January 24th, 2019

Daily Market Commentary

 

Canadian Headlines

• Rogers Communications Inc. raised its dividend for the first time since 2015 as it reported a better-than-expected fourth-quarter profit. The cable and wireless company will now pay a quarterly dividend of 50 cents per share, up from its previous payment to shareholders of 48 cents per share. The increased dividend came as Rogers said it earned $502 million or 97 cents per diluted share for the quarter ended Dec. 31. That compared with a profit of $499 million or 97 cents per share in the same period a year earlier.
• Bombardier and Triumph report agreement for Bombardier to acquire Triumph’s Global 7500 wing manufacturing operations and assets. Bombardier will assume ongoing working capital investments and usual costs associated with the program’s production ramp-up, which are expected to fall within its consolidated 2019 adj. EBIT and free cash flow guidance ranges, and 2020 objectives.
• One of Canada’s largest pension funds is boosting infrastructure and financial services investments in Colombia, even as other foreign investors have pulled back. Caisse de depot et placement du Quebec, or CDPQ, Canada’s second-largest pension manager, has committed roughly $3 billion (C$4 billion) in the country since 2017. Colombia is one of five principal emerging countries where CDPQ is focused as it seeks to grow its exposure to Latin America and Asia, said Anita Marangoly George, executive vice president for growth markets.

