July 5th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks ended Thursday’s session slightly higher in thin trading given the July 4 U.S. holiday. Gains in industrial shares were offset by a decline in marijuana stocks. The S&P/TSX Composite Index rose 0.08% to 16,588.85 in Toronto. Industrials were led by airline stocks, while the health-care index slid as cannabis stocks retreated. Meanwhile, 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.
- The old adage of “knee high by first of July” isn’t ringing true for most cornfields in southern Ontario this year. Instead, crops are almost a month behind normal development thanks to a soggy spring. It has been “the most stressful spring I have ever experienced,” said Jeff Harrison, who has been farming for more than two decades and is a director for the Grain Farmers of Ontario. Growers in southern Ontario have faced much of the same weather that has wreaked havoc across the U.S. Midwest. Harrison counts himself lucky. Unlike his neighbors in Trenton, he was able to seed most of his corn and soybean acres, with just 10% left unplanted.
- World Headlines
- European shares fell slightly as traders worldwide awaited the release of U.S. jobs data to gauge the outlook for American monetary policy. The Stoxx Europe 600 dropped 0.1% as of 8:11 a.m. in London, paring its five-day advance to 2% in its fifth straight week of gains. Basic resources stocks were the worst performers, as iron ore sank after China’s largest steel industry group urged the government to look into the recent price jump.
- Traders are showing their nerves ahead of the key U.S. jobs report, with American stocks poised to open lower and government bonds edging down. The dollar strengthened and crude oil fell. Futures on the S&P 500, Nasdaq and Dow Jones slipped. The 10-year Treasury yield nudged higher from near a two-and-a-half-year low.
- Earlier, benchmarks in Japan, China and South Korea rose along with Australian stocks. Gold dipped, though still headed for the longest stretch of weekly gains since 2011.
- Oil is set for the biggest weekly decline since May as global demand concerns outweighed an OPEC+ pact to extend supply curbs into 2020 and worries that a renewed confrontation with Iran may threaten supplies. Futures are down in New York from Wednesday’s close as anxieties over demand resurfaced this week following sluggish economic numbers from the U.S. to China. The bleak figures emphasize the market OPEC and its allies face as their supply action and the seizure of a tanker carrying Iranian crude to Syria by British special forces on Thursday failed to spur prices.
- Gold is headed for the longest stretch of weekly gains since 2011 as investors count down to the release of a highly anticipated U.S. jobs report that could provide clues on the Federal Reserve’s interest rate path. Bullion is higher for a seventh week as investors bet on looser policy from the central bank after signs of an economic slowdown. The non-farm payrolls data later Friday is projected to show an increase of 160,000 in June, up from 75,000 in May but less than a year earlier.
- The largest steel industry group in China has urged the government to maintain order in the global iron ore market after prices surged to a five-year high following a supply squeeze, saying that it’s requested authorities look into the gains. Futures slumped. The China Iron & Steel Association “is reporting relevant problems in the industry to government ministries and regulators, urging a stronger investigation and supervision to maintain normal iron ore market order,” Vice Chairwoman Qu Xiuli said at a conference in Shanghai on Friday. The group wants to see prices back at “reasonable levels,” she said.
- Samsung Electronics Co.’s quarterly profit more than halved after a global industry downturn and trade tensions hammered demand for its chips and high-end smartphones. Korea’s largest company reported a less-than-expected 56% fall in operating income to about 6.5 trillion won ($5.6 billion) in the June quarter — but that was helped by an unspecified one-time gain from a customer that analysts estimate could have topped $800 million. The company won’t provide net income or break out divisional performance until it discloses final results toward the end of the month. Its shares slid0.8% in Seoul.
- Amazon.com Inc. is facing an initial review by the U.K. competition regulator into its bid to buy a slice of fast-growing food delivery startup Deliveroo. The Competition and Markets Authority on Friday said it has “reasonable grounds” to believe that Amazon and Deliveroo have either ceased to be separate businesses, or will merge in the near future, according to the enforcement order posted online on Friday.
