June 21st, 2017

Daily Market Commentary



Canadian Headlines:

  • Canadian stocks dropped to a 2017 low as oil entered a bear market after falling to the lowest level in nine months. The S&P/TSX Composite Index fell 0.8 percent to 15,149.60 at the close, as energy stocks dropped 2 percent. Crude oil fell 2.2 percent to 43.23 per barrel.
  • Sears Canada Inc., the struggling offshoot of Sears Holdings Corp., is preparing to seek court protection from creditors in the coming weeks, according to people familiar with the matter. The court filing will likely lead to a liquidation, with the business sold off in pieces, said one of the people, who asked not to be identified because the deliberations are private.
  • CES Energy Solutions Corp., which withdrew a Canadian dollar-bond sale this year, is looking to U.S. debt markets to finance growth in its drilling-fluid business. The Calgary-based firm had attempted to sell high-yield debt in March when oil was above $50 a barrel, but pulled the offer as it didn’t get the rate it wanted. Fresh off a name change, it’s now in talks with banks and could try as early as this fall to refinance C$300 million ($226 million) of 7.375 percent 2020 bonds.


United States Headlines:

  • U.S. stock-index futures declined, signaling more pain in store after a rout in energy shares dragged the S&P 500 Index away from a record. Contracts on the benchmark expiring in September slipped 0.3 percent to 2,430.5 as of 5:46 a.m. New York time. The underlying gauge fell 0.7 percent on Tuesday, the most in more than a month, with a bear market in crudes purring a decline in oil stocks.
  • 2018 is already beginning to look bleak for U.S. natural gas bulls. Gas for delivery in March of next year is trading at just 35 cents above April supplies, the smallest premium in over a year. The collapse of the spread signals traders are betting that this summer won’t be scorching enough to erase a stubborn glut of the heating and power-plant fuel in storage, keeping a lid on prices through the winter, when demand peaks.
  • At this time of year, demand for gasoline in the U.S. is normally rising as people head out for summer vacations in a country that has millions more vehicles than any other. But that’s not happening in 2017, and one contributing factor could be that undocumented immigrants are driving less. Part of the blame for the slowdown may be higher pump prices, but Barclays Capital Inc. says another possible element is the immigration crackdown. Since President Donald Trump took office in January, the government is increasingly using routine traffic stops by local police to find and deport people without valid papers.
  • Travis Kalanick has resigned from his job leading Uber Technologies Inc., giving up on his effort to hold onto power as a torrent of self-inflicted scandals enveloped him and the global ride-hailing leviathan he co-founded. Pressure from investors, who’ve poured more than $15 billion into a company that has burned through billions, ultimately did what the board could, or would, not: it convinced the 40-year-old chief executive to step aside.
  • Republican Karen Handel defeated a well-funded opponent in a special election for a U.S. House seat in Georgia, a setback for Democrats who hoped President Donald Trump’s low approval ratings would help them win congressional races.


International Headlines:

  • European equities fell in a broad decline, heading for their worst back-to-back drop in a month, with lenders leading losses amid falling bond yields. The Stoxx Europe 600 Index fell 0.8 percent at 8:36 a.m. in London, as a decline in all 19 industry groups sent the benchmark below its 50-day moving average.
  • Asia stocks declined for a second day, led by energy companies after crude oil entered a bear market, overshadowing MSCI Inc.’s move to include mainland Chinese shares in its benchmark global indexes.
  • Oil slid further into a bear market as rising global supply countered efforts by OPEC and its allies to drain a glut. Futures fell as much as 1.1 percent in New York after front-month prices closed Tuesday more than 20 percent below their February peak. Libya, exempt from the OPEC-led output cuts, is pumping the most in four years while oil stored on tankers reached a 2017 high this month.
  • Gold advances from lowest level in five weeks on risk-off sentiment in global markets and as investors weigh outlook for U.S. interest rates and inflation.
  • Oil companies risk wasting $2.3 trillion of investments should demand peak in the next decade as the world works toward its goal of limiting global warming, according to a report from Carbon Tracker. Exxon Mobil Corp. is the most exposed oil major with as much as 50 percent of potential spending to 2025 on projects that wouldn’t be needed as the world changes its energy mix to meet climate targets.
  • Boeing Co. dominated the deal flow at the Paris Air Show, overwhelming rival Airbus SE on the back of Asian demand for the new Max 10, the biggest version of its 737 workhorse. The U.S. planemaker secured orders and expressions of interest for about 350 jets worth as much as $48 billion as of Wednesday morning, compared with Airbus’s tally of 229 airliners for about $24 billion.
  • Workers at Freeport-McMoRan Inc.’s Grasberg copper mine in Indonesia, the world’s second biggest, will down tools for a third month as talks to resolve a labor dispute stall. The metal advanced in London.
  • Ericsson AB, whose credit rating was cut to junk by Moody’s Investors Service last month, has hired banks to review its media businesses as the company refocuses on its main wireless network-equipment operations by selling assets, according to people with knowledge of the matter.
  • Pine River Capital Management is liquidating its $560 million China hedge fund after a second year of losses, a person with knowledge of the matter said. The Pine River China Fund, which was started in 2013 and run by Dan Li, has begun selling holdings and returning money to clients, said the person, who asked not to be named because the firm is private.
  • Already buffeted by political chaos at home and abroad, the U.K. gas market must now operate without its biggest stabilizing force: the giant Rough gas storage facility under the North Sea. The planned permanent shutdown of the Centrica Plc site, able to meet 10 percent of peak demand in winter, means Britain is becoming even more reliant on imports of liquefied natural gas or pipeline fuel from Russia and Norway.
  • MSCI sees $17b of China inflows from current inclusion plan, according to comments made on conference call with the index compiler’s executives Sebastien Lieblich and Chin Ping Chia.
  • Takata Corp., the embattled air-bag supplier facing mounting liabilities from a record safety recall, is seeking to sell its solar-power assets in Japan to raise funds, according people familiar with the plan.
  • Gecina SA agreed to buy rival French real estate investment trust Eurosic for about 2.5 billion euros ($2.8 billion), adding Paris office buildings in a deal that will make it Europe’s fourth-biggest property company. Eurosic shares climbed as much as 24 percent.
  • Atlas Mara Ltd., the company co-founded by former Barclays Plc head Bob Diamond, plans to sell a 35 percent stake to Fairfax Africa Holdings Corp. so it can increase its stake in a Nigerian bank. Atlas Mara will raise $200 million selling new shares to existing shareholders and Fairfax Africa and by issuing a convertible bond to the Toronto-based investment company.
  • Wang Shi, who built China Vanke Co. into the country’s biggest developer after founding it 33 years ago, stepped down as chairman after an ownership tussle that ended with a state entity becoming its biggest investor.
  • A group led by Bain Capital and Japanese investors emerged as the preferred bidders for Toshiba Corp.’s memory chip business, ending months of uncertainty over the company’s future. By bringing in state-supported Innovation Network Corp. of Japan and Development Bank of Japan, the consortium has all-but-secured the government’s approval. The buyers have indicated that they’re willing to pay 2.1 trillion yen ($19 billion) for the semiconductor unit.
  • Buyout firm SK Capital Partners LP is planning to raise funds through a sale of Archroma debt rather than accept offers for the Swiss chemicals supplier formed from the combination of Clariant AG and BASF SE units.


*All sources from Bloomberg unless otherwise specified