March 18, 2019

Daily Market Commentary


  • Canadian Headlines
    • Prime Minister Justin Trudeau delivers his fourth and final budget this week before Canada’s next election. The fiscal plan, to be unveiled Tuesday in the Ottawa legislature by Finance Minister Bill Morneau, comes with the economy in a soft patch, concerns building over the country’s competitiveness and the Liberal government trailing in opinion polls. Trudeau’s enhanced child benefit payments are his most important achievement. The program -– worth C$24 billion ($18 billion) in 2018 — built upon one that had already been enhanced by the previous Conservative government. The Liberals made the benefits tax free and more-heavily skewed to lower-income families.

    World Headlines

    • European equities started the week’s trading with slight gains as mining shares rallied on higher iron ore. The Stoxx Europe 600 Index added 0.1 percent. In London, the FTSE 100 Index increased 0.2 percent as Prime Minister Theresa May threatens to give up trying to get Brexit done any time soon unless euroskeptics in her Conservative Party back down and promise to vote for her deal this week. Rio Tinto gained 1.7 percent and BHP climbed 1.3 percent after a Brazilian court ordered Vale to stop operations at another mine, intensifying fears of an iron-ore supply shortage.
    • Equities are grinding higher and volatility is declining on expectations the Fed will point the way to just one rate hike in 2019 when it meets later this week. A slew of other central bank gatherings, including the Bank of England, will give further clues on monetary policy. In politics, investors are keeping an eye on this week’s Brexit developments as the British prime minister works to win support for her divorce agreement.
    • Halfway through the month of March, and Asia’s stocks are up, heading for their best quarter in seven years. But everything’s still at play as this week gets heavy on central-bank rate decisions and the biggest company in the region’s benchmark index is set to report results. The MSCI Asia Pacific Index has gained about 9 percent this year, adding $2 trillion in market cap as of Friday’s close. That’s the biggest surge since the quarter ended March 2012, when it rallied 11 percent. And if history is any guide, this month should be positive for stocks: In the last 10 years, the gauge gained in March 70 percent of the time.
    • Oil slipped from near a four-month high as OPEC and its allies met in Azerbaijan Monday and recommended deferring a decision on whether to extend oil production cuts until June. Futures in New York fell as much as 0.8 percent after Saudi Arabia’s Energy Minister Khalid Al-Falih said in Baku that the Organization of Petroleum Exporting Countries is scrapping a planned extraordinary meeting in April because it would be too soon to make a decision on extending oil-supply cuts.
    • Gold gains for a second day to trade above $1,300 an ounce as the dollar weakens. Silver, platinum and palladium all rise. Traders will be monitoring the Federal Reserve’s meeting this week, where officials will likely reinforce their policy-pause stance. The central bank will bring the current cycle of interest-rate increases to an end after one more hike later this year, according to a new Bloomberg survey of economists.
    • Lyft Inc. is seeking to raise as much as $2.1 billion in its initial public offering, valuing the firm at up to $18.5 billion. The No. 2 U.S. ride-hailing giant is offering 30.8 million shares at $62 to $68 each, it said in a regulatory filing Monday. At the targeted range, the San Francisco-based company’s offering will be the biggest from a tech upstart since Snap Inc. went public two years ago, and the largest in the U.S. so far this year after the partial U.S. government shutdown put a damper on first-quarter listings. Lyft had earlier been aiming for a market valuation of $20 billion to $25 billion, a person familiar with the matter said in February.
    • Fidelity National Information Services Inc. agreed to acquire Worldpay Inc. for about $34 billion in cash and stock, the biggest deal ever in the international payments sector. The industry is now at the heart of a dealmaking boom as consumers change the way they pay for goods and legacy providers are challenged by rivals from startups to Apple Pay. Industrywide revenue is projected to surge to $2.4 trillion by 2027, according to a report from Boston Consulting Group and Swift.
    • FAA employees warned as early as seven years ago that Boeing Co. had too much sway over safety approvals of new aircraft, prompting an investigation by Department of Transportation auditors who confirmed the agency hadn’t done enough to “hold Boeing accountable.” The 2012 investigation also found that discord over Boeing’s treatment had created a “negative work environment” among Federal Aviation Administration employees who approve new and modified aircraft designs, with many of them saying they’d faced retaliation for speaking up. Their concerns pre-dated the 737 Max development.
    • OneWeb — fresh off launching its first batch of satellites — has pulled in another huge round of funding as it seeks to build a worldwide internet system delivered from space. On Monday, the seven-year-old startup announced that it had just raised $1.25 billion, bringing its total investment to date to $3.4 billion. SoftBank Group Corp., Grupo Salinas, Qualcomm Technologies Inc. and the Government of Rwanda led the latest round, while Virgin Group, Coca-Cola and Airbus are existing investors. “We are committed to bridging the digital divide, and this funding helps ensure our globally shared dream will soon become a reality,” said Greg Wyler, the founder of OneWeb, in a statement.
    • America Movil SAB, controlled by billionaire Carlos Slim, agreed to buy Nextel Telecomunicacoes Ltda to grow in Brazil, strengthening its mobile network and boosting its holdings of wireless spectrum. The deal, valued at $905 million less net debt, represents the second major purchase by America Movil in the region this year, after Slim’s carrier spent $648 million on Telefonica SA’s businesses in Guatemala and El Salvador.
