July 23rd, 2018

Daily Market Commentary

Canadian Headlines

  • Canada’s Liberal government will seek to address competitiveness challenges faced by the nation’s businesses in a budget update later this year amid pressure to respond to U.S. tax reform. Finance Minister Bill Morneau, in an interview with Bloomberg News in Buenos Aires on Saturday, said the key themes emerging for his fiscal update — a document the finance department typically releases in October or November — will include business taxation, oil pipelines and the renegotiation of the North American Free Trade Agreement.
  • Justin Trudeau’s latest headache is unusual for a country bounded by three oceans and just one neighbor: the border. Canada has seen a steady flow of asylum seekers since Donald Trump’s election, with people who fear the U.S. will deport them or reject their bids for asylum crossing the 4,000-mile undefended border and filing a claim. While the total numbers are relatively modest, the influx has strained resources and prompted calls for more funding.

World Headlines

  • European equities retreated at the open as Fiat dropped on the news of a change in chief executive and as investors considered President Donald Trump’s new tariff threats. The Stoxx Europe 600 Index declined 0.3 percent, with the automakers and travel sectors pacing the retreat. Fiat Chrysler Automobiles NV fell 4 percent after Mike Manley was named CEO to replace Sergio Marchionne, whose health declined suddenly and unexpectedly after shoulder surgery.
  • U.S. equity futures pointed to a lower open and European stocks fell on Monday as investors digested warnings from the world’s financial leaders about the impact of protectionism on growth. Futures on the Dow, S&P 500 and Nasdaq were in the red in the wake of warnings from Group of 20 finance chiefs that trade tensions threaten expansion as leading economies fall out of sync.
  • Chinese stocks advanced as the market welcomed new guidelines on asset management products. The Shanghai Composite Index closed up 1.1 percent, building on Friday’s 2.1 percent gain. Lenders led the advance, as regulators were seen taking a softer stance on asset management product rules to balance deleveraging with a slowing economy. Drug makers tumbled though as the government announced a probe into a vaccine scandal.
  • Oil rose to near $69 a barrel as flaring tensions between the U.S. and OPEC member Iran countered growing concerns that trade protectionism will harm economic growth. Futures added 1 percent in New York following a third straight weekly decline. President Donald Trump, whose administration is seeking to choke off Iranian crude exports, warned the Islamic Republic of grave “consequences” if it threatens the U.S., after his counterpart Hassan Rouhani issued his own warning against any U.S. aggression. Industrial action halted work at three North Sea oil and gas platforms operated by Total SA, adding to supply concerns.
  • Gold holds gains made Friday, after U.S. President Donald Trump tweets that China, European Union have been manipulating their currencies and also sends warning to Iran.
  • A dramatic day for Japan’s debt market saw yields surge on media reports of possible changes to the nation’s ultra-loose monetary policy, spurring the central bank to offer to buy an unlimited amount of bonds. The yield on 10-year government securities soared as much as six basis points to 0.09 percent, its biggest increase in almost two years, pulling the yen higher and weighing on stocks. While the yield came down after the purchase offer by the Bank of Japan, it then bounced back to just one basis point below the day’s high.
  • Commercial real estate firm Cushman & Wakefield Plc plans to raise as much as $810 million from an initial public offering in the U.S. The firm aims to offer 45 million shares for $16 to $18 apiece, according to a regulatory statement Monday. Cushman & Wakefield, whose owners include private equity firms TPG and PAG Asia Capital, has said it will use the proceeds to reduce debt, for general corporate purposes and for making deferred payments to employees who worked for Cassidy Turley, a brokerage that its predecessor agreed to buy in 2014.
  • U.S. President Donald Trump launched a new broadside against Iran, warning of unspecified “consequences” if Hassan Rouhani continues threatening America. The threat — similar to ones Trump issued last year in warning North Korea about its rapidly improving nuclear weapons program — risks leading to a speedy escalation if neither side backs down. Traders appeared to take the news in stride. Brent oil — the global benchmark — was trading up less than 0.2 percent at $73.2 a barrel as of 08:56 a.m. in London.
  • Exxon Mobil Corp. faces a legal clash with Russian oil giant Rosneft PJSC over its largest energy project in the country, with a potential liability of more than $400 million. Russia’s state-owned oil behemoth filed an arbitration claim alleging “unjust enrichment” against all the Sakhalin-1 co-owners, including its own units, for a total of 89 billion rubles ($1.41 billion), according to the country’s legal database. The offshore project is Exxon’s flagship in the nation after quitting most of its developments earlier this year due to sanctions. The U.S. company operates the venture with a 30 percent stake.
