November 1st, 2019

Daily Market Commentary

Canadian Headlines

  • Bank of Nova Scotia would consider buying a U.S. money manager that targets affluent customers as part of its effort to get more of its wealth management earnings from outside Canada. “That’s something we would look to build or ultimately acquire,” Glen Gowland, who oversees global wealth management at Scotiabank, said in an interview. “We wouldn’t be looking to do something large retail — it would be something that has some specific investment-management capability, and some ability to serve ultra-high-net-worth clients.” It’s part of a new strategy by Gowland, who sees adding wealth management in the U.S. as a way to fill a gap for Canada’s third-largest lender. Of the two options — building or buying — Gowland said it’s hard to develop a high-quality asset manager from scratch, meaning an acquisition may be the best path for Scotiabank, which doesn’t have a retail presence in the U.S.

World Headlines

  • November got off to a positive start, with European stocks climbing after slipping on Thursday. Investor focus remains on developments in trade talks and the upcoming U.S. payrolls report. The Stoxx Europe 600 rose 0.4% at 8:12 a.m. in London. Basic resources led the sector higher, while banks were the worst performers. Shares of Danske Bank A/S fell after it lowered its guidance for this year. Staying in Denmark, insulin maker Novo Nordisk A/S raised the lower end of its sales forecast.
  • U.S. index futures climbed with European stocks on Friday as investors weighed better-than-expected Chinese manufacturing data against uncertainty over an interim trade deal. Treasuries were steady ahead of American jobs numbers. Contracts for all three main U.S. equity gauges pointed to a positive start on Wall Street, and the Stoxx Europe 600 Index advanced, with some regional bourses shut for a holiday.
  • Markets are looking for footing after being rattled on Thursday as Chinese officials cast doubts about reaching a comprehensive long-term trade deal with the U.S., even as the two sides close in on signing a “phase one” agreement. Investors will look for the next catalyst in the monthly U.S. non-farm payrolls report due on Friday and a read on American manufacturing for October. On the trade front, negotiators are expected to hold a call today.
  • Oil headed for its biggest weekly loss in a month as swelling American stockpiles and renewed doubts over a long-term U.S.-China trade deal suggested supply will continue to outpace demand. Futures edged higher in New York on Friday, but are down about 4% this week. Chinese officials are warning they won’t budge on the most problematic issues and are wary of President Donald Trump’s impulsiveness even as the two sides get close to signing an initial agreement, people familiar with the matter said. U.S. crude inventories rose by more than forecast last week, while a JBC Energy report showed Saudi production rebounded to normal levels in October.
  • Gold headed for a third straight weekly gain as renewed concerns about a U.S.-China trade deal and a weaker dollar stoked demand for the metal. Also on investors’ radars are the monthly American jobs report and a read on manufacturing for October due later Friday. The data will be keenly parsed for further clues on the Federal Reserve’s monetary policy path after officials signaled a pause in further cuts. Bullion and other precious metals edged lower Friday as investors weighed better-than-expected Chinese manufacturing data. Still, all of them headed for a second synchronized weekly gain in a row even amid outflows from exchange-traded funds backed by silver and platinum.
  • Economists expect Friday’s U.S. payrolls report will show job growth slumped to a five-month low in October, though it may be trickier than usual to sort out the true underlying trend. The data will likely reflect the impact of 46,000 striking General Motors Co. workers, as well as related effects from any idling at the company’s suppliers and contractors. The automaker’s longest nationwide walkout since 1970 began Sept. 15 and stretched for six weeks, through the mid-month reference period that the Labor Department’s Bureau of Labor Statistics uses to calculate the monthly jobs report.
  • Alibaba Group Holding Ltd. posted a stronger-than-projected 40% surge in revenue, affirming the resilience of online consumer spending despite a rapidly cooling economy. Better shopping recommendations, revamped grocery services and deeper content such as livestreams drove sales for China’s largest corporation, a barometer for the health of online retail as well as the broader economy. It reported revenue of 119 billion yuan ($16.9 billion) in the September quarter, surpassing the 116.7 billion yuan average of analysts’ estimates. Shares rose more than 3% in pre-market trading.
  • Nancy Pelosi has launched a new phase of the impeachment inquiry with no explicit timetable, no defined scope of what to investigate, no guarantee the White House will cooperate and not a single Republican vote — in many ways taking Congress and the country into the exact politically perilous place she long sought to avoid.
  • Pinterest’s revenue misses disappointed analysts and prompted several price target cuts as the reality hit that the recently-listed company is still in the early days of making money from its platform. The results show that Pinterest is still “building the plumbing” around several key initiatives, JPMorgan analysts said, adding that they had been hoping for more from the company. Shares fell 20% in U.S. pre-market trading, heading toward the April IPO price of $19. At its peak since the IPO, the stock had almost doubled, trading at $36.56 in late August.
