January 26th, 2018


Daily Market Commentary


Canadian Headlines

  • Canadian stocks closed at their lowest since December as comments by U.S. President Donald Trump strengthened the U.S. dollar and sent oil and gold prices tumbling. The S&P/TSX Composite Index fell 80 points or 0.5 percent to 16,204.01, the lowest since Dec. 27. Materials lost 1.4 percent as precious and base metals fell after Trump said he ultimately wants a stronger dollar.
  • Bank of Canada Governor Stephen Poloz said central banks aren’t going to aggressively tighten policy because there are still underlying vulnerabilities in many economies. Calling this the “‘end of easy money’ is a little too simple,” he said in a Bloomberg Television interview in Davos, Switzerland. “It’s likely that money is going to remain easy for some time yet” because “economies are still working their way through a lot of underlying stresses.” Central banks are slowly moving away from the emergency stimulus put in place after the financial crisis, and leaders gathered for the World Economic Forum have combined optimism with caution in their assessment of the outlook. The IMF sees global growth accelerating to the fastest pace in seven years, but exuberance in markets, surging debt in China and elsewhere, and political flash points — from Brexit to North Korea — are all risks.
  • U.S. President Donald Trump joined Canadian and Mexican officials in striking an upbeat tone on the North American Free Trade Agreement, with one country’s top negotiator saying talks have been constructive on divisive issues. “Will it be renegotiated? We’re trying right now,” Trump said in an interview on CNBC Thursday from the World Economic Forum in Davos, Switzerland. “I think we have a good chance, but we’ll see what happens.” Trump’s comments came as his trade representative Robert Lighthizer held a detailed Nafta meeting at the Swiss ski resort with Canadian Foreign MinisterChrystia Freeland.
  • Japan Petroleum Exploration Co. plans to write down C$750 ($607 million) on a shale gas field in Canada’s British Columbia due to the cancellation of the export project designed to sell supplies from the field to Asian markets. The impairment will likely have a negative impact of about 34 billion yen ($311 million) on the oil and gas explorer’s net income for the nine-month period ended December, the Tokyo-based company known as Japex said in a statement Friday. It still plans to develop the field.
  • Keystone XL is feasible, though a touch more costly, even after Nebraska regulators imposed an alternative route. That’s the message from TransCanada Corp.’s CEO in the latest hint the company is leaning toward building the pipeline that will ship more crude from the oil sands to refineries in the Gulf of Mexico. It doesn’t mean the Calgary-based pipeline giant has made a decision. TransCanada’s evaluation after the ruling to allow the alternate route was mostly about its legality, he said.



