March 29 2019

Daily Market Commentary


  • Canadian Headlines
    • BlackBerry Ltd. beat analysts’ estimates for fourth-quarter earnings, boosted by an artificial intelligence acquisition and continued growth in software. Profit in the quarter ended Feb. 28 was 11 cents a share, on an adjusted basis, beating expectations of 6 cents. Sales also topped the average analyst estimate, gaining 8 percent on an adjusted basis, to $257 million.
    • Fiat Chrysler Automobiles NV is cutting about 1,500 jobs at a factory in Canada that’s scaling back production due to slowing minivan sales. The Italian-American automaker plans to eliminate the third shift at its assembly plant in Windsor, Ontario, beginning Sept. 30, according to an emailed statement. The company produces Chrysler Pacifica and Dodge Grand Caravan minivans at the facility, which employed more than 6,100 workers as of January.
    • Alternative lender Romspen Investment Corp. is in talks with U.S. institutional investors to raise as much as $5 billion to provide bridging mortgages on U.S. commercial and industrial properties. The 53-year-old Toronto-based firm has a U.S. fund with $300 million and plans to boost that to as much as $5 billion over three-to-five years by wooing family offices, pension funds, foundations and the like, according to managing partner Mark Hilson, 62. Almost half the closely held company’s first C$2.8 billion ($2.1 billion) Canadian fund is also invested there.

