March 21, 2019

Daily Market Commentary


  • Canadian Headlines
    • Canadian stocks pared mid-day Fed related gains and closed Wednesday’s session slightly down, along with U.S. stocks. Energy and materials were the best performing sectors, while consumer discretionary was the worst. The S&P/TSX Composite Index fell 0.1 percent to 16,167.56. Westshore Terminals was the best performing stock, while BRP Inc was the worst performer. Meanwhile, Montreal homes could be the way to play Trudeau’s latest measures to help first-time homebuyers. The new policies could price out much of the Toronto and Vancouver markets. But it could be a big change for more modestly priced markets, including Montreal, Canada’s second-most-populous city.
    • Ford Motor Co. plans to spend about $900 million and hire about 900 workers to build electric and self-driving vehicles in Michigan, while moving production of a small commercial van to Mexico from Europe. The moves, announced the same day Donald Trump visits an Ohio tank plant, follow the president’s sharp criticism of General Motors Co. for idling a car factory in Lordstown, Ohio. Ford is reiterating some previous financial and employment commitments while changing gears for the third time on building electric autos at an underutilized factory south of Detroit.

    World Headlines

    • European equities retreated at the open as banks and insurers fell amid concerns about global growth and trade talks. Mining shares led the gains on the weaker U.S. dollar. The Stoxx Europe 600 Index fell 0.2 percent. The FTSE 100 Index added 0.3 percent on the weaker pound even as Prime Minister Theresa May gambled on a desperate bid to get her Brexit deal approved by Parliament, as a standoff with the European Union drives Britain to the brink of an economically challenging no-deal divorce.
    • Government bond yields retreated while U.S. equity futures and European stocks struggled for traction on Thursday as investors digested a dovish lurch by policy makers in the world’s largest economy. The dollar trimmed losses from a day earlier. The yield on 10-year Treasuries extended Wednesday’s drop, rates slumped across Europe and gold climbed as a cautious mood prevailed in the wake of this week’s Federal Reserve meeting. Futures for the three main U.S. share gauges were range-bound after the S&P 500 Index slipped a day earlier
    • Asian equities bucked the trend, with the regional index advancing even as Hong Kong shares fell and Japanese markets shut for a holiday.
    • Oil held near a four-month high after U.S. crude inventories plunged by the most since July, while Saudi Arabia pressed on with export cuts. Futures slipped 0.5 percent in New York, having closed above $60 a barrel on Wednesday for the first time since November. U.S. government data showed that nationwide stockpiles declined by 9.59 million barrels, while analysts had expected an increase. The country’s crude exports were near a record high, imports from Saudi Arabia fell by more than half and shipments from Venezuela stopped completely.
    • Gold traded at the highest level in three weeks after Federal Reserve Chairman Jerome Powell said interest rates could be on hold for “some time” as global risks weigh on the economic outlook and inflation remains muted. The yield on 10-year Treasuries fell to a 14-month low of 2.53 percent on Wednesday and a gauge of the dollar tumbled the most since January as investors assessed the Fed’s stance, which was more cautious than most had forecast. Meanwhile, palladium traded at an all-time high.
    • Theresa May heads to the European Council meeting in Brussels to push her demand for a one-off, three-month delay to Brexit — something her EU counterparts have already said she can’t have unless Parliament ratifies the divorce deal. Her government plans to put it to another vote next week.
    • Sweden’s minority government is now facing a majority in parliament calling for a sale of the state’s 37 percent stake in phone carrier Telia Co., which is valued at about $7.5 billion. The nationalist Sweden Democrats have changed footing and are demanding a sale of the stake along with the center-right parties. The Moderates, Christian Democrats, Center and Liberals and the Sweden Democrats control 205 of parliament’s 349 seats.
    • In 1873, German immigrant Levi Strauss founded an industry when he began outfitting California gold miners with blue jeans. His company evolved by innovating—adding belt loops, for example—and expanding its product line, making clothing for women, kids, and teenagers. By the middle of the last century, Levi’s jeans were an American icon. In the 1980s competition from the likes of Calvin Klein and Gap dethroned Levi Strauss & Co. Fashion shifted away from denim, to khakis in the 1990s and more recently to athleisure’s mix of workout gear and casual clothing, adding to its woes. Now the company synonymous with pants says it’s found a strategy to revive its past glory: tops.
    • Almost 40 years after Paul Volcker brought the U.S. economy to its knees to bring inflation down, Federal Reserve Chairman Jerome Powell and his colleagues are on a mission to stoke price pressures and avoid a Japan-like deflationary trap. Declaring that too-low inflation was “one of the major challenges of our time,’’ Powell left open the possibility on Wednesday that the Fed’s next interest-rate move might be a cut after four increases last year.
    • The Swiss National Bank kept interest rates at rock bottom, cut its inflation forecasts again and warned that the global slowdown could worsen. A dramatic change in fortune for the world economy is making it harder for policy makers across major economies to boost price pressures. In Switzerland, the franc’s strength against the euro has exacerbated the issue, which the central bank has sought to counter with the world’s lowest interest rates and occasional currency interventions.