World Headlines

  • European equities headed higher after a mixed session in Asia, while the dollar resumed a decline that was briefly interrupted when President Donald Trump said he expected a stronger greenback. Treasuries ticked lower and gold rose. The Stoxx Europe 600 Index climbed, led by LVMH after the luxury-goods maker’s quarterly sales beat estimates. U.S. equity futures inched higher. Earlier in Asia, Japanese stocks fell while those in South Korea and Hong Kong climbed. The Bloomberg Dollar Spot Index dropped to three-year low as the euro advanced. Sterling gained after the U.K. economy expanded faster than expected.
  • Investors added the most money on record to equity funds last week as the earnings season began on a positive note and global stocks continued to post record highs. The rush to risk assets sparked a note of caution from Bank of America Merrill Lynch strategists, who see a “tactical pullback” in the stock market as likely in the first quarter, at least for the S&P 500. The bank’s “Bull & Bear” indicator has given the highest “sell” signal since March 2013, according to a report Thursday from the bank. Investors poured $33.2 billion into stocks in the week to Jan. 24, Bank of America Merrill Lynch said in a research report, citing EPFR Global data. Actively managed equity portfolios, technology funds and Treasury Inflation Protected Securities all enjoyed record inflows.
  • Asian stocks fluctuated, with Japan stocks declining after the yen strengthened against the U.S. dollar. South Korea’s Hyundai Motor Co. fell after quarterly profit missed estimates, while China banks extended gains on earnings optimism. The MSCI Asia Pacific Index was little changed at 186.67 as of 5:01 p.m. in Hong Kong. Japan’s key stock gauges declined, led by electronics makers as the yen’s appreciation fanned concern about profit outlooks. Hyundai Motor Co. and related stocks were among the region’s worst performers. Chinese banks dominated financial stocks that boosted the regional measure, which is set for its longest stretch of weekly gains since July 2014. Australia and India markets are closed for holidays.
  • Oil headed for a weekly increase as U.S. crude stockpiles dropped further and the nation’s currency weakened. Futures have climbed 3.8 percent in New York this week after reaching the highest since December 2014 on Thursday. Crude stockpiles fell for a 10th week to the lowest level since February 2015, according to Energy Information Administration data Wednesday. The weaker dollar has made oil more attractive to investors.
  • Gold heads for sixth weekly gain in seven as dollar resumes decline that was briefly halted when President Donald Trump said he favored strong greenback, after Treasury Secretary Steven Mnuchin endorsed weaker U.S. currency.
  • Iron ore’s coming under pressure. Futures in Singapore are heading for the first back-to-back weekly loss since September amid concern that mills in China are well stocked after a buying spree, boosting speculation that demand’s set to slacken in the coming weeks. The most-active SGX AsiaClear contract lost as much as 2.3 percent to $72.13 a metric ton, and was at $73.15 at 3 p.m. The contract’s down 2.3 percent this week after a 1 percent fall last week. On China’s Dalian Commodity Exchange, prices ended at the lowest level since December.
  • The U.K. economy ended 2017 on a stronger-than-expected note, but it’s moving at a pedestrian pace given the global acceleration that’s taking place. The 0.5 percent expansion in the fourth quarter announced on Friday was better than the 0.4 percent forecast by economists in a Bloomberg survey. For the full year, growth slowed to 1.8 percent, the weakest in five years, as consumers and companies felt the repercussions of the 2016 vote to the leave the European Union.
  • President Donald Trump wanted to fire Special Counsel Robert Mueller in June, three people familiar with the matter said, raising concerns among his top aides and closest supporters that Trump would put himself in legal jeopardy. Trump ultimately relented after his White House counsel Don McGahn refused to carry out the order and threatened to resign, the New York Times reported late Thursday. Trump called the story “fake news” as he arrived at the World Economic Forum in Davos, Switzerland on Friday.
  • ACWA Power International, a Saudi Arabian energy producer, is seeking to raise more than $1 billion through an initial public offering on the kingdom’s local bourse, according to people familiar with the matter. The Riyadh-based power plant developer has shortlisted four banks for the IPO after receiving pitches, the people said, asking not to be identified as the information is private. It’s planning to hire two of them to run the process as early as by next week.
  • Intel Corp., whose microprocessors dominate the personal-computer market, gave an upbeat quarterly and annual sales forecast, signaling optimism that demand will persist even as the industry scrambles to fix vulnerabilities in its PC and server chips. Sales in the current period will be about $15 billion, plus or minus $500 million, and annual revenue will rise to a record $65 billion, the company said in a statement late Thursday. The projections exceed analysts’ estimates.
