June 23rd, 2017


Daily Market Commentary



Canadian Headlines

  • Warren Buffett’s deal to back Home Capital Group Inc. does more than support a struggling mortgage lender — it’s a vote of confidence for a housing market that everyone from investors to global ratings companies say is a bubble ready to burst.
  • Royal Dutch Shell Plc’s sale of its remaining New Zealand energy assets has drawn interest from companies including OMV AG and Vermilion Energy Inc., people with knowledge of the matter said. Vermilion has been talking with potential financial partners about bidding together for Shell’s stakes in two New Zealand gas fields, one of the people said.
  • BlackBerry Ltd. which exited the hardware business last year, missed analyst estimates for total revenue, the majority of which is now made up of software sales. Revenue excluding some costs was $244 million in the fiscal first quarter compared with the average analyst estimate of $265.4 million.



World Headlines

  • European stocks dropped, heading for a decline in the week, led by automobile and food shares amid economic reports that signaled growth eased in June. The Stoxx Europe 600 Index fell 0.5 percent at 11:47 a.m. in London, as the carmaker sector declined 1 percent. Price charts show both the 600-member gauge and the Euro Stoxx 50 index rose toward their 50-day moving averages for third day in row, but failed to cross back above them, in a technical signal of weakness.
  • U.S. stock-index futures held steady, indicating stocks will struggle to break out of a lull that has left the S&P 500 Index virtually flat for the week. Contracts on the benchmark expiring in September added less than 0.2 percent to 2,435.50 as of 5:46 a.m. New York time. The $21 trillion index has stalled since closing at an all-time high on Monday.
  • Asian stocks gained as China Resources Gas Group Ltd. led a utility rally after China’s government said it will cap gas distributor investment returns. The MSCI Asia Pacific Index rose 0.2 percent to 155.17 as of 4:57 p.m. in Hong Kong, set for the first weekly advance in three weeks. Japan’s Topix gained, capping a second-straight weekly increase, buoyed by technology shares and machinery makers.
  • Oil is heading for a fifth weekly decline after sinking into a bear market amid concerns rising supply from the U.S. to Libya would offset production cuts from OPEC and its allies. Front-month futures gained 12 cents in New York, yet were down 4.2 percent for the week. U.S. crude production has extended gains above 9.3 million barrels a day, Libya is pumping the most in four years and oil stored in tankers rose to a 2017 high earlier this month.
  • Gold climbs for third day as European equities dropped, heading for the longest run of weekly losses in a year and fueling demand for havens. Bearish investors see no incentive to hold the precious metal because equities are climbing to records, the global economy is recovering, and the Federal Reserve is so wary of tight labor markets that it has pledged to increase U.S. interest rates further this year.
  • The European Central Bank made a play for power over London’s lucrative clearing industry, bolstering its case in a key issue in Brexit talks between the European Union and the U.K.
  • China gas distributors rose after the government imposed limits on investment returns that are less onerous than expected amid a drive by President Xi Jinping’s government to spur consumption of the fuel. A 7 percent cap for natural gas distributors in urban areas is higher than the initially proposed 6 percent.
  • President Donald Trump told China’s State Councilor Yang Jiechi in a meeting that the U.S. is willing to cooperate with Beijing on projects related to its Belt and Road infrastructure initiative, according to a statement from China’s foreign ministry.
    Thirty-four of the largest banks operating in the U.S. cleared a Federal Reserve stress test of their ability to withstand economic shocks, showing firms are getting the hang of the once-dreaded reviews — a trend that may continue if the Trump administration dials them back.
  • Ireland raised about 3 billion euros ($3.4 billion) selling a 25 percent stake in Allied Irish Banks Plc, returning the bailed-out lender to the market seven years after it helped tip the country into financial ruin.
  • Britain’s first new nuclear plant in a generation may cost consumers 30 billion pounds ($38 billion) or more in higher electricity costs, five times more than ministers had expected, the government’s auditor warned.
  • The long-awaited Obamacare replacement plan from Senate Republicans wouldn’t do much to preserve coverage for millions of poor and working-class people, but it would deliver tax cuts to the wealthiest Americans. To appeal to their moderate members, GOP leaders initially faced pressure to maintain some of the Obamacare taxes that funded expanded Medicaid coverage. Instead, the Senate version mirrors the House bill in seeking to repeal almost all of the Obamacare taxes, which largely affect the highest earners.
  • India’s states are lining up to rescue indebted farmers hammered by depressed crop prices and rising costs, a trend that may further hurt the nation’s prospects for a sovereign-rating upgrade. Prime Minister Narendra Modi’s government has criticized ratings companies for keeping Asia’s third-largest economy at the lowest investment grade, and his administration has pursued fiscal targets aimed at limiting borrowing needs.
  • Saudi Arabia and its allies presented Qatar with a list of steep demands to end the crisis that has roiled the Gulf for almost three weeks, as diplomats predicted the tiny Gulf state would likely refuse to comply. The 13 requirements include shutting the Al-Jazeera TV network, cutting back diplomatic ties with Iran, severing relations with the Muslim Brotherhood and ending Turkey’s military presence in Qatar.
  • General Electric Co. Vice Chairman John Rice said incoming Chief Executive Officer John Flannery will review and put his personal stamp on the company’s portfolio as the U.S. conglomerate pushes ahead with the sale of some assets.
  • The euro-area economy recorded its fastest expansion in six years in the second quarter even as momentum eased in June due to weakening services activity. A composite Purchasing Managers’ Index dropped to a five-month low of 55.7, IHS Markit said on Friday.
  • Toshiba Corp.’s shares are being demoted to the second section of the Tokyo Stock Exchange after its shareholders’ equity slipped into negative territory for the latest fiscal year. Earlier on Friday, Toshiba announced that it asked for an extension to submit its earnings report to Aug. 10 and updated its forecasts for the year, to a loss of 995.2 billion yen ($8.9 billion) and negative shareholders’ equity of 581.6 billion yen.
  • NextEra Energy Inc. hasn’t given up on its twice-rejected $18 billion deal for Oncor Electric Delivery Co., a transaction that could clear the way for Oncor’s bankrupt Texas parent to exit bankruptcy.
  • Emerson Electric Co. is in talks to acquire Paradigm Ltd., a maker of software for the oil and gas industry, for about $1.5 billion, according to people familiar with the matter.
  • Uber made an unusual commitment to the engineer it hired to lead its driverless car project: It would cover the costs of legal actions against him over information stored in his head from his previous job at Waymo.
  • Tanzania will allow foreign investors to buy shares in telecommunications companies listing on the domestic stock exchange, after an initial public offering by the country’s biggest mobile operator stalled.
  • Flipkart Online Services Pvt.’s planned acquisition of rival Indian e-commerce provider Snapdeal has hit a snag that may put the deal in jeopardy, or at least substantially drive down Snapdeal’s valuation from a previously agreed-upon $1 billion.



*All sources from Bloomberg unless otherwise specified