June 28th, 2017


Daily Market Commentary


Canadian Headlines

  • Canada’s economy is booming, though you’d hardly know it from listening to Prime Minister Justin Trudeau. Led by a soaring housing sector and consumer spending, Canada’s gross domestic product is forecast to lead the Group of Seven this year. Jobs numbers are surging, the central bank is hinting at rate hikes and a new round of GDP figures this week will likely show the expansion continues.
  • Spreads on Canadian-dollar corporate bonds are set to extend their longest shrinking streak in seven years as a recovering economy is bolstering appetite for the country’s riskier debt. Investment-grade spreads over federal bonds tightened two basis points in April-June, the fifth straight quarter of narrowing according to Bloomberg data going back to 2010, as a slowdown in issuance this month offset a flood in May. The index is on track for the sixth gain in seven quarters.
  • Air Canada is eager to revive a revenue-sharing arrangement with United Airlines on cross-border routes, now that a bill in the Canadian Parliament has been introduced that could make such joint ventures easier to pass regulatory muster.


World Headlines

  • European stocks deepened declines as investor sentiment suffered from a U.S. technology selloff, a widespread cyberattack and lower oil prices. The Stoxx Europe 600 Index dropped 0.8 percent at 8:35 a.m. in London, with utilities and technology shares leading a broad retreat. The benchmark is poised to end four months of gains, in keeping with a trend that has seen it decline in nine of the past 10 Junes.
  • As technology shares in the S&P 500 Index head for their first monthly decline since November, investors are boosting bearish bets. Short interest on the biggest exchange-traded fund tracking the industry climbed to a 2017 high of 3.8 percent of shares outstanding in June from 1.1 percent in May, according to data from IHS Markit Ltd. The Technology Select Sector SPDR Fund is having a third straight month of outflows, with investors withdrawing almost $1.1 billion this quarter after adding $1.4 billion in the previous period.
  • Asian stocks fell as a selloff in technology shares overshadowed gains in financial equities. Tencent Holdings Ltd. and Samsung Electronics Co. retreated. The MSCI Asia Pacific Index fell 0.3 percent as of 4:16 p.m. in Hong Kong with technology and consumer companies as the biggest decliners, while material and finance companies were the best gainers.
  • Oil fell, snapping the longest run of gains in a month, as U.S. industry data showed crude stockpiles rose. Futures lost as much as 1.3 percent in New York after climbing 4 percent the previous four sessions. U.S. stockpiles expanded by 851,000 barrels last week, the American Petroleum Institute was said to report on Tuesday. Government data on Wednesday is forecast to show inventories extended declines from a record reached at the end of March.
  • Gold advances for second day as comments from European Central Bank President Mario Draghi saw the euro strengthen, while those from Federal Reserve Chair Janet Yellen did little to support the U.S. currency.
  • U.K. Prime Minister Theresa May will face the first key test of her new minority government’s power as opposition Labour Party leaderJeremy Corbyn challenges Tory lawmakers over austerity. In the wake of the inferno at a London high-rise apartment building this month that’s believed to have killed 79 people and a wave of terrorist attacks in Britain, Corbyn will put forward a motion in Parliament demanding an end to years of cuts to public services.
  • India’s benchmark stock index dropped for a third day, reaching a fresh one-month low, amid weakness in consumer shares and energy producers ahead of the derivatives expiry on Thursday.
  • Nestle SA made its first concession to activist investor Dan Loeb, announcing Tuesday a $21 billion share buyback plan to boost its stock price. Don’t expect Loeb’s Third Point LLC to stop there.
  • Royal Philips NV agreed to buy Spectranetics Corp., a U.S. maker of devices to treat cardiac disease, for $1.7 billion as the Dutch company bolsters its growing health-care business. Philips will offer $38.50 a share in cash for the Colorado Springs-based company, according to a statement Wednesday. The price is 27 percent above Spectranetics’ closing level on Tuesday. Philips also will buy back as much as 1.5 billion euros ($1.7 billion) of stock to offset share dilution from an employee incentive program, the company said.
  • Alibaba Group Holding Ltd. will invest another $1 billion to raise its stake in online mall Lazada Group SA to 83 percent, securing control of a fast-growing startup at the vanguard of its Southeast Asian expansion.
