November 29th, 2019
Daily Market Commentary
- Canadian equities hit another record high on Thursday even as volume was light due to the U.S. Thanksgiving holiday. The S&P/TSX Composite Index was slightly higher, up 0.1% to 17,114.52. Health-care and materials stocks led the market higher. Brookfield Asset Management contributed the most to the index advance, increasing 0.5%. Aurora Cannabis had the largest gain, rising 3.6%. Couche-Tard was the biggest drag on the index, declining 1.6%. Norbord had the biggest drop, falling 1.9%. Meanwhile, Canada’s economy is shifting into a lower gear as some of the country’s growth drivers begin to lose steam. Statistics Canada will release third-quarter gross domestic product numbers Friday that will probably show a sharp drop in growth. According to the median forecast of economists in a Bloomberg survey, the country’s expansion slowed to a 1.3% annualized pace in the three months through September, down from an unsustainable clip of 3.7% in the prior period
- Diluted bitumen, the petroleum product carried out of Alberta’s oil sands through pipelines across North America, sinks in freshwater, Canadian researchers have found. The findings, released this month, stand in contrast with what happens in spills of conventional oils, which stay on the water’s surface, Diane Orihel, a researcher involved in one of two research programs in northern Ontario seeking to fill gaps in pipeline safety science, said by email.
- European shares slid on Friday, tracking losses in Asian markets, as investors await further news on U.S.-China trade talks, while Ocado surged after it signed a licensing agreement with Japanese peer Aeon Co. The Stoxx 600 Index is down 0.4%, led lower by energy, tech and banking shares, though retailer Ocado climbed 13%. The European gauge is up almost 3% in November, following gains in September and October and taking this year’s advances to about 21%.
- U.S. equity futures fell with stocks in Asia while European shares struggled for traction, signaling a lackluster finale to the third straight month of gains for major global benchmarks. The dollar was steady. Contracts on the S&P 500, Nasdaq 100 and Dow Jones Industrial Average all edged lower, auguring a weak opening on Wall Street, where markets will resume after the Thanksgiving break. On the Stoxx Europe 600 Index, declines in mining and construction shares offset increases in technology and travel. A major Asia benchmark headed for its biggest one-day drop since September, led by a 2% fall in Hong Kong shares.
- Japan’s Topix index fell in thin trade ahead of the weekend, weighed down by declines in automakers and trading houses. Volume on the benchmark measure was 24% below its 30-day average. It capped a third month of gains, adding 1.9% in November. The Nikkei 225 also slid on low volume, but is still within 1% of its recent high of 23,520. U.S. markets were shut Thursday for Thanksgiving. China is considering putting the drafters of the U.S. bill supporting Hong Kong protesters on its no-entry list, Global Times editor-in-chief Hu Xijin said in a tweet, without saying where he got the information.
- Oil is heading for a fourth weekly gain, the longest winning streak since April, before a key OPEC+ meeting next week that will set the path for future production cuts. Futures were steady near $58 a barrel in New York as the U.S. Thanksgiving holiday reduced trading volumes. Saudi Arabia is likely to signal at the Vienna gathering that it’s no longer willing to compensate for the non-compliance of other members, according to people familiar with the kingdom’s thinking. OPEC and its allies are expected to extend the current supply pact, rather than deepen reductions, according to a Bloomberg survey.
- Gold headed for its biggest monthly drop in three years on signs China and the U.S. are edging closer to a trade deal. Palladium steadied after climbing to a record on expectations its eight-year supply deficit will widen next year. U.S. President Donald Trump declared Tuesday that talks on the first phase of a trade deal were nearly done after negotiators from both sides spoke by phone. Trump also this week signed legislation expressing U.S. support for Hong Kong protesters. While that prompted China to threaten retaliation, Beijing stopped short of any immediate action and didn’t offer any details.
- U.S. President Donald Trump made a surprise Thanksgiving visit to Afghanistan to meet with both troops and the country’s president — saying that peace talks with the Taliban have resumed amid a push for a cease-fire and to reduce U.S. deployment in the region. The president landed at Bagram Airfield around 8:30 p.m. local time Thursday and greeted U.S. soldiers over a turkey dinner before meeting with Afghan President Ashraf Ghani at the airfield’s Air Force headquarters.
- From rural bank runs to surging consumer indebtedness and an unprecedented bond restructuring, mounting signs of financial stress in China are putting the nation’s policy makers to the test. Xi Jinping’s government faces an increasingly difficult balancing act as it tries to support the world’s second-largest economy without encouraging moral hazard and reckless spending. While authorities have so far been reluctant to rescue troubled borrowers and ramp up stimulus, the costs of maintaining that stance are rising as defaults increase and China’s slowdown deepens.
- German unemployment unexpectedly dropped this month as a slump in manufacturing showed signs of stabilizing and the trade tensions that have weighed on exporters eased. In a report that’s likely to damp any expectations of German fiscal stimulus, the number of people out of work slid by 16,000, compared with estimates for an increase of 6,000. The jobless rate held at 5%, near a record low. The drop in those out of work is good news for the economy after earlier figures Friday showed a sharp drop in retail sales.
