July 17th, 2019

Daily Market Commentary

  • Canadian Headlines
    • Canadian stocks were little changed Tuesday, while U.S. shares fell from a record high as President Donald Trump said he could impose more tariffs on China. The S&P/TSX Composite Index fell less than 0.1% to 16,502. Industrial stocks advanced, led by Canadian Pacific Railway Ltd. after the company beat second-quarter earnings estimates and closed at a record high. Meanwhile, the Bank of Canada is taking over a new risk-free overnight rate that could become the dominant benchmark for the country’s C$12 trillion ($9.2 trillion) market for loans and derivatives.
    • Heavy Canadian crude prices narrowed to the smallest discount against U.S. benchmark futures since April as crude-by-rail shipments were forecast to increase. Western Canadian Select, an oil sands benchmark, shrank $1.30 to $9.20 a barrel below West Texas Intermediate crude Tuesday, data compiled by Bloomberg show. Prices surged after Canadian Pacific Railway Ltd. said crude-by-rail volumes were expected to rise 20% in the third quarter from about 160,000 barrels a day in the second quarter.
    • Air Canada has surged 67% to a record this year, the best-performing stock in the Bloomberg World Airlines Index. A deal for tour operator Transat AT promises to accelerate the carrier’s global presence, this time in leisure. Revenue from outside Canada has been growing, pushing domestic sales to about a third of the total in 2018 from 40% in 2014, according to data compiled by Bloomberg.
    • Acacia Mining Plc hit another roadblock in Tanzania, two days before a deadline for its parent Barrick Gold Corp. to make an offer to minority shareholders. Tanzania ordered the company’s core gold mine, North Mara, to stop using its tailings storage from Saturday because of alleged seepage from the facility, Acacia said in a statement on Wednesday. The miner also said an international arbitration with Tanzania could be postponed to give the government time to settle a wider dispute through talks with Barrick.

     

