July 4th, 2018
Daily Market Commentary
- The Vancouver Airport Authority plans to access the domestic bond market next year to help finance its C$9.1 billion ($6.9 billion) expansion. The Canadian airport is looking to boost Vancouver’s position as an international hub by completing 75 projects over the next two decades, which includes expanding the terminal, setting up new parking spaces and improving car rental facilities. It expects to increase the number of passengers to 32 million in 2022 from a record 24.2 million last year.
- European equities dipped at the open, reversing some of Tuesday’s gains amid ongoing trade tensions between the U.S. and China, while auto shares rose on a report saying the European Union is considering talks on a tariff-cutting deal between the world’s big car exporters. The Stoxx Europe 600 Index fell 0.1 percent, after raising 0.8 percent on Tuesday following German Chancellor Angela Merkel deal with coalition partners to curb migration. Market sentiment remains fragile amid the trade spat, with a Chinese court temporarily banning chip sales by the American firm Micron Technology Inc. in the country.
- U.S. futures advanced amid holiday-hit trading, shrugging off a more downbeat mood in Asia where shares slipped even as the yuan extended a rebound. The dollar recouped earlier losses. Greenback weakness helped fuel an advance in gold, while West Texas Intermediate oil gave up earlier gains and most industrial metals declined.
- Asian shares declined, two days before new U.S. tariffs on Chinese goods are scheduled to take effect. The S&P 500 Index closed lower after a Chinese court temporarily banned chip sales by an America’s Micron Technology Inc. In Hong Kong, ZTE Corp. surged after the U.S. allowed it to temporarily resume some business activities. The MSCI Asia Pacific Index fell 0.2% to 163.40 as of 5:25 p.m. in Hong Kong, after swinging between gains and losses at least seven times. Japan’s Topix closed little changed from Tuesday’s level, while Hong Kong’s Hang Seng Index lost 1.1 percent. South Korea’s Kospi retreated 0.3 percent.
- Oil traded near $74 a barrel in New York as Saudi Arabia’s pledges to boost supply assuaged concerns of a shortage, while a decline in crude stockpiles in the U.S. inflamed them. Futures slipped 0.8 percent after earlier adding 1 percent. The American Petroleum Institute was said to report that inventories dropped by 4.51 million barrels last week, while a Bloomberg survey also estimated a decline. The Saudi Cabinet affirmed the kingdom is ready to use its spare capacity as needed, while Energy Minister Khalid Al-Falih reiterated with Russia that OPEC’s agreement with allies is to boost output by 1 million barrels a day.
- Gold traded near the highest in a week after China’s central bank stems decline in the yuan with pledge to keep exchange rate stable, hurting dollar.
- The U.K.’s dominant services sector grew at the fastest pace in eight months in June, driving a bounce back in the nation’s economy and boosting the case for a Bank of England rate increase as soon as next month. The unexpected gain in the gauge of activity followed reports this week showing faster growth in manufacturing and construction. IHS Markit, which publishes the surveys, said they suggest U.K. economic growth doubled to 0.4 percent in the second quarter.
- The Trump administration is letting ZTE Corp. resume some business activities while the U.S. weighs an end to a seven-year ban on the Chinese telecommunications company. The easing of restrictions didn’t come soon enough for ZTE’s bid to win a contract in Italy to supply wireless equipment to Wind Tre SpA. ZTE lost the deal because it’s barred from buying U.S. technology, and Ericsson AB won the 600 million-euro ($700 million) contract instead, people with knowledge of the matter said, asking not to be identified because it hasn’t been announced. ZTE’s shares in Hong Kong rose about 2 percent and Ericsson gained as much as 1.1 percent in early trading in Stockholm.
- Danske Bank A/S’s Estonian operations may have been used to launder as much as $8.3 billion in a case that has rocked Denmark and triggered calls for tougher penalties from the country’s political establishment. The amount, which represents roughly a third of Danske’s market value and almost 3 percent of Danish GDP, is more than double that previously estimated, according to figures first reported by Berlingske and confirmed by Bloomberg. The alleged illicit transactions span the years 2007 to 2015.
- Uber Technologies Inc. and Careem Networks FZ are in preliminary talks to combine their Middle Eastern ride-hailing services, hoping to resolve a costly rivalry as Uber prepares for a public offering next year, according to three people familiar with the matter. The companies have discussed a number of potential deal structures, but they haven’t come to an agreement on the contours, according to the people, who asked not to be identified because the talks are private.
