July 20th, 2018
Daily Market Commentary
- Two years ago, Canadian Prime Minister Justin Trudeau announced a set of aggressive policies to reduce his country’s greenhouse gas emissions, centered on a nationwide price on carbon. As that price is about to take effect, growing opposition has put Trudeau on the defensive and has provincial governments rolling back other measures, raising questions about the appetite of this oil-exporting country to tackle climate change.
- Detour Gold says in an update on its 2018 Life of Mine plan that it will name two new directors to its board who have expertise in large-scale open pit mining and experience in corporate social responsibility, including First Nations engagement. The new directors will replace existing board members.
- European stocks plunged, led by the auto sector, as U.S. President Donald Trump said a new round of tariffs on Chinese goods were “ready to go.” The Stoxx Europe 600 reversed earlier gains to fall 0.5 percent after Trump said in an interview on CNBC he is ready to impose levies on all $505 billion of Chinese imports into the U.S. The VStoxx surged while cyclical sectors including auto, mining and construction were among the worst performers.
- S&P stock-index futures declined along with the Stoxx Europe 600 gauge after Trump told CNBC he was ready to ratchet up the tariffs “to do the right thing for our country”. Earlier, the Shanghai Composite Index posted the largest gain in a week as the offshore yuan paused a slide amid reports of intervention. The dollar dipped along with Treasuries. Italian bonds fell on concern that the finance minister may resign, though they pared the decline after a Treasury spokeswoman denied the reports.
- China’s markets ended Friday on a stronger footing, with the yuan reversing an early slump spurred by the central bank’s move to weaken the daily currency fixing by the most since 2016. The Chinese currency was little changed at 6.7790 per dollar at 5:36 p.m. in Shanghai after falling as much as 0.5 percent to mark a fresh one-year low. Dollar selling by a big Chinese bank helped stem the morning losses, traders said. Stocks also changed course, surging in the afternoon session after a report said regulators will loosen rules on the asset management industry.
- Oil headed for a third weekly loss as concerns that an escalating trade clash between the U.S. and China overshadowed reassurances from Saudi Arabia that it won’t flood global crude markets. Futures pared gains in New York on Friday as President Donald Trump said on CNBC that he’s “ready to go” with tariffs on $500 billion of imported Chinese goods. Crude had risen earlier after Saudi Arabia, under pressure from Trump to lower prices by pumping more, said they will keep exports steady this month and reduce them by 100,000 barrels a day in August.
- Gold reverses drop to trade little-changed after suspected yuan intervention by China.
- Base metals prices won a reprieve from their recent collapse after the dollar sank against the yuan late in Friday’s Asian session. Copper in London rebounded as much as 0.8 percent from the lowest level in a year as the yuan wiped out a steep retreat amid speculation Chinese authorities were seeking to cool its decline. Zinc and nickel rose by more than 1 percent, while copper in Shanghai erased losses to end only slightly lower.
- President Donald Trump said he’s “ready to go” with $500 billion in tariffs on Chinese imports, saying the U.S. has been taken advantage of for too long. “I’m not doing this for politics. I’m doing this to do the right thing for our country,” Trump said in a CNBC interview aired Friday. “We are being taken advantage of and I don’t like it.” The $500 billion figure is about the value of Chinese goods imported into the U.S. last year. S&P stock-index futures declined along with the Stoxx Europe 600 gauge after Trump’s comments aired.
- Donald Trump intensified the uproar over his meeting with Russian leader Vladimir Putin by extending an invitation for a second summit as worries about what the two leaders discussed in Helsinki this week are rising. Details of what the leaders talked about in a one-on-one session that lasted more than two hours have been trickling out from Moscow while White House efforts to clarify Trump’s stance have been slow, vague and at times conflicting. The uncertain U.S. response to a Putin proposal for Russians to pose questions for a former American ambassador triggered a rare, unanimous rebuke from the Senate on Thursday.
- Britain sees convincing France as key to getting a Brexit deal and the Chancellor of the Exchequer will target his French counterpart this weekend. The U.K. government thinks that persuading French President Emmanuel Macron of the benefits of its Brexit vision will be crucial to getting other European Union countries like Germany onside, according to a person familiar with the matter. France has often been among the countries taking the most hardline stance against the U.K.
