July 17th, 2017


Daily Market Commentary



Canadian Headlines

  • A hawkish shift from the Bank of Canada is fueling a rout in the nation’s short-term bonds, narrowing the yield spread with similar-maturity Treasuries to the least since September 2016. The yield on Canada’s two-year government bond has risen 46 basis points since July 12, when central bank officials first signaled plans to tighten policy, while the yield on similar-maturity U.S. Treasuries climbed a mere two basis points in the same period.
  • BHP Billiton Ltd.’s plan to enter the potash market with a contentious $13 billion project in Canada is adding to challenges facing the incoming chairman of the world biggest mining company. Ken MacKenzie, a 53-year-old board member who takes up the role in September, currently is on a global tour to meet investors in the wake of an activist campaign in recent months spearheaded by Elliott Management Corp. Issues of concern for some shareholders include the producer’s U.S. onshore oil and gas assets and its plans to accelerate the Jansen potash venture.
  • Quebec said it will save at least C$1.5 billion ($1.2 billion) over five years after reaching an agreement with pharmaceutical companies to lower prices for generic drugs. The deal, announced Sunday by Health Minister Gaetan Barrette, will take effect in the fall and marks the end of acrimonious negotiations during which the government threatened to pursue competitive bidding.



World Headlines

  • European stocks snapped a winning streak as a report showed June consumer prices in the euro area were unchanged from a month earlier, while miners climbed after China’s economic growth exceeded estimates. The Stoxx Europe 600 Index fell 0.1 percent at 10:21 a.m. in London, erasing gains after the June inflation data. Industrial shares slid after the report, posting the worst declines among industry groups.
  • Equities are rallying to records almost every day, while bonds are facing turmoil spurred by concern that central banks will pare — and one day end — their debt purchases.
  • Asian equities ex-Japan rose to their highest in two years as better-than expected economic data in China and receding bets on rate hike by U.S. boosted the growth outlook for the region. China small-cap shares fell amid regulatory concerns.
  • Oil steadied above $46 a barrel in New York after China’s economic growth in the second quarter slightly surpassed expectations, while OPEC’s commitment to supply curbs faltered. Futures were little changed in New York, after rising 5.2 percent last week. The world’s second-largest economy expanded by 6.9 percent from a year earlier.
  • Gold climbs for second day after U.S. data show little change in inflation and a drop in retail sales, clouding the outlook for further tightening by Federal Reserve and hurting dollar.
  • China’s old economy is displaying greatly renewed vigor. Output of steel and aluminum hit records last month, with mills and smelters boosting run-rates of the products used to make buildings, cars and appliances just as the Trump administration in the U.S. weighs steps to roll back imports. Output of crude steel was 73.23 million metric tons in June, 5.7 percent more than a year earlier, and up 4.6 percent to 419.75 million tons in the first half, the statistics bureau said on Monday.
  • U.K. house prices are “virtually at a standstill” as consumers contend with a squeeze on living standards, Rightmove Plc said. Asking prices rose by 0.1 percent in July from the previous month, the property website said on Monday. The average asking price climbed to 316,421 pounds ($412,000), a “relatively subdued” 2.8 percent increase from a year earlier. The annual rate of price gains was almost 8 percent in May last year.
  • The onshore yuan rose for the sixth day in a row, the longest run of gains since 2015, boosted by a stronger central bank fixing and data showing China’s economy held up in the second quarter. The yuan gained 0.05 percent to 6.7704 per dollar as of 5:14 p.m. in Shanghai, extending its six-day advance to 0.5 percent.
  • China’s economy grew faster than expected in the second quarter, putting the nation on track to meet its growth target this year and giving backing to officials in their campaign to corral oncoming financial risk. Data showing that the world’s second-largest economy expanded 6.9 percent in the second quarter, matching the pace from the first three months, was released hours after the Communist Party’s People’s Daily newspaper warned of potential “gray rhinos” — highly probable, high-impact threats that people should see coming, but often don’t.
  • Mexico will delay its next offshore oilfield auctions by a month, giving international bidders more time to evaluate recent major crude discoveries that highlight the potential value of the assets.
