March 12, 2019

Daily Market Commentary


  • Canadian Headlines
    • Canadian stocks rose to their highest level since September with every sector gaining as global indexes rebounded from a gloomy week. The S&P/TSX Composite Index added 0.7 percent to 16,106.24. That’s the biggest gain since mid-February and more than erases last week’s drop, which was the first weekly decline of the year. Technology stocks led the way, rising 1.8 percent to the highest since 2008. Shopify Inc. jumped 5.5 percent to a record high after it was added to the S&P/TSX 60 Index. Energy stocks also gained, adding 1.1 percent as Saudi Arabia moved to extend supply curbs.
    • Core to Justin Trudeau’s rise to power was attracting star candidates with a pledge to do politics differently. Now, two of those top recruits have quit cabinet and the Canadian leader faces his biggest crisis. His winning 2015 campaign featured a slate of political newcomers against a Conservative opponent who had been in office nearly a decade. But today, amid accusations Trudeau twisted his attorney-general’s arm to help Montreal-based construction firm SNC-Lavalin Group Inc., his slogan of “real change” has given way to more traditional realpolitik, sinking his Liberals in the polls.
    • Barrick Gold Corp. may have withdrawn its pursuit of rival Newmont Mining Corp., but the hostile-takeover bid did yield a big prize: Control over the largest single gold mining operation in the world. On Monday, Barrick abandoned its $17.8 billion bid for Newmont, with the two largest gold companies instead announcing a joint venture around their Nevada assets, with Barrick holding sway over 61.5 percent of the operation. Barrick Chief Executive Officer Mark Bristow declined to say if control of the venture was his end game all along, but stressed that the final deal offers less “gristle” for investors to chew on than a full merger.
    • If U.S. Court of Appeals for the Ninth Circuit doesn’t stay other court’s ruling that blocked Keystone XL crude oil pipeline, TransCanada will lose more than $900m in earnings, co. says in filing.