    • Deutsche Bank AG’s new European wealth management head, Claudio de Sanctis, slashed the number of regional managers and announced aggressive hiring plans in a bid to jump-start revenues at the unit. As part of the shakeup, the German lender hired Marco Pagliara from Goldman Sachs Group Inc. He will oversee northern and eastern Europe as one of six market heads, down from 14 previously. De Sanctis, just three months on the job, also cut the number of regional chiefs in the bank’s German home market by two thirds in a bid to simplify the structure.
    • PetroChina Co. is set to spend the most since 2013 as the nation’s biggest oil and gas producer answers President Xi Jinping’s call to raise output to bolster energy security. The company estimates capital expenditures this year at 300.6 billion yuan ($45 billion), from 256 billion yuan in 2018, according to a statement to the Hong Kong stock exchange Thursday.
    • Indonesia’s central bank left its benchmark interest rate unchanged for a fourth month as the U.S. Federal Reserve’s shift to a prolonged pause gives policy makers in Southeast Asia’s biggest economy room to support growth. The seven-day reverse repurchase rate was left at 6 percent on Thursday, as predicted by all 36 economists surveyed by Bloomberg. Governor Perry Warjiyoand his board raised the rate by a total of 175 basis points last year to head off a market rout in developing economies and a slump in the currency, triggered by tighter U.S. monetary policy.
    • Tencent Holdings Ltd. posted a slump in fourth-quarter earnings on increased spending as its prized games business showed signs of recovery after a brutal 2018. Net income fell 32 percent to 14.2 billion yuan ($2.1 billion), missing the 17.55 billion-yuan average of estimates, on investments in content, cloud computing and financial technology. The result also included the costs of share issues and impairments for companies it’s invested in as revenue surpassed projections.
    • Siemens AG is exploring a combination of its large gas turbine business with an Asian partner, according to people familiar with the matter. The German company has held talks with firms including Mitsubishi Heavy Industries Ltd., said the people, who asked not to be identified because the talks are private. Options range from a full or partial sale of the division to a joint venture, the people said. No final decisions have been made and Siemens may still decide to keep the unit, they said.
    • Murphy Oil is exiting its operations in Malaysia via the sale of subsidiaries Murphy Sabah Oil and Murphy Sarawak Oil to a subsidiary of PTT Exploration and Production for $2.13 billion in cash.
    • Mubadala Investment Co., the Abu Dhabi sovereign fund, and Chinese internet giant Tencent Holdings Ltd. are weighing bids for part of Temasek Holdings Pte’s stake in global retailer A.S. Watson Group, people with knowledge of the matter said. The Singapore state investment company is considering selling around a 10 percent stake in A.S. Watson for about $3 billion, according to the people, who asked not to be identified because the information is private. Tencent may team up with some investment funds for an offer for the stake in A.S. Watson, which is a unit of Hong Kong tycoon Victor Li’s CK Hutchison Holdings Ltd., the people said.
    • Norway’s central bank raised its main interest rate for a second time since September and signaled there’s more tightening to come, as western Europe’s biggest oil exporter lets a rebound in crude prices steer monetary policy. “Our current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of the next half-year,” central bank Governor Oystein Olsen said in a statement on Thursday. Norges Bank, which is based in Oslo, raised its deposit rate by a quarter point to 1 percent, as expected by most economists.
    • Saudi Crown Prince Mohammed Bin Salman’s U.S. trip a year ago was packed with the sort of events most world leaders struggle to secure: a meeting at Bill Gates’s home, a tour of Inc.’s headquarters and a private visit to Virgin Galactic’s hangar in the Mojave Desert. The murder of Jamal Khashoggi destroyed all that, leaving the 33-year-old heir to the Saudi throne shunned, his government unable to repair ties with its most important foreign partner and the crown prince’s grand vision for economic development increasingly out of reach.
    • VPS Healthcare LLC, a hospital operator in the Middle East, Europe and India, is reconsidering plans to list in London due to uncertainty surrounding Brexit, according to a person with knowledge of the matter. The Abu Dhabi-based hospital operator is also evaluating listing in the U.S. or Singapore and will decide closer to the IPO, the person said, asking not to be identified because the matter is private. VPS Healthcare now plans to sell shares in 2020 rather than this year, the person said.
    • SenseTime Group Ltd., the world’s most valuable artificial intelligence startup, plans to sustain growth by expanding globally and diving deeper into arenas from autonomous cars to health care. The company counts education, self-driving vehicles as well as surgery and diagnostics among areas ripe for commercializing AI, Managing Director Esther Wong said. It’s now actively seeking out investments in fellow startups that can benefit from its own technology, she told the Bloomberg Invest Asia forum in Hong Kong.

*All sources from Bloomberg unless otherwise specified