investors appear to have taken the latest U.S. government drama in their stride as the optimism over economic growth and increasing profits that pushed many stock indexes to all-time highs continues to linger. Meanwhile, the next catalyst for bonds may come from commentary by policy makers after central bank decisions in Europe and Japan this week, after signals that unprecedented stimulus will soon be wound back sparked a surge in yields.
- Asian shares rose, buoyed by energy stocks, as the price of oil rebounded after production-cut leaders pledged supply cuts will continue. The MSCI Asia Pacific Index gained 0.2 percent to 183.92 as of 5:14 p.m. in Hong Kong, reversing an earlier drop.
- Brent crude steadied after Saudi Arabia and Russia pledged to continue supply cuts. Futures rose as much as 0.5 percent in London before paring those gains. Output limits should remain through 2018 as rebalancing may be achieved next year, Saudi Arabia’s Energy Minister Khalid Al-Falih said in a Bloomberg television interview held with his Russian counterpart on Sunday. Russia is prepared to cooperate with OPEC after the current curbs expire, Energy Minister Alexander Novak said. Neither minister said if the cuts would continue in 2019.
- Gold holds gain amid U.S. federal government shutdown and as euro advances on optimism Germany’s Angela Merkel has made a breakthrough toward securing fourth term.
- American International Group Inc. agreed to buy Validus Holdings Ltd., a Bermuda reinsurer, for about $5.56 billion in cash. Validus stakeholders will get $68 a share, the companies said in a statement on Monday. That represents a 46 percent premium over the stock’s Friday close. The acquisition will immediately start adding to AIG’s earnings and return on equity, they said.
- Lawmakers failed to negotiate an end to the government shutdown Sunday despite a bipartisan effort to broker a deal, raising the political stakes as federal agencies begin closing at the start of their normal workweek. Many more Americans will begin feeling the repercussions of a shutdown that officially began at 12:01 a.m. Saturday after most government offices had stopped work for the weekend. The widening disruption intensifies frantic efforts by Republicans and Democrats to blame one another for the deadlock and may harden the determination of lawmakers to gain leverage from the moment.
- Celgene Corp. agreed to buy Juno Therapeutics Inc. for about $9 billion, one of its largest deals ever, in a bid to expand in the increasingly competitive landscape of cutting-edge cancer treatments. With Juno, Celgene will gain research into a novel class of therapies known as CAR-T that use the body’s own immune system to fight cancer. The Summit, New Jersey-based company will pay $87 a share in cash, according to a statement Monday. That’s 91 percent above Juno’s closing price Jan. 16, the last trading day before the Wall Street Journal reported the companies were in talks.
- Richemont’s decision to plow 2.7 billion ($3.3 billion) into e-commerce by buying out Yoox Net-a-Porter SpA is a wake-up call to skeptics who thought consumers would never buy $5,000 Cartier necklaces and $50,000 Vacheron Constantin watches online. YNAP had been targeted by short-sellers who thought Amazon.com Inc.’s appeal to buyers of books or appliances would be hard to replicate with high-end luxury. The Swiss company’s bid overwhelmed those bearish bets as the stock surged to a record.
- Greece is nearing a key milestone in its financial-crisis history, as it moves a step closer toward the exit from its rescue program, and its creditors are set to start discussing better repayment terms for its bailout loans. Euro-area finance ministers meeting in Brussels on Monday are expected to tentatively sign off on the latest set of economic overhauls the Greek government legislated, and agree to disburse 6.7 billion euros ($8.2 billion) in aid over the coming weeks.
- Tiger Global Management LLC has amassed a stake of about $1 billion in Barclays Plc, according to a person with knowledge of the hedge fund’s investment. The New York-based firm’s holding now amounts to about 2.5 percent, the person said, asking not to be identified as the investment hasn’t been publicly disclosed. The purchase makes Tiger Global a top 10 investor in Barclays, the person said. It would be the seventh largest holder, according to data compiled by Bloomberg.