    World Headlines

    • European shares opened higher Friday and are set for the best quarterly gain in four years. The Stoxx Europe 600 Index is up 0.4 percent, led by basic resources and autos shares. The benchmark is poised to rise 12 percent in the first three months of the year, which would be the most since the first quarter of 2015. Shares of Hennes & Mauritz AB and Altice Europe NV both surged on strong earnings, while travel giant TUI AG dropped 10 percent after a profit warning.
    • U.S. stock index futures are little changed ahead of the open as trade talks advance and the U.K. Parliament heads for a new vote on Brexit. Chinese and U.S. negotiators are going over the text of an agreement that could put an end to a nearly year-long trade war. Chinese Vice Premier Liu Hevisits Washington next week. On the last day of trading for the first quarter, the S&P 500 is poised for the best quarterly gain since 2009.
    • After a blistering start to the year, Asian stocks are poised for their best quarter since 2017, and the rally looks like it’s just getting started. The MSCI Asia Pacific Index’s 50-day moving average is set to close above its 200-day line for the first time since May 2016. Investors were treated to a surge of more than 18 percent during the 12 months that followed that crossing.
    • Oil headed for its best quarter in almost 10 years as the OPEC+ coalition’s production cuts and the loss of barrels due to U.S. sanctions on Iran and Venezuela countered a wobbly demand outlook. Futures rose as much as 1.5 percent in New York. Crude rallied with equities Friday after Federal Reserve Bank of New York President John Williams downplayed the chances of a recession in the world’s largest economy. The market also shrugged off a tweet by U.S. President Donald Trump saying oil prices are “getting too high”.
    • Palladium fell for a third day, posting the biggest drop in almost nine years and fueling concern that the metal’s multi-month rally has run out of steam. The commodity used in pollution-reducing auto catalysts, which surged to a record last week on the outlook for tightening supplies, fell as signs of slowing economic growth sparked demand worries. The sell-off comes after hedge funds cut bullish bets and some analysts warned of a growing potential for a price correction. A strong dollar also weighed on gold, silver and platinum.
    • Iron ore is heading for the biggest quarterly gain since late 2016 as Vale SA finally detailed the extent of the hit to full-year sales from its dam burst; Australia warned the impact from that disruption will be felt for years; and Rio Tinto Group said a cyclone prompted a force majeure notice. Futures in Singapore rallied as much 4.7 percent on Friday after the series of announcements, while shares in Australian mining companies jumped. In Sydney, Rio stock advanced to the highest level since 2008, while Fortescue Metals Group Ltd. posted a a quarterly climb of 70 percent.
    • The U.S. economy isn’t likely to slip into recession anytime soon, and there is no reason for the Federal Reserve to cut interest rates, former Fed Chair Janet Yellen said. Speaking to an investor conference in Fort Worth, Texas on Thursday, Yellen said that while Fed officials had marked down their economic growth forecasts to a median of 2.1 percent for 2019, “that’s not a recession. A slowdown is something that was long expected.” Yellen said Fed officials have “been looking to engineer something of a slowdown” because the labor market is “really quite tight.”
    • Chinese and U.S. negotiators have been working line-by-line through the text of an agreement that can be put before President Donald Trump and counterpart Xi Jinping to defuse a nearly year-long trade war, according to officials familiar with the matter. U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer held meetings in Beijing Friday partly to ensure there were no discrepancies in the English and Chinese-language versions of the text, and also to balance the number of working visits to each capital, according to the officials, who asked not to be identified because the talks aren’t public. Chinese Vice Premier Liu He is due in Washington next week.
    • Demand for Lyft Inc. shares has lifted the value of the combined stake of its co-founders to $1.2 billion. The second-largest ride-hailing company priced its shares at $72 on Thursday, from an earlier range of $62 to $68. The increase boosted the value of the stakes held by Logan Green and John Zimmer to about $700 million and $500 million respectively in the firm they established in 2012, according to calculations by the Bloomberg Billionaires Index.
    • AstraZeneca Plc forged its biggest deal in more than a decade, agreeing to pay as much as $6.9 billion to buy into a promising Japanese cancer treatment as part of its push to become a global oncology powerhouse. AstraZeneca will pay the Japanese drugmaker Daiichi Sankyo Co. $1.35 billion upfront to jointly develop and commercialize the cancer therapy trastuzumab deruxtecan, with as much as $5.6 billion in additional payments subject to sales milestones and other contingencies, the companies said late Thursday. They will also equally split development and commercialization costs.
    • A mounting backlash against cashless stores isn’t slowing growth in the $95 trillion payments industry. Even as some U.S. cities seek to protect low-income consumers by barring stores and restaurants from shunning physical currency, digital payments are building acceptance around the world. A Citigroup Inc. index that measures the readiness of 84 countries to adopt electronic payments has increased 5.5 percent in the past five years, the bank said in a report this week.
    • Vivendi SA abandoned its latest attempt to win back control of Telecom Italia SpA, handing activist hedge fund Elliott Management Corp. another victory that may prompt conciliatory talks to end a boardroom battle. Vivendi made the announcement at Telecom Italia’s annual investor meeting near Milan on Friday. The French media company, which owns almost a quarter of the indebted Italian phone company’s shares, had wanted to replace the five directors to regain strategic influence after Elliott pushed it aside last May.
    • Turkey’s financial markets have gone haywire as overnight interest rates fluctuated between 24 percent and 1,300 percent this week, leaving investors dazed and disorientated ahead of Sunday’s local elections. Bigger than Russia and South Africa in size, Turkey’s $210 billion debt market has the highest yields among emerging markets, but money managers and strategists are struggling to take positions given the sheer unpredictability of government policy.
    • London continued to lead the U.K.’s weakening property market at the start of 2019, with prices falling the most since the financial crisis a decade ago. Nationwide Building Society said Friday that values in the capital dropped 3.8 percent year-on-year in the first quarter. That’s a seventh straight decline and leaves London as the worst-performing region in Britain.
    • The imminent arrival of a new group of investors in China’s domestic bonds is set to strengthen the hand of reform advocates in the world’s third-largest debt market. With overseas holdings already at record levels, the April 1 inclusion of a slice of China’s near-$13 trillion of onshore bonds in a key global index will usher in fund managers who use the benchmark to assemble their portfolios. Strategists see $100 billion or more flowing in in 2019 and for years to come. That will make the foreign investor community an increasingly significant stakeholder in China’s financial system.
    • Japan received its first cargoes of Iranian oil last month and more shipments may arrive through April before the import window opened by waivers on U.S. sanctions against the Islamic Republic shuts. The country imported about 76,000 barrels a day from OPEC’s fourth-largest producer in February after a three-month hiatus, the Ministry of Finance said Thursday. That’s after Japanese refiners cleared the hurdles to avail themselves of exemptions Washington had offered in November as the sanctions went into effect. While more cargoes may arrive this month and next, the outlook for further imports is unclear.
    • Mondelez International Inc., the maker of Oreo cookies and Cadbury chocolates, is in advanced talks to acquire international brands being sold by Campbell Soup Co., people familiar with the matter said. Mondelez is negotiating final terms of a purchase of Arnott’s Biscuits, the Australian maker of Tim Tam cookies, and Danish butter-cookie producer Kelsen Group, according to the people. The parties have been discussing a price of around $2.5 billion for the assets, the people said, asking not to be identified because the information is private.
    • Some of the biggest players in distressed debt are proposing a $35 billion plan that would allow California utility giant PG&E Corp. to emerge from bankruptcy within a year, according to people familiar with the matter. Pacific Investment Management Co., Elliott Management Corp. and Davidson Kempner Capital Management have been meeting with California lawmakers and other stakeholders to discuss the proposal, the people said, asking not to be identified because the discussions are private. The plan would establish a $14 billion cash trust to pay for claims tied to the deadly 2017 and 2018 wildfires that forced the utility to declare bankruptcy, according to the proposal seen by Bloomberg News.
    • Royal Dutch Shell Plc could ramp up acquisitions of electricity producers to achieve its target of becoming the world’s biggest power company by the 2030s, according to analysis by Sanford C Bernstein Ltd. To become the biggest low-carbon electricity provider, the company must produce 214 terawatt-hours of clean power every year by 2035, the analysis shows. That’s 11 percent more than Egypt, a country of nearly 100 million people, generated last year, according to data from BP Plc. Shell could achieve that through organic growth, ultimately managing 61 gigawatts of power capacity, said Bernstein. However, it will probably want to move even faster and expand acquisitions of electricity producers, a strategy that has already divided investors.
    • ESR, a Warburg Pincus-backed logistics developer, is investing more than $1 billion to build a logistics park in Japan, riding on the region’s burgeoning demand for warehouse space. The company bought a land parcel in southern part of Yokohama on the Tokyo Bay to develop the project, it said in an emailed statement on Friday. ESR is partnering with Equity Group Investment Inc., the Chicago-based investment firm founded by billionaire Sam Zell, and an unidentified U.S. pension fund, according to the statement.

*All sources from Bloomberg unless otherwise specified