November 5th, 2019
Daily Market Commentary
- Canadian stocks gained on Monday as oil hit a one-week high and investors studied signals that a U.S.-China trade deal is imminent. Industrial stocks were the second best sector, while consumer staples underperformed. The S&P/TSX Composite rose for a second day, climbing 0.5%, or 75.74 to 16,669.81 in Toronto. The index advanced to the highest closing level since Sept. 27. Canadian National Railway Co. contributed the most to the index gain, increasing 1.5%. Gran Tierra Energy Inc. had the largest percentage increase, rising 9.6%.
- Oil deliveries off the Keystone pipeline are set to tumble this month, as fears mounted over a longer-than-expected outage after its operator said Monday that work to remove a damaged section of the pipe would be completed by week’s end. The 590,000 barrel-a-day conduit carrying crude from Alberta to refineries in the U.S. Midwest and Gulf Coast ruptured Oct. 29 near the city of Edinburg in North Dakota, spilling an estimated 9,120 barrels of crude. The company initially expected the outage to last 7 to 12 days.
- BlackBerry Limited said that Bryan Palma, President and Chief Operating Officer, has decided to leave the company to pursue other opportunities. The BlackBerry IoT Business will report directly to John Chen, Executive Chairman and CEO
- Toronto’s housing market continued to bounce higher in October, with prices rising the most in almost two years amid dwindling supply. The benchmark price, which accounts for differences in the type of homes sold, rose 5.8% from a year ago to C$810,900 ($616,607), the Toronto Real Estate Board said in a report Tuesday. That’s the biggest jump since December 2017 and takes it to within about C$4,300 of the record set in mid-2017.
- U.S. equity futures climbed with European and Asian stocks as investors took confidence from signs that America and China are inching toward a trade deal. Treasuries fell, while the yuan strengthened past 7 for the first time since August. Contracts on the S&P 500, Dow Industrials and Nasdaq 100 all pointed to a positive start on Wall Street, following records for each of the underlying gauges on Monday spurred by mounting optimism the world’s two largest economies will sign the first phase of an agreement. The Stoxx Europe 600 Index nudged up, with gains in mining shares offsetting declines for real estate firms, a day after the gauge advanced to a four-year high. Oil rose for a third day, while gold slipped toward $1,500.
- Europe’s equities were little changed in early trading on Tuesday, pausing after trade optimism helped Wall Street climb to new peaks. The Stoxx Europe 600 Index declined less than 0.1% as of 8:08 a.m. in London after reaching its highest since 2015 on Monday. The basic resources sector was the best performer, up 0.6%, while telecoms were 0.8% lower. Shares of Pandora A/S dropped as much as 11% after the Danish jewelry maker cut its outlook. Carrier Air France-KLM meanwhile said it sees the prospect of a resumption of dividends as part of a five-year plan.
- Asian stocks climbed for a fourth day, led by communications firms, after a gauge for global developed markets rose to a fresh record amid signs of progress toward an initial China-U.S. trade deal. Most markets in the region were up, with Japan leading gains in a catch-up rally after Monday’s holiday break. The Topix advanced 1.7% to a one-year high, with electronic firms offering the biggest boosts. The Shanghai Composite Index closed 0.5% higher, supported by large insurers and banks. China’s central bank lowered the cost of loans that it offered to lenders Tuesday, cutting the so-called medium-term lending rate for the first time since 2016.
- Gold headed for a back-to-back decline as U.S. equities futures climbed and investors weighed up prospects for a first-phase U.S.-China trade deal. President Xi Jinping stressed China’s commitment to the global trading order as his trade negotiators wrangle with the U.S. over rolling back punitive tariffs ahead of a phase one deal. At the opening of the second annual China International Import Expo, Xi said the country would “open its doors only wider” to the world.
- Oil rose for a third day, buoyed by signs of progress in the prolonged U.S.-China trade dispute, despite expectations for expanding American crude stockpiles. Futures gained as much as 1% in New York. China is reviewing locations in the U.S. where President Xi Jinping would be willing to meet with his counterpart Donald Trump to sign the first phase of a trade deal, according to people familiar with the plans, while Xi stressed his nation’s commitment to the global trading order.