  • China has banned online sales of e-cigarettes in the latest blow for the nascent vaping industry, which has come under intensifying scrutiny around the globe. All websites and apps selling e-cigarettes should be shut down and all online marketing campaigns halted, according to a statement by the State Tobacco Monopoly Administration and State Administration for Market Regulation on Friday. The measures are aimed at protecting adolescents from vaping, it said. The directive also ordered online shopping platforms to remove e-cigarette products from their sites. China’s e-cigarette market size rose from $451 million in 2016 to $718 million in 2018, according to estimates from L.E.K. Consulting, as lack of specific regulations on e-cigarettes allowed for their proliferation.
  • Amgen Inc. will take a 20.5% stake in Chinese-American drug developer BeiGene Ltd. under a deal to develop and commercialize about two dozen of Amgen’s on-market and experimental cancer drugs in China. Amgen will buy about $2.7 billion worth of Beijing and Cambridge, Massachusetts-based BeiGene’s shares. It has agreed to pay $174.85 per American depositary receipt, a 26% premium to where the U.S.-traded shares closed Wednesday. It will also take a seat on BeiGene’s board.
  • A payments platform created by India’s largest retail banks surpassed a billion transactions in October, a milestone that affirms the tremendous growth of services offered by U.S. giants from Walmart Inc. to Inc. and Google. Indian digital payments took off when the government pushed demonetization in 2016, invalidating most of the country’s high-value currency notes in a move to curb corruption and push Indians away from cash. The Unified Payments Interface or UPI has now surpassed a 100 million users three-and-a-half years after its launch, thanks to booming smartphone use and wireless data rates among the lowest in the world.
  • Sentiment toward Jaguar Land Rover Automotive Plc is improving at an unprecedented pace after stabilization in its China business helped the premium British carmaker’s parent report a narrower loss than expected. So say the debt markets, where credit-default swaps insuring against default at the company dropped a record 268 basis points in October to 538. The cost to buy protection against Jaguar bond non-payment had been as high as 943 basis points in February.
  • As the global campaign against coal gathers pace, the world’s biggest consumer is nevertheless set to boost imports this year. China’s purchases of foreign coal in the first nine months have already raced ahead of last year by almost 10%, suggesting it’ll be “difficult to have imports at the same level as last year, while a rise is highly possible,” according to Zeng Hao, an analyst at consultancy Fenwei Energy Information Services.
  • Danske Bank A/S will resort to job cuts in its fixed-income and currencies unit as part of a plan to revive profits, it said on Friday. Details of the measures, contained in a slide that accompanied third-quarter results, show the bank is planning “short-term cost reductions of up to 15% of direct staff costs.” Danske says it hopes most of the cuts will take place through “voluntary resignations” and against the backdrop of its hiring freeze. The bank also used its quarterly report to lower its guidance for a second time since July in response to an increasingly tough business environment shaped by growing compliance costs and negative interest rates.
  • President Donald Trump on Friday will road-test his latest attacks on Democrats’ impeachment efforts at his first campaign rally since the House voted to kick off the public phase of the accelerating inquiry. The rally, to be held in Mississippi, comes after the House voted on Thursday along mostly partisan lines to begin open hearings into what Democrats say is an abuse of power by Trump in pressuring Ukraine to undertake investigations for his personal political benefit. Trump regularly recites a lengthy list of grievances about his political opponents at his rallies. He’s expected to amplify complaints that Democrats have politicized early depositions in the impeachment inquiry while gathering evidence for the public portion of the proceedings.
  • Apple Inc. launches its TV+ original video streaming service Friday, ending years of anticipation about the company’s next act in television. But it will lack what many consumers want: a giant library of their favourite movies and shows. Over the past decade, the iPhone maker has explored building its own TV set, buying major content firms like Time Warner and partnering with cable companies on new TV set-top boxes. Instead, it landed on a combination of a video aggregation app, on-demand access to pay-TV channels like HBO and Starz and a $4.99 monthly subscription service of original movies and television shows.
  • An unprecedented series of deliberate blackouts that left millions of Californians in the dark this month is coming to an end. Less than 150,000 people remained without power late Thursday, down from the millions that went down earlier in the week as part of widespread shutoffs carried out by power companies to keep electrical wires from igniting fires during high winds. The state’s two biggest utilities, PG&E Corp. and Edison International, said they planned to restore power to virtually everyone by the end of Friday

*All sources from Bloomberg unless otherwise specified