July 24th, 2018

Daily Market Commentary

Canadian Headlines

  • Canadian stocks slid as falling gold prices and an executive departure at Barrick Gold Corp. pushed the materials sector to its lowest since early May. The S&P/TSX Composite Index lost 15 points or 0.1 percent to 16,420.84. Materials fell 1.4 percent as Barrick tumbled 4.3 percent, the most in nine months. The gold giant’s president, who was responsible for reducing debt and rationalizing operations, quit to become chief executive officer of AngloGold Ashanti Ltd.
  • Canada fired back at Donald Trump’s metals tariffs with dollar-for-dollar retaliation. For autos, it may not be so simple. One of Prime Minister Justin Trudeau’s envoys said last week the government would respond “proportionally” if the U.S. imposes tariffs on vehicles and parts, though Canada hasn’t begun preparing any formal retaliatory package, two people familiar with the matter said. This contrasts with the European Union, which is already preparing a list of American goods to hit with protective duties in the event of auto levies.



World Headlines

  • Stoxx Europe 600 extended its advance to 1%, set for its largest gain since June 22 on a closing basis, amid strong earnings and reassuring economic data.
  • U.S. equity futures climbed as a slew of positive earnings boosted investor sentiment. Futures for the Dow, S&P 500 and Nasdaq indexes pointed to a positive open, with Google parent Alphabet climbing after strong results.
  • Shares in Asia rallied on news China will increase spending on infrastructure among other measures to bolster growth, with the Shanghai Composite Index posting the biggest three-day rally in two years.
  • Oil rose from a one-month low in New York ahead of data released on U.S. crude inventories, while traders weighed erratic global crude supplies and the threat to demand from trade tensions. Prices in New York were up 0.5 percent, after front-month futures closed at the lowest level since June 21 on Monday. U.S. government data is forecast to show that American crude stockpiles resumed the decline that’s been in progress since early June, according to a Bloomberg survey. While labor strikes have hit the North Sea, including in Norway’s Knarr Field are now over. Libya has also restored halted output and Saudi Arabia has pledged to keep markets carefully balanced.
  • Gold declines for second day as dollar recovers and 10-year Treasuries slip, pushing yields to highest in more than a month.
  • U.S. President Donald Trump’s efforts to prise open China’s markets are likely to be counterproductive, at least as far as capital controls are concerned. Under a plan announced in 2016, China aimed to allow “basic capital account convertibility,” or free non-speculative cross-border investment flows, by 2020. The likelihood of that happening has fallen to 10 percent, according to Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria SA.
  • Bitcoin’s rebound continued on Tuesday, carrying the largest cryptocurrency above $8,000 for the first time in two months and leading a revival among digital currencies that have been under pressure for much of the year. The most-followed crypto asset jumped as much as 5 percent to $8,083.95 during London trading hours, according to composite Bloomberg pricing. Rival tokens Ethereum, Litecoin and Ripple rallied as much as 7.6 percent. While Bitcoin last breached $8,000 in May, it’s still about 17 percent below its high for that month.
  • Switzerland’s Lindt & Spruengli AG plans a 200 million-franc ($200 million) U.S. investment offensive to further challenge Hershey Co. and Mars Inc. in that market. The maker of Lindor chocolate balls is expanding a plant in Stratham, New Hampshire, over the next four years, constructing high-tech production lines for premium chocolate, the company said Tuesday. The site will eventually have more than 1 million square feet of space for production, storage and distribution.
  • Boeing Co. investors can bank on the planemaker for another stellar quarter. Strong deliveries in the second quarter, several strategic deals and a stable cash flow has ensured big returns for Boeing shareholders over the past year, with the stock gaining nearly 67 percent, compared to a 14 percent bump for the rest of the market. While intensifying concerns about a trade war have taken some of the shine off, Boeing is still the biggest gainer in the Dow Jones Industrial Average over the past 12 months.
  • Synovus Financial Corp. and FCB Financial Holdings, Inc. today jointly announced their entry into a definitive merger agreement under which Synovus will acquire FCB Financial Holdings, Inc., owner of Florida Community Bank, Florida’s largest community bank. With the addition of FCB, Synovus will become a top five regional bank by deposits in the Southeast region with pro forma $36 billion in deposits and $44 billion in assets. The transaction is expected to close by the first quarter of 2019.
  • China Petroleum & Chemical Corp. said profit surged in the first half of the year as higher global crude prices benefited the company’s segment that produces oil and gas. Net income by the oil refining giant, known as Sinopec, in January-June is estimated to have risen by about 50 percent from a year ago, it said in a filing Tuesday to the Hong Kong stock exchange, citing Chinese accounting standards. That’s about 40.7 billion yuan ($6 billion), putting it on course for possibly the highest half-year profit in data compiled by Bloomberg going back to 2007.