  • World Headlines
    • European stocks halted a winning streak as worries about U.S.-China trade talks tempered gains sparked by earnings at companies including Swatch Group AG. The Stoxx Europe 600 Index dropped less than 0.1% as of 8:06 a.m. in London. Swatch led personal and household-goods shares to the best performance among industry groups after reporting first-half operating profit that beat analyst estimates. Swedish Orphan Biovitrum AB, SKF AB, GVC Holdings Plc and ASML Holding NV also advanced after reporting results.
    • U.S. equity futures gained along with European stocks as solid economic data and a raft of corporate earnings offset fresh trade tensions. Treasuries were steady and European government bonds climbed. Contracts on the S&P 500, Dow Jones and Nasdaq pointed to a firmer U.S. open, even after sentiment overnight was dented by President Donald Trump saying he could impose more tariffs on China.
    • Benchmarks in Japan, Korea and China fell, while Australian stocks rose. The dollar held near a one-week high, while the euro erased a decline after June inflation data for the common-currency region largely met economists’ expectations. Crude oil rose for the first time in three days.
    • Oil eked out a gain, after its biggest loss in two weeks, as the Trump Administration rekindled fears about global demand with a threat of new China tariffs and signaled a possible easing of tensions with Iran. Futures edged higher in New York after tumbling 3.3% on Tuesday. President Donald Trump reiterated that he could impose additional duties on Beijing if he wants after agreeing to a trade-war truce with his counterpart Xi Jinping last month, while Secretary of State Mike Pompeo said Iran indicated it would be open to talks if some conditions were met. U.S. inventory figures were mixed as crude stockpiles fell, but that was offset by a large rise in distillates, the API reported.
    • Gold held a decline as better-than-projected U.S. data raised doubts over the Federal Reserve’s monetary policy path after an expected interest rate cut at the end of this month. U.S. retail sales and factory output in June exceeded expectations and underscored steady economic growth. Fed Chairman Jerome Powell saidTuesday the central bank is “carefully monitoring” downside risks to U.S. growth and “will act as appropriate to sustain the expansion,” echoing his Congressional testimony last week.
    • The pound may fall to parity with the dollar on a no-deal Brexit, according to Morgan Stanley. A drop to historic lows would come under the market’s worst-case scenario of the U.K. leaving the European Union without a deal, a risk that the bank says is growing. The pound hit a two-year low below $1.24 Wednesday after both contenders for prime minister hardened their Brexit rhetoric, and for Morgan Stanley it could get much worse with a tumble to $1.00-$1.10 on a crash exit.
    • European car registrations fell sharply in June, resuming a downward spiral this year that has seen profit warnings at German manufacturer Daimler AG and a quarterly automotive division loss at rival BMW AG. Sales dropped 7.9% to 1.49 million cars, the European Automobile Manufacturers’ Association said Wednesday, the worst monthly decline since December. France and Spain had falls of more than 8%, while German and U.K. sales fell 4.7% and 4.9% respectively.
    • CSX Corp. shares could fall to levels they haven’t seen since March after its “fairly sober assessment” of freight markets prompted the company to cut its forecast, Citi analysts wrote. The railroad operator has already slumped 7.5% to $73.61 in pre-market trading in New York Wednesday, which would be its lowest intraday price since May. But Citi’s Christian Wetherbee says the stock could fall to the low $70s after forecasting a decline in annual revenue. The outlook may also pressure peers, he said. including Union Pacific Corp., Norfolk Southern Corp. and Genesee & Wyoming Inc., he said.
    • Volkswagen AG is making headway toward an overhaul meant to tackle the disruptive shift to self-driving and electric cars, according to the leader of its newly public trucks division. The partial listing of Traton SE “was an important move for the further strategic development of the group,” Andreas Renschler said in an interview. “It showed that we’re making progress.” Last month’s initial public offering brought the first tangible results from an asset review that’s lasted three years so far. VW’s byzantine governance structure, covering 12 vehicle brands and ownership ranging from family and state shareholdersto labor unions, has proven tension-prone during that time.
    • Amazon.com Inc. becomes the latest U.S technology giant targeted by European Union antitrust chief Margrethe Vestager as the watchdog opened a probe into suspicions the retailer misuses data from smaller traders. The European Commission will assess the company’s “dual role” as a retailer and host to other sellers, the authority said in an emailed statement on Wednesday. Ramping up scrutiny first mentioned last year allows officials to start to build a case that could ultimately lead to fines or an order to change the way the Seattle-based company operates.
    • U.S. companies are regaining their dominance in the world’s stock markets. They accounted for about 56% of the total market value of the MSCI All-Country World Index at the end of last week, according to data compiled by Bloomberg. Their weight in the index, consisting of companies in developed and emerging markets, was the highest since August 2003. The U.S.’s ascent was highlighted in a chart on Driehaus Capital Management LLC’s Twitter feed Tuesday that was attributed to Goldman Sachs Group Inc.’s research unit.
    • BofA shares were slipping in pre-market trading as the bank’s net interest income and net interest margin, or NIM, both missed estimates, while profit beat. Adjusted earnings per share of 74 cents topped an estimate of 71 cents, but Chief Financial Officer Paul Donofrio said in the earnings statement that year-over-year EPS growth was helped by buying back 7% of the bank’s shares in the past 12 months.
    • Singapore’s exports plummeted in June amid a worsening trade war, spelling more bad news for the city state’s economy. Non-oil domestic exports contracted 17.3% from a year ago after falling a revised 16.3% in May, Enterprise Singapore said in a statement on Wednesday. That was worse than the median estimate of a 9.6% decline in a Bloomberg survey of economists.
    • Ant Financial Services Group is in talks with lenders for a syndicated loan, according to people familiar with the matter, which could mark its return to the debt market after a two year-gap. The Chinese financial services giant is self-arranging a $2 billion loan for general corporate purposes, said the people, who are not authorized to speak publicly and asked not to be identified. Terms of the borrowing facility are yet to be finalized, said the people. Ant Financial declined to comment via an emailed statement.
    • President Donald Trump reiterated that he could impose additional tariffs on Chinese imports if he wants, after promising to hold off on more duties in a trade-war truce he reached with China’s Xi Jinping last month. “We have a long way to go as far as tariffs where China is concerned, if we want. We have another $325 billion we can put a tariff on, if we want,” Trump said. “So, we’re talking to China about a deal, but I wish they didn’t break the deal that we had.”
    • India is considering a plan that would increase import duties on refined palm oil from Malaysia to the same level as supply from Indonesia, according to a person with direct knowledge of the matter. The proposal is to raise the duty on shipments from the world’s second-largest producer to 50% from 45%, said the person, who asked not to be identified because the information is not yet public. A final decision will be taken by the finance ministry, the person added. Spokespersons for the finance and trade ministries could not be reached for comment.
    • At the heart of Chief Executive Officer Christian Sewing’s turnaround plan for Deutsche Bank AG is a contrarian bet: that he can cut spending on technology while gaining ground on the competition. Even with the digital revolution in finance accelerating, Deutsche Bank expects to trim its annual outlays on tech to 2.9 billion euros ($3.3 billion) in 2022 from a peak of 4.2 billion euros this year.
    • Elliott Management Corp. wants Saga Plc to explore options to boost returns for shareholders, including potentially separating its insurance and cruise businesses, according to people familiar with the matter. The New York hedge fund, run by billionaire Paul Singer, disclosed earlier Wednesday that it holds 5.1% of voting rights in the company through financial instruments. Shares extended gains and rose as much as 10% in London, the most since July 4th, after details of Elliott’s strategy emerged. Saga is valued at about 516 million pounds ($640 million).
    • Netflix Inc.’s earnings should help answer a key question for the streaming giant: whether customers are willing to pay more in an increasingly competitive market. After boosting prices in markets around the world, the company will deliver its second-quarter results on Wednesday afternoon. Analysts don’t expect much growth at home — they’re predicting a mere 309,240 subscriber additions in the U.S. on average — but the hope is that the increases and more users overseas will let Netflix sustain the expansion investors have come to expect.
    • Charterhouse Capital Partners is considering selling its nuclear measurement and analytics company, Mirion Technologies, for as much as $2 billion in a process set to kick off after the summer, people familiar with the matter said. Citigroup Inc. and Morgan Stanley are working with the buyout firm on the potential sale, the people said, asking not to be identified because the deliberations are private. The discussions are at an early stage, and Charterhouse may decide to retain Mirion for longer, they said.
    • A French-U.S. clash over digital taxation overshadowed the start of a Group of Seven finance chiefs meeting as France refused to flinch on its levy that would hit tech giants from Facebook Inc. to Alphabet Inc.’s Google. Just before an encounter with U.S. Treasury Secretary Steven Mnuchin at the G-7 near Paris, French Finance Minister Bruno Le Maire pledged to forge ahead with a 3% tax on digital revenues of large companies. France hopes its drive will pressure the U.S. to be more constructive in talks at the Organization for Economic Cooperation and Development to agree on a similar levy on profits in 129 countries.
    • The next leader of the European Commission, Ursula von der Leyen, said she hopes to dissuade U.S. President Donald Trump from imposing tariffs on EU cars by reminding him of all the areas where European and American interests coincide. “If you look at the broader picture a lot of things are interdependent,” von der Leyen said in an interview with Bloomberg Television in Strasbourg, France, after winning a confirmation vote Tuesday evening. The plan will be “to convince our friends from the U.S. that it’s better to find a good compromise and work together,” she said.

*All sources from Bloomberg unless otherwise specified