July 5th, 2017


Daily Market Commentary



Canadian Headlines

  • Canadian stocks fell, with losses in materials and technology shares offsetting a slight gain in financials amid low trading volume. The S&P/TSX Composite Index dropped 0.3 percent to 15,130.61 Tuesday, when U.S. markets were closed for Independence Day. Materials fell 1.6 percent as rising U.S. interest rates and equities tarnish silver, pushing down prices of the precious metal.
  • The Ontario government said overseas buyers accounted for just 4.7 percent of home purchases in the Toronto area over a recent one-month period. The new data is in line with other surveys, signaling that foreigners haven’t been major drivers of real estate prices in one of Canada’s most expensive markets.


World Headlines

  • European stocks held losses from Tuesday as defensive shares including utilities led declines. The Stoxx Europe 600 Index was little changed at 8:32 a.m. in London. It fell 0.3 percent in thin trading yesterday, extending losses in the final minutes before close. The benchmark has gained only once in the last seven sessions, amid scarce triggers for further gains before the earnings season kicks off this month.
  • Asian equities gained even as concerns over potential international fall out from North Korea’s nuclear weapons program faded. The MSCI AC Asia Pacific Index rose 0.2 percent to 153.97 as of 4:30 p.m. in Hong Kong, reversing an earlier drop of the same magnitude. Technology stocks were among the biggest boosts to the gauge after being beaten down on Tuesday. Automakers led gains in Japan.
  • Crude oil fell, snapping the longest winning streak this year, as Russia was said to oppose any proposal to deepen OPEC-led production cuts. Futures dropped 1.7 percent in New York, snapping eight straight sessions of gains. Russia wants to continue with the current deal and any further supply curbs would send the wrong message to the market, according to government officials. The U.S. dollar gained, reducing the appeal of commodities denominated in that currency.
  • Gold climbs for a second day on demand for haven assets after North Korea’s missile launch Tuesday raised concerns that the country is closer to building a device capable of hitting the U.S.
  • The Bloomberg Dollar Spot Index reversed early losses on a move fueled by the greenback’s rally versus the yen as risk sentiment improved across markets. As Treasuries erased their initial drop, the dollar rose to its strongest level versus the yen since May 16 at 113.59, on a firm rebound from its 112.83 Asia-session low. Weakness early on came as geopolitical concerns were at the forefront of traders’ minds and demand for safer assets prevailed.
  • The U.K. is becoming more dependent than ever on the European Union to look after its natural gas, even as it negotiates its exit from the bloc. Britain is expected to ship a record volume of natural gas from the U.K. to Belgium through an interconnecting pipeline Wednesday, capping a year of buoyant flows to the mainland.
  • India’s stock benchmark inched higher, as energy giant Reliance Industries Ltd. climbed for a third day and most industry groups advanced. The S&P BSE Sensex rose 0.1 percent to 31,245.56 in Mumbai, pulling to within 0.3 percent of its record-high close, reached June 19.
  • Iron ore’s headed lower, according to Capital Economics Ltd., the top forecaster of the commodity, which predicts that increasing supply from miners in Australia and Brazil will combine with slowing activity in largest user China to drag prices down by the year-end.
  • China’s banks are weaning themselves off short-term debt — with a little help from the authorities. The amount of negotiable certificates of deposit outstanding is likely to drop by the end of this quarter, according to 15 of 26 traders and analysts polled by Bloomberg last month. That would be the first quarterly decline since the instruments were introduced at the end of 2013 as a way to funnel cash to smaller banks.
  • Australia & New Zealand Banking Group Ltd. has narrowed the list of bidders for its wealth unit, which could fetch more than A$4 billion ($3 billion), people with knowledge of the matter said.
  • China Vanke Co., the nation’s biggest developer by market value, suspended trading of its shares in Hong Kong over an $8 billion acquisition that the firm had already announced. The company has entered a “formal agreement” to buy assets of Guangdong International Trust Investment Corp. and a statement is pending, it told Hong Kong’s stock exchange.