  • Initial investor feedback has valued Volvo Cars far below owner Zhejiang Geely Holding Group Co.’s top-end estimates for a potential listing, people familiar with the matter said. Institutional investors have indicated the Swedish carmaker is worth about $12 billion to $18 billion in early meetings to discuss an initial public offering, the people said, asking not to be named as the deliberations are confidential. China’s Zhejiang Geely and Volvo Cars had discussed a value of $16 billion to $30 billion, people familiar with the matter said in May.
  • A year after General Motors Co. gave up on European automaker Opel, the brand is making money again under French owner PSA Group following nearly two decades of losses. The turnaround shows PSA Chief Executive Officer Carlos Tavares is reaping the benefits of pushing Opel’s labor unions to accept job losses, and of cutting back on everything from printers to company phones. He’s also slashed development spending by piggybacking new Opel models onto existing platforms of the parent’s Peugeot and Citroen brands.
  • BT Group Plc is offering discounts to communication providers to get their customers onto faster broadband services, part of a push to boost internet speeds across Britain. Openreach, the infrastructure unit of the former phone monopoly, is offering wholesale customers that use the grid cheaper prices than the maximum set by regulators if they bring subscribers onto services that use fiber, rather than copper.
  • UBS Group AG’s newly combined wealth-management business and investment bank are helping Chief Executive Officer Sergio Ermotti boost growth after investors questioned the lender’s commitment to higher returns. The private banking unit — which counts many of the world’s billionaires among its clients — took in more fees and interest income in the second quarter while bringing down costs, even as UBS saw money leave the firm. At the investment bank, surging equities and foreign-exchange trading helped the unit led by Andrea Orcel beat estimates.
  • Credit Agricole SA is considering the purchase of as much as 10 percent of Italian lender Credito Valtellinese SpA within six months, as it seeks to increase investments in the euro region’s third-largest economy, according to people familiar with the matter. The French bank may buy a 5 percent stake as soon as today and then plans to double its holding, said the people, asking not to be named because the matter isn’t public. Among its strategic options, Credit Agricole is also considering a full acquisition of the Italian bank, the people said.
  • U.S. cable and satellite television providers should brace themselves for the biggest blow yet from streaming services. The number of viewers abandoning pay TV is expected to increase by a third to 33 million this year, according to research firm EMarketer Inc. That compared with an estimated 22 percent loss for last year.
  • Mineral Resources Ltd. expects initial bids next month for a minority stake in its Wodgina lithium mine, which it says is the world’s largest hard rock deposit of the battery material. The Perth-based company hopes to announce a sale of up to 49 percent of Wodgina before the end of the year, it said in a statement Tuesday. The mine, located about 100 kilometers (62 miles) south of Port Hedland in Western Australia’s Pilbara region, has already drawn interest from suitors in China, Japan and South Korea, people with knowledge of the matter said in May, valuing the entire project at as much as A$4 billion ($2.9 billion).
  • China’s securities regulator has approved the initial public offering of a Shenzhen-based maker of medical equipment, people familiar with the matter said, in what could be the biggest ever listing on the ChiNext equity index. Shenzhen Mindray Bio-Medical Electronics Co. aims to raise about 6.34 billion yuan ($930 million), according to a draft prospectus on the China Securities Regulatory Commission’s website. That would top Contemporary Amperex Technology Co.’s 5.46 billion yuan float in June. Mindray’s IPO application was approved at a hearing Tuesday, according to the people, who asked not to be named as the information wasn’t public.
  • United Technologies Corp. raised its 2018 profit forecast again as the manufacturer benefits from rising demand in its aviation businesses. Adjusted earnings will be $7.10 to $7.25 a share, up from a previous range of $6.95 to $7.15, the company said Tuesday in a statement. Wall Street had been expecting $7.12 a share, according to the average of analyst estimates compiled by Bloomberg.
  • The U.K. plans to give ministers more powers to intervene in takeovers of British companies and assets where it deems national security to be at stake. The proposals widen the scope for government intervention to include small companies, business units and individual assets, including intellectual property, the Department for Business, Energy and Industrial Strategy said Tuesday. The regulations would apply to both foreign and British purchases of U.K. assets.


*All sources from Bloomberg unless otherwise specified