  • China is on pace to produce the least amount of oil this year since 2009 as a bear market weighs on domestic drilling. Output in January to June fell 5.1 percent from the same period last year to average 3.91 million barrels a day, according to Bloomberg calculations based on data Monday from the National Bureau of Statistics.
  • UniCredit SpA completed a deal to transfer 17.7 billion euros ($20.3 billion) of bad loans to securitization vehicles with Fortress Investment Group and Pacific Investment Management Co. as it seeks to divest most of its remaining stake in the debt.
  • The European Central Bank is on track to unwind its stimulus next year but it’s likely to drag out the process, economists say. The ECB will probably hold fire this week and wait until September before slowing the pace of its bond-buying program, a Bloomberg survey shows. The rollback is seen starting in January and taking nine months, up from thepreviously predicted seven months.
  • Procter & Gamble Co. faces a proxy fight for a board seat with activist Nelson Peltz’s Trian Fund Management, which says the consumer-products company’s stock has underperformed peers because of P&G’s “slow-moving and insular culture.”
  • Exchange-traded funds that invest in emerging-markets rebounded from last week’s losses, led by inflows to China and Hong Kong and South Korea. Deposits into U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $937.3 million in the week ended July 14 compared with losses of $155.4 million in the previous period.
  • HDFC Standard Life Insurance Co., backed by India’s largest mortgage lender, has picked banks to work on a revived initial public offering, people with knowledge of the matter said. The Mumbai-based company selected firms including Credit Suisse Group AG and Morgan Stanley to advise on the share sale, according to the people. The offering could raise about 50 billion rupees ($777 million).
  • Bitcoin briefly fell below $2,000 for the first time in two months amid anxiety its dominant status is under threat. As enthusiasts consider adopting two competing software updates, raising the possibility that bitcoin will split, it’s lost about a third of its value since attaining a peak of just below $3,000 on June 12. Calls for a revamp of the cryptocurrency come as exchanges have struggled to keep up with rising volumes.
  • Senate Republicans anxiously awaiting a key analysis of their revised health bill have more time to wait, and debate on the controversial measure that had been expected this week will also be delayed following a medical scare involving one of its potential backers.
  • For years, Google has poured time and money into one of the most ambitious dreams of modern technology: building a working quantum computer. Now the company is thinking of ways to turn the project into a business. Alphabet Inc.’s Google has offered science labs and artificial intelligence researchers early access to its quantum machines over the internet in recent months.
  • Air France-KLM’s stake in Kenya Airways Ltd. will shrink as the state carrier issues new shares in a recapitalization plan it said will help improve finances and make operations more efficient. The African airline company’s stock plunged 5 percent. The Nairobi-based airline will seek shareholder approval Aug. 7 to create 7.5 billion shares through a share split that will cut Air France-KLM’s share to 13.7 percent from 26.73 percent.
  • Telenor ASA rose the most in more than seven years after the Nordic region’s biggest phone carrier reported quarterly earnings that beat analysts’ estimates and said it will buy back shares valued at about 4.5 billion kroner ($550 million) at current prices.
  • Centrica Plc and Stadtwerke Muenchen GmbH agreed to combine assets to set up a new European exploration and production company and may sell shares in the venture after two years. The U.K.’s biggest energy supplier to homes will own 69 percent of the business and the transaction is expected to close in the fourth quarter, Centrica said Monday in a statement. The organization allows for further consolidation and joint ventures, potentially through an initial public offering in two to five years.
  • A six-year push to impose a tax on financial transactions in Europe may have run its course, with Germany and France dragging their feet as they prepare for Brexit and a redrawing of the financial map that has already begun. French Finance Minister Bruno Le Maire said earlier this month that Brexit could bring “thousands of jobs to Paris,” an opportunity that could be lost if the tax were imposed.
  • Taiwan prosecutors are investigating a criminal complaint against directors appointed by Carlyle Group LP to the board of one of the island’s biggest broadcasters over an alleged breach of their duties during efforts to offload the private equity firm’s stake.
  • Elliott Management Corp., the activist hedge fund run by billionaire Paul Singer, is planning a campaign to woo retail investors in BHP Billiton Ltd. as it pushes for a change of strategy at the world’s biggest mining company.


*All sources from Bloomberg unless otherwise specified