  • The United Nations Security Council will hold an emergency meeting later Wednesday after the U.S. confirmed North Korea’s rocket launch on July 4 was its first intercontinental ballistic missile. As North Korean leader Kim Jong Un bragged about sending more “gifts” to U.S. President Donald Trump, South Korea and the U.S. announced Wednesday they had conducted a joint ballistic-missile drill in waters off the eastern coast of the Korean peninsula.
  • HSBC Holdings Plc is in talks to resolve a U.S. probe into its sale of toxic mortgage bonds a decade ago, according to people familiar with matter, a negotiation that could offer an early look at how the Trump Justice Department will deal with global banks.
  • Federal Reserve officials have mapped out plans to reduce their $4.5 trillion balance sheet, but they’ve left out one key detail: the starting point. Clues about whether they’ll begin the asset reduction before another rate hike could come from the record of policy makers’ debate last month. Minutes of that June 13-14 meeting will be released at 2 p.m. on Wednesday in Washington.
  • Asset managers including Schroders Plc and Jupiter Fund Management Plc are getting off lightly in a regulatory overhaul of Britain’s 7 trillion-pound ($9 trillion) industry, analysts say. While the Financial Conduct Authority’s backing for an all-in-fee was a blow for asset managers, the proposals in its report last week are less onerous than some had feared.
  • Volvo is phasing out cars that rely on combustion engines, with every new model launched from 2019 to have an electric motor, as the shift away from the technology that’s dominated the auto industry for more than a century gathers pace. Promising the “historic end” of cars that only have combustion engines, Volvo Car Group will introduce five electric models by 2021 and offer hybrid options across its product line, according to a statement on Wednesday.
  • KKR & Co. received access to Vocus Group Ltd.’s financial accounts following its A$2.2 billion ($1.7 billion) offer for the Australian telecommunications company last month so it can determine whether it will make a binding bid. The private equity firm will undertake non-exclusive due diligence, Sydney-based Vocus said Wednesday in a statement. There is no certainty an agreement will be reached.
  • Gold will probably trade in a range of $1,200 to $1,300 an ounce in the short-term as the metal tracks U.S. real interest rates, according to UBS Group AG’s wealth management unit.
  • Embraer SA’s E190 aircraft is flown by airlines around the world, but has struggled to find much of a home in North America. Now the largest U.S. operator of the plane may walk away, casting doubts on whether the next version of the jet can succeed in the market. JetBlue Airways Corp. plans to decide by the end of this year whether to join American Airlines Group Inc. and Air Canada in dropping the plane, ending an original plan for one hundred E190s in the New York-based carrier’s fleet.
  • Emirates, the world’s biggest long-haul airline, said measures barring laptops from the cabins of aircraft departing its Dubai base for the U.S. have been lifted, leaving Qatar Airways as the only major carrier still affected by the ban. The moratorium, imposed in March, was removed Wednesday following work with local authorities and regulators on implementing the “heightened security measures and protocols” required by the U.S. Department of Homeland Security, Emirates said in a statement.
  • Investment firms may have to move thousands of jobs to the European Union after regulators said “letterbox entities” nominally based in the EU but run from abroad will not be tolerated, lawyers and advisers say. The proposal would affect UCITS, a type of mutual fund domiciled in the European Union, that hold about 9.1 trillion euros ($10.3 trillion) of assets.
  • Thailand’s central bank held its benchmark interest rate near a record low, seeking to preserve policy room despite signs that the economy is heading deeper into deflation again. The one-day bond repurchase rate was left at 1.5 percent, with monetary policy committee members voting unanimously in favor, the Bank of Thailand said in Bangkok on Wednesday. All 21 economists surveyed by Bloomberg predicted the decision.
  • China struck deal after deal to acquire companies abroad over the last few years. Now the bill is coming due. The nation’s top corporate dealmakers, including HNA Group Co. and Fosun International Ltd., must pay off the equivalent of at least $11.5 billion in bonds and loans by the end of 2018 — a feat now complicated by government efforts to rein in their aggressive rush overseas.


*All sources from Bloomberg unless otherwise specified