World Headlines

• Stocks in Europe rose alongside Asian equities and U.S. index futures as a rally in technology shares lifted the mood for investors in a lackluster week. The dollar climbed and Treasuries advanced with European bonds. The euro weakened as regional economic data fell short of forecasts, adding attractiveness to government bonds, which rose across the region hours before the European Central Bank’s next policy decision is announced.
• Futures in the tech-heavy Nasdaq index pointed to a strong U.S. open, as did contracts in the Dow and S&P 500, which may test its 50-day moving average. Investors are operating with few signals on China trade talks and in a drought of data on the U.S. economy thanks to the partial government shutdown that’s persisting as Republicans and Democrats dig their heels in over opposing positions. The tit-for-tat battle between President Donald Trump and Democrat leader Nancy Pelosi appears to have escalated before a vote set for later on Thursday.
• Oil traded just below $53 a barrel as a darkening outlook for the global economy offset the risk of American sanctions on OPEC member Venezuela’s crude. March futures in New York were little changed after dropping 0.7 percent on Wednesday. An extended shutdown of the government could wipe out U.S. economic growth in the first quarter of 2019, an economic adviser to President Donald Trump said. The U.S. recognized Juan Guaido as the interim president of Venezuela on Wednesday, a move that carries the risk of further disruption to the nation’s oil exports.
• Gold remains in the holding pattern that has characterized its start to the year as investors weigh rising concern over the outlook for global economic growth while awaiting fresh developments on U.S.-China trade talks.
• The U.S. government shutdown risks putting a dent in both the dollar and Treasuries if it drags on. A quick resolution could do the same. A drawn-out spending battle may collide with the looming debate over America’s borrowing limit, potentially raising the odds of a U.S. credit rating downgrade, as occurred in 2011. But some observers reckon the market reaction this time around would be different: Instead of driving a haven trade into Treasuries, concerns about the U.S.’s growing debt burden could reverse that flow, pushing sovereign yields higher and the dollar lower.
• Two Senate votes on Thursday aimed at ending the partial government shutdown threaten to leave lawmakers and President Donald Trumpin the same place they started: deadlocked. Senate Democrats are poised to block a GOP bill to open the government that includes $5.7 billion for Trump’s proposed border wall. A separate Democratic bill that would temporarily fund the government without funding the wall is unlikely to get the 13 Republican votes needed to advance.
• Southwest Airlines Co. said strong business travel demand and prices for last-minute tickets will fuel improvement in a gauge of pricing power early this year. Revenue from each seat flown a mile will rise 4 percent to 5 percent this quarter from a year earlier, the carrier said Thursday as it reported earnings. The outlook exceeded forecasts from Delta Air Lines Inc. and United Airlines, which reported results earlier.
• A New York investment firm said it’s seeking to replace all of PG&E Corp.’s board members at the annual shareholder meeting, and urged the company not to take action on its bankruptcy plans. BlueMountain Capital Management LLC plans to introduce this “new slate” of board members no later than Feb. 21, ahead of the annual shareholder meeting scheduled for May 21, according to a statement Thursday. The investor previously urged the company not to file for bankruptcy in a Jan. 17 letter.
• Chancellor Angela Merkel’s successor as leader of the Christian Democratic Union party chided President Donald Trump for upending global agreements and pressuring allies. Annegret Kramp-Karrenbauer said in a Bloomberg Television interview at the World Economic Forum that support for a major Russian gas pipeline, Gazprom’s Nord Stream 2, must take into account security interests in eastern Europe. But she took aim at U.S. pressure, including against the pipeline, more broadly.
• International Airlines Group says it doesn’t intend to make offer for Norwegian Air Shuttle and it will be selling its 3.93% shareholding in Norwegian in due course, co. says in statement.
• Bank of China Ltd. is set to offer the first perpetual bonds from a Chinese lender on Friday, a landmark deal that will pave the way for similar fundraising from financial institutions. The bank is looking to issue as much as 40 billion yuan ($5.9 billion) of perpetual bonds to replenish additional tier 1 capital, it said in a filing. China’s financial regulators last year called for more innovative capital instruments to expand funding channels for banks in order for them to boost support to the real economy.
• Juan Guaido says he is president of Venezuela. So too, of course, does Nicolas Maduro, the authoritarian leader who has ruled the crisis-ravaged country since the death of his mentor Hugo Chavez six years ago. Guaido has the backing of the people, thousands of whom took to the streets Wednesday, along with a host of foreign governments, led by the U.S., Canada and Brazil, that recognized the congressman as the rightful head of state. But Maduro has control of the security forces, the military, the courts, the treasury coffers and the state oil giant.
• President Donald Trump said he would deliver his State of the Union address when the partial government shutdown is over, clarifying his plans hours after House Speaker Nancy Pelosi blocked him from delivering the speech in the chamber while federal agencies are closed. “As the Shutdown was going on, Nancy Pelosi asked me to give the State of the Union Address. I agreed,” Trump said in the Twitter post. “She then changed her mind because of the Shutdown, suggesting a later date. This is her prerogative – I will do the Address when the Shutdown is over.”
• Google, whose employees have captured international attention in recent months through high-profile protests of workplace policies, has been quietly urging the U.S. government to narrow legal protection for workers organizing online. During the Obama administration, the National Labor Relations Board broadened employees’ rights to use their workplace email system to organize around issues on the job. In a 2014 case, Purple Communications, the agency restricted companies from punishing employees for using their workplace email systems for activities like circulating petitions or fomenting walkouts, as well as trying to form a union. In filings in May 2017 and November 2018, obtained via Freedom of Information Act request, Alphabet Inc.’s Google urged the National Labor Relations Board to undo that precedent.
• Renault SA named a new leadership team hours after Carlos Ghosn resigned as chairman and chief executive officer from a prison cell in Japan, where he’s been held for more than two months. Michelin CEO Jean-Dominique Senard, 65, was appointed chairman of France’s largest carmaker, Renault said in a statement Thursday. He’ll be given full responsibility for managing the alliance with partners including Nissan Motor Co. Thierry Bollore, 55, was named CEO, a role he has held on an interim basis since shortly after Ghosn’s arrest in November.
• Kuwait Finance House offered to buy Bahrain’s Ahli United Bank BSC in a share swap deal, a potential combination that would create the Gulf’s sixth-biggest lender with $92 billion in assets. HSBC Holdings Plc and Credit Suisse Group AG, the advisers on the merger process, recommended a swap ratio of 1 Kuwait Finance House share for every 2.325581 Ahli United shares, the banks said. The ratio is subject to satisfactory due diligence and regulatory approvals.
• EQT Partners is spending more than $1 billion to buy Osmose Utilities Services Inc., a company that provides maintenance and restoration services for telephone poles and other infrastructure, according to people with knowledge of the matter. EQT, the largest private equity firm in the Nordic region, is acquiring the business through its infrastructure fund from Kohlberg & Co., the people said, asking not to be identified as the details are private.
• A Chinese furniture retailer backed by tech giant Alibaba Group Holding Ltd. is gaining a stock exchange listing through a $5.6 billion share transaction as the battle for the nation’s surging home improvement market heats up. As part of the deal, department store operator Wuhan Zhongshang Commercial Group Co. will issue about 6 billion shares to Beijing Easyhome Furnishing Chain Store Group Co. owners at 6.18 yuan each, effectively gaining a listing in Shenzhen, according to an exchange filing late Wednesday. Wang Linpeng, Easyhome’s owner, and parties acting in concert with him will own 61 percent of Zhongshang after the transaction.
• Tencent Holdings Ltd. as well as private equity firms Hillhouse Capital and KKR & Co. are considering bids to acquire a major stake in gaming company Nexon Co., people familiar with the matter said. Tencent is evaluating a possible bid and could team up with some investment funds, the people said, asking not to be identified because the deliberations are private. Other global companies as well as buyout funds have expressed interest in a potential deal for Nexon, the people said. Blackstone Group LP is also considering a bid, a person familiar said.

*All sources from Bloomberg unless otherwise specified