June 22nd, 2017

 

Daily Market Commentary

 

 

Canadian Headlines

• Canadian stocks were little changed following a roller-coaster day that saw the benchmark spike on falling oil inventories, then fall back into the red. The S&P/TSX Composite Index fell 1 point to 15,148.53. Financial stocks fell 0.5 percent and energy shares lost 0.2 percent, offsetting a 1.5 percent gain in materials.
• Warren Buffett’s Berkshire Hathaway Inc. is providing a lifeline to Home Capital Group Inc., the embattled Canadian alternative lender whose near collapse sparked intense scrutiny of the country’s fraught housing market. Berkshire agreed to indirectly acquire C$400 million ($300 million) of the firm’s shares for about a 38.4 percent stake and provide a C$2 billion credit line to subsidiary Home Trust Co., Home Capital said late Wednesday in Toronto.
• Quebec’s second straight budget surplus will likely be a whopper. Canada’s second most populous province posted a surplus of C$2.49 billion ($1.87 billion) for the fiscal year ended March 31, according to preliminary data released Thursday by the government. That’s 10 times as large as the C$250 million surplus forecast by Finance Minister Carlos Leitao in his March 28 budget.
• Ista International GmbH has received takeover offers from bidders including Blackstone Group LP, CK Infrastructure Holdings Ltd. and the Ontario Teachers’ Pension Plan Board, people familiar with the matter said. The German metering business, owned by CVC Capital Partners, could fetch an equity value of 2 billion euros ($2.2 billion) to 2.5 billion euros, the people said. That may give the entire company, including debt, a value of 4.5 billion euros, one of the people said.

 

 

World Headlines

• European stocks headed for their worst three-day drop in a month as a selloff in energy shares continued and miners resumed declines. The Stoxx Europe 600 Index dropped 0.3 percent at 8:30 a.m. in London, as all but two industry groups declined. Oil-related equities are sliding this week with crude prices in a bear market amid a persistent supply glut.
• U.S. stock-index futures drifted lower amid a lack of drivers as the S&P 500 Index still headed toward a seventh quarterly gain. Contracts on the benchmark expiring in September slipped 0.2 percent to 2,429.50 as of 5:42 a.m. New York time. Futures on the Dow Jones Industrial Average declined 27 points to 21,351.
• Asia stocks headed for the first gain in three days, led by technology firms after their more expensive peers jumped in the U.S. The MSCI Asia Pacific Index rose 0.4 percent to 155.07 as of 4:31 p.m. in Hong Kong with 10 of the industry groups rising. A gauge of technology stocks in the Asian benchmark added 0.7 percent, following a 1 percent rally by the Nasdaq 100 Index on Wednesday.
• Oil held its slide into a bear market amid speculation rising U.S. output will blunt OPEC-led efforts to trim a global glut. Futures were unchanged in New York, trading below $43 a barrel. U.S. oil production increased to the highest since August 2015, according to a report from the Energy Information Administration.
• Gold climbed as oil’s slide into a bear market may potentially retard the pace at which the U.S. Federal Reserve raises interest rates amid tumbling expectations for inflation, with the precious metal back on course for a second straight quarterly advance.
• The euro and yen are set to keep on surprising this year on prospects the Federal Reserve will slow monetary tightening while central banks in Europe and Japan move toward reducing stimulus, Asia-based foreign-exchange strategists say. Traders are betting the Fed will raise interest rates just once more this year after two hikes in the first half.
• Coal’s rally in defiance of a slump in crude may not last much longer. While commodity bellwether crude, which impacts coal production and freight costs, slumped 7 percent since May 8, coal for next-month delivery in northwest Europe rose 11 percent to the highest level since February. That rally is likely to end in the third quarter as supply from producers including Australia and Russia recovers.
• Energy Transfer Partners LP is making a mess of its biggest project since the Dakota Access pipeline. Construction of the $4.2 billion Rover natural gas line has caused seven industrial spills, polluted fragile Ohio wetlands and angered local farmers.
• China’s initiation into MSCI Inc.’s club has put the world’s second-biggest stock market on a new global footing. Yet spinning that endorsement into what really matters — significant investment flows — is a whole other challenge. By August 2018, Chinese domestic stocks will make up 0.7 percent of the MSCI Emerging Markets Index, the index firm said Tuesday.
• Terry Gou is intent on building Foxconn Technology Group’s international footprint. The world’s largest maker of iPhones is readying $10 billion or more of investment across several U.S. states, starting with a decision by July on the location for a $7 billion display-making plant.
• China Gas Holdings Ltd., which posted an 82 percent jump in profit as the country pushes to replace coal with natural gas and as earnings rebounded from a one-time loss, forecast a surge in sales volumes over the next three years. The Shenzhen-based company is targeting city gas sales growth of 30 percent in the current year to March, followed by 25 percent growth the next two years, Vice-President Kevin Zhu said in a briefing Wednesday night in Hong Kong.
• China Tower Corp., which owns wireless infrastructure used by the country’s main phone carriers, picked banks to lead a proposed Hong Kong initial public offering that could raise about $10 billion, people with knowledge of the matter said. The Beijing-based company chose China International Capital Corp. and Goldman Sachs Group Inc. as sponsors of the share sale, the people said, who asked not to be identified because the information is private.
• Takata Corp. slumped a record 55 percent in Tokyo in the first trading on the stock this week as investors expect a bankruptcy filing for the air-bag maker at the center of the biggest recall in automotive history. The stock fell to 110 yen, the lowest level since a 2006 listing. That gave the Tokyo-based air-bag and seat-belts maker a market value of 9.1 billion yen ($82 million).
• Tesla Inc. has signed a preliminary agreement with the city of Shanghai to explore production in China, moving the electric-car maker a step closer to lowering its manufacturing and shipping costs, according to people familiar with the matter.
• Airbus SE sales chief John Leahy conceded defeat to Boeing Co. at his last European air show, marking a rare show of humility from the American who confirmed his plans to retire after racking up $1.7 trillion of jet orders over two decades.
• Germany stiffened its opposition to a proposed revamp of global bank capital standards, renewing a confrontation with the U.S. and putting at risk a deal on rules intended to help prevent another financial crisis. After opening the door earlier this year to an agreement in the Basel Committee on Banking Supervision, Germany has changed tack and closed ranks with France, the staunchest critic of proposed measures to stop banks gaming the rules known as Basel III.
• News Corp., publisher of the Wall Street Journal and the Times of London, is holding “very advanced” discussions with Facebook Inc. about subscriptions to its content online, Chief Executive Officer Robert Thomson said.
• Japan’s biggest brokerages are heading to Frankfurt. Nomura Holdings Inc. picked the German city as the headquarters for its European Union operations after the U.K. leaves the bloc, according to people with knowledge of the matter.
• Some European investors were unable to participate in Russia’s sovereign Eurobond sale this week because the Russian bank that arranged the deal is subject to U.S. and European sanctions. Investors at Union Investment Privatfonds GmbH in Frankfurt and Dublin-based EI Sturdza Investment Funds told Bloomberg they couldn’t bid for the dollar-denominated debt because of internal bans on trading with sanctioned brokers, including Russia’s VTB Capital.
• The head of UBS Group AG’s China investment-banking business has resigned, becoming the fourth senior departure from the division since mid-April, people familiar with the matter said. Jiang Guorong, China head of corporate client solutions and also a vice chairman for the division in Asia, resigned Wednesday and will join Citigroup Inc.

 

*All sources from Bloomberg unless otherwise specified