May 2nd, 2019
Daily Market Commentary
- Canadian Headlines
- Bombardier Inc. will seek to sell its aerospace operations in Northern Ireland and Morocco, as Chief Executive Officer Alain Bellemareextends a revamp to focus primarily on private jets and trains. The company will form Bombardier Aviation, with core assets in Montreal, Mexico and Texas, according to a statement Thursday. The division will be led by David Coleal, the head of Bombardier’s business-jet operations.
- A political brawl between between British Columbia and Alberta over a stalled pipeline expansion is being blamed for handing Vancouver a somewhat dubious municipal distinction. The city recently recorded the highest retail gasoline price on record for a major North America metro, according to GasBuddy, a motor-fuel pricing website. The price hit almost $4.80 a gallon (C$1.70 a liter), a bit higher than the $4 a gallon seen in Los Angeles, traditionally one of the most expensive U.S. markets.
- Oxford Properties Group is planning to sell a 50 percent in its Canadian Fairmont hotels in a deal that could be worth more than C$1 billion ($743 million), according to a person with knowledge of the plans. The four properties in Whistler, British Columbia, and Lake Louise, Banff Springs and Jasper Park, Alberta, are some of Canada’s most iconic hotels. With more than 2,200 rooms that draw 1.2 million guests a year, they have rootsdating to the dawn of the country’s train travel in the late 1800s.
- Suncor Energy Inc., Canada’s largest integrated energy producer, said it was able to generate positive results in the first quarter despite Alberta’s oil-production curtailments. Net income almost doubled from a year earlier to C$1.47 billion, the producer said in a statement. That beat the average $822.6 million of five analyst estimates compiled by Bloomberg.
- World Headlines
- European equities retreated at the open as investors were disappointed by earnings and as mining shares fell on the stronger U.S. dollar. The Stoxx Europe 600 Index fell 0.3 percent. Lloyds fell 2.2 percent after the results of Britain’s largest mortgage lender missed estimates. Mining shares were the biggest declining sector amid dollar gains and as BHP dropped 2 percent after Citigroup cut it to neutral, saying it’s reached fair value. Shell was up 0.7 percent in Amsterdam after earnings topped estimates.
- Stocks were mixed on Thursday as investors switched their focus from monetary policy back to company earnings and the outlook for global trade. Treasuries retreated. U.S. equity futures advanced after the three main gauges fell on Wednesday, when the Federal Reserve pushed back on market expectations that its next move would be a rate cut.
- In Asia, trading was again depressed by holidays in Japan and China. Equity benchmarks in South Korea and Hong Kong hit their highs of the session after CNBC reported that the U.S. and China could announce a trade deal as soon as next Friday, citing sources it didn’t name. Alongside the earnings season, the chances of a breakthrough in the trade talks are back on top of the agenda, with negotiations between the U.S. and China set to continue in Washington next week.
- Oil declined for a second day, trading near $63 a barrel in New York, as a massive surge in U.S. crude stockpiles allayed worries about supply disruptions around the world. West Texas Intermediate futures fell as much as 1.2 percent. U.S. government data showed that crude inventories soared by 9.93 million barrels last week, more than four times the amount initially anticipated by analysts, as production hit a new record. That’s easing concerns that tougher American sanctions on Iran — which take effect today — along with a political uprising in Venezuela and military clashes in Libya may strain supplies elsewhere.
- Gold fell for a second day after the Federal Reserve kept rates unchanged, with Chairman Jerome Powell saying the central bank has no bias to either tighten or ease, while playing down recent weakness in inflation. Focus for investors now switches to the outlook for global trade and the possible conclusion of the U.S. and China trade war. A positive outcome could put further pressure on gold, which is already trading lower than at the start of the year.
- Tesla files to offer 2.72 million shares, with CEO Elon Musk indicating preliminary interest in buying up to 41,896 shares of stock for about $10 million at the public offering price. Concurrently, Tesla is offering $1.35 billion convertible senior notes due 2024
- The Bank of England signaled that it’s in no rush to raise interest rates despite stronger economic growth, as policy makers stayed united on the need to keep borrowing costs on hold for now. In an upbeat set of forecasts, Governor Mark Carney and his colleagues upgraded their expectations for growth, saying unemployment will fall further and the economy will generate more excess demand than previously predicted. Yet the Monetary Policy Committee cut its inflation outlook. Investors predict only one more quarter-point hike between now and 2021.
- Homebuyers took advantage of Brexit uncertainty to get steep discounts in London’s fanciest neighborhoods in the first quarter. Prices for homes under 2 million pounds ($2.6 million) in the capital’s most sought-after districts fell the most in a decade in the three months through March as politicians failed to agree on a deal for the U.K.’s orderly withdrawal from the European Union. Transaction volumes rose sharply as more purchasers piled into the market to take advantage of the potential for reductions, according to data from LonRes.