  • For centuries, gold has been a go-to asset among investors worried about all sorts of financial risks. In the past decade, exchange-traded funds backed by the metal drew more money than any other commodity. Even the world’s biggest central banks hoard bullion as a reserve asset. But when it comes to inflation, which can erode the value of portfolios that don’t keep pace with rising consumer prices, anyone who bought gold as a hedge over the past 25 years missed out on a much better deal — copper.
  • Co-Operative Bank Plc reached an agreement with investors on a 700 million-pound ($898 million) recapitalization plan, enabling the U.K. lender to avoid being broken-up by regulators. The deal will involve a debt-for-equity swap for junior bondholders to raise 443 million pounds, while the lender will also sell 250 million pounds of new shares, the Manchester, England-based bank said in a statement on Wednesday. The bank also agreed to split its pension program from the Co-Op Group supermarket chain.
  • FIT Hon Teng Ltd., a unit of Apple Inc.’s biggest supplier, will seek as much as HK$3.05 billion ($391 million) in an public offering in Hong Kong. The maker of connectors for computers and smartphones will offer 990.1 million shares at HK$2.38 to HK$3.08 apiece, according to terms for the deal obtained by Bloomberg. FIT Hon Teng will start taking investor orders Thursday, the terms show.
  • The Navajo generating station, the biggest coal-fired power plant in the U.S. West, will live to see another two years. On Monday, Navajo Nation leaders approved a lease with the plant’s utility owners that will keep the ailing, 2,250-megawatt complex operatingthrough December 2019. The owners signaled on Tuesday that they’ll sign the deal this week, the Navajo Nation Council said by email.
  • Societe Generale SA drew preliminary bid from Apollo Global Management LLC, Christofferson Robb & Co. and Varde Partners as it seeks to sell an Italian consumer-loan business, according to people familiar with the matter. The non-binding offers for Fiditalia SpA, which has about 3 billion euros ($3.4 billion) of outstanding loans, were among those submitted last week, and a final round of bidding will take place within two months
  • The International Finance Corporation, the financial arm of the World Bank, said it raised $500 million from Prudential Plc’s Asian asset management unit for infrastructure investments in emerging markets.
  • JPMorgan Chase & Co. reorganized its senior European regional management after Enrique Casanueva, the former head of southern, central and eastern Europe, retired to pursue a career in academia, according to a memo seen by Bloomberg News.
  • A new cyberattack similar to WannaCry reached parts of Asia after hitting businesses, port operators and government systems in Europe, U.S. and South America. A terminal operated by A.P. Moller-Maersk at the Jawaharlal Nehru Port Trust, a facility near Mumbai which is India’s biggest container port, was unable to load or unload because of the attack. With the Gateway Terminal India facility unable to identify which shipment belongs to whom, the port is clearing cargo manually, Chairman Anil Diggikar said in a phone interview.
  • Singapore regulators have proposed rules that will make it easier for banks to conduct or invest in non-financial businesses such as e-commerce and digital-payment platforms, helping them to better compete with non-bank firms in these areas, Finance Minister Heng Swee Keat said Tuesday.
  • After China finally got a start on seeing its local stocks into global equity indexes, focus turns to what could be an even bigger deal — winning inclusion into the world’s benchmark bond gauges. China is preparing the final touches for the next stage in that campaign — a “Bond Connect” program with Hong Kong that will allow international investors to buy Chinese debt in the city, a mirror of two stock connect facilities with domestic equity markets. Market participants expect an official announcement on the start as soon as July 3.
  • Microsoft Corp., cybersecurity analysts, and Ukrainian police say the global hack that has disrupted companies across the globe can be traced to a Ukrainian accounting software producer called M.E.Doc. The cybercrime unit of the Ukrainian police said late Tuesday that a software upgrade from M.E.Doc unwittingly contained the virus. Microsoft said in a blog post that the initial infection “appears to involve a software supply-chain threat involving the Ukrainian company M.E.Doc” and that it has evidence that some active infections started from the software maker’s updates.
  • Kroton Educacional SA Chief Executive Officer Rodrigo Galindohas pulled out every stop in the weeks leading up to a regulatory decision on whether his company can buy its biggest rival in the education business, Estacio Participacoes SA. With the $1.8 billion deal in jeopardy, the 41-year-old hired an all-star team of former antitrust regulators and a prominent former official to help win approval.


*All sources from Bloomberg unless otherwise specified