March 22nd, 2018
Daily Market Commentary
- Canada’s equity benchmark gained as energy shares jumped the most since November after an unexpected decline in U.S. crude inventories sent oil prices soaring, while the loonie rallied on growing trade optimism. The S&P/TSX Composite Index rose 0.4 percent to 15,675.28 after gaining as much as 0.8 percent earlier in the session. Energy stocks rose 2.6 percent, with Precision Drilling Corp. up 9.4 percent and Encana Corp. gaining 7.5 percent.
- BlackBerry Ltd. will help Jaguar Land Rover develop new automotive technology, adding another major brand to its web of partnerships on car software. Jaguar, owned by Indian conglomerate Tata Motors Ltd., will license BlackBerry’s technology and host some of the former smartphone maker’s engineers to work on a new infotainment system. The deal is the latest BlackBerry has trumpeted over the last year as it seeks to expand its QNX car software unit from in-car entertainment systems to other realms of auto software, including self-driving technology.
- AutoCanada today announced it has entered into a definitive agreement to purchase Grossinger Auto Group (“Grossinger”), a successful family business that has been retailing new and used vehicles in Illinois for 90 years. Grossinger generated revenue of US$401 million (C$513 million) in 2017 from dealerships representing 11 different manufacturers. The acquisition includes eight metro dealerships in Chicagoland, selling and servicing five different brands. The agreement also includes six luxury and premium brands in an auto mall under one roof in Bloomington/Normal, Illinois, approximately a two-hour drive southwest of Chicago. The acquisition diversifies the AutoCanada portfolio adding four new brands – Toyota, Honda, Lincoln and Volvo – and extends its geographical presence into the U.S. for the first time.
- European stocks retreat as traders weigh the news that U.S. President Donald Trump is set to announce tariffs against China and the Federal Reserve raised borrowing costs Wednesday. The Stoxx Europe 600 Index drops 0.5%, with 18 of 19 industry groups in the red.
- There was plenty to digest from the Fed gathering, where the central bank raised the benchmark lending rate a quarter point and forecast a steeper path of hikes in 2019 and 2020, but downgraded its characterization of economic growth from solid to moderate. Traders won’t have long to dwell on it, though: President Donald Trump is set to announce tariffs against Asia’s largest economy on Thursday, according a person familiar with the matter, the latest escalation of his protectionist agenda.
- Asian shares gained for the first time in five days as the Federal Reserve’s first interest-rate hike under new Chairman Jerome Powell passed without surprising the market. The MSCI Asia Pacific Index gained 0.3 percent to 177 as of 4:20 p.m. in Hong Kong, ending a four-day decline, after the Fed raised rates a quarter-point and forecast a steeper path of hikes in 2019 and 2022 amid an improving economic outlook.
- Oil traded near $65 a barrel after U.S. crude inventories unexpectedly fell, dropping below their five-year average for the first time since 2014. Futures in New York lost 0.6 percent after jumping to a six-week high on Wednesday. American crude stockpiles fell last week by the most since January, government data showed, confounding more than 80 percent of analysts in a Bloomberg survey. It added to signs that production cuts by OPEC and Russia are successfully clearing a global glut.
- Gold holds most of its gains made Wednesday, when the metal posted its biggest jump in 10 months as the Federal Reserve signaled the pace of monetary tightening won’t accelerate this year.
- China’s central bank increased the cost of short-term loans to commercial lenders, tightening policy in step with the U.S. Federal Reserve. The People’s Bank of China raised the interest rates it charges on 7-day reverse-repurchase agreements by five basis points, the central bank said in a statement. The move is “in line with market expectations and a normal reaction to the Fed’s rate hike”, the PBOC said in a statement on the website.
- The euro area’s private-sector economy grew at the slowest pace in 14 months in March, as service providers and factories struggled to keep up with demand. A composite purchasing managers’ index by IHS Markit slid to 55.3 from 57.1. That’s below the median estimate of 56.8 in a Bloomberg survey of economists, and marks a second successive decline from the 12-year high reached in January.
- The European Union believes it’s on track to be exempted from imminent U.S. tariffs on foreign steel and aluminum, dialing down the risk of a trans-Atlantic trade war. European Trade Commissioner Cecilia Malmstrom ended two days of talks in Washington with the hope of a U.S. pledge to exclude the EU from the import duties of 25 percent on steel and 10 percent on aluminum, four EU officials said Thursday on the condition of anonymity. The levies initially were set to take effect on Friday.
