March 7, 2019
Daily Market Commentary
- The Bank of Canada diluted its conviction that interest rates will need to go higher as officials expressed greater uncertainty about the outlook amid a deeper-than-expected slowdown. The Ottawa-based central bank left its overnight benchmark rate unchanged at 1.75 percent for a third straight decision Wednesday, as widely expected. From their last statement in January, policy makers dropped their assertion that rates will need to rise over time, replaced by a mention that the economy continued to require stimulus and that there was “increased uncertainty” about the timing of future increases.
- Two weeks ago, Canada’s dollar was 2019’s best-performingGroup-of-10 currency, while its Australian counterpart was busting higher as well. Wednesday’s trading session put a serious dent in each of them. The loonie slumped to its weakest level in two months as the Bank of Canada dialed back its expectations for interest-rate increases and a gauge of the country’s manufacturing fell. Australia’s currency suffered a similar fate after data showed the nation’s economy experienced its worst six-month period since the global financial crisis, and Reserve Bank of Australia Governor Philip Lowe said it’s hard to envision a scenario for raising rates this year.
- European shares fell at the open, tracking Asian markets lower, amid mounting economic growth concerns. The focus now turns to the European Central Bank and its possible new round of aid to banks. The Stoxx Europe 600 Index dropped 0.2 percent, led down by basic resources and the autos sectors. German publishing company Axel Springer SE fell 6 percent after it provided a 2019 revenue outlook that Morgan Stanley describedas “tepid.” The ECB will announce its decision at 1:45 p.m. in Frankfurt with officials poised to cut economic forecasts by enough to justify another round of loans for banks, known as TLTROs, Bloomberg news reported Wednesday citing people with knowledge of the matter.
- Stocks were mostly lower Thursday as fresh cuts to economic forecasts added to investor concerns about the outlook for global growth. The euro held steady ahead of a rate decision by the European Central Bank, while the dollar edged higher for a seventh day. Investors will study the monthly U.S. jobs report on Friday for further clues. Trade remains in the picture with markets awaiting details of a possible accord, as President Donald Trump is said to be pressuring U.S. negotiators to cut a deal with China soon.
- Japanese equities declined after weaker U.S. employment data in February raised concerns about growth in the world’s largest economy. The Topix index was weighed by electronics makers and banks as it fell for a third day. Renesas Electronics Corp. dropped 15 percent, the most since May 2012, after reports that it will halt production at some domestic plants in response to slowing Chinese demand. Mizuho Financial Group Inc. dipped 1.5 percent after it slashed its net income forecast by 86 percent on charges tied to business restructuring and securities losses.
- Oil advanced after mixed data from the U.S. government, which showed an unexpectedly large jump in crude inventories and a substantial drop in fuel stockpiles. Futures added 0.7 percent in New York, trading above $56 a barrel. U.S. government data showed crude stockpiles last week gained the most since mid-January, more than analysts had expected. Still, a larger draw in refined-product inventories helped ease some concerns about demand.
- Gold held near a five-week low as the dollar headed for a seventh day of gains ahead of Thursday’s European Central Bank meeting, and the release of the monthly U.S. jobs report on Friday. Investors also weighed President Donald Trump’s push for U.S. negotiators to close a trade deal with China soon, and the latest developments in the Huawei Technologies Co. saga that could complicate talks between the two countries.
- The euro-area economy enjoyed broad-based growth at the end of last year that was only weighed down by a change in inventories. Private and government spending accelerated, investment expanded at a solid pace and trade made a positive contribution to gross domestic product. Growth was confirmed at 0.2 percent in the fourth quarter, while a reading for the previous three months was revised down to 0.1 percent.
- President Donald Trump wants the stock market to celebrate if he strikes a trade deal with China. Investors may struggle to deliver. The outcome is something far less certain than investors have priced in during this year’s equities rally. Instead, the most likely scenario is an accord with few details, or a paucity of specifics on which tariffs will stay and which may go.
