November 8th, 2019

Daily Market Commentary

Canadian Headlines

• Canadian equities gained Thursday as traders assessed a slew of earnings and trade-talk signals. Energy was the best performing sector, while materials stocks fell. The S&P/TSX Composite Index rose for a fifth day, climbing 0.4%, or 60.11, to 16,805.75 in Toronto. The index advanced to the highest closing level since Sept. 23. Canadian Natural Resources Ltd. contributed the most to the index gain, rising 8.3%. Stantec Inc. had the largest increase, rising 16%.
• Alberta is weighing more debt issues in foreign currencies including the euro and sterling, according to a person familiar with the Canadian province’s funding plans. The sterling issue could be a potential benchmark-sized transaction, said the person, asking not to be identified because the matter is private. While some bond arrangers see a window for a deal in the European currency, the province hasn’t made a decision, the person said. Alberta has raised close to C$6 billion ($4.55 billion) in the international and domestic bond markets, about halfway toward its plan for C$12.2 billion of long-term debt issuance for the fiscal year ending March 31. That includes $2.25 billion raised in the dollar market earlier this week.
• Encana Corp., which is moving from Canada to the U.S., will locate its new headquarters in Denver, where Chief Executive Officer Doug Suttles lives. The company, to be renamed Ovintiv, will be incorporated in Delaware and trade on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “OVV,” according to a filing on Thursday. The move to Denver was widely anticipated because Suttles, a Texan, relocated his residence there in March 2018, though the company also has a major office in Houston. Suttles said in November of last year that he envisioned the company moving toward a “headquarterless” model, with work being performed close to its operations.
• Canadian dairy giant Saputo Inc. is considering an acquisition to tap growing demand for plant-based beverages. After several acquisitions in the past two years, the Montreal-based company still has room on the balance sheet and is looking at three or four potential deals, including buying a plant-based beverage company, Chief Executive Officer Lino Saputo Jr. said in a telephone interview.

World Headlines

• Asian stocks were mixed Friday and U.S. equity futures edged lower as the risk-on mood that’s permeated global financial markets this week showed signs of abating. Benchmark Japanese bond yields inched toward an exit from negative territory. Japanese and Chinese shares edged higher, while equities in Hong Kong dipped. Futures on the S&P 500 slipped after the index notched another record high. Japanese 10-year government bond yields were on track for their biggest weekly climb since May 2013, the month the taper tantrum began. China’s offshore yuan was trading stronger than 7 per dollar. Gold headed for its worst week since May 2017, back when the global economic narrative was all about synchronous growth.
• European equities fell on Friday as the initial euphoria over the prospect of the U.S. and China rolling back tariffs cooled, with shares in cyclical sectors such as miners and banks leading the retreat. The pan-European Stoxx 600 Index was down 0.4% by 8:04 a.m. London time, on track to break a five-day winning streak as some earnings updates disappointed. France’s Credit Agricole SA fell 1.4% after third-quarter results and Natixis SA was down 5.3%, while British Airways owner IAG SA declined 1.8% after paring back its expansion plan.
• The risk-on mood that’s permeated global financial markets this week showed signs of easing as U.S. futures fluctuated and most European stocks slipped along with Asian equities. Treasuries swung from a gain to a loss after sliding on Thursday. Contracts on all three main American stock indexes pointed to drift at the open after the gauges notched record highs in the previous session. Miners and travel companies weighed on the Stoxx Europe 600 Index. Core European bonds were steady while peripheral debt dropped led by Greek and Italian notes. The dollar gained while gold fell.
• Gold headed for the biggest weekly loss in three years as progress in U.S-China trade talks hammered demand for havens and sent miners’ shares tumbling. The metal dropped 3.5% this week, the most since November 2016, as China and the U.S. indicated they are heading toward an interim deal to halt the trade war. Some signs of stabilization in the global economy have also dented gold’s allure, and JPMorgan Chase & Co. and Citigroup Inc. closed out their bets on the traditional haven. Other precious metals also plunged this week, with silver losing almost 7% of its value.
• Oil fell as traders awaited more concrete signs that the U.S. and China are resolving their trade dispute, and amid concerns that OPEC and its partners won’t deepen output curbs to prevent a glut. Futures lost as much as 1.9% in New York. The U.S. and China have agreed to roll back tariffs on each other’s goods in phases as they work toward a deal, giving some relief to the outlook for oil demand. Yet American crude inventories jumped last week, and delegates from the Organization of Petroleum Exporting Countries and its allies say the group’s biggest producers aren’t pushing for further intervention to clear up a global excess.
• Saudi Arabia is negotiating commitments from its wealthiest citizens to buy stock in the Aramco initial public offering, from the Olayan family and Prince Alwaleed Bin Talal to low-profile tycoons in the oil producer’s backyard, people with knowledge of the matter said. The billionaire Olayans, who own a major stake in Credit Suisse Group AG, are considering buying several hundred million U.S. dollars worth of Aramco shares, according to the people. Prince Alwaleed has also held talks to commit a significant amount to the IPO, the people said, asking not to be identified because the information is private.
• Alibaba Group Holding Ltd. is moving ahead with plans to raise as much as $15 billion in a Hong Kong share sale, people with knowledge of the matter said, a major win for a city rocked by months of civil unrest. Asia’s largest company by market value is now preparing for a listing hearing as mandated by companies that debut on the Hong Kong bourse early next week, the people said, requesting not to be named discussing a private matter. The company declined to comment in an email.
• China’s exports declined less than expected in October as optimism rose about an interim trade deal with the U.S., while imports contracted for a sixth straight month. Exports decreased 0.9% in dollar terms in October from a year earlier, while imports dropped by 6.4%, the customs administration said Friday. That left a trade surplus of $42.81 billion for the month.
• Billionaire Ken Fisher made his name and fortune picking stocks. But over the years he’s also become a huge player in an arcane — and controversial — corner of Wall Street: exchange-traded notes. With little fanfare, his Fisher Investments has come to dominate more than a quarter of the $22 billion market in ETNs, whose outsize risks and hefty costs have drawn scrutiny from federal regulators. ETNs are debt instruments issued by banks that can enable investors to make leveraged bets on investments including stocks, bonds and commodities.
• As investors fretted for most of the year that the trade war and slowing growth would end in a global recession, assets like gold and sovereign bonds provided protection. That ended spectacularly Thursday. Gold lost as much as $30 an ounce, Treasuries tumbled the most since summer and defensive equities sank. While continued signs of a detente in the U.S.-China trade war sparked the day moves, such a beat-down has been months in the making as peak pessimism on global and U.S. growth has ebbed.
• ICBC Standard Bank, a venture between the biggest lenders in China and Africa, will close its base metals and equities businesses because of poor performance and difficult market conditions. The changes will affect 150 jobs and will take place in the first half of 2020, according to a statement from the London-based lender. The bank will keep other businesses, including precious metals and energy, and the decision is subject to shareholder approval.

*All sources from Bloomberg unless otherwise specified