January 30th, 2018
Daily Market Commentary
- Canadian stocks fell the most since August as every sector but one declined and government bond yields continued to rise, trading at their highest level since 2014. The S&P/TSX Composite Index lost 145 points or 0.9 percent to 16,094.72, the lowest since mid-December. Health-care shares led the decline, falling 2.3 percent as cannabis shares continued to retreat from record highs.
- Blackstone Group LP, the private equity giant led by Stephen Schwarzman, is considering its biggest foray yet into the $27 billion-a-year industry for financial information. The firm is in talks to buy a 55 percent stake in Thomson Reuters Corp.’s largest unit, which supplies data and analytical tools to financial professionals, a person familiar with the matter said. Thomson Reuters, controlled by one of Canada’s richest families, would cede its flagship Eikon terminal business while keeping the news operations, as well as ownership of its legal, tax and accounting arm.
- Toronto’s housing market has cooled for seven months, with prices falling and listings surging. The market has begun to buckle under a raft of measures to curb prices that were soaring at a 20 percent clip a year ago and saddling Canadians with debt, part of a global real-estate boom that’s swept cities from Hong Kong to New York. The latest move requires that even people with a 20 percent down payment, who don’t need mortgage insurance, prove that they can make payments at much higher rates. The so-called stress tests, which already exist for insured mortgages, will be calculated at a rate of at least 2 percentage points above the contracted rate.
- Canada’s exchange-traded fund industry will nearly triple over the next five years to C$400 billion ($325 billion) as more institutional investors are drawn to the low-cost funds, according to a forecast by Bank of Montreal. The sector has been on a tear, attracting a record C$26 billion of inflows in 2017, up 56 percent from the year before, according to data from Canada’s fourth-biggest lender. This brought total assets to C$147 billion, still a tiny slice of the $4.6 trillion global industry.
- European stocks fall, mirroring declines in Asian shares and U.S. index futures. The Stoxx Europe 600 Index drops 0.5%, declining for the fourth time in five days. Miners are among the biggest decliners as copper and gold prices fall. Index losses are tempered by a gain for Swatch after its earnings beat estimates, while Siemens Gamesa also advances after saying it’s on the right path to meet 2018 targets.
- U.S. stock index futures point to another drop on Wall Street, with shares set to resume Monday’s slump in which the S&P 500 suffered its biggest fall in almost five months amid mounting worries over a rally in 10-year Treasury yields to levels not seen since 2014. At 2.7 percent, yields are starting to hurt stocks in sectors paying the highest dividends such as real estate, telecoms and utilities, while also putting the spotlight on companies with high debt levels which could end up paying higher financing costs.
- Most equity indexes fell in Asia, with Japanese stocks declining the most in two months, as a selloff in technology shares broadened. The MSCI Asia Pacific Index slipped 1.2 percent to 184.76 as of 4:43 p.m. in Hong Kong. Japan’s Topix Index dropped the most in eight weeks, while China financial companies dragged down Hong Kong’s H-share gauge by 2 percent, with Bank of China Ltd. and China Minsheng Banking Corp. both falling by more than 3 percent.
- Oil’s slowing down as danger signs flash ahead. Futures fell for a second day as U.S. crude stockpiles were seen expanding for the first time in 11 weeks, ending a record run of declines. A sharp contraction in Brent’s premium to West Texas Intermediate may lead to further inventory gains as U.S. exports grow less economical.
- Gold rises as dollar weakens and investors await Federal Reserve meeting, U.S. jobs data this week for clues on outlook for monetary policy.
- President Donald Trump plans to promote the Republican tax overhaul he signed into law in his first State of the Union speech on Tuesday night, but fiscal headwinds mean he’s likely to have less legislative success in his second year in office. Democrats and Republicans have voiced concerns about the administration’s approach to financing a large-scale infrastructure program and military investment — two key themes expected in Trump’s speech — after passing a $1.5 trillion tax bill that’s projected to balloon the federal deficit.
- The euro-area economy finished off last year with another quarter of robust growth, and confidence among businesses and households suggests there’s no slowdown in sight. Gross domestic product rose 0.6 percent in the three months through December, in line with forecasts and marking a 19th straight expansion. The French and Spanish economies, two of the bloc’s largest, both recorded similarly solid rates of growth.
- Ryanair Holdings Plc recognized the union representing its U.K. pilots, reaching its first formal labor agreement in the discount airline’s history. The 600 U.K. pilots directly employed by the carrier will be represented by the British Airlines’ Pilots Association, Ryanair said in a statement Tuesday. All 15 of its bases in the market — the company’s biggest — have also voted to accept management’s offer to lift pay by 20 percent.
- Pfizer Inc. is joining the long list of big corporations that expect to benefit from the lower tax rate in the U.S. and pledged to invest in the country, through manufacturing and bonuses to its workers after recent tax reform. The drugmaker anticipates an adjusted tax rate for 2018 of 17 percent, down from 23 percent last year, according to a statement Tuesday. The company also said that as a result of the new tax legislation, it expects a repatriation tax liability of about $15 billion over eight years.
- Dalian Wanda Group Co. said it is getting a 34 billion yuan ($5.4 billion) investment in its property arm from a group of investors and will strive to take the company public as soon as possible, easing pressure on the conglomerate to meet a listing deadline. The unit’s bonds soared. Chinese internet giant Tencent Holdings Ltd. is leading the acquisition of the 14 percent stake in billionaire Wang Jianlin’s Wanda Commercial Properties Co., Wanda said on its website late Monday.
