March 22, 2019

Daily Market Commentary


  • Canadian Headlines
    • Quebec plans to balance its budget for a fifth straight year following a record surplus, enabling new Premier Francois Legault to give tax breaks to families, home owners and older workers. Canada’s second-most populous province benefited from a surge in tax revenue and lower borrowing costs that led to an operating surplus of C$5.6 billion ($4.2 billion) for the year ending March 31, the largest since at least the 1970s. The surplus was C$2.5 billion after contributing to a debt reduction pool known as Generations Fund.

    World Headlines

    • European stocks opened steady following a mixed trading session in Asia, as British stocks fall after new Brexit developments. With only one week left of trading, European equities are heading for their best quarter since 2015. The Stoxx Europe 600 Index rose 0.2 percent, led by gains in technology shares. Deutsche Bank AG jumped 2.6 percent as the German lender said it sees 2019 revenue slightly higher than in 2018.
    • U.S. equity futures extended declines and the euro slumped after miserable data from the German manufacturing sector renewed worries about global growth on Friday. The yield on Germany’s 10-year bonds — Europe’s benchmark — tumbled to zero.
    • The surprise to stock and bond markets pulled the MSCI index of global equities down from its highest level since October, which had been achieved on optimism that the Federal Reserve’s dovish tilt could prolong the bull market for stocks. Bonds, however, were already signaling worries that momentum in growth and inflation remains too subdued.
    • Oil fell amid growing concerns of an economic slowdown, yet remained on track for a third weekly increase as OPEC presses on with supply cutbacks. Futures retreated as much as 1.1 percent in New York as German 10-year bondyields dropped below zero for the first time in two years, highlighting fears of a slowdown in the region, while a stronger U.S. dollar dimmed the appeal of commodities. Prices are still up 1.6 percent this week as U.S. government data showed an unexpected 9.59 million-barrel withdrawal in nationwide inventories last week, while OPEC and its allies reaffirmed plans to restrict supply.
    • Gold is poised for a third straight weekly gain as investors assessed the Federal Reserve’s policy shift to a prolonged pause in monetary policy tightening. Traders and analysts retained a bullish outlook on the precious metal in a weekly Bloomberg survey, as the Fed adopted a more dovish tone by signaling it won’t raise U.S. interest rates this year at its meeting on Wednesday. Still, Pictet Wealth Management expects prices to trade “sideways” in the short-term, with more upside seen in 2020.
    • Warren Buffett, who once joked that capitalists should have shot down the Wright brothers’ first plane and saved investors money, has made a course correction that’s raised the idea he’s considering the purchase of an airline. Thirty years after a troublesome investment in USAir, Berkshire Hathaway Inc. has amassed stakes that make his holding company among the biggest shareholders in the four largest U.S. airlines. Last year, the famed investor said he wouldn’t rule out owning a carrier, prompting talk about which one he’d grab.
    • Uber Technologies Inc. has selected the New York Stock Exchange for its imminent initial public offering, handing the trading floor what could be one of the five biggest listings of all time, according to a person familiar with the matter, who asked not to be identified as the details aren’t public. The ride-hailing giant is expected to publicly file for its offering in April, kicking off a listing that could value the company at as much as $120 billion and is likely to be the biggest of the year, people familiar with the plans have said previously. At that valuation, Uber would only have to float about 16 percent of its shares to make the top five, according to data compiled by Bloomberg.
    • It took just 10 hours for a star Chinese stock picker to attract more than 70 billion yuan ($10 billion) of orders for his new firm’s debut mutual fund, the latest sign of investor exuberance in the world’s best-performing equity market. The Shanghai-based Foresight Fund, managed by Chen Guangming, said on Friday that it stopped accepting client subscriptions after blowing past its 6 billion yuan fundraising target. While the fund didn’t disclose the amount of orders it received, people familiar with the matter said they topped 70 billion yuan, including about 20 billion yuan via China Merchants Bank Co.’s fund distribution platform.
    • U.S. Treasuries are, once again, proving to be a buy at almost any price. After the Federal Reserve’s surprise dovish turn this week, investors piled into the $15.8 trillion market and left the 10-year note yielding a mere 2.5 percent. Just a few months ago, it had surged past 3.2 percent, sparking all sorts of talk — yet again — that this was the dawn of a new era of rising rates.
    • BlackRock Inc., the world’s biggest money manager, is nearing to deal to acquire French software provider eFront at a valuation of more than $1.3 billion to expand private equity and real estate analytics for clients, people familiar with the matter said. The New York-based firm may announce an agreement with eFront’s private equity owner Bridgepoint as soon as the next few days, according to the people, who asked not to be identified because the information is private. No final decision has been made, and Bridgepoint could still choose a different bidder, according to the people.
