June 5th, 2018
Daily Market Commentary
- Canadian stocks eked out a small gain but didn’t keep pace with their U.S. counterparts as a surge in Canadian crude prices failed to boost energy stocks. The S&P/TSX Composite Index added 9 points, or less than 0.1 percent, to 16,052.24. Energy shares tumbled 1.1 percent even as the discount for Canadian crude versus the U.S. benchmark tightened by nearly 50 percent. Cenovus Energy Inc. lost 5.9 percent, the most since March, on a report that ConocoPhillips is preparing to sell its stake in the company.
- Canadian crude surged by the most ever after Enbridge Inc. said it won’t implement a new procedure to stop shippers from claiming more space than they can use on a key pipeline linking Alberta’s oil sands with U.S. refineries. Western Canadian Select jumped as much as $12.20 a barrel to $13.80 below the U.S. benchmark Monday, the narrowest spread since May 16. Canadian crudes have weakened to historically low levels in recent weeks as growing production overwhelms available pipeline capacity to transport Alberta’s supplies south of the border.
- Group of Seven summits — such as last week’s all-male cohort of finance chiefs and central bankers — aren’t known for their diversity. Justin Trudeau is pushing to change that. Canada will host the leaders of the industrialized world near Quebec City this week, with all eyes on Donald Trump’s brewing trade war. U.S. tariffs have angered allies, prompted retaliation and divided the bloc. Amid all that, Trudeau is making gender equality and women’s empowerment one of five core themes of this year’s meeting.
- European stocks are little changed as investors weigh global trade tensions, while oil halts its decline, boosting energy shares. The Stoxx Europe 600 Index trades less than 0.1% lower, with basic resources and banking stocks pacing the drop.
- U.S. futures also turned higher following the S&P 500’s highest finish since mid-March. Treasury yields slipped for the first time in five days, while those of Italian bonds were poised for the first increase since they blew up a week ago.
- Asian equities were little changed after setting the pace for Monday’s global rally as investors seek new catalysts and monitor developments of the dispute between the U.S. and its trading partners. The MSCI Asia Pacific Index traded less than 0.1 percent higher at 174.56 as of 4:52 p.m. in Hong Kong, after rising 1.4 percent on Monday.
- Brent crude declined after the U.S. government was said to have asked Saudi Arabia and other OPEC producers to raise oil supply. The request for a 1 million-barrel-a-day increase follows Washington’s decision to reimpose sanctions on Iranian crude exports that had previously removed roughly the same amount from global markets. OPEC pumped 31.9 million barrels a day last month, unchanged from April when production was the lowest in a year, according to a Bloomberg survey.
- Gold trades little changed for a second day amid a strong dollar and U.S. data that’s bolstering the case for higher interest rates.
- An emerging-market selloff that’s hit India hard presents its central bank with a dilemma: hold interest rates steady to keep the economy motoring or follow the example of the Philippines and Indonesia by raising them to stem market pressure. The rupee has dropped about 5 percent against the dollar this year and yields have spiked on government and corporate bonds. While those moves would argue for a rate increase, most economists aren’t convinced it will come on Wednesday. Of the 41 surveyed by Bloomberg, 27 predict the monetary policy panel will leave the benchmark repurchase rate at 6 percent.
- The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter. The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production.
- Adyen BV, the Dutch payment-processing firm, said its shareholders plan to raise as much as 947 million euros ($1.1 billion) in one of the biggest European fintech IPOs in years. The investors will sell as much as 14.2 percent of the outstanding shares — if an over-allotment option is exercised — at 220 euros to 240 euros, valuing Adyen at as much as 7.1 billion euros, according to a statement on Tuesday. The first day of trading is expected to be June 13. The company won’t receive any proceeds from the sale.
- Corporate America is set to shower investors with a record surge of cash. Between buybacks, dividends, and merger activities, companies are poised to plow $2.5 trillion into the stock market this year, according to UBS Group AG. The buying spree is equivalent to 10 percent of the S&P 500’s market capitalization, easily outstripping prior records. The projection helps revive the bull case for stocks, which have flat-lined so far in 2018 amid trade tensions and higher bond yields. And it’s no wonder U.S. equity leadership has remained so narrow: the corporate flow comes largely from momentum shares such as technology companies, which have enjoyed the largest gains over the past year.
- Dana Gas PJSC received consent from majority of the holders of its $700 million Islamic bonds to restructure the debt. The company received support from 90.93 percent of ordinary sukuk certificate holders and 96.45 percent of exchangeable sukuk certificate holders as of June 1, the Sharjah, United Arab Emirates-based gas producer said in a statement. No vote was cast against the restructuring and refinancing of the sukuk al-mudarabah.
- The British government sold a 2.5 billion pound ($3.3 billion) stake in Royal Bank of Scotland Group Plc, reducing its majority holding a decade after it bailed out the lender during the financial crisis. The state sold 7.7 percent in the lender at 271 pence per share to institutional investors, it said in a statement on Tuesday. Shares in the Edinburgh-based bank fell 3.4 percent to 271.40 pence at 8:47 a.m. in London trading.
