March 13, 2019
Daily Market Commentary
- Canadian Headlines
- Canada is signaling it won’t rush to ground Boeing Co.’s 737 Max, awaiting an investigation into a second fatal crash even as 40 other nations temporarily take the airliner out of service. Transport Minister Marc Garneau, in a statement to fellow Liberal Party lawmakers Tuesday evening, said it was too early to determine the cause of this weekend’s deadly crash in Ethiopia, adding no one should speculate on what happened. He stressed that the investigation is ongoing.
- Billionaire investor Nelson Peltz is joining Aurora Cannabis Inc. as a strategic adviser and is receiving stock options that could make him the pot firm’s second-largest shareholder. Peltz, whose New York-based Trian Fund Management LP has more than $10 billion under management, will advise Aurora on “potential partnerships with leading corporations,” the company said in a statement Wednesday. Aurora’s shares jumped more than 7 percent in early trading in New York, reaching as high as $8.60 each.
- Oil sands producers including MEG Energy Corp. and Imperial Oil Ltd. are reconsidering oil sands expansions as new export pipelines are delayed and the provincial government limits production. MEG had planned to ramp up output at an expansion of its Christina Lake oil sands project in the second half of the year. Now, the “probability of that going ahead this year has decreased” after Enbridge Inc. announced a year delay on its Line 3 expansion, Derek Evans, MEG’s chief executive officer, said March 8. In November, Imperial Oil Ltd said it would push ahead with the 75,000 barrel-a-day Aspen project. Last month, CEO Rich Kruger said the company is reevaluating its assumptions about Aspen after Alberta’s oil curtailment “introduced new risk.”
World Headlines
- The Stoxx Europe 600 Index saw a modest advance as gains for oil companies and financial services offset a slide for retailers following disappointing earnings from Inditex, owner of the Zara chain, and Adidas. Treasury yields ticked higher along with those on core European bonds. The dollar was steady after three days of declines.
- U.S. equity futures edged higher alongside European stocks and Asian shares declined on Wednesday as investors weighed the latest clues on the strength of the global economy. The pound gained before the next major Brexit vote. Contracts on the S&P 500 fluctuated before nudging upward, while those on the Dow Jones struggled as Boeing extended losses in pre-market trading.
- Japanese stocks fell as investors weighed Brexit developments and the pace of the recent run-up in the Topix index, which completed its biggest two-day advance in a month on Tuesday. Electronics makers and telecommunication providers were the heaviest dragson the Topix before U.K. lawmakers decide Wednesday whether to tear the country out of the European Union with no agreement in place in 16 days’ time, or give themselves the chance to delay Brexit in the hope of securing better terms. Japan’s machinery makers fell after machinery orders dropped more than expected, adding to data that show trade tensions and cooling external demand are taking a toll on the nation’s export-dependent economy.
- Crude rose for a third day after an industry report showed an unexpected drop in U.S. stockpiles just as planned cuts and disruptions to OPEC output are tightening supply. Futures in New York added as much as 1.1 percent. U.S. crude inventories declined by 2.58 million barrels last week, the American Petroleum Institute was said to report. That contrasts with a survey showing an increase in stockpiles in government data due Wednesday. While OPEC nations like Saudi Arabia press on with planned production curbs, crises in fellow members Venezuela and Iran are also removing barrels from the market.
- Gold traded above $1,300 an ounce as a key measure of underlying U.S. inflation unexpectedly eased, underpinning the Federal Reserve’s plan for being patient on raising interest rates. Silver, platinum and palladium also gained. Investors are also weighing the latest developments on Brexit. On Wednesday, lawmakers will decide whether to tear the country out of the European Union with no agreement in place in 16 days’ time, or give themselves the chance to delay Brexit in the hope of securing better terms.
- China relaxed bond issuance rules for the nation’s debt-ridden local government financing vehicles as they face a record amount of maturities this year. The Shanghai Stock Exchange will now allow the funding units that generate more than half of their revenue from local governments to sell bonds on its platform if the proceeds are used for refinancing, people familiar with the matter said on Tuesday. Previously, LGFVs that received such a high share of their sales from local authorities weren’t allowed to issue debt on this platform as regulators sought to curb debt buildup at municipalities.
- Britain will confront head-on the threat of a no-deal Brexit in a parliamentary vote with huge ramifications for Prime Minister Theresa May. On Wednesday, members of Parliament will decide whether to tear the country out of the European Union with no agreement in place in 16 days’ time, or give themselves the chance to delay Brexit in the hope of securing better terms. If — as expected — they reject leaving without an accord on March 29, there will be another vote Thursday on whether to ask the EU for more time and delay departure day. An extension, which markets would welcome, could however provoke furious pro-Brexit officials to quit May’s administration, and even set in train a chain of events that could bring her government down.