- MSCI Inc. said China should consider easing foreign-ownership restrictions in its stock market to prevent more companies from being dropped from its widely followed benchmarks. New York-based MSCI said it will remove Han’s Laser Technology Industry Group Co. from its China indexes after Friday’s close because the stock had reached the 28 percent ownership limit that halted buy orders. Midea Group Co., which is also close to the ceiling allowed for overseas holdings, will see its weight adjusted due to concern over accessibility effective from March 11, the index provider said. The two stocks dropped at least 3.1 percent at the close.
- MTN Group Ltd. shares jumped the most in almost three years after Africa’s biggest wireless carrier started a 15 billion-rand ($1.1 billion) disposal plan to shore up the balance sheet. The company agreed to sell its 53 percent stake in Botswana’s Mascom to Econet Wireless Zimbabwe Ltd. for $300 million, the Johannesburg-based company said in a statement on Thursday. Other businesses now on the market include e-commerce services, which includes Nigerian online retailer Jumia Technologies AG. and Travelstart.co.za. MTN is also looking to sell its interest in IHS Towers Ltd., the company said.
- Grifols SA agreed to pay about $1.9 billion for a stake in Shanghai RAAS Blood Products Co., gaining a major foothold in China’s booming blood-products market. The Barcelona-based company will acquire a 26 percent stake in Shanghai RAAS in a noncash deal, making it the second-largest shareholder in the Chinese producer, Grifols said in a regulatory filing Thursday.
- PLDT Inc. plans to spend a record 78.4 billion pesos ($1.5 billion) this year, higher than initially planned as it seeks to build on its 2018 gains when profit surged 41 percent. Net income rose to 18.9 billion pesos last year from 13.4 billion pesos in 2017. Service revenues climbed 3 percent to 154.2 billion pesos., the Philippines’ second-largest telecommunications company by market value said on Thursday, using a new accounting standard.
- U.S. Army officials have delayed a decision on moving BAE Systems Plc’s new self-propelled howitzer into full production, possibly as late as November, until the service sees more improvements in the $8.1 billion program that’s one its highest priorities. “They have made progress, but they’re still not at the point where they’ve convinced us they are prepared to go into full-rate production,” Army Secretary Mark Esper said in an interview. “There’s some thresholds they have to meet” for the service and for the Defense Contract Management Agency, which is monitoring the company’s progress in improving quality.
- Developers and retailers have made a $2 billion wager that a new shopping mall can prosper in New York. The Shops at Hudson Yards, opening to the public March 15, has been given the herculean task of luring consumers to what was once a commercial desert—a section of Manhattan’s West Side hemmed in by a commuter rail yard and the massive Jacob Javits Convention Center. The windswept streets along the Hudson River were once bereft of window-shopping pedestrians and spendthrift tourists. But the High Line helped change all of that. The elevated railroad-turned-gentrification artery has remade the landscape, with hotels and a major museum springing up around it. The tourist attraction also triggered a luxury arms race of glass condominiums, pricey restaurants and chic boutiques. Now comes a brand new mall to rule them all, sucking in tourists and anyone else looking to spend a lot of money.
- PG&E Corp. is asking a bankruptcy judge for permission to award as much as $235 million in performance bonuses to thousands of its workers after canceling similar incentive payments last year. PG&E wants court approval for its short-term incentive plan that covers employees who, under the 2019 plan, would be awarded bonuses if the San Francisco utility meets performance goals tied to safety and financial performance, according to a filing Wednesday. Senior executives wouldn’t be eligible for the incentives, PG&E said. The company estimated a total bonus target of about $235 million, but listed an “aggregate maximum payout” of about $350 million.