    • Europe’s economic outlook was thrown into fresh doubt after reports showed weakness across France and Germany. Hopes that the slowdown had reached a trough have taken a beating from renewed weakness in France and the deepest slump in German manufacturing in over six years. A euro-area Purchasing Managers Index is signaling growth of 0.2 percent this quarter, matching the pace of the previous three months.
    • European Union leaders staved off the threat of the U.K. crashing out of the bloc without a deal next Friday by giving Theresa May an extra two weeks to work out what to do. At a summit in Brussels on Thursday, the leaders told May that if U.K. lawmakers don’t endorse her Brexit deal next week, she’ll have until April 12 to decide whether to leave without an agreement or request a much longer extension. The decision removes the immediate possibility of a no-deal Brexit in seven days’ time.
    • U.S. officials are downplaying the prospect of an imminent trade deal with China as President Donald Trump’s top negotiators prepare to head to Beijing for a fresh round of talks next week, according to people familiar with the matter. Trump has said that he wants an agreement that could be enforced, not a quick deal. U.S. Trade Representative Robert Lighthizer, who is leading the talks for Trump, and Treasury Secretary Steven Mnuchin will travel to Beijing for meetings at the end of next week, and Chinese Vice Premier Liu He will then come to Washington in April to continue the discussions, the Chinese Ministry of Commerce said on Thursday.
    • SpiceJet Ltd., India’s low-cost carrier, is talking to aircraft leasing companies to replace the suspended Boeing 737 Max planes amid grounding of Jet Airways India Ltd.’s fleet over inability to pay owners. The Indian government is discussing with SpiceJet to consider taking over as many as 40 of Jet Airways’ grounded planes for non-payment of dues as it mulls options to revive the debt-laden airline and save about 23,000 jobs to skirt an embarrassment for Prime Minister Narendra Modi just weeks before the federal elections. The budget airline grounded 12 Boeing 737 Max aircraft following a deadly crash of an Ethiopian Airlines jetliner of the same, the second in less than six months.
    • Japan’s key inflation gauge crept fractionally lower, before a bigger downturn likely later this year that will further slow the Bank of Japan’s long journey to its price target. Consumer prices excluding fresh food rose 0.7 percent in February, versus economists’ median forecast of 0.8 percent, the ministry of internal affairs said Friday.
    • Some of China’s top internet and auto companies are teaming up to establish a $1.5 billion fund that will explore ride-sharing investments, as big-name car-makers try to hitch a ride on a booming market. Tencent Holdings Ltd. and an affiliate of Alibaba Group Holding Ltd. will join Chongqing Changan Automobile Co. and other carmakers in creating the 9.76 billion yuan ($1.5 billion) fund, the carmaker said in a stock exchange filing. Other partners include China FAW Group Corp., Dongfeng Motor Group Co. andSuning Holdings Group Co. The new entity will mainly invest in a ride-sharing industry now dominated in China by Didi Chuxing, Changan said without elaborating.
    • Indonesia’s flag carrier said it plans to meet Boeing Co. officials next week to discuss the airline’s request to cancel its $4.8 billion dollar order for the troubled 737 Max 8 jet. PT Garuda Indonesia, which told Bloomberg last week it wants to cancel its order for 49 Boeing 737 Max jets, has informed the U.S. aircraft maker of its plans and is scheduling to hold the meeting in Jakarta, President Director I Gusti Ngurah Askhara Danadiputra said on Friday. Still, the airline has yet to reach a decision on the cancellation of the Boeing 737 Max order, the company said.
    • Deutsche Bank AG pledged to reverse years of declining revenue and kept a key profit target intact, striking a more upbeat tone than some rivals as it starts merger talks with Commerzbank AG. The defiant outlook — just two days after UBS Group AG warned that the first quarter was one of the worst environments in recent history — lifted Deutsche Bank’s shares and may strengthen Chief Executive Officer Christian Sewing in talks with investors on the merger. Sewing in the past year accelerated a turnaround plan focused on cost cuts, but the failure to reverse revenue declines has been seen as a key weakness.
    • Turkey’s Yilport Holding AS is in advanced talks to buy a container terminal in Long Beach, California, a deal that would value the facility at close to $2 billion, people with knowledge of the matter said. The discussions between Yilport, backed by businessman Robert Yuksel Yildirim, and terminal owner Cosco Shipping Holdings Co. aren’t yet exclusive, said the people, who asked not to be identified because the information is private. There were at least two other bidders who made the shortlist and no final decision has been made, they added.
    • President Donald Trump expressed hope the Federal Reserve had finished raising interest rates, two days after policy makers scaled back their projected hikes this year to zero and one in 2020. “Hopefully now we won’t do the tightening,” Trump told Fox Business Network’s Mornings With Maria, according to an emailed transcript. Trump has regularly used speeches and tweets to lobby Fed Chairman Jerome Powell and colleagues not to tighten monetary policy, arguing doing so would jeopardize the economic expansion.

*All sources from Bloomberg unless otherwise specified