November 4th, 2019
Daily Market Commentary
- Investors have an impressive array of opportunities this week to take the pulse of commodity markets, check in on the trade war, and discover how hungry energy giants are to secure a trove of hydrocarbon riches as global concerns about climate change ratchet ever higher. Earnings season features big gold, with reports from Newmont Goldcorp Corp. and Barrick Gold Corp. that will reflect bullion’s rally and the impact of recent consolidation. In Europe, steel giant ArcelorMittal hands in its scorecard amid a challenging slump in demand. And there will be a host of insights from right across the U.S. shale patch, including from Occidental Petroleum Corp.
- Bank of Montreal’s push into the U.S. has proven fruitful for its employees — and challenging for a company seeking to get its expenses under control. Among Canada’s six largest banks, pay has grown fastest at Bank of Montreal since last decade’s financial crisis. Compensation per employee at the Toronto-based firm is up 18.6% since fiscal 2007 when adjusted for nominal wage growth, according to company filings and calculations by Bloomberg. That’s made Chief Executive Officer Darryl White’s mission to improve efficiencies more difficult.
- European shares kicked off the week with gains, following Asian markets up, on optimism that a China-U.S. trade deal will be signed soon. The Stoxx 600 Index is 0.5% up, led by rises in miners and banks, with autos shares also climbing. IAG jumped 2% after agreeing to buy Spanish airline Air Europa for 1 billion euros ($1.1 billion). Ryanair Holdings Plc advanced 2.8% as second-quarter profit increased 8%. European shares climbed last week for a fourth consecutive week, while the S&P 500 rose on Friday to an all-time high.
- U.S. equity futures advanced along with stocks worldwide while bonds slipped on optimism China and America are moving closer to an interim trade deal. Contracts on the three main U.S. share indexes increased, though MacDonald’s Corp. fell in pre-market trading after firing its chief executive. Investors are trying to push up stocks for a fifth successive week, adding to the 18% gain this year notched by a global gauge of equities. Earnings continue to roll in around the world, with Uber Technologies Inc. and Marriott International Inc. still due Monday. In China, trade data at the end of this week will give details for October against a backdrop of easing tensions on negotiations with U.S. counterparts.
- All major Asian markets advanced except Tokyo’s, which was shut. A gauge of emerging-market stocks was set for its biggest gain in three weeks.
- Oil held its biggest gain in almost seven weeks after improved U.S. and Chinese economic data aided the demand outlook and Saudi Aramco said it would go ahead with its long-awaited initial public offering. Futures rose 0.8% in New York after jumping on Friday. U.S. Commerce Secretary Wilbur Ross met with Chinese Premier Li Keqiang Monday afternoon at a regional summit in Bangkok, a person familiar with the discussion said. That comes as optimism grows that a trade deal will be reached after bullish data from both China and the U.S. on Friday. Aramco, the world’s biggest oil company, announced its intention to list on Sunday, more than three years after Crown Prince Mohammed bin Salman first raised the idea.
- Gold steadied as investors assessed prospects for the conclusion of a first-phase U.S.-China trade deal after Commerce Secretary Wilbur Ross expressed optimism that there would be an agreement this month. President Donald Trump told reporters on Sunday that an agreement, if one is completed, would be signed somewhere in the U.S. “First of all I want to get the deal,” he said. “The meeting place, to me, is going to be very easy.”
- Euro-zone manufacturing remained near the weakest in seven years last month, a poor start to the final quarter that raises pressure on the region’s governments to add fiscal stimulus to insulate the region from a worsening global slowdown. Factories from China to the U.S. are suffering from flagging demand. While a Purchasing Managers’ Index for the 19-nation euro region rose slightly, it shows the sector firmly in contraction. Job losses accelerated and order books deteriorated.
- Saudi Arabia is pulling out all the stops to ensure the success of Aramco’s initial public offering after Crown Prince Mohammed bin Salmanfinally decided to offer shares in the world’s largest oil producer. The kingdom cut taxes on the company for a third time, revealed incentives for investors not to sell and is considering boosting dividends further. Yet the Saudi government has already conceded the company probably isn’t worth the $2 trillion valuation Prince Mohammed has long advocated.