- Buying European natural gas in the summer to sell during winter is the most profitable it’s been for eight years — at least on paper. The trouble is there’s no room to store it. An unusually mild winter means fuel supplies are above average for this time of year and capacity at stores from salt caverns to depleted gas fields is almost booked out. The situation has been compounded by record levels of liquefied natural gas tankers to the region and a shrinking amount of storage space overall.
- China’s plans to loosen its solar subsidy policy will keep growth of the world’s largest market intact, according to the head of JinkoSolar Holding Co., which is increasing production capacity by as much as 20 percent this year. Installations will probably maintain at about 40 gigawatts, close to the levels last year, Chen Kangping, chief executive officer of the world’s largest panel maker, said in an interview in Beijing. China’s main industry group said last month the country is planning more supportive policies, which include resuming quotas for some utility-scale projects.
- Bank of New York Mellon Corp. has done a U-turn on restricting staff working from home after a backlash from employees. Chief Executive Officer Charlie Scharf wrote in a March 6 email to his 51,300 employees that he had decided to “hit pause on implementing any changes to remote working arrangements.” BNY Mellon will take the next few months to reconsider its approach, Scharf wrote in the note seen by Bloomberg.
- Blackstone Group LP expects to reach about $20 billion when it completes the first phase of capital raising for its flagship fund, signaling the appetite for private equity has yet to wane. The New York-based firm notified investors that the first close for its eighth buyout fund may be in March or early April, according to people with knowledge of the matter. Blackstone hasn’t yet set a limit for the fund’s size as it approaches a record for its buyout pools. Blackstone and its peers are benefiting from the strong demand for private equity, which has been outperforming other asset classes and hedge funds. The firm, which manages $472 billion, said in January that it planned to take in $100 billion this year.
- Lord Corp. is exploring a sale that could value the closely held adhesives and coatings manufacturer at as much $3 billion, people with knowledge of the matter said. The company is working with an adviser to run an auction process, said the people, who asked not to be identified because they weren’t authorized to speak publicly. The company, which said it reached $1 billion in sales in 2018, is likely to attract interest from peers in Europe and the U.S., the people said.
- China has drafted tougher rules for its 12.7 trillion yuan ($1.9 trillion) private fund industry, tightening scrutiny as the government reins in financial risks, according to people familiar with the matter. The proposed new Asset Management Association of China rules would require hedge funds and venture capital funds to raise at least 10 million yuan before registering a product, ending the popular practice of starting with smaller amounts, the people said, declining to be identified because the draft hasn’t been publicized. Private equity and asset allocation funds would have to raise higher amounts under the plan.
- Tesla Inc. is updating its charging network to halve typical wait times as the Model 3 fleet grows larger and rivals like Porsche ready their own powerful infrastructure. After doubling power at Tesla’s stations and vehicles preheating batteries ahead of arriving at a plug, charging times will drop to around 15 minutes, the electric-car leader said on its blog. The rollout of the V3 Supercharging network will take until the end of the year and allow twice as many cars each day to charge. The first V3 Supercharger site that’s not a test version will break ground next month. After rolling out in North America, the technology will reach Europe and the Asia-Pacific region in the fourth quarter, the company said.
- A deal between the U.S. and China to drop tariffs couldn’t come soon enough for a global economy already showing strains from the trade war. Economists predicted that eye-for-an-eye tariffs by the U.S. and China could eat into world growth, and there’s evidence that’s happening. Export orders in China slumped last month to the lowest level in a decade amid signs of a deepening factory downturn in the world’s second biggest economy. In the euro area, a key gauge of manufacturing activity has dropped to a level consistent with contraction.
- The European Central Bank is putting all the pieces in place for new support for the economy as policy makers debate how quickly they need to act in response. Forecast downgrades are set to justify a new round of funding for banks, according to people familiar with the matter. Staff have been working on the design of the loans, and the question is whether the Governing Council will unveil all details on Thursday or wait until April. Given the changed economic backdrop, there’ll also be a focus on policy makers’ language on interest rates.
*All sources from Bloomberg unless otherwise specified