- Euro-area inflation has fallen back below 1% in the last couple of months, driven by large negative contributions from energy prices. These downward pressures should unwind over the next three months because we don’t expect the sharp drop in fuel prices observed from November 2018 to January 2019 to be repeated this year. This will provide some solace for policy makers at the European Central Bank.
- Saudi Aramco’s initial public offering has drawn total bids of 166 billion Saudi riyals ($44.3 billion) so far from institutional and retail investors, about 1.7 times the amount the government is seeking to raise. In the retail tranche, where final bids were due last night, 4.9 million people applied for shares with a total value of 47.4 billion riyals. Institutional investors, who have until next Wednesday to submit bids, have made subscriptions for 118.9 billion riyals of shares, Samba Capital, one of the deal’s lead managers said. Of that, 10.5% came from non-Saudi investors.
- Thai Beverage Pcl is considering an initial public offering of its brewery business, in what could be the biggest listing in Singapore in close to a decade. Shares of the company surged. The drinks maker is speaking with potential advisers about listing the brewery unit next year and may seek a valuation of as much as $10 billion, according to people with knowledge of the matter. A deal could include its beer assets in Thailand and Vietnam, one of the people said, asking not to be identified because the information is private.
- Plans to restructure Innogy SE’s U.K. energy supplier Npower and migrate its household customers to EON SE’s British business could put as many as 4,500 jobs at risk, according to Unison, one of the nation’s biggest unions. Workers will be given details at briefings later on Friday and the companies said they will consult and work with the trade unions. Innogy isn’t providing any numbers regarding how many positions are at stake, a spokeswoman said. Npower has been bleeding money for years. The U.K. energy retail market has traditionally been dominated by the six big utilities, but their share is shrinking with smaller and more nimble rivals undercutting prices. In a far cry from Margaret Thatcher’s liberalization drive decades ago, lawmakers from all parties have turned against the traditional suppliers, with former Prime Minister Theresa May introducing a price cap to stop what she called “rip off” contracts.
- In a steamy foundry behind a century-old Czech brewery, a mechanical arm pours molten aluminum into a two-story robotic mold. Within seconds, gleaming pump covers for diesel engines roll out for inspection. The state-of-the-art production line at Motor Jikov Group AS in Ceske Budejovice, near the border with Germany and Austria, is running at full speed to deliver orders to Volkswagen AG’s Scania truck unit. But the upgrades that cost millions of dollars represent more than the success of a well-run midsize business. Executives see them as a matter of life and death in a cutthroat industry gripped by existential dread.
- Zurich Airport International AG will build a second airport for New Delhi, after offering to pay more to the government than billionaire Gautam Adani and the operator of the existing airport in the Indian capital. Zurich Airport will pay a state-owned authority a fixed 400.97 rupees per passenger, Shailendra Bhatia, a nodal officer for the Noida airport project, said in a text message. Adani Enterprises Ltd. offered to pay 360 rupees for every passenger, while Delhi International Airport Ltd. offered 351 rupees, Bhatia said. A second airport for New Delhi is crucial as the existing airport is running out of parking and landing slots as budget carriers make air travel affordable for an emerging middle class. Mumbai, the financial capital, started work on a new airport only last year, more than two decades after first proposing it.
- China’s top chipmaker has offered to guarantee a new $900 million loan recently launched to help one of its units refinance existing debt, as the group struggles to win support from lenders amid concerns about its finances. Tsinghua Unigroup Co., a business arm of the country’s top university, agreed to provide the guarantee on the new loan to repay two loans signed more than two years ago by its subsidiary Unis Technology Innovation and Development Ltd., according to people familiar with the matter. The two outstanding loans have a combined value of $894 million. Unigroup, which is controlled by Tsinghua University, previously provided a form of backing known as “keepwell deeds” for the two loans. That requires it only to ensure that Unis Tech remains in good financial health throughout the loan’s lifespan.
- The Bank of Japan lowered the purchase range for bonds maturing in 10-25 years in its monthly operations plan for December, when compared with November, according to a statement Friday. The central bank trimmed the range to between 50 billion yen ($456 million) and 150 billion yen. That’s versus a band of 50 billion yen and 200 billion yen in November
- Daimler AG plans to eliminate more than 10,000 jobs worldwide to revive profit margins squeezed by heavy investments in electric and self-driving vehicles, following on the heels of rivals BMW AGand Volkswagen AG’s Audi division in mapping out cost savings. The cuts — equal to at least 3.3% of the workforce — will be carried out by the end of 2022 as part of efforts to reduce personnel spending by 1.4 billion euros ($1.5 billion), the maker of Mercedes-Benz cars said Friday in a statement. The company plans to widen early-retirement programs and offer buyouts to reduce administrative staff in Germany.
*All sources from Bloomberg unless otherwise specified