- The U.S. and China signaled further progress on Monday toward a breakthrough in trade talks that could culminate in a meeting between Donald Trump and Xi Jinping later this month. China had hoped that if Xi traveled to the U.S. to sign a phase one trade deal it would be as part of a state visit, but is open to having him go even if it isn’t, people familiar with the matter said. Chinese Premier Li Keqiang on Monday met a U.S. delegation that included National Security Adviser Robert O’Brien and U.S. Commerce Secretary Wilbur Ross at a regional summit in Bangkok.
- British Airways parent IAG SA pushed further into the Spanish market, agreeing to buy Air Europa in deal aimed at strengthening Madrid as a rival to European hubs in London, Paris, Frankfurt and Amsterdam. The 1 billion-euro ($1.1 billion) cash purchase from tourism group Globalia Corp. adds Spain’s third-largest airline to an IAG lineup that already includes the top two, former national carrier Iberia and discount operator Vueling.
- Under Armour’s Class A shares plunge 15% in U.S. pre-market trading after the company disclosed that federal officials have been probing its accounting practices for more than two years. Under Armour said on Sunday that it’s cooperating with investigations by the Securities and Exchange Commission and the U.S. Department of Justice and doesn’t think it’s done anything wrong
- Hungarian refiner Mol Nyrt. agreed to buy U.S. peer Chevron Corp.’s stake in an oilfield in Azerbaijan, and a stake in the pipeline that transports the crude to the Mediterranean, for a total $1.57 billion, Mol said on Monday. The Azeri-Chirag-Gunashli field will be Mol’s first in the Caspian, further reducing the reliance on its home region of central Europe after earlier ventures from Norway to Pakistan.
- U.K. fracking companies tumbled in London trading after the government ended its support for the controversial drilling practice ahead of a general election. IGas Energy Plc fell as much as 41%, while Egdon Resources Plc sank 22%. The decline reflects gloomy prospects for the two small-cap British companies after the Conservative government effectively banned any new wells that use hydraulic fracturing technology.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the fourth straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.06 billion in the week ended Nov. 1, compared with gains of $780.8 million in the previous week, according to data compiled by Bloomberg. This was the biggest weekly inflow since Feb. 22. So far this year, inflows have totalled $2.03 billion.
- McDonald’s Corp. fired Chief Executive Officer Steve Easterbrook because he had a consensual relationship with an employee, losing the strategist who led the company’s charge into online ordering and delivery. The burger chain’s board voted Friday to terminate Easterbrook, 52, after investigating the relationship, which violated company policy, according to a statement Sunday. McDonald’s policy doesn’t allow the CEO to have a relationship with anyone in the company. Chris Kempczinski, who runs U.S. operations, was promoted to president and CEO.
- Ryanair Holdings Plc called on Europe’s air-safety regulator to speed up work on returning Boeing Co.’s grounded 737 Max to service as the planemaker addresses fixes for the jet after two fatal crashes. The European Union Aviation Safety Agency, known as EASA, is failing to move at the same pace of the U.S. Federal Aviation Administration, which is leading the scrutiny, Ryanair Chief Executive Officer Michael O’Leary said in an interview with Bloomberg TV. The company has 135 orders for the Max.
- Angela Merkel’s visit to a revamped Volkswagen AGelectric-car plant in Zwickau on Monday is a stark reminder of what’s at stake both for the German chancellor and VW boss Herbert Diess. Merkel — who critics say has long been soft on the auto industry — has come under fire for failing to make more progress in curbing greenhouse-gas emissions, while Diess is attempting to manage the expensive shift to electric vehicles for the masses without ruining the world’s biggest carmaker.
- Peer-to-peer lender Validus Capital Pte has agreed to join forces with Oversea-Chinese Banking Corp. and Temasek Holdings Pte’s venture capital arm to seek a local digital banking license before a year-end application deadline, according to people with knowledge of the matter. As part of an in-principle agreement, Validus will be taking a bigger stake than the other partners of a consortium that includes OCBC, Temasek’s Vertex Ventures and Keppel Corp., the people said, asking not to be identified because the plan is confidential. The group seeks a wholesale banking license, they said, only three of which will be up for grabs for non-banking technology firms.
- Stryker Corp. agreed to acquire Wright Medical Group NV, a deal that will help bulk up the U.S. company at a time when the medical-device industry is growing more concentrated. Under the terms of the proposed transaction, Stryker will pay $30.75 a share in cash, giving the deal a total equity value of about $4 billion, the company said in a statement. Including debt, the deal values Wright at about $5.4 billion. As of Friday, Wright had a market capitalization of $2.8 billion.
*All sources from Bloomberg unless otherwise specified