- Tata Consultancy Services Ltd. and Hindustan Unilever Ltd. are among at least 100 Indian companies that may need to sell shares worth billions of dollars after the government proposed to raise the minimum public shareholding. The rule may result in equity sales of about 3.9 trillion rupees ($57 billion), creating a supply overhang on the market that’s trading near a life-time high, according to analysts including Centrum Broking Pvt. The proposal may have another side-effect: it could prompt domestic units of multinationals, who don’t rely on local funding, to delist from exchanges.
- A little over two decades ago, Deutsche Bank AG set out to become a Wall Street giant. This weekend, Chief Executive Officer Christian Sewing will probably pull the plug on that dream for good. Sewing is poised to unveil the biggest job cuts program in the bank’s history, including a major retreat across its briefly held U.S. empire, people familiar with the matter have said. The reductions will probably go far beyond the previously targeted equities and interest-rate derivatives trading units and may mark the company’s biggest-ever pullback from the country, they said.
- The world’s biggest pension fund posted a gain for a third consecutive fiscal year as overseas stocks rallied and strength in the dollar versus the yen helped boost the value of its assets abroad. Japan’s Government Pension Investment Fund returned 1.5%, or 2.4 trillion yen ($22.1 billion), in the year ended March 31, with assets totaling 159.2 trillion yen, it said Friday in Tokyo. Overseas stocks were the fund’s best performing investment, handing it a gain of 3.1 trillion yen, while domestic equities lost 2.1 trillion yen. Its investment income was 698 billion yen for overseas bonds and 596 billion yen for domestic debt.
- Kamala Harris says she supports “Medicare for All,” and she has cosponsored legislation with Bernie Sanders. But unlike her Democratic presidential rival, she says the plan wouldn’t end private insurance. That’s misleading. The measure would outlaw all private insurance for medically necessary services but allow a sliver to remain for supplemental coverage. It would force the roughly 150 million Americans who are insured through their employer to switch to a government-run program.
- Osram Licht AG’s supervisory and managing boards accepted a 3.4 billion euro ($3.8 billion) takeover bid from Bain Capital and Carlyle Group LP, ending the German lighting company’s relatively brief and at times contentious period as a standalone company. Bain and Carlyle are offering 35 euros a share, 21% more than the stock’s close on Tuesday, amid reports about the latest offer. The price is still 15% lower than its peak this year in February. They’ve put a minimum acceptance level of 70% on the deal, excluding shares owned by Osram, and the acceptance period will run until early September. The stock rose 1.4% to 32.94 euros at the open of trading in Frankfurt.
- Swedish buyout firm EQT Partners plans to privatize Health Management International Ltd., valuing the Singapore-based hospital operator at S$611 million ($450 million) as it seeks to increase its exposure in Southeast Asia. EQT is offering HMI shareholders either S$0.73 per share in cash or 1 new ordinary share in PanAsia Health Ltd., EQT’s special-purpose vehicle set up for the offer, priced at S$0.73 for each HMI share, the company said in a filing to Singapore Exchange on Friday.
- BMW AG Chief Executive Officer Harald Krueger told the board he won’t seek a second term, pre-empting mounting speculation over his future at the German luxury carmaker. The 53-year-old executive, who has led BMW since 2015, has faced growing criticism amid falling profits and an electrification plan that was seen as too tentative for a rapidly changing industry, Bloomberg reported in May. Production head Oliver Zipse, 55, is the front-runner to succeed him, a person familiar with the matter said Friday.
- German factory orders slumped in May in the latest sign that global trade uncertainty is turning Europe’s temporary slowdown into a more serious downturn. The economy ministry reported huge declines in export orders and investment goods, just days after a survey showed factory activity shrank for a sixth month in June. The continued gloom is increasing concern at the European Central Bank, and a growing number of economists are predicting it will add more monetary stimulus as soon as this month.
- Joe Biden said he wasn’t prepared for the friendly fire he’s taken from Democrats over busing, and instead tried to refocus his message on differences with President Donald Trump. In an interview with CNN, the former vice president said his decades-old comments on school desegregation were taken out of context and that his position isn’t that different from his challengers, including California Senator Kamala Harris.
*All sources from Bloomberg unless otherwise specified