November 13th, 2018
Daily Market Commentary
- HNA Group Co.’s sale of container-leasing business Seaco has attracted potential bidders including Japanese financial firm Orix Corp.and Bermuda-based Triton International Ltd., people familiar with the matter said. Seaco has also drawn preliminary interest from investment funds including Ontario Teachers’ Pension Plan, which owns rival lessor SeaCube Container Leasing Ltd., according to the people. The business could fetch $1 billion to $1.5 billion, the people said, asking not to be identified because the matter is private.
- There’s a shakeout coming to the Canadian cannabis industry and midsized companies may find it hardest to survive, according to the new president of Aphria Inc. “There will be a group of companies at the top, the big producers, and some smaller producers at the bottom, like craft beer,” Jakob Ripshteinsaid in an interview at Bloomberg’s Toronto office. “I suspect there will be some in the middle who will be very challenged to stay around.”
- Sun Life Financial Inc. is moving up in the debt quality stack as it readies itself for the next phase of the markets cycle. The Canadian insurer, which has almost half of its C$145.6 billion ($110.2 billion) portfolio in investment-grade debt securities, expects a rapid pace of downgrades when the credit cycle turns, Chief Executive Officer Dean Connor said. Moody’s Investors Service had 1.83 percent of the credits it covers worldwide on watch for a downgrade as of the end of the third quarter, up from 0.91 percent a year earlier, the New York-based rating company said in a report last month. About 3.4 percent of Moody’s ratings in Europe are under a negative watch, more than any other region.
- European shares bounced back from Monday’s drop, which was the largest in three weeks, lifted by a resumption of trade talks. Italy will again be in focus. The Stoxx 600 Index rose 0.5 percent, with all the subgroups gaining except for oil shares as President Donald Trump took aim at Saudi Arabia’s plan to cut oil production. Telecom Italia Spa rose 3 percent as its Chief Executive Officer Amos Genish was said to resign.
- U.S. stock futures rose after Washington and Beijing were said to have resumed discussions on trade ahead of a planned meeting between the two nation’s leaders later this month. December contracts on the S&P 500 Index were up 0.4 percent after the underlying gauge’s 2 percent slump on Wall Street on Monday. Contracts on the Dow Jones Industrial Average gained 0.3 percent, while those on the Nasdaq 100 rose were up 0.6 percent.
- Chinese shares advanced as trade talks were said to have resumed with the U.S., helping the country’s equity markets shrug off earlier losses following a tech sell-off in the U.S. The ChiNext gauge led the charge for a second day, closing up 1.7, while the Shanghai Composite Index added 0.9 percent after sliding 1.3 percent in the morning. The Hang Seng Index gained 0.5 percent as tech heavyweights including Tencent Holdings Ltd. reversed losses.
- Oil fell for a 12th day, its longest losing streak on record, after U.S. President Donald Trump criticized Saudi Arabia’s plan to cut output. West Texas Intermediate futures in New York sank as much as 2.8 percent, extending a drop of more than 11 percent since Oct. 26. Prices “should be much lower based on supply,” Trump said in a tweet, after Saudi Energy Minister Khalid Al-Falih said producers need to cut about 1 million barrels a day. Meanwhile, OPEC said in its monthly report released Tuesday that it sees demand for its own crude falling even faster than expected in 2019 as a slowing global economy crimps demand and rival supplies surge.
- Gold reversed earlier gains to decline for an eighth day, extending its worst run of losses in more than two years. A recovery in equities lessened the metal’s appeal as a haven, with global trade tensions showing signs of easing. Tuesday’s drop saw bullion slip below the psychologically significant $1,200-an-ounce level for the first time in just over a month and the metal is now trading below both the 50-day and 100-day moving averages.
- U.S. natural gas futures jumped to $4 per million British thermal units for the first time in almost four years as a cold snap stoked concern that unusually low stockpiles will fall short of heating needs this winter. Gas has rallied 36 percent this year as inventories enter the peak heating season at the lowest level since 2003. That triggered speculation a supply crunch will send prices soaring even higher in the coming months. Though production from shale basins has climbed a record, the U.S. is exporting unprecedented volumes of the heating and power-plant fuel to Mexico and overseas buyers as domestic demand climbs.
- U.K. wage growth accelerated to a near 10-year high, backing the Bank of England’s view that there is now no spare capacity in the labor market. Average earnings excluding bonuses rose 3.2 percent in the three months through September from a year earlier, the most since December 2008, the Office for National Statistics said Tuesday. Unemployment unexpectedly rose from a 43-year low to 4.1 percent.
- PT Semen Indonesia, the country’s top cement maker, is acquiring LafargeHolcim Ltd.’s local business in a deal valuing the unit at about $1.75 billion including debt. LafargeHolcim agreed to sell its entire holding in PT Holcim Indonesia as part of a continuing review of its portfolio, according to a statement Monday. Semen Indonesia will conduct a tender offer for remaining shares of Jakarta-listed Holcim Indonesia after completing its purchase of LafargeHolcim’s 80.6 percent stake, it said in a separate exchange filing.
- Greece’s central bank is working on a plan to help banks cut their bad debts in half, the latest effort to restore trust in the country’s financial system, two people familiar with the matter said. Under the proposal, Greek lenders would transfer about half of their deferred tax claims to a special purpose vehicle, which will then sell bonds and use the proceeds to buy some 42 billion euros ($47 billion) of bad loans from the lenders, according to the people, who asked not to be named as the plan hasn’t been finalized yet.