- Microsoft Corp.’s earnings report and forecast cheered investors, providing further evidence the company can increase cloud sales and squeeze more profit from the area while cutting into Amazon.com Inc.’s massive industry lead. Profit and revenue in the period ended June 30 exceeded analysts’ estimates, as did Microsoft’s projection for cloud sales in the current quarter. Chief Financial Officer Amy Hood pledged that commercial cloud margins would improve overall and for each of the products that make up the area — Azure, Office 365 and cloud-based customer software.
- From the U.K. to Indonesia, global bond investors have been joining their U.S. counterparts in driving yield curves flatter, adding to signs that escalating trade tensions are depressing expectations for economic growth and inflation. Federal Reserve rate hikes kicked off the trend, but now other central banks are also tightening policy, and developing economies have had to act to support their sliding currencies. The upshot is that short-term rates are rising faster than longer maturities in a slew of markets worldwide, a potential source of concern for officials wary of the recessionary signals that curve flattening sends.
- State Street Corporation today announced that it has entered into a definitive agreement to acquire Charles River Systems, Inc., a premier provider of investment management front office tools and solutions. Under the terms of the agreement, State Street will purchase Charles River Development in an all cash transaction for $2.6 billion. The acquisition, which is subject to regulatory approvals and customary closing conditions, is expected to be completed in the fourth quarter of 2018.
- German Chancellor Angela Merkel vowed to keep lobbying President Donald Trump to head off tariffs on U.S. auto imports, which could escalate a trade war and threaten the global economy. “On the issue of trade, we have a very serious situation in the world, I want to make that very clear,” Merkel told reporters Friday in Berlin. Potential auto tariffs are “really a danger for the prosperity for many in the world” and would be viewed by Germany as a violation of global trade rules, likely provoking retaliation.
- General Electric Co. topped Wall Street’s earnings expectations for the second straight quarter, offering investors a measure of relief after a wrenching share collapse. Strong demand for aviation and health-care equipment boosted quarterly results for the beaten-down manufacturer, which is attempting to avoid further missteps while shoring up operations. The company also maintained a 2018 profit forecast of $1 to $1.07 a share, according to a statement Friday, shrugging off analysts’ expectations of a cut.
- Tokai Carbon Co., a leading supplier of graphite electrodes used to produce recycled steel, has hiked domestic prices by as much as 40 percent to a new record, and forecasts more increases as China’s crackdown on air pollution drives an unprecedented surge in the market. The 100-year-old Japanese manufacturer has raised domestic prices from 900,000 yen a metric ton, or $8,000, adjusting them quarterly for the first time as it strives to keep pace with soaring raw material costs, said Kenji Enokidani, general manager at the graphite electrode division. International prices were lifted to $12,000-$13,000 a ton in the second half from $8,000, he said.
- The Trump administration’s decision to consider tariffs on uranium imports may raise the cost of fuel for nuclear reactors and undermine a separate initiative to shore up struggling electricity generators.
- Telia AB Chief Executive Officer Johan Dennelind is making a major expansion by the Swedish telecom monopoly into content with a 9.2 billion kronor ($1 billion) agreement to buy Bonnier AB’s television operations, his second big purchase this week. The acquisition follows a $2.6 billion deal on Tuesday to buy TDC A/S’s business in Norway to take on the country’s largest operator, Telenor ASA, on its home turf.
- Tata Motors Ltd., the owner of Jaguar Land Rover, has restarted talks on the sale of a stake in its engineering unit just months after a deal with Warburg Pincus was called off, people with knowledge of the matter said. The carmaker has started preliminary discussions with a private equity firm that expressed interest in buying a stake in Singapore-headquartered Tata Technologies Ltd., according to the people, who asked not to be identified because the information is private. Tata Motors plans to use proceeds from the sale on capital expenditures for its domestic automotive business, one of the people said.
- China issued draft rules to regulate banks’ issuance of wealth management products, as policy makers continue their crackdown on the nation’s $15 trillion shadow-banking industry. Issuers should limit leverage and strengthen liquidity management, the China Banking and Insurance Regulatory Commission said in draft guidelines posted on its website late Friday. The rules are due to take effect at the end of 2020.
- Honeywell International Inc. raised its 2018 profit outlook as sales got a boost from higher oil prices, increased U.S. defense spending and a rebound in business jets and helicopters. Darius Adamczyk pointed to weak sales as one of the areas he wanted to fix when he took over as chief executive officer last year. The economic rebound in the U.S. and Europe has energized his initiatives to hire more sales people, invest in startups, spin out underperforming businesses and create more new products.
*All sources from Bloomberg unless otherwise specified