- Steinhoff International Holdings NV plans to sell almost 7.5 billion rand ($622 million) of shares in South African financial services firm PSG Group Ltd., the latest in a line of disposals aimed at shoring up the retailer’s battered balance sheet. The owner of Mattress Firm in the U.S. and Poundland in the U.K. started an accelerated bookbuild to place about 29.5 million shares in Stellenbosch, South Africa-based PSG with institutional investors, Steinhoff said in astatement Monday.
- General Electric Co.’s A380 engine venture with Pratt & Whitney may be poised to muscle back in on the double-decker jet following Airbus SE’s deal to sell 36 superjumbos to Gulf carrier Emirates. While Rolls-Royce Holdings Plc is supplying Trent 900 turbines for the last 50 A380s ordered by Emirates, the Dubai airline is leaning toward a rival powerplant offered by the so-called Engine Alliance of GE and Pratt for the new batch, according to people familiar with the matter who asked not to be named.
- When euro-area finance ministers launch the process to find a new European Central Bank vice president on Monday, they won’t be flooded with nominations. So far, only Spain has said it will put forward a candidate to replace Portugal’s Vitor Constancio, whose term expires at the end of May, with Finance Minister Luis de Guindos the most likely nominee. The meeting in Brussels kicks off a two-year process to replace two-thirds of the ECB’s top officials that involves striking a balance between nationalities, gender and competency. A southern European choice such as Spain’s Guindos for the vice presidency would bolster the case for someone from the north of the continent to succeed President Mario Draghi.
- DP World Ltd., the Dubai-based port operator that manages terminals from Hong Kong to Peru, and India’s National Investment & Infrastructure Fund plan to jointly invest up to $3 billion in the South Asian nation. The companies set up a platform to invest in ports, terminals, transportation and logistics businesses in India, DP World said in a statement on Monday. The $3 billion of equity will be used to acquire assets and develop projects.
- India is considering lowering tariffs for new hydro-electric power projects to help them compete against cheaper forms of electricity, according to people with knowledge of the matter. The federal power ministry has proposed excluding the costs of building infrastructure such as roads and bridges from tariffs to make new hydropower projects viable, the people said asking not to be named as the discussions are not public yet. Those costs might be borne by the federal government and the states where the projects are located, the people said, adding that the details haven’t been finalized.
- Noble Group Ltd. said it remains in talks with “potential strategic parties” after people familiar with the matter said a Chinese conglomerate had made an approach to shareholders of the commodities trader, which is separately attempting to restructure $3.5 billion in debt. Cedar Holdings Group has expressed interest in buying control of Noble Group, the people said, asking not to be identified because the information is confidential. Noble Group’s shares soared as much as 37 percent, prompting a query from Singapore Exchange Ltd., where its stock is listed.
- Sanofi is making big deals again, as Chief Executive Olivier Brandicourt agreed to pay $11.6 billion for a Biogen Inc. spinoff a little more than a year after his last takeover attempt floundered. The French drugmaker will pay $105 a share for Bioverativ Inc., a maker of drugs for hemophilia, the companies said Monday in a statement. Sanofi’s biggest transaction in seven years represents an effort to branch out into treatments for the blood disorder, which still command lofty prices as prices for the company’s diabetes drugs face increased pressure.
- Chancellor Angela Merkel moved forward in her bid to form a fourth-term government after her prospective coalition partner agreed to shelve its misgivings and enter negotiations on a common policy platform for Germany. Merkel, 63, welcomed the outcome of Sunday’s vote by Social Democratic Party delegates in Bonn following what she termed an “intensive and contentious” debate. The chancellor’s Christian Democrats and their Bavarian allies will coordinate on strategy Monday, allowing talks aimed at a resumption of the so-called grand coalition to begin as soon as Tuesday.
- Grifols SA, Europe’s largest maker of blood-plasma products, is nearing a deal to buy the U.S. operations of rival Biotest AG to satisfy regulatory requirements for the German company’s sale to China’sCreat Group Corp., according to people familiar with the matter. The value of Biotest’s U.S. operations is about $200 million to $400 million, said the people, who asked not to be identified because the deliberations are private. Barcelona-based Grifols has emerged as the buyer for the assets following a sale process, the people said.
*All sources from Bloomberg unless otherwise specified