- The value of Mitsubishi UFJ Financial Group Inc.’s majority stake in Indonesia’s PT Bank Danamon Indonesia just got a little smaller. Shares of the Indonesian bank plunged 20 percent Thursday, wiping out about $1.2 billion in value, after MSCI Inc. said Tuesday it will remove the stock from indexes from May 6. The stock fell the most since October 2008 on heavy volume. Indonesia was closed Wednesday for a holiday. Funds tracking MSCI indexes likely sold Bank Danamon, Smartkarma analyst Travis Lundy said by phone. Mitsubishi UFJ may also sell 1.6 percent of its stake “sometime in the next two years” due to stock exchange’s rules, Lundy wrote in a note earlier in the day.
- Royal Dutch Shell Plc’s first-quarter earnings beat even the highest analyst estimate as its natural gas business led a strong companywide performance. Shares rose. Shell gives a positive ending to a mixed Big Oil earnings season, which showed companies mostly recovering from a worst-in-a-generation downturn but unable to fully insulate themselves against volatile markets. While BP Plc, Chevron Corp. and Total SA mostly matched earnings estimates on a mixture of rising output and cost cuts, Exxon Mobil Corp.suffered a “shocker” due to its worst refining performance in nearly 20 years.
- ING Group NV’s chief financial officer did nothing to dispel speculation that the bank may be interested in Commerzbank AG, saying that the lender will consider merger and acquisition opportunities as they arise. Tanate Phutrakul, who declined to comment specifically on the German bank, said in a Bloomberg TV interview with Manus Cranny on Thursday that the Amsterdam-based lender will “look at transactions as they are presented to us.” That echoed comments by ING Chief Executive Officer Ralph Hamers, who said last week that the bank would look at M&A in countries where it operates.
- Russia pumped more crude last month than agreed under the OPEC+ deal, lagging behind Energy Minister Alexander Novak’s pledge to comply with the pact. Russia produced 45.97 million tons of crude in April, according to preliminary data from the Energy Ministry’s CDU-TEK unit. This equals 11.233 million barrels a day, or 185,000 barrels lower than the October daily baseline, according to Bloomberg calculations.
- More than four years after the leaders of Deutsche Bank AG unveiled their first postcrisis strategic reboot, they’re back at square one. It’s the eternal turnaround. The giant German bank’s core problem is the same—costs are too high, revenue is too low—but there are fewer levers for Chairman Paul Achleitner and Chief Executive Officer Christian Sewing to pull now that merger talks with Commerzbank AG are off. The combination could have helped Deutsche Bank by taking out its biggest domestic rival and lowering its own funding costs by expanding its deposit base. But the obstacles to forging one sturdy institution out of two weak ones proved insurmountable. In a joint statement, the banks’ CEOs cited execution risks, restructuring costs, and the higher capital requirements the combined bank would face.
- Caterpillar is raising its quarterly dividend to $1.03 per share from 86 cents and said it sees $28 billion of sales from its Machine, Energy & Transportation division by 2026.
- 3M Co. agreed to acquire closely held Acelity Inc. from a group of funds advised by Apax Partners for about $6.7 billion including debt, expanding the company’s medical-products portfolio. The acquisition of the maker of post-surgical wound products shifts focus away from 3M’s rocky recent performance. The shares logged the worst one-day loss in 31 years last week after the company cut its annual profit forecast and reported quarterly results that missed Wall Street estimates.
- The Federal Aviation Administration has been increasing its scrutiny of Boeing’s plant near Charleston, S.C., where manufacturing errors have at times threatened to undermine safety. Since September, the agency has investigated and confirmed three safety complaints made by employees who detailed problems with planes in the final stages of production, according to an F.A.A. official and an internal agency email. The regulator is also looking into a claim that an employee faced pressure to sign off on work related to the airworthiness of a jet during the last week of March.
- Uber Technologies Inc. found its first official bull on Wall Street, who made yet another a comparison to Amazon.com Inc. as Uber focuses more attention on markets outside its core ride-hailing business. Uber is just “scratching the surface of the full monetization potential” of its platform given opportunities in food-delivery, freight and autonomous vehicles, Wedbush Securities analyst Ygal Arounian wrote in a research note. Uber plans to raise as much as $9 billion next week in what is expected to be the biggest initial public offering so far this year. The San Francisco-based company is offering 180 million shares at $44 to $50 apiece, according to a regulatory filing last week.
*All sources from Bloomberg unless otherwise specified