- Indians’ love affair with gold is cooling. Imports slumped more than 25 percent to 54 metric tons in June from a year earlier, a person familiar with the information said, asking not to be identified as the figures aren’t public. Overseas purchases plunged 40 percent to 343 tons in the first half from a year ago, according to data from Finance Ministry officials compiled by Bloomberg.
- The U.K. Supreme Court threw out a bid from Goldman Sachs Group Inc. and investors to recover an $835 million loan to Portuguese lender Banco Espirito Santo SA from an institution that succeeded the bank after its collapse. English courts don’t have the jurisdiction to rule on the loan, the five-judge Supreme Court panel unanimously agreed, upholding a previous decision that ruled that the dispute should be resolved in Portugal.
- Russia’s state development bank, still emerging from a bailout it needed after international sanctions, is now preparing to ask for another infusion to help fund Vladimir Putin’s latest ambitions, according to people familiar with the plans. Vnesheconombank, known as VEB, is looking for 1 trillion rubles ($16 billion) over the next five years to cover the cost of subsidizing interest rates for infrastructure and other projects that the Russian president made a cornerstone of his re-election campaign this spring, two of the people said, speaking on condition of anonymity to discuss private deliberations.
- The decision by a Chinese court to temporarily ban some sales by Micron Technology Inc. adds to a series of setbacks for the world’s chipmaking giants in their most important market. Micron, which has been caught up in dueling intellectual property lawsuits with United Microelectronics Corp., received a preliminary injunction from the Fuzhou Intermediate People’s Court in Fujian province stopping sales of 26 products. The order includes dynamic random access memory and Nand flash memory chips, according to a statement from UMC.
- U.S. lawmakers plan to pressure the Trump administration to closely scrutinize T-Mobile US Inc.’s planned purchase of Sprint Corp., arguing the acquisition poses a threat to American security because the owner of Sprint has ties to Chinese telecommunications company Huawei Technologies Co. A draft letter to Treasury Secretary Steve Mnuchin, who leads a U.S. national security review of the deal, is to be sent next week and is being circulated for signatures among lawmakers in the House by congressional critics of the deal, according to a copy obtained by Bloomberg News.
- The sharpest decline in China’s currency since policy makers devalued the yuan in 2015 has seen little of the capital-flight panic that gripped markets back then. How long the calm lasts depends in part on the effectiveness of controls put in place last time. This time around, the yuan’s 3.6 percent slide since mid-June has been accompanied mainly by an outflow of cash from foreign, rather than domestic, investors, analysts say. Overseas funds took out almost 4 billion yuan ($610 million) from Hong Kong’s Stock Connect with mainland exchanges in that period, reversing inflows the prior two weeks.
- President Donald Trump spoke with three more potential Supreme Court candidates on Tuesday as a key senator privately aired concerns about one of the contenders. As Trump weighs his options, he has heard from Sen. Rand Paul, R-Ky., who has expressed reservations about one top potential nominee, Brett Kavanaugh, according to a person familiar with the call but not authorized to publicly disclose details of it. The activity around Kavanaugh was an early glimpse of the frenzied jockeying around the short list of candidates in the run-up to Trump’s July 9 announcement.
- Just 20 banks have applied for a license to operate in the European Union in time to receive approval before Britain leaves the bloc. The European Central Bank has talked with 50 financial companies exploring options to retain the so-called passport that grants them access to one of the world’s largest economies, said Pentti Hakkarainen, a member of its supervisory board. Most of those hadn’t submitted applications by the end of June, a deadline the watchdog said banks had to meet to be sure that they are processed by the time the U.K. leaves the EU next March.
- China Tower Corp., the state-owned wireless infrastructure operator, has started gauging investor demand for a proposed Hong Kong initial public offering that could be the city’s biggest since 2010, people with knowledge of the matter said. The world’s largest telecom tower service started investor education Wednesday, said the people, who asked not to be identified because the details are private. China Tower’s IPO could raise about $10 billion, although the size of the potential deal could change, one of the people said.
- Steinhoff International Holdings NV is gauging takeover interest in businesses including clothing chain Pepco as the scandal-hit retailer prepares for the next phase of a recovery plan, according to two people familiar with the matter. The South African company has informally sounded out potential buyers for Pepco including private equity firms, said the people, who asked not to be identified as the plans aren’t public. The profitable chain, with more than 1,300 stores in Eastern European countries such as Poland and Romania, has emerged as one of the jewels in Steinhoff’s crown as the retailer battles to survive an accounting scandal.
*All sources from Bloomberg unless otherwise specified