- AstraZeneca Plc agreed to sell U.S. rights to the respiratory medicine Synagis to Swedish Orphan Biovitrum AB for at least $1.5 billion. Sobi also gained the right to share the U.S. profits and losses on a potential new medicine that targets the same virus, which Astra is developing with Sanofi, the Cambridge, England-based company said in a statement. Chief Executive Officer Pascal Soriot is paring back Astra’s portfolio, selling the rights to aging blockbusters such as Nexium and Seroquel as a new drug crop emerges. The goal is to become “very focused, very lean,” with innovative drugs driving growth, Soriot said last week.
- Home Depot Inc. eased doubts about a slowing home-improvement market, raising its annual sales forecast as quarterly earnings and revenue beat analysts’ estimates. Same-store sales rose 4.8 percent, surpassing analysts’ projections for the third quarter. Revenue of $26.3 billion topped estimates.
- U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have resumed talks on trade, and a potential Washington visit by Liu is being considered before the nations’ top leaders meet later this month. The two officials spoke by phone on Friday, according to people briefed on the matter, who asked not to be named due to the sensitivity of the topic. The conversation didn’t yield any concrete results, the people said. The Hong Kong-based South China Morning Post reported Tuesday that Liu was “expected” to visit Washington shortly. The Wall Street Journal first reported the phone call Monday.
- OPEC sees demand for its own crude falling even faster than expected in 2019 as a slowing global economy crimps demand and rival supplies surge. The figures, published in the cartel’s monthly report, underline why Saudi Arabia and some other members are talking about cutting production again. The data could bolster their case for a significant supply reduction before a crucial meeting in Vienna next month. Global appetite for the group’s crude will be about 31.5 million barrels a day next year, OPEC said. That’s 500,000 barrels a day lower than its forecast just two months ago and about 1.4 million below current production.
- Money manager QMA is buying Wadhwani Asset Management as part of a strategy to expand globally. Led by Sushil Wadhwani, a former member of the monetary policy committee of the Bank of England, the London-based investment firm manages about $1.4 billion and uses computer-driven models to trade across asset classes. QMA is part of Prudential Financial Inc. Financial details weren’t provided.
- Amazon.com Inc. has selected New York City and Northern Virginia as the company’s second and third headquarters, the Wall Street Journal reported Monday. An announcement could come as soon as Tuesday, the newspaper reported, citing unidentified people familiar with the plan. Other cities may get major sites from the company, the newspaper said.
- Telecom Italia SpA Chief Executive Officer Amos Genish has been removed following a strategy clash with investor Elliott Management Corp., ending months of speculation about his future and setting up another face off between the fund and top shareholder Vivendi SA. Genish, a 58-year-old former Vivendi executive, was at odds with Elliott over his plan to split off the carrier’s landline network, said people familiar with the matter, who asked not to be identified because the talks were private.
- Vodafone Group Plc shares jumped 7.1 percent after the mobile phone company’s new chief executive unveiled stronger than expected results in a fiercely competitive market and kept the dividend stable while he tries to rein in debt. Investors were already bracing for CEO Nick Read to end Vodafone’s policy of constant dividend growth after the $22 billion takeover over Liberty Global Plc’s German and Eastern European businesses stretched leverage at the world’s second-biggest mobile operator.
- Kazakhstan’s ambitious plan to list stakes in its most-prized state assets is finally underway after the country’s uranium giant floated in London and Astana with a valuation of $3 billion. Kazatomprom, the world’s largest producer of the nuclear fuel, priced its initial public offering at $11.60 per global depository receipt, the bottom end of a planned range, confirming an earlier Bloomberg report. The company has a fifth of the global uranium market — double Saudi Aramco’s share of the oil market.
- President Donald Trump’s hardening line on immigration sets him on a collision course with House Democrats that is likely to shape the next presidential campaign. Trump’s first move following midterm elections in which he stoked fears of undocumented immigrants was to restrict asylum claims by people who illegally cross the U.S.-Mexico border. He has also promised to try to end the constitutional guarantee of citizenship to anyone born in the country through executive action. Both Trump and House Minority Leader Nancy Pelosi, the likely next speaker of the House, racked up political gains in the election that each credits to the intractable debate over immigration policy. It’s unclear whether Pelosi is willing to make the compromises necessary to move forward — and regardless, Trump appears ready to spend the next two years testing the limits of his executive authority and daring the federal courts to stop him.
- Chevron Corp. and Exxon Mobil Corp. are among the companies considering first-round bids this month for closely held oil producer Endeavor Energy Resources LP, according to people with knowledge of the matter. The two oil majors may be joined by ConocoPhillips in competing for the business, which could be valued at about $15 billion including debt, said the people, asking not to be identified because the information is confidential. Royal Dutch Shell Plc has also been contacted and may participate, they said.
- Roivant Sciences Ltd. raised $200 million in a new funding round that makes it one of the most highly valued private firms in the history of the biotechnology industry at $7 billion, according to the company. Previous backers including SoftBank’s Vision Fund took part in the new financing, as did new investors NovaQuest Capital Management and RTW Investments, Roivant said in a statement on Tuesday. In August 2017, the company raised $1.1 billion from the Vision Fund, which has placed a series of splashy bets on Internet and other startups but backed few other biotech ventures.
- European Union countries want to defy U.S. President Donald Trump and keep funds flowing to Iran to save the nuclear agreement — just as long as it doesn’t happen in their backyard. EU nations have identified Austria as the best candidate to host a special purpose vehicle that could handle payments to Iran, according to three people familiar with the negotiations. Austria itself is not so keen. Belgium, Luxembourg and France have also been identified as potential venues but Belgium and Luxembourg have declined while France is looking to Austria.
*All sources from Bloomberg unless otherwise specified