- Billionaire T. Ananda Krishnan is weighing the possibility of taking Astro Malaysia Holdings Bhd. private after shares of the pay-TV operator dropped to a record low, people familiar with the matter said. The tycoon has revived deliberations about a buyout of Kuala Lumpur-based Astro, which had a market value of $1.9 billion at Monday’s close, according to the people. Krishnan has been speaking to potential advisers about funding options and is reaching out to some major investors to gauge their interest, the people said, asking not to be identified because the information is private.
- Soaring lumber prices, rising mortgage rates and a dearth of skilled workers are a triple threat looming over the housing industry right now. That spells bad news for homebuilders, but not for home-improvement chains. That’s because anything that slows production of new homes — like an industrylabor shortage — should increase demand for existing ones, and, in theory, boost their values. Rising home prices convince people to see their residences as investments and make them feel better about renovating a bathroom or adding a patio to the backyard with the help of Home Depot Inc. or Lowe’s Cos.
- A group of Takeda Pharmaceutical Co. shareholders opposed to the Japanese drugmaker’s acquisition of Shire Plc knows they face an uphill climb, but that’s not deterring them from trying to stop the $62 billion deal. The group, which calls itself “Thinking About Takeda’s Future,” is made up of former Takeda employees and shareholders who collectively own about 1 percent of Takeda’s stock. Many of the 130 members have objected to the company’s direction and strategy even before current CEO Christophe Weber took over in 2015, with some belonging to a former group that was set up to oppose Takeda’s acquisition of Nycomed in 2011.
- Xiaomi Corp. has brought in six more Chinese banks to help arrange its Hong Kong listing, as it moves closer to the world’s largest initial public offering in nearly four years, people with knowledge of the matter said. The smartphone maker last week added ABC International Holdings Ltd., BOC International Holdings Ltd., CCB International Holdings Ltd., China International Capital Corp., CMB International Capital Ltd. and ICBC International Holdings Ltd. to the share sale, according to the people. They have taken roles as joint global coordinators, the people said, asking not to be identified because the information is private.
- The U.K. government is set to rule on 21st Century Fox Inc.’s proposed 11.7 billion-pound ($15.6 billion) takeover of Sky Plc on Tuesday, a key step in Rupert Murdoch’s battle with Comcast Corp. for control of Britain’s biggest pay-TV company. Culture Secretary Matt Hancock will make a statement to Parliament Tuesday afternoon on Fox’s bid, a spokesman for the Department for Digital, Culture, Media and Sport said by phone. Hancock is expected to say whether he will approve the Fox-Sky deal subject to conditions, or block it.
- Ethanol consumption credits traded at more than 90 cents apiece when President Donald Trump was elected in November 2016. On Monday, they touched 18 cents, a five-year low, as his administration was expected to unveil changes to U.S. biofuels policy. The credits, known in the biofuels industry as renewable identification numbers, or RINs, are purchased by oil refiners to prove they have satisfied government quotas for the blending ethanol in gasoline.
- Special Counsel Robert Mueller accused Paul Manafort, the former chairman of Donald Trump’s 2016 presidential campaign, of attempting to tamper with witnesses in the federal case charging him with money laundering and acting as an unregistered foreign agent of Ukraine. Manafort and a longtime associate tried to contact two witnesses to secure false testimony about work that a group of former senior European politicians secretly did on behalf of Ukraine, Mueller’s prosecutors claimed in court papers filed late Monday.
- Christofferson Robb & Co., Davidson Kempner Capital Management, and Elliott Management Corp., are among bidders for the riskiest part of a securitization backed by 5.1 billion euros ($6 billion) of Banco BPM SpA’s bad loans, according to people with knowledge of the matter. Italy’s third-largest lender asked for final offers to be submitted by June 18 for the equity and mezzanine tranches of a securitization known as “Project Exodus,” said the people, who asked not to be identified because the matter is private. Pacific Investment Management Co. is also among firms that made non-binding offers for the loans, one of the people said.
- The U.K. is considering whether to take an equity stake in a 20 billion-pound ($27 billion) nuclear project in Wales, a move that would mark a major step away from private control of energy markets. Greg Clark, the Cabinet minister in charge of business and energy, confirmed the government has entered detailed negotiations with the developer Hitachi Ltd. and Japan about how to fund the project in Wylfa and that deeper involvement by the state is one of the options. No decision has been made, and the discussions may last months and require numerous regulatory approvals.
- Two of the most famous Silicon Valley venture capital firms just scored a huge win with Microsoft Corp.’s $7.5 billion purchase of GitHub Inc., the online platform for developers sharing and collaborating on code. In 2012, Andreessen Horowitz cut a $100 million check to GitHub, which had previously been self-funded. Three years later Sequoia Capital led a $250 million round that valued the startup at $2 billion. On Monday, Microsoft announced the acquisition, which is the largest venture-backed enterprise software sale in history, according to CB Insights. It will generate a massive return for two of Silicon Valley’s most elite venture firms, one founded less than a decade ago and the other started in 1972. The duo have long competed for high-profiles deals and needle each other behind closed doors.
*All sources from Bloomberg unless otherwise specified