July 4th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks closed higher Wednesday, led by consumer staples and real estate shares. The energy complex also aided the rally after crude oil rebounded on drop in U.S. gasoline supplies. The S&P/TSX Composite Index gained 0.6% to 16,576.52. Materials and communication services were the worst performing sectors in the index. Cascades Inc. was among top gaining stocks after an upgrade to outperform at National Bank. Meanwhile, Bruce Linton, who founded Canopy Growth Corp. in an abandoned chocolate factory and turned it into the world’s biggest cannabis firm, has been ousted as chief executive officer effective immediately. The stock pared early losses and advanced 2%.
- Toronto home sales jumped again in June, nudging prices higher and narrowing affordable options for buyers. A total of 8,860 homes changed hands in Canada’s biggest city in the month, up 10% from the same month a year earlier, the Toronto Real Estate Board reported Thursday. New listings fell 0.4% to 15,816, leading to increased competition between buyers and price increases across certain segments. Benchmark prices, which adjusts for the type of housing sold, rose 3.6% to C$798,500 ($611,500) from a year ago, driven by gains in semi-detached homes, townhouses and condos.
- Canada had its slowest start for stock sales in 16 years, as trade woes and global uncertainty kept companies on the sidelines. Companies raised about C$12 billion ($9.2 billion) in Canadian equity and equity-linked financings in the first six months, 39% less than a year ago and the slowest first half since 2003, according to data compiled by Bloomberg. It was also the slowest of any six-month period since 2003, except the C$10.4 billion raised in the back half of last year. Global trade tensions, including the fact that the free trade agreement between Canada, the U.S. and Mexico remains unratified, are creating uncertainties for businesses, according to Dean Braunsteiner, national IPO leader for consulting firm PwC Canada.
- It’s an unexpected bet by Hong Kong’s richest man: a penny stock seeking to modernize clinics for Canada’s overstretched family doctors, many of whom are stuck in the age of paper charts. Billionaire Li Ka-shing is the biggest outside investor in Well Health Technologies Corp., a Vancouver-based startup that’s acquiring clinics and electronic medical records providers to bring Canada’s highly fragmented primary care market into the digital era. Its shares have more than doubled this year, making it one of the top-performing health-care stocks on the TSX Venture Exchange.
- World Headlines
- European stocks extended their highest level in more than a year, boosted by deal activity and gains in carmakers. The Stoxx Europe 600 Index added 0.2% as of 8:12 a.m. in London, for a sixth day in the green. Valeo SA led auto shares higher after a report it won orders from four major groups for its Lidar car sensor products. Banks were also among the best performers. Metso Oyj jumped after it said it will merge its mining business with Outotec Oyj and create a separate company, while Osram Licht AG gained after confirming a $3.8 billion buyout offer from Bain Capital and Carlyle Group LP.
- Contracts on the S&P 500 Index drifted and shares across Asia were mixed. Trading volumes were well below average, as investors await Friday’s key U.S. jobs report. Core European bonds climbed, with German 10-year yields sliding below the European Central Bank’s deposit rate for the first time. Treasuries aren’t trading thanks to Independence Day. Thursday’s holiday in the U.S. is giving many investors a breather after a hectic few weeks in which bonds surged and stocks hit records as they tracked every twist in the trade war, tried to second guess central bankers and analyzed every data point. Next up, a U.S. jobs report that will be closely monitored for clues on the Federal Reserve’s next move.
- Oil declined as a smaller-than-expected draw in U.S. inventories added bearish sentiment to a market already reeling from gloomy economic news. Futures fell as much as 1.5% in New York after gaining 1.9% on Wednesday. While American crude and gasoline stockpiles both fell for a third week, they dropped less than forecast in a Bloomberg survey. Anxieties over demand resurfaced earlier this week following a slew of sluggish economic indicatorsfrom the U.S., China and Europe, even as the Organization of Petroleum Exporting Countries and its allies agreed to extend output cuts into 2020.
- Gold dropped ahead of U.S. jobs numbers due Friday that could give further clarity on the Federal Reserve’s interest rate path amid President Donald Trump’s comments on Chinese and European currency manipulation. Bullion, which is holding near a six-year high, may be buoyed by a series of appointments to the Fed and European Central Bank who traders view as likely advocates of further stimulus. U.S. equities closed at a record on Wednesday, while markets are shut Thursday for the Independence Day holiday.
- Anheuser-Busch InBev NV’s Asian business is eyeing deals to expand its regional presence once it completes an initial public offering that could raise as much as $9.8 billion. While proceeds are likely to be used to pay down debt, the IPO of Budweiser Brewing Co. APAC in Hong Kong later this month will give the business more flexibility to seek local partners, Chief Executive Officer Jan Craps said at a press conference in Hong Kong. “There are still several markets that we are not No. 1 or 2, specifically if we think about Japan and Southeast Asia, several very interesting markets that we believe we could partner with regional brewers to offer more choices to consumers,” Craps said.
- President Donald Trump is getting what he wants for the nation’s birthday: a celebration featuring fireworks, fighter jets and tanks that makes him the center of attention. Trump will speak from the steps of the Lincoln Memorial Thursday evening, remaking the capital’s July 4th festivities into a display of military might mixed with presidential politics. The White House said Trump’s message won’t be political — Trump is calling the speech a “Salute to America” — but it comes as the 2020 campaign is heating up.