- Apple Inc. should be probed by the European Union’s antitrust agency over how it allegedly squeezes rival music streaming services, Spotify Technology SA said, escalating a row over how Apple takes a cut of all sales on its app store. The iPhone maker has created an “untenable” situation by imposing ever-changing rules and a 30 percent tax for apps that compete with Apple Music, Spotify said in a statement on Wednesday. The Stockholm-based company said it filed a complaint with the European Commission on March 11.
- Martin Gilbert lost his grip on power at Standard Life Aberdeen Plc as the asset manager scrapped the dual-leadership structure that had been in place since the company was created in a 2017 merger. The 63-year-old dealmaker was bumped down to vice chairman of the Edinburgh-based firm, as Keith Skeoch became sole chief executive officer. Adding insult to injury, Gilbert’s maximum bonus was nearly halved.
- Chinese and Russian hackers are attacking Indonesia’s voter data base in a bid to disrupt the country’s upcoming presidential election, according to a senior election commission official. As Indonesia prepares for simultaneous presidential and legislative polls on April 17, authorities are facing a wave of cyber incursions they say may be aimed at discrediting the polling process. The head of Indonesia’s General Elections Commission, Arief Budiman, said some of the attacks originated in Russia and China, and include attempts to “manipulate or modify” content as well as to create so-called ghost voters, or fake voter identities.
- The U.K. will avoid imposing tariffs on most imported goods in the event of a no-deal Brexit, though officials said prices of key European Union products including beef, cheese and cars will rise. The government said Wednesday its “balanced approach” aims to offset a spike in prices that consumers would experience in a no-deal departure as a result of the falling pound and higher costs of imports. But a major U.K. business lobby described it as a “sledgehammer” for the economy.
- The global standoff over the airworthiness of Boeing Co.’s 737 Max jet intensified as U.S. regulators reiterated their support for the aircraft, even after the European Union and other authorities issued blanket bans. Investigators are still trying to understand why an Ethiopian Airlines 737 Max 8 crashed near Addis Ababa on March 10, killing 157 people, less than five months after an identical Lion Air plane plunged into waters off Indonesia.
- Uber Technologies Inc. has added several banks to the list of underwriters that will help manage its initial public offering, according to a person with knowledge of the matter. The ride-hailing company, which could be valued at as much as $120 billion in an IPO, is working with Bank of America Corp., Barclays Plc, Citigroup Inc. and Allen & Co. on preparations for the public listing, said the people, who asked not to be identified as the details aren’t public. The banks join Morgan Stanley, which will lead the IPO for Uber, as well as Goldman Sachs Group Inc., the people said.
- Nestle SA has selected a slew of private equity firms and consumer companies to participate in the next round of an auction for its skin-health business in one of the most hotly contested asset sales in Europe this year, people familiar with the matter said. A consortium that includes Advent International, Cinven and GIC Pte, as well as KKR & Co. and EQT Partners, are among the firms brought through to the second round, the people said, asking not to be identified because the deliberations are private. Paris-based makeup giant L’Oreal SA, Unilever NV and Carlyle Group LP have also been invited to the second round to bid for parts of Nestle’s business, they said.
- U.S. solar companies are rushing to get billions of dollars of projects on the books to cash in on a federal tax credit that’s scheduled to shrink at the end of the year. First Solar Inc. is fielding interest from customers who want to source equipment from the solar panel manufacturer before the credit phases out, according to Chief Executive Officer Mark Widmar. NextEra Energy Inc. said in July that it was developing a plan to take advantage of the credit while it still can. Rooftop solar installers Vivint Solar Inc. and Sunrun Inc. are among those exploring the strategy.
- Apple Inc., after teasing investors for months about its ambitions to become a services company, is getting ready to showcase plans for new video and news products. All it needs now is for Hollywood to sign up. The company will host A-list celebrities and media executives on March 25 to outline how it will take on competitors like Amazon.com Inc. and Netflix Inc.Apple plans to unveil a long-awaited streaming service and magazine subscription bundle, and could use the event in Cupertino, California, to preview additional Apple Pay features, laying the groundwork for an iPhone credit-card partnership with Goldman Sachs Group Inc.
- The person to lead California energy giant PG&E Corp. out of the biggest utility bankruptcy in U.S. history may be Bill Johnson, the outgoing chief of the federally operated power agency Tennessee Valley Authority. Johnson is PG&E’s top pick for chief executive officer, people familiar with the situation said, while cautioning that the company hasn’t made a final decision and is still discussing the potential hire. The utility is also close to picking new directors for its board, they said, asking not to be identified because the information isn’t public.
*All sources from Bloomberg unless otherwise specified