- GlaxoSmithKline Plc has submitted a binding bid to acquire Pfizer Inc.’s consumer health unit, people familiar with the matter said, leaving the U.K. drugmaker as the frontrunner for the assets after Reckitt Benckiser Group Plc withdrew from the process. Glaxo made a final bid Wednesday that could value the U.S. giant’s over-the-counter treatments at about $15 billion to $20 billion, the people said, asking not to be identified because the matter is private. Pfizer, based in New York, could still opt not to sell to Glaxo and pursue a potential spinoff of the unit or hold on to it, the people said.
- President Donald Trump is set to announce about $50 billion of tariffs against China over intellectual-property violations on Thursday, according a person familiar with the matter. The president is considering targeting more than 100 different types of Chinese goods, according to the person, who spoke on the condition of anonymity. The value of the tariffs was based on U.S. estimates of economic damage caused by intellectual-property theft by China, the person said.
- South African media company Naspers Ltd. is cashing in a tiny sliver of one of the greatest venture-capital investments ever. The company is selling $10.6 billion of shares in Tencent Holdings Ltd., equal to 2 percent of the stock in the Chinese operator of the WeChat messaging service, the Cape Town-based company said in a statement Thursday.
- Facebook Inc. CEO Mark Zuckerberg broke his silence on the crisis over political-advertising firm Cambridge Analytica’s access to user data on the social network, outlining concrete steps the company is taking to make sure such a leak doesn’t happen again. Critics were underwhelmed. The billionaire finally spoke in a series of media interviews, and a blog post, promising to probe the extent to which “rogue apps” are harvesting sensitive data on the social network. Zuckerberg told CNN that Facebook would inform every one of its two billion-plus users that may have gotten their personal data compromised.
- The chief executive officers of AT&T Inc. and Time Warner Inc. will be in a Washington federal court Thursday to hear their lawyers make the case for why their merger, 17 months in the making, should get the green light. The appearance of AT&T’s Randall Stephenson and Time Warner’s Jeff Bewkes underscores the high stakes involved in the Justice Department’s lawsuit seeking to block the $85 billion combination, which the government says will lead to higher prices.
- Starwood Capital Group offered 824 million euros ($1 billion) for stakes in Austrian property groups CA Immobilien Anlagen AGand Immofinanz AG, further complicating a convoluted ownership struggle. The bid from Barry Sternlicht’s global property investment company comes as Austria’s commercial property stocks trade at a discount to asset values and the industry is rife with consolidation moves, including long and ultimately unsuccessful talks between CA Immo and Immofinanz. Starwood said it doesn’t plan a full takeover of the companies.
- Tencent Holdings Ltd. lost more than $26 billion of market capitalization after Asia’s most valuable company warned it will sacrifice short-term margins, spending on content and technology in pursuit of growth. Its shares slid 5 percent in Hong Kong — the biggest fall in over a month — shaving some of the gains that ranked it among the world’s best performers over the past decade. The Shenzhen-based company plans to keep spending on areas from artificial intelligence to video that it says may weigh on short-term profitability but anchor long-term growth. The internet giant reported net income almost doubled to 20.8 billion yuan ($3.3 billion) in the three months ended December, beating projections.
- Bitcoin fell after one of the world’s largest cryptocurrency exchanges was said to face a government warning in Japan, heightening concern that increased regulatory scrutiny will curb demand for digital assets. Japan’s Financial Services Agency is planning to tell Binance, the trading venue founded by Zhao Changpeng, to stop operating in the country without a license, a person familiar with the matter said. Binance has several staff in Japan and has been expanding operations without receiving permission, the person said.
- Electric cars may be cheaper than their petroleum counterparts by 2025 if the cost of lithium-ion batteries continues to fall. Some models will cost the same as combustion engines as soon as 2024 and become cheaper the following year, according to a report by Bloomberg New Energy Finance. For that to happen, battery pack prices need to fall even as demand for the metals that go into the units continues to rise, the London-based researcher said on Thursday.
- Argentina’s Macri administration is working on a rule change that would scrap the role of an agency that has for years set the prices of wholesale electricity and the fuel that feeds power plants, according to people familiar with the plan. The Compania Administradora del Mercado Mayorista Electrico SA — Cammesa for short — would no longer serve as an intermediary setting the prices at which power generators pay for diesel and fuel oil and sell electricity based on new rules being drafted, the people said, asking not to be identified because the plan isn’t public yet.
*All sources from Bloomberg unless otherwise specified