November 1st, 2018

Daily Market Commentary


Canadian Headlines

  • Canadian stocks rose alongside their U.S. peers as megacap tech shares that bore the brunt of October’s rout paced the Wednesday rebound. The rally trimmed some of the S&P/TSX Composite index’s losses this month but the benchmark still ended October lower by 6.5%, its worst monthly performance since 2011. The S&P/TSX Composite Index rose 0.9 percent on Wednesday, with health care and technology shares leading gains. Telecom shares fell.
  • Encana Corp. agreed to buy Newfield Exploration Co. in an all-stock deal valued at about $5.5 billion, creating North America’s second-largest producer of unconventional resources. The company pledged significant investor benefits from the deal, including a 25 percent increase in the dividend and expanding its share buyback program to $1.5 billion, to be funded from cash flow.
  • Suncor Energy Inc., Canada’s largest energy producer by market value, posted third-quarter profit that topped analysts’ estimates as its refining operations helped it weather lower prices for oil-sands crude. Profit was 96 Canadian cents a share, excluding some items. The average of 16 analysts’ estimates compiled by Bloomberg was 92 cents.
  • TransCanada Corp. said it’s moving forward with a C$1.5 billion ($1.1 billion) expansion of its NOVA Gas Transmission Ltd. system. The project will offer Western Canadian natural gas producers some much needed relief from a pipeline bottleneck that sent local prices close to zero earlier this year.



World Headlines

  • European equities opened little changed after ending the worst month since January 2016 as investors focused on company earnings. The Stoxx Europe 600 Index was down less than 0.1 percent after losing 5.6 percent last month. ING Groep NV surged 4.2 percent after third-quarter underlying pretax profit beat estimates. BP Plc and Total SA declined as oil extended losses after the worst month in more than two years on lingering concern over a supply glut.
  • Stocks added to gains Thursday as upbeat earnings helped investors turn the page on the worst month for global equities in more than six years. The dollar fell and the pound jumped on hopes for progress in Brexit negotiations. Investors are looking for reasons to be positive after a tumultuous October, the worst month for global shares since May 2012. While risks abound from the likes of European politics and slowing Chinese growth, bulls are hoping some of the momentum garnered at the end of last month from firm U.S. economic data can be sustained. The focus turns to Apple Inc. earnings Thursday, then to the monthly U.S. jobs report Friday.
  • Nov. 1, 2018. We are now two months away from the end of the year, and half of the major Asian stock markets are down about 10 percent or more. Some have entered bear markets and in total, more than $5 trillion in market value has been wiped out in 2018. With about 40 trading days left, whether bulls or bears will win is anyone’s guess, but bracing for more volatility could perhaps be a smart move. The MSCI Asia Pacific Index gained for a third straight day — a streak not seen in six weeks — and for now, it looks like “shock-tober” hasn’t seeped into November.
  • Oil fell to the lowest in more than two months on signs of surging U.S. supply and speculation that American sanctions against Iran won’t succeed in reducing exports to zero. Futures in New York dropped as much as 1 percent, after falling 1.3 percent on Wednesday. U.S. crude inventories rose for a sixth week, while Russia was said to raise oil output to a post-Soviet record. The supply surge comes just as concern eases around a halt of exports from Iran, with oil buyers India and South Korea said to agree with the U.S. on the outline of waivers.
  • Gold snapped a three-day decline as the dollar retreated from a 17-month high. The pound rose amid signs of progress in Brexit talks. Investors are now looking ahead to the U.S. jobs report on Friday for clues on the strength of the economy, and a U.K. monetary policy decision Thursday.
  • Apple Inc. results on Thursday will provide the first real insight into the success of the company’s new iPhones, especially the lower-priced XR model. The focus will be on Apple’s fiscal first-quarter forecast covering the important holiday season, when the XR is expected to be a popular gift, luring owners of older iPhones to upgrade.
  • Europe’s dream of turning the euro into a global reserve currency that can rival the dollar got another reality check. Angela Merkel said this week that she won’t contest to be Germany’s Chancellor again in 2021 after her party suffered electoral setbacks in regional elections, while Italy’s coalition government is embroiled in a stand-off with the European Union over a wider deficit in its planned budget. Those developments have damped the allure of the euro, which had its biggest drop in five months against the dollar in October.
  • BHP Billiton Ltd. will return $10.4 billion to shareholders through a buyback and special dividend after completing the sale of its onshore U.S. shale assets. The stock rose the most in six weeks in Sydney trading. The off-market buyback of the Sydney-listed shares will start this month and will return $5.2 billion to holders, while the balance will then be paid out as a special dividend, the company said Thursday in a statement. This latest capital management steps will bring the total cash returned to shareholders to $21 billion over the past two years, the company said.
  • LaSalle Investment Management, an arm of Jones Lang LaSalle Inc., is betting big on U.S. commercial real estate debt. LaSalle is acquiring a majority stake