- Foreign investors have sold a net $70.3 billion of Japanese equities since the start of 2018. The early days of Abenomics, when they were huge net buyers, are a distant memory. The usual suspects are cited as reasons: fear of the impact of the trade war, a strengthening yen, and a looming increase in the sales tax.
- Boeing Co. is offering $100 million to support the families of victims and others affected by two crashes of its 737 Max jetliner, which killed 346 people and have led to scores of lawsuits. The money will go toward “education, hardship and living expenses for impacted families, community programs and economic development in impacted communities,” Boeing said Wednesday in a statement. The funds would be committed over multiple years.
- President Donald Trump warned Iran Wednesday against stepping up uranium enrichment, the latest escalation of the conflict over the Islamic Republic’s nuclear program that has plunged the Gulf into renewed uncertainty. “Rouhani says that they will Enrich Uranium to ‘any amount we want’ if there is no new Nuclear Deal,” Trump tweeted Wednesday afternoon in Washington, referring to Iranian President Hassan Rouhani. “Be careful with the threats, Iran. They can come back to bite you like nobody has been bitten before!” Iran has said it will restart construction on the Arak reactor and step up enrichment if European nations fail to offer it economic guarantees by a July 7 deadline, escalating a crisis that threatens to collapse what’s left of the 2015 nuclear accord that Trump quit last year.
- The charity looking after Britain’s historic stately homes and archaeological remains will sell all its stakes in companies profiting from fossil fuels, making it the latest investor to turn away from companies blamed for damaging the planet. The National Trust has more than 1 billion pounds ($1.3 billion) invested in the stock market and over time has shifted its strategy toward investments that reduce the carbon footprint of its portfolio. New measures announced on Thursday involve the charity divesting from all fossil-fuel companies within three years and seeking ways to back green start ups.
- Rice farmers in India, the world second-biggest producer, are set to receive their smallest price increase in four years after the government announced the latest support level for the commodity. The minimum payment for common-grade paddy rice has been increased by 3.7% from a year earlier to 1,815 rupees ($26.5) per 100 kilograms for the 2019-20 crop, according to the farm ministry on Wednesday. The price for soybeans was raised by 9.2%, the least in three years, the data show.
- British special forces seized a supertanker off Gibraltar suspected of carrying Iranian oil to Syria in violation of European and U.S. sanctions against the war-torn country. Grace 1, which can hold 2 million barrels of crude, is now anchored near Gibraltar, a British overseas territory in southern Spain that controls the strait between the Mediterranean Sea and the Atlantic Ocean. The vessel is registered in Panama. The seizure, announced by Gibraltar’s government, could inflame tensions between Iran and the European Union just as the U.K., France and Germany try to keep the Islamic Republic from walking away from the nuclear deal. The U.S. quit the pact a year ago, prompting Iran to significantly increase uranium enrichment in response.
- The yields on Europe’s safest bonds have fallen below the European Central Bank’s deposit rate for the first time as investors bet on policy easing. German 10-year yields slid below the minus 0.40% rate that the central bank pays on money parked with it. That is spurring investors to turn to riskier assets such as Italian and Greek notes that are leading a rally in European bonds this week. Governments are cashing in, with both Spain and France auctioning debt at record-low borrowing costs on Thursday.
- An Indian court allowed ArcelorMittal’s $6 billion purchase of a bankrupt steel company, paving the way for tycoon Lakshmi Mittal to enter the world’s second-biggest market. Shares of Arcelor advanced in Amsterdam. The National Company Law Appellate Tribunal rejected petitions challenging the sale by the lenders and founders of Essar Steel India Ltd. and modified the distribution of the proceeds, saying the money has to be shared proportionately.
- T-Mobile U.S. Inc. is on the cusp of securing U.S. Justice Department approval for its $26.5 billion merger with Sprint Corp., after establishing the general outlines of asset sales to Dish Network Corp., according to people familiar with the matter. The Justice Department is hammering out final issues with T-Mobile on an agreement aimed at ensuring Dish can become a strong fourth competitor in the U.S. wireless market, said the people, who asked to not be identified because the matter isn’t public. While the sticking points aren’t insurmountable, the Justice Department has yet to bless the arrangement to allow Sprint’s acquisition to proceed.
- Qualcomm Inc., BMW AG, and Deutsche Telekom AG clinched a victory Thursday after European Union member states scrapped new rules mandating WiFi technology as the basis for how future connected cars talk to each other. The ruling is victory for 5G technology as countries around the world prepare for the roll-out of ultra-fast 5G wireless networks, which will power everything from self-driving cars to smart factories. The legislation — first proposed in March by the European Commission, the bloc’s executive — aimed to govern how future connected and automated cars in Europe send information between vehicles and infrastructure, in order to communicate about dangerous situations, road works, traffic lights and more.
- Saudi Arabia, the world’s biggest crude exporter, cut most pricing for August oil sales to Asia as refinery profits slump. State-oil producer Saudi Aramco reduced its official selling price for Arab Light crude for August shipment to buyers in Asia by 25 cents a barrel to a premium of $2.45 more than the Middle East benchmark. Five traders and refiners in a Bloomberg survey had expected pricing for the grade to fall by 20 cents a barrel to a $2.50 a barrel premium.
*All sources from Bloomberg unless otherwise specified