    World Headlines

    • Gains in industrial-goods shares were mostly offset by declines in oil and food producers on the Stoxx Europe 600. The benchmark struggled to track a jump in Asia, where markets posted the biggest increase since January. In the U.K., the pound erased gains. Prime Minister Theresa May struck a deal to revise the terms of Britain’s divorce from the European Union, but it’s unclear whether she’s done enough to win Parliament’s support in a crucial vote later on Tuesday.
    • U.S. equity futures were mixed and European stocks edged higher as the risk-on mood across markets showed signs of fading. Treasuries fell and the dollar was steady, while the pound gave up an advance as a crucial Brexit vote nears. Futures on the Dow index fell, while those on the S&P 500 were little changed and contracts for the Nasdaq edged up.
    • In what’s been a stellar rally overall for Asian equities to start the year, it hasn’t always been smooth sailing — especially when it comes to China and Hong Kong, markets full of potential perils and rewards. Take selfie app maker Meitu Inc. and property developer Jiayuan International Group Ltd., which with moves of more than 70 percent are some of the biggest gainers and losers of the MSCI Asia Pacific Index in 2019. Those compare with a rebound of 8.3 percent in the benchmark gauge.
    • Oil rose to the highest in more than a week after Saudi Arabia was said to plan extending deep supply curbs and a nationwide blackout sparked a production collapse in Venezuela. Futures climbed as much as 1.2 percent in New York to the highest since March 1. A Saudi official said the world’s top crude exporter plans to pump well below10 million barrels a day in April, stretching deeper-than-agreed cuts into a second month. Meanwhile, fellow OPEC member Venezuela’s output has slumped as electrical problems were making it difficult to operate wells, according to a senior official at the country’s oil ministry.
    • Gold inched closer to $1,300 an ounce as investors turn their focus to a U.K. Parliament vote on a revised Brexit deal. Silver, platinum and palladium also rose. U.K. Prime Minister Theresa May struck a deal to revise the terms of the U.K.’s divorce from the European Union, but it’s unclear whether she’s done enough to win Parliament’s support in a crucial vote on Tuesday. Palladium is up for a second day as the metal shrugs off slowing car sales in China. The head of the largest pure-play palladium producer in North America said he’s not expecting any meaningful platinum substitution by automakers.
    • Investors pulled about $14 billion from funds operated by Standard Life Aberdeen Plc in the first two months of this year, extending the asset manager’s tough run in 2018. The biggest withdrawals came from Standard Life Aberdeen’s flagship Global Absolute Return Strategy, which lost about $2.4 billion in the period, according to data compiled by Bloomberg. A company spokesman declined to comment. Standard Life Aberdeen, which reports full-year results on Wednesday, was probably hit by 40.3 billion pounds ($53.3 billion) of redemptions last year, according to a consensus of analysts’ forecasts compiled by the company. That helped drive assets under management down to 555.8 billion pounds, according to the consensus estimate.
    • Theresa May struck a deal to revise the terms of the U.K.’s divorce from the European Union but it’s unclear whether she’s done enough to win Parliament’s support in a crucial vote on Tuesday. After a chaotic day of changing plans in London, the prime minister made a last-minute decision to fly to Strasbourg, France, for late talks with European Commission President Jean-Claude Juncker. More than two hours later — at 11:40 p.m. — the weary leaders sat down for a joint news conference to announce changes they both hope will now put an end to the tortuous negotiations that have defined the U.K.’s exit from the 28-country bloc. It remains to be seen if the new wording will convince her country’s lawmakers to sign off on the plan in a crunch vote Tuesday night.
    • The U.K. economy rebounded at a stronger-than-expected pace in January following a downbeat end to 2018, Office for National Statistics figures published Tuesday show. Gross domestic product grew 0.5 percent, the biggest monthly gain in more than two years, after it shrank 0.4 percent in December. That left growth in the latest three months at 0.2 percent, maintaining the pace recorded in the fourth quarter.
    • Boeing Co. shares are in free fall after this weekend’s deadly air crash, and trading in exchange-traded funds exposed to the manufacturing giant has gone through the roof. The SPDR Dow Jones Industrial Average ETF Trust, traded as DIA, saw more than four times its average pre-session volume as its Boeing exposure spooked investors. Over 265,000 shares of the $21.1 billion fund traded before 9:30 a.m. in New York, the most since Jan. 30. XLI tracks the gauge of U.S. blue-chip stocks, of which Boeing is the heaviest weighting with 11 percent. About 83,000 shares of the $10.4 billion Industrial Select Sector SPDR Fund, ticker XLI, exchanged hands before stock markets opened in New York Monday. That’s more than nine times the average pre-session volume over the past year, and the most since Dec. 24. The fund had traded close to 70 percent of its average daily volume for the past year as of 1 p.m.
    • Royal Dutch Shell Plc plans to become the world’s biggest power company within 15 years, a move that suggests it sees climate change as a bigger threat to its business than electricity’s historically weak returns. The world’s No. 2 oil explorer by market value is spending as much as $2 billion a year on its new-energies division, mainly to grow in a power sector it sees delivering 8 to 12 percent annual returns, according to Maarten Wetselaar, director of Shell’s integrated gas and new-energies unit.
    • Sirius Minerals Plc said it might have found a new backer for its $3 billion potash mine in the U.K. The company has received a “conditional proposal” from a “major global financial institution” to fund the project in North East England, Sirius said Tuesday in a statement, without providing further details. The shares surged the most in almost two years.
    • Embassy Office Parks REIT, backed by Blackstone Group LP, plans to raise about 47.5 billion rupees ($682 million) in India’s first real estate investment trust listing. The REIT, which includes Embassy Group properties, will offer as many as 158.6 million units at 299 rupees to 300 rupees apiece, according to terms for the deal obtained by Bloomberg. It will start taking orders from anchor investors Friday before moving on to a public offering March 18 through March 20, the terms show.
    • PT Lippo Karawaci, backed by Indonesia’s Lippo Group, will raise $1 billion through a rights issue of shares and by selling some healthcare assets and a shopping mall to repay some debt and make fresh investment. The Riady family, founders of the Lippo Group, will underwrite the $730 million rights issue at 235 rupiah each, an 8 percent discount to Monday’s closing price, Lippo Karawaci said in a statement on Tuesday. The property developer will raise $280 million by divesting its stake in two healthcare joint ventures in Myanmar and Lippo Mall Puri in Jakarta, it said.
    • China’s multi-year campaign to contain financial risk is re-focusing on the so-called “hidden debt” owed by local governments, as officials seek to reduce repayment pressures amid falling tax revenues. Provinces and cities from Jiangsu in the east to Qinghai in the west are looking for means to pay-off or restructure their implicit borrowings, a term which includes off-book funding via financing vehicles. Some authorities are seekingcheap refinancing from the nation’s largest policy lender, the China Development Bank, and others are selling off state-owned assets such as office buildings and housing.
    • Boeing Co. is contending with a growing crisis after Singapore and Australia closed their air space to 737 Max planes in response to a second crash of the model in five months. While investigators are still piecing together why an Ethiopian Airlines 737 Max 8 plunged to the ground minutes after takeoff Sunday, the two nations opted for caution, following the lead of China and Indonesia — even as the U.S. Federal Aviation Administration has said the jet model remains airworthy. Boeing shares slipped further in pre-market U.S. trading Tuesday, after tumbling the most on the S&P 500 Index the day before amid swirling questions around the newest version of its 737 family, a cash cow that generates almost a third of the company’s operating profit.
    • Tesla fell 1.7 percent pre-market Tuesday, after Morgan Stanley forecast “an air pocket in demand that is coming earlier than we expected,” and cut its price target on the electric-vehicle maker to $260 from $283. “For what many investors believe to be a high growth tech firm, TSLA has made notable moves to cut costs/prices & stimulate orders,” the firm wrote, referring to Tesla’s recent decision to cut prices and shutter stores.
    • HNA Group Co. is considering a sale of its majority stake in oil storage and logistics business HG Storage International Ltd., as the embattled Chinese conglomerate seeks to cut debt through asset sales, people familiar with the matter said. The group has started to sound out potential buyers for the 51 percent holding, said the people, who asked not to be identified because the deliberations are private. HNA is seeking a valuation close to the $775 million it agreed to pay for the stake in its 2017 deal with Glencore Plc, the people said.

    Former Vice President Joe Biden will speak to a key labor ally in Washington on Tuesday as he nears a decision on whether to join a crowded Democratic field for what would be his third run for president. Biden will address a meeting of the International Association of Fire Fighters, a group that has long supported him and signaled it will back him if he runs in 2020. The union’s 316,000 members lean Republican but its leadership has typically endorsed Democratic candidates and believes its members would largely rally behind Biden.

*All sources from Bloomberg unless otherwise specified