  • The Dutch intelligence service passed on “crucial evidence” to the FBI about Russian interference in the 2016 U.S. presidential election, Dutch newspaper de Volkskrant reported Friday, citing the results of an investigation. Hackers from the Dutch intelligence service known as the AIVD gained access to the network of Russian hacking group “Cozy Bear” in the summer of 2014. While monitoring the group’s activities, the AIVD learned of attacks launched on the Democratic Party, according to six unidentified American and Dutch sources cited by the investigation.
  • Nestle SA plans to cut as many as 400 jobs in France as the Swiss maker of Perrier water and Herta lunch meats cuts costs. The Swiss food company announced the plan in a meeting with labor leaders, according to Daniel Loget, secretary of the worker’s consultation committee at Nestle Purina in Paris, and Patrick Fernand, a representative from the CGT union. The company has 13,000 employees in France. Nestle will offer the employees retraining to switch to other positions and accept voluntary departures, a spokeswoman for the company said.
  • Dell Technologies is considering strategic options including a public stock offering, according to people familiar with the matter, as the corporate-technology company seeks ways to boost revenue and raise funds. The board is meeting later this month and will discuss its options, said the people, who asked not to be identified because the talks are private. Round Rock, Texas-based Dell may also decide not to make any such moves at this time, the people said.
  • When it comes to finally reaching a deal to secure Freeport-McMoRan Inc.’s long-term right to keep mining in Indonesia, the ball appears to be firmly in Rio Tinto Group’s court. Over an almost two-hour conference call Thursday, Chief Executive Officer Richard Adkerson made it clear that the company’s efforts to get a new long-term contract in Indonesia — including divesting a stake in its Indonesian unit to local interests — remain challenging. However, Rio’s apparent willingness to part with its own share of future production has changed the game.
  • Honeywell International Inc.’s sales growth rose in the fourth quarter on higher demand for warehouse automation and aerospace parts. Lighting a fire under sales is one of the top priorities for Darius Adamczyk, who took over as chief executive officer in March. He plans to spin off two under-performing businesses by the end of the year to rev up growth. Organic sales, which exclude the effects of acquisitions and currency fluctuations, rose 6 percent in the quarter and 4 percent for the year, the company said in a statement Friday. Adamczyk has set a long-term growth target of 3 percent to 5 percent.
  • Novo Nordisk A/S is planning to sweeten its 2.6 billion-euro ($3.1 billion) takeover offer for Ablynx NV, which is seeking more than 40 euros a share, according to people with knowledge of the matter. The Danish drugmaker, which has been spurned twice in less than a month after offering as much as 30.50 euros apiece, is preparing a new bid that could be presented to the target as early as early as next week, the people said, asking not to be identified as the discussions are confidential. Novo aims to gain access to Ablynx’s confidential data and begin negotiations with the higher offer, though no final decision has been made, they said. Shares of the Belgian target jumped to a record.
  • As the latest China data showed some softening at the end of an upbeat year, reports for this month are looking likely to show the economy keeping pace despite slowing industrial profits. The earliest indicators for January show momentum remains intact, with sales managers the most upbeat since July, financial experts more optimistic, and satellite imagery signaling manufacturing conditions are improving for the first time in four months. That reading is in line with forecasts that both main factory gauges remained at solidly expansionary levels.
  • HNA Group Co. agreed to sell a Sydney office building to Blackstone Group, according to people familiar with the matter, in what could be the acquisitive conglomerate’s first-ever disposal of an overseas property as it struggles with mounting debts. Blackstone Real Estate Partners (BREP) Asia agreed to buy the building located at 1 York Street, said the people, who asked not to be identified because the information is private. HNA Group’s Hong Kong International Investment Group sold the tower for A$205 million ($166 million), it said in an emailed statement Friday, without identifying the buyer. It paid A$117 million for the property in Jan. 2012, the company said.
  • Sime Darby Plantation Bhd., Malaysia’s biggest listed palm oil producer, is exploring a sale of a minority stake in its Papua New Guinea unit, people familiar with the matter said. In any deal, Sime Darby Plantation would seek a valuation for New Britain Palm Oil of at least $1.7 billion, the amount it paid when it acquired the company in 2015, the people said. Any deal would add to the $5.6 billion of announced acquisitions of agriculture-related companies in Asia over the last 12 months, data compiled by Bloomberg show.
  • UBS Group AG plans to keep the maximum amount of jobs and business in the U.K. as the country works toward a solution with European authorities on its exit from the trading block. The bank considers a centralized model more efficient and favors a European financial center that can “balance” New York, investment banking head Andrea Orcel said in an interview on Friday with Bloomberg Television. In general, Zurich-based UBS is seeking to keep “as much as we can in the U.K.,” he said.



*All sources from Bloomberg unless otherwise specified