July 13th, 2018
Daily Market Commentary
- Canadian stocks rose the most in two and a half months to a record high, following global benchmarks in rebounding from Wednesday’s trade-related slump. The S&P/TSX Composite Index added 150 points or 0.9 percent to 16,567.42 after China appeared to tone down its response to U.S. tariff threats. Technology shares jumped 3 percent to the highest since 2008, with Constellation Software Inc. adding 4.6 percent.
- The Stoxx Europe 600 Index edged higher, with trading volume more than 20 percent lower than the 30-day average and commodity producers underperforming. Stocks in Asia were set for a first weekly advance in five as benchmarks in Japan, Hong Kong and South Korea gained.
- U.S. equity futures gave up gains and European stocks pared an advance as China’s record trade surplus with America served as a reminder that trade tensions aren’t going away, even as investors’ focus shifted to second-quarter earnings. Futures on the S&P 500, Dow Jones and Nasdaq fluctuated between gains and losses before earnings from some of America’s biggest banks, including JPMorgan Chase & Co.
- Chinese equities achieved their first weekly advance since mid-May, suggesting they have priced in the latest salvo in a trade dispute with the U.S., while the yuan fell near its weakest in 11 months. The Shanghai Composite Index has added 3.1 percent this week, yet it remains one of the world’s worst performing benchmarks after tumbling 14 percent over the previous seven weeks. Analysts said the market may have found a floor after the severe slide, boosted by hopes the Chinese government will ease liquidity conditions. The yuan was poised for a fifth week of losses.
- Oil headed for the biggest weekly loss in more than five months as escalating trade tensions between the U.S. and China rattled investors, while Libya’s plans to restore output allayed fears of a supply crunch. Futures in New York plunged 5 percent this week as U.S. President Donald Trump doubled down on a trade war with China by threatening tariffs on nearly half of all American imports from the Asian nation. Libya restarted a key field that had been shut since February after regaining control of ports from a political faction. Nonetheless, the International Energy Agency warned on Thursday that spare capacity may be stretched to the limit.
- Gold heads for fourth weekly drop in five as stronger dollar curbs bullion’s appeal. Silver and palladium are on course for longest run of weekly declines since 2015.
- China’s monthly trade surplus with the U.S. rose to a record in June, underlining the imbalance at the heart of an escalating trade war between the world’s two largest economies. The trade surplus with the U.S. stood at $28.97 billion, the highest in any month in data back to 1999. Exports climbed to $42.62 billion, also a high, the customs administration said on Friday.
- JPMorgan Chase & Co. said Friday its book of what it considers core loans expanded 7 percent in the second quarter and trading revenue jumped 13 percent, surprising analysts who’d been forecasting mediocre results in both businesses. Strength in the loan portfolio put the lender on pace to meet its full-year target, which banked on companies borrowing to fund growth plans in the wake of President Donald Trump’s tax cuts. And volatility returned to stock markets in June as talk of a trade war started to turn from risk to reality, boosting trading results far beyond the bank’s expectation at the end of May that revenue would be flat from last year.
- Johnson & Johnson was ordered by a jury to pay $4.69 billion to women who claimed asbestos in the company’s talc products caused them to develop ovarian cancer, marking the sixth-largest product-defect verdict in U.S. history. The award of $4.14 billion in punitive damages on top of the $550 million meant to compensate each of 22 women and their families for their losses sent the company’s shares down by as much as 3.3 percent in German trading.
- Netflix Inc. will get a chance next week to validate the $46 billion added to its market value since the company’s blowout earnings report in April. The main question hanging over Netflix’s second-quarter results — much like the first — is whether the company can add enough streaming subscribers to satisfy investors, whose bullish bets have made the stock the second-best performer in the S&P 500 Index this year. Netflix silenced critics in the first quarter, adding almost 1 million more subscribers than analysts projected. But analysts have made that task more difficult in recent months by raising subscriber estimates, even as some question the stock’s valuation.
- The U.K. government moved to limit the damage from President Donald Trump’s outspoken attack on Theresa May, after he warned that her soft Brexit plan will likely end hopes of a trade deal with the U.S. Foreign Office Minister Alan Duncan sought to talk down the differences, insisting that the president’s visit was “most definitely” a success so far, while rejecting his warning that May’s Brexit plan to keep close ties with the EU would torpedo a U.S. trade deal.
- U.S. Commerce Secretary Wilbur Ross said Thursday that he would divest all his remaining equity holdings after the government’s top ethics watchdog said his failure to sell off assets that could pose a conflict of interest “created the potential for a serious criminal violation.” In his ethics agreement, Ross, a New York businessman, had pledged to divest numerous assets, including all his holdings in Invesco Ltd., within 90 days of his confirmation, and more complex assets within 180 days.
- Less than a week into President Donald Trump’s trade war with China, global automakers have shown there are ways to bypass the battle — and scoring a win for Beijing in the process. Tesla Inc. and BMW AG are among the biggest potential losers from Beijing’s retaliatory tariffs on car imports from the U.S. because much of their production is centered in America. They’re now doubling down in China: this week, Tesla announced its first factory outside the U.S. while BMW is poised to become the first foreign manufacturer to own majority control of a Chinese automobile venture. Cars made locally by foreign brands will dodge import levies.
- They were the planes that promised a new era of profitable flying for airlines. Instead, a series of engine glitches has left much of the aviation industry with a severe case of jet lag. The revamped Airbus A320neo narrow-body and Boeing’s rival 737 Max, together with the U.S. company’s bigger 787 Dreamliner, came with the enticement of drastically reduced fuel burn, the biggest single cost for carriers. While the three models have largely made good on that pledge, the achievement has been undermined as the turbine faults result in a seemingly never-ending stream of safety warnings and aircraft groundings.
- Walmart Inc. said it’s committed to building its Japanese business, downplaying media reports that the retailing giant will sell its Seiyu chain. The world’s largest retailer has held preliminary talks with investment banks about a possible sale of Seiyu, according to people with knowledge of the matter, who asked not to be identified because the information is private. Walmart hasn’t started a formal sale process, and there’s no certainty the deliberations will lead to a transaction, the people said.
- BNP Paribas SA, Credit Agricole SA and four other French lenders won a European Union court fight against the European Central Bank’s refusal to change the way it calculates the leverage ratio. The lenders, which also include Societe Generale SA and La Banque Postale SA, argued that the ECB overstepped its authority by rejecting their bid to exclude some regulated tax-free savings accounts from the leverage-ratio calculation in August 2016.
- The Trump administration’s renewed battle against AT&T Inc.’s Time Warner Inc. deal signals that it still sees a path to undoing the blockbuster merger — even after a stinging rebuke of its case last month. Rather than walk away, the Justice Department’s antitrust division took a big gamble Thursday, with a one-sentence notice of appeal filed in federal court in Washington. In doing so, it risks a second defeat that could lead to binding precedent that makes future merger challenges harder.
- Viva Energy Group Ltd., an Australian oil refiner and fuel retailer backed by a Vitol Group Ltd.-led group, fell on its first day of trading after capping the nation’s biggest initial public offering in almost four years. Shares in Viva Energy slumped 4 percent to end the session at A$2.40 in Sydney, compared with the benchmark S&P/ASX 200 Index, which was little changed. Vitol Investment Partnership raised about $2.65 billion ($2 billion) this week after selling shares at A$2.50 apiece, which is at the bottom end of its marketed range. It’s the nation’s largest IPO since health insurance company Medibank Private Ltd. raised A$5.7 billion in late 2014.
*All sources from Bloomberg unless otherwise specified