July 31st, 2017


Daily Market Commentary



Canadian Headlines

  • Canada’s economy is booming, and that’s good news for Justin Trudeau. The question is whether it can last until the next election. Growth in May beat all forecasts, a 4.6 percent expansion on a yearly basis that was the fastest in 17 years. Canada is forecast to lead the Group of Seven in growth this year, data compiled by Bloomberg show.


World Headlines

  • European stocks bounced back from Friday’s losses, with miners tracking a rally in a number of metal prices including iron ore after manufacturing data from China showed expansion in the world’s largest steel industry. The Stoxx Europe 600 Index was up 0.4 percent at 08:30 a.m. in London, with the basic resources sector index gaining 1.5 percent. The Stoxx 600 is flat for the month of July, in contrast with a gain of 2 percent for S&P 500 over the same period. European stocks have been hurt by a strengthening euro which has fueled concerns for European earnings.
  • Hong Kong stocks climbed, capping the biggest monthly advance since January, with Chinese investors piling into the city’s stocks amid tightening liquidity on the mainland. The Hang Seng Index added 1.3 percent to 27,323.99 at the close, extending the month’s rise to 6.1 percent. Kunlun Energy Co., Power Assets Holdings Ltd. and China Shenhua Energy Co. added at least 12 percent from the beginning of July. Energy stocks were among the biggest gainers Monday, with China Shenhua rising the most in more than a week after saying its first-half profit probably doubled.
  • Oil traded near $50 a barrel in New York as efforts by Venezuela’s president to seize more power raised speculation the U.S. could step up sanctions. Futures were little changed after surging 8.6 percent last week.
  • Gold headed for its biggest monthly gain since February as the dollar’s slump bolstered demand and enticed hedge funds back into the metal. Bullion, which earlier reached a six-week high, is up 2.1 percent in July as the dollar is set to cap its longest run of monthly declines in six years.
  • After the collapse of Obamacare repeal, Republicans may have to choose between pursuing another health bill or pushing through a tax overhaul this year, because there’s almost certainly not enough time to do both. The Senate debate last week laid bare how sharply divided the party remains over health care. And Thursday, the group in charge of developing a tax plan made clear that it’s agreed on very little.
  • Discovery Communications Inc. agreed to buy Scripps Networks Interactive Inc. for $14.6 billion in a blockbuster cable TV merger that will help the company gain leverage with distributors and expand internationally as its U.S. operations face new pressures. Discovery will buy Scripps in a cash-and-stock transaction that’s worth about $90 per share, based on closing prices on July 21, according to a statement Monday. The offer includes $63 per share in cash and about $27 per share in Class C Common shares of Discovery stock. The total acquisition price includes the assumption of $2.7 billion of Scripps’ net debt.
  • After posting a second quarter of revenue growth and with plans to return another $2 billion of cash to investors, departing boss Stuart Gulliver’s six-year turnaround of HSBC Holdings Plc might finally be gathering momentum. Adjusted revenue and pretax profit rose 4 percent and 13 percent respectively, beating analysts’ estimates, as the bank continued to pump capital into better-returning markets in Asia and earnings at the investment bank surged.
  • Chinese authorities have asked Anbang Insurance Group Co., the insurer whose chairman was detained in June, to sell its overseas assets, according to people familiar with the matter. he government has also asked Anbang to bring the proceeds back to China after disposing of holdings abroad, said the people, who asked not to be identified because details are private.
  • It was political theater at its best when a smiling Nicolas Maduro arrived at a polling place just after dawn Sunday to be among the first to vote for members of a National Constituent Assembly that will rewrite Venezuela’s constitution, and likely aim to upend six decades of democracy.
  • Mario Draghi kept expectations low for inflation this summer, and July’s number is proving him right. Consumer-price growth in the euro area stayed at 1.3 percent — enough to argue that deflation risks have disappeared, but too little to meet the European Central Bank president’s goal of just under 2 percent.
  • Italy’s unemployment rate fell last month, dropping to a level that matches the lowest since 2012. Joblessness was at 11.1 percent in June, down from 11.3 percent the month before, statistics agency Istat said Monday in Rome. The median estimate in a Bloomberg survey was for a reading of 11.2 percent. The rate was also 11.1 percent in April, which was the lowest since September 2012.
  • While the CBOE Volatility Index ended up rising only 9.9 percent last week and remains down for the month, the gauge itself has become more volatile. The CBOE VVIX Index, which tracks the cost of VIX options, posted its biggest weekly rally since April, rebounding from a low. The VVIX reached an all-time high relative to the VIX in July, a record month for volatility bets at this time of the year.
  • India is poised to reject Shanghai Fosun Pharmaceutical Group Co.’s proposed $1.3 billion takeover of an Indian drugmaker, according to people familiar with the matter, scuppering the biggest-ever Chinese acquisition in the country.
  • Saudi Arabia is considering a flexible tax system for state-owned oil company Aramco that would increase royalty payments when crude prices rise, according to people familiar with the deliberations.  Aramco has proposed to initially set the royalty at 20 percent — the same rate as today’s fixed rate — and increase it automatically if oil prices rise significantly.
  • Vladimir Putin said he hoped there wouldn’t be a need for further retaliation against Washington after his government ordered the U.S. to slash staff at its diplomatic missions in Russia by 755, or nearly two-thirds, in retaliation for new sanctions approved by Congress.
  • South Africa’s benchmark stock index advanced to a record Monday, joining a global rally as commodity prices surged on optimism economic growth is gathering momentum.
  • Shares in Tokyo fell, after fluctuating throughout Monday’s session, as the yen’s appreciation against the dollar overshadowed a number of encouraging corporate earnings reports. Japan’s currency rose to a six-week high in Asian trading after strengthening 0.5 percent on Friday when North Korea test-fired an intercontinental ballistic missile, its second such attempt in a month.
  • HSBC Holdings Plc faces as much as $300 million in legal and relocation fees as it prepares to move 1,000 staff to Paris, in one of the first indications of the cost of Brexit to the U.K.’s financial industry. Europe’s biggest lender took a $4 million charge in the second-quarter for “costs associated with the U.K.’s exit from the EU,” which Chief Executive Officer Stuart Gulliver said could rise to between $200 million and $300 million.
  • I Squared Capital agreed to pay HK$14.5 billion ($1.9 billion) in cash to buy the fixed-line assets of billionaire Li Ka-shing’s Hong Kong telecommunications business, giving the investor group control of a fiber-optic network serving corporate customers and residents. The FTSE/JSE Africa All Share Index rose as much as 0.9 percent to 55,366.74. It pared gains to be 0.7 percent higher by 10:45 a.m. in Johannesburg, still set for the strongest close on record. The gauge is up more than 7 percent in July, headed for the best monthly performance since October 2015.
  • Japanese Prime Minister Shinzo Abe called on China and Russia to do more to stop North Korea after the isolated regime test-fired its second intercontinental ballistic missile in a month. Abe, speaking after a phone call with U.S. President Donald Trump, told reporters on Monday that they agreed more action was needed to mitigate the threat from North Korea.
  • Blackstone Group LP, the world’s largest manager of alternative assets, is in exclusive talks to buy a majority stake in 30 billion euros ($35 billion) of Banco Popular Espanol SA’s real estate loans and properties at a discount. Popular received several binding offers from other investors but has awarded Blackstone exclusivity on the deal while it continues to hold talks on the sale, Adolfo Diaz-Ambrona, secretary of Popular’s board, said in a regulatory filing Monday.



*All sources from Bloomberg unless otherwise specified