- President Xi Jinping stressed China’s commitment to the global trading order as his trade negotiators wrangle with the U.S. over rolling back punitive tariffs ahead of a phase one deal. As Xi spoke in Shanghai, the nation’s central bank acted in Beijing to stem a sell-off in the debt market. The People’s Bank of China reduced the cost of 1-year funds to banks for the first time since 2016 after a week in which investors had dumped debt amid fears of tightening liquidity.
- Goldman Sachs Group Inc., stung by losses in Uber Technologies Inc. and WeWork, has a message for investors in growth stocks: profit matters. After years of pursuing revenue growth at all costs, driven by cheap money, markets are increasingly focusing on whether companies can translate top line expansion into profitability, Chief Executive Officer David Solomon said Tuesday in a wide-ranging interview that also touched on Europe’s negative interest rates and his plans for the bank’s investor day in January.
- A sell-off across global bond markets deepened after further signs that trade tensions between the U.S. and China may be easing. Japanese bonds, U.S. Treasuries and European securities all slumped as the potential removal of U.S. tariffs on Chinese goods revived optimism over the economic outlook. In Europe, where sovereign yields have hit record lows this year on fears of recession, French rates climbed to near positive territory for the first time since July.
- China slashed pricing on its first bond offering in Europe’s common currency since 2004 after pulling in nearly 20 billion euros ($22 billion) of investor orders. The sovereign will price four billion euros of notes across seven, 12 and 20-year maturities, according to people with knowledge of the sale, who asked not to be identified as they aren’t authorized to speak about it publicly. The most popular tranche was a 2 billion-euro seven-year note that received more than 9.25 billion euros of investor bids. Those notes are set to price at 30 basis points above midswaps and as much as 20 basis points inside an initial target, the people said.
- As Boris Johnson heads into a general election battle, he does so in the knowledge he can count on the support of at least one loyal constituency: hedge funds. In a little over a year, Johnson raised more than 400,000 pounds ($516,000) for his own campaign fund from hedge fund executives, investors and bankers — a group that made up half of his donors, according to government figures. After Johnson initiated his bid to replace Theresa May in June, his supporters even held a secret fundraiser aimed at tapping prominent hedge fund managers, including representatives from Odey Asset Management and CQS. Robert Oxley, a Johnson spokesman, declined to comment.
- Wall Street is getting a three-year reprieve from the Securities and Exchange Commission on Europe’s tough investment research rules, as the U.S. regulator said it needs additional time to evaluate sweeping changes affecting the brokerage industry. The SEC announced the extension in a Monday statement, saying American securities firms can adhere to a European requirement that brokers charge clients separately for analysis until at least 2023 and not run the risk of getting sued by the U.S. regulator. Relief that the SEC had granted the industry in 2017 was set to expire in July of next year.
- OPEC slashed estimates for the amount of oil it will need to pump in coming years, projecting that its share of world markets will shrink until the middle of the next decade amid a flood of U.S. shale supplies. The producer group expects that demand for its oil will slide by about 7% over the next four years, slumping to an average of 32.7 million barrels a day in 2023, according to its annual report.
- Xerox Holdings Corp. agreed to sell 25% of Fuji Xerox to its Japanese partner, jettisoning its slice of the five-decade old venture after a merger attempt fell through. Fujifilm Holdings Corp. will buy the stake for $2.3 billion and own 100% of Fuji Xerox, the companies said in a statement Tuesday. Shares in Fujifilm jumped 6.7%, their biggest gain since February 2018, after the Wall Street Journal reported on the deal before trading closed on the Tokyo Stock Exchange. Xerox, a name synonymous with the copying industry, had signaled since 2018 it intended to sever ties with its Japanese ally. Forged in 1962, the Fuji Xerox joint venture was one of the oldest tie-ups between an American and Japanese firm. The deal will bring to a close a two-year saga involving a complex merger plan, a chief executive’s ouster, several lawsuits and activist investors Carl Icahn and Darwin Deason.
*All sources from Bloomberg unless otherwise specified