- Amazon, Berkshire Hathaway, JPMorgan to create independent company focused on technology solutions “that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”
- Aetna Inc., the health insurer being bought by CVS Health Corp., said the new tax law will boost gross profits by about $800 million. At least half of the tax-cut benefit will flow to the bottom line, while other proceeds will go to lower insurance premiums and increase investment spending, Aetna said in a statement on Tuesday. The insurer also posted fourth-quarter 2017 profit of $1.25 a share, excluding some items, beating analysts’ estimates.
- Investors are expecting more from Mark Carney as the Bank of England governor prepares for his first major U.K. appearance of 2018. Money markets show traders assign a roughly 50 percent chance of another quarter-point BOE interest-rate hike in May — rising to 80 percent by August. Both figures have climbed since the central bank’s last meeting in December, and have also accelerated in 2018 amid improving jobs and growth data.
- Verizon Communications Inc. has dropped all plans to sell phones by Chinese manufacturer Huawei Technologies Co., including the new Mate 10 Pro, under pressure from the U.S. government, according to people familiar with the matter. The move follows AT&T Inc.’s decision earlier this month not to introduce the Mate 10 Pro to the U.S. market. Huawei devices still work on both companies’ networks, but direct sales would’ve allowed them to reach more consumers than they can through third parties.
- The center of gravity in Europe’s natural gas market is heading south as one of the continent’s biggest pipeline operators builds a system that could make Italy an exporter of the fuel for the first time. Fortified with new supplies due from a $5.6 billion pipeline link to the Caspian Sea as well as tankers full of gas in its liquid form, Snam SpA and its Chief Executive Officer Marco Alvera are seeking to place Italy at the crossroads of Europe’s gas trade.
- A U.S. House committee voted Monday to seek White House clearance to publicly release a classified Republican memo that alleges bias and counterintelligence abuses in government surveillance of people surrounding President Donald Trump, members of the panel said. Representative Adam Schiff, the ranking Democrat on the House Intelligence Committee, said the majority-Republican panel decided to seek release of the memo on a party-line vote. The Republican majority refused along party lines to disclose a competing memo written by Democrats.
- SAP SE Chief Executive Officer Bill McDermott has backed U.S. President Donald Trump’s tax plan, and revealed a $2.4 billion deal forCallidus Software Inc., its biggest acquisition in more than three years. SAP said Tuesday it will pay $36 a share for Dublin, California-based Callidus, known as CallidusCloud, to give Europe’s biggest software company access to new sales analytic and customer engagement tools.
- Exxon Mobil Corp. is set to invest $50 billion over the next half decade in a return to the oil giant’s spending habits before crude suffered its worst price rout in a generation. With oil prices now hovering above $65 a barrel in New York, Exxon Chief Executive Officer Darren Woods disclosed a program that includes the Permian Basin of West Texas and New Mexico, a hotbed of U.S. shale drilling where Exxon has been aggressively expanding for years.
- Lloyds Banking Group Plc is changing the way it reports some of its key numbers ahead of its annual results next month. The earnings of the consumer finance unit, whose assets increased by 12 percent to 39.2 billion pounds ($54.8 billion) in 2016, will be merged with the retail division, according to a memo sent to investors and seen by Bloomberg News. During 2016, the bank had average assets of 303 billion pounds in its bigger retail unit.
- Royal Philips NV shares dropped after fourth-quarter profit missed estimates as a weaker dollar ate into earnings. Adjusted earnings before interest, taxes and amortization rose 9 percent to 884 million euros ($1.1 billion), the maker of medical scanners said in a statement on Tuesday. That missed the average estimate of analysts surveyed by Bloomberg of 898.2 million euros.
- China’s government, which has been probing alleged financial wrongdoing at Anbang Insurance Group Co., is seeking to broker the sale of a stake in the insurer, people with knowledge of the matter said. Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, has held preliminary discussions about buying a stake in Anbang, although failed to reach any agreement, said the people. It wasn’t clear what the potential size of any stake sale would be, or who the selling shareholders are. The people asked not to be named because the deliberations are private.
- PetroChina Co., the country’s biggest oil and gas producer, forecast that full-year profit rebounded off a record low and may have tripled amid cost cutting and higher energy prices. Net income for 2017 may have jumped by as much as 16 billion yuan ($2.5 billion), the state-run oil giant said in a filing to the Hong Kong stock exchange, citing Chinese accounting standards. That implies net income of as much as 23.9 billion yuan. Profit at the Beijing-based company will snap three years of declines after posting its worst-ever profit in 2016 as falling crude prices crushed profitability.
- China Evergrande Group, once China’s most leveraged developer, is offering HK$23 billion ($3 billion) of convertible perpetual securities as it seeks capital to refinance debt. The deal has a conversion premium of 50 percent to 60 percent over a reference share price of HK$27.85, according to terms for the deal obtained by Bloomberg. The securities have an initial annual distribution rate of 3 percent to 4 percent, with a 4 percent step-up margin every three years, the terms show.
- Varian Medical Systems Inc. agreed to buy Australia’s Sirtex Medical Ltd. for about A$1.6 billion ($1.3 billion) in a bid by the U.S. company to add radiation medicine to its portfolio for cancer treatments. Sirtex investors will receive A$28 in cash for each share, Palo-Alto, California-based Varian said in a statement Tuesday. That’s 49 percent higher than the stock’s latest closing price in Sydney. Sirtex directors unanimously backed the offer, following multiple unsolicited proposals to acquire the company from other parties, according to a Sirtex statement.
- Saudi authorities have reached agreements to recover more than 400 billion riyals ($107 billion) from people held under a controversial corruption investigation but refused to settle with 56 suspects who remain in custody. The payments are a combination of “various types of assets, including real estate, commercial entities, securities, cash and other assets,” Attorney General Sheikh Saud Al Mojeb said in a statement released by the government’s Center for International Communication.
*All sources from Bloomberg unless otherwise specified