  • Facebook Inc. will double the amount of space it occupies in London as technology firms continue to expand in the U.K. The new office buildings in the city’s King’s Cross district will have room for more than 6,000 people, compared with a target of 2,300 workers by the end of this year. Facebook’s statement on Monday did not say how many jobs will be created as part of part of the expansion.
  • Labor strife is starting to weigh on Ryanair Holdings Plc, and the conflict looks set to deepen. The discount airline posted a 20 percent drop in first-quarter profit on Monday, and warned that walkouts by trade unions, along with regional air traffic-control strikes, are making customers wary of booking trips.
  • India’s move to slash levies on more than 50 goods will lower revenue by as much as 150 billion rupees ($2.2 billion) each year and is raising the prospect of the country missing budget goals again this year. A panel of federal and state finance ministers late on Saturday cut the goods and services tax on items from washing machines and lithium iron batteries to stone-carved deities and sanitary napkins as Prime Minister Narendra Modi looks to boost sentiment and growth before he faces re-election next year. The revenue loss will be minimal, India’s interim Finance Minister Piyush Goyal told reporters in New Delhi, without elaborating.
  • For more than a month, China seemed to be enjoying the advantage of exchange-rate depreciation without the global backlash and panicky capital outflows that accompanied the bout of yuan weakening in 2015. Then Donald Trump took issue. The U.S. president’s charges that China is “manipulating” a currency that’s been “dropping like a rock” came at the end of a six-week slide in the yuan that took it to its lowest level in more than a year against the dollar. The remarks, in a tweet and an interview with CNBC, suggested to market participants that the U.S.-China trade war is now broadening to include currencies, putting fresh scrutiny on Chinese management of the yuan.
  • Barclays Plc is considering a return to consumer banking in India as it seeks to deploy more of the capital it holds in the South Asian unit, people familiar with the matter said. The U.K. bank, which decided to pull out of the business in 2011, aims to rebuild the retail banking operation in Asia’s third-largest economy through digital channels this time around, the people said, asking not to be identified because the information isn’t public. Barclaycard International Chief Executive Officer Barry Rodrigues would oversee the platform, which would mobilize deposits and offer loans electronically, the people said.
  • Tesla Inc. asked some suppliers to return a portion of its payments to them in an attempt by the electric-car maker to turn a profit, the Wall Street Journal reported, citing a memo sent to a supplier last week. The company, whose eroding cash position has alarmed investors, requested a “meaningful” amount of payments made since 2016 to be returned, according to the letter. The note stated all suppliers had been asked to help the Californian company become profitable.
  • China Tower Corp., the state-owned wireless infrastructure operator, is seeking as much as $8.7 billion in its planned Hong Kong initial public offering. The world’s largest telecom tower service is offering 43.1 billion shares at HK$1.26 to HK$1.58 each, according to terms for the deal obtained by Bloomberg. Hillhouse Capital and a unit of Alibaba Group Holding Ltd. are among the 10 firms that agreed to buy about $1.4 billion of shares as cornerstone investors, the terms show.
  • Megvii Inc., the Chinese developer of facial recognition system Face++, is said to be raising at least $600 million from investors including Alibaba Group Holding Ltd. and Boyu Capital, according to people familiar with the matter. The Beijing-based company, which already counts billionaire Jack Ma’s Ant Financial and one of China’s largest state-backed venture funds as investors, will close this round of funding within weeks, the people said, asking not to be named because the matter is private. The company will then seek a second tranche of funding, the people said.
  • Atos SE agreed to buy Syntel Inc. in a $3.4 billion cash deal to help it get better access to U.S. financial customers like American Express Co. and State Street Corp. At $41 a share, the transaction is also a way for acquisitive French computer-services provider Atos to recover from a rebuffed bid 8 months ago for Gemalto NV, which secures digital payments for banks and other clients.
  • Fiat Chrysler Automobiles NV’s European chief has resigned after being passed over to replace ailing Sergio Marchionne as chief executive officer of the group, according to people familiar with the matter. The departure of Alfredo Altavilla, chief operating officer for the region, deprives new Fiat Chrysler CEO Mike Manley of crucial management experience as he tries to steady the ship following the sudden loss of Marchionne, who was forced to relinquish his post of 14 years due to declining health.


*All sources from Bloomberg unless otherwise specified