    • Germany’s effort to catch up to the digital age starts this week with an auction of the airwaves needed to build ultrafast 5G wireless networks. The rollout will be critical as Europe’s biggest economy tries to reduce its dependence on old-school engineering. The country lags behind the likes of Qatar, Albania and Moldova when it comes to mobile internet speeds, a handicap in the transition to a data-based economy. “Updating Germany’s digital infrastructure is very important,” said Rubin Ritter, co-chief executive officer of Berlin-based Zalando SE, Europe’s biggest online fashion platform. “There are moments when customers have difficulties accessing our app.”
    • Saudi Arabia urged fellow producers in the OPEC+ coalition to persevere with output cuts but conceded the group may delay a meeting to consider the policy. The likely change in timing reflects uncertainty in an oil market where U.S. sanctions could remove significant supplies from Iran and Venezuela. It’s also the latest sign that Russia, not Saudi Arabia, is setting the agenda for a group that controls more than half of global crude production.
    • CapitaLand Commercial Trust, Singapore’s biggest office landlord, is among suitors in talks about a potential acquisition of the Duo office and retail development in the city, people with knowledge of the matter said. The real estate investment trust has been negotiating the purchase of a 39-story office building called Duo Tower, along with the connected Duo Galleria mall, according to the people. The property could be valued at more than S$1.5 billion ($1.1 billion), one of the people said, asking not to be identified because the information is private.
    • A bankruptcy court refused to halt the sale of Essar Steel India Ltd. to ArcelorMittal, clearing another hurdle for billionaire Lakshmi Mittal as he prepares to enter India after a yearlong struggle. A two-judge bench of the National Company Law Appellate Tribunal allowed ArcelorMittal to proceed with payment for the purchase, while agreeing to further hear appeals by Standard Chartered Plc on the distribution of funds to lenders. Standard Chartered and an Essar group company had challenged a lower court’s approval of the resolution plan submitted by Arcelor and partner Nippon Steel & Sumitomo Metal Corp.
    • Rubicon Fund Management plans to shut its flagship hedge fund after two decades, joining a growing list of money managers that are throwing in the towel, according to people with knowledge of the matter. The firm, one of the oldest hedge funds in London, will close its macro Rubicon Global Fund, said the people, who asked not to be identified as the plans are private. The fund fell 3.3 percent in January, according to a letter to investors seen by Bloomberg. The Financial Times reported the closure earlier.
    • After months of informal talks and weeks of increasingly fevered speculation, Deutsche Bank AG Chief Executive Officer Christian Sewing finally got the green light he needed to proceed with negotiations on a tie-up with crosstown rival Commerzbank AG. Finance Minister Olaf Scholz agreed not to oppose the tens of thousands of job cuts needed to make a deal between Germany’s two biggest publicly traded banks work, Sewing was told, according to people familiar with the matter. In the preceding days, employee representatives at both lenders announced their opposition to a merger that risks eliminating as many 30,000 positions — more than one out of five of the combined workforce. That’s when Sewing sought assurances that the government had his back.
    • Takeda Pharmaceutical Co. is planning a sale of its Tachosil brand of surgical patches and sealants as it looks to cut debt after its $62 billion takeover of Shire Plc, people familiar with the matter said. Tachosil could fetch about $500 million in a sale, said the people, who asked not to be identified because the deliberations are private. The asset has attracted interest from bidders including Baxter International Inc. and Johnson & Johnson, according to the people.
    • Italy’s Nexi SpA plans to list shares on the Milan exchange in an offering expected to be the world’s biggest so far this year, as payment service companies test investor appetite in Europe’s lackluster IPO market. Nexi plans to issue a mix of existing and new shares by the end of April, it said in a statement Monday. The target is to raise as much as 2.7 billion euros ($3.1 billion), according to people familiar with the plan, who said the company wants to complete its listing before European Parliament elections in May.
    • Prada SpA shares fell to the lowest close since 2016 as slower Chinese spending contributed to an unexpected drop in the Italian fashion house’s annual profit. The Hong Kong-listed luxury group attributed a slump in Asia mostly to Chinese tourists reining in spending in Hong Kong and Macau because of the weakness in the yuan. Other luxury brands, including Kering SA’s Gucci, have seen the impact of softer buying by Chinese tourists offset by increased spending on the mainland, but Prada failed to get a similar boost from Chinese spending at home, said Citigroup analysts led by Thomas Chauvet.
    • Oil refiners are getting ready for a boom. The plants in Europe and the U.S. are scaling back planned maintenance later this year in anticipation of a surge in demand and fatter margins as the shipping industry gets ready for a historic fuel switch. Analysts say a similar picture is emerging in Asia, too. Refiners in the Mediterranean and Northwest Europe so far arranged to take about 60 percent less capacity offline for routine work from September to November than they did a year earlier, according to data compiled by Bloomberg. There’s been a similar plunge in planned U.S. work. Even though more maintenance will come to light, most industry observers are nonetheless expecting fewer shutdowns.

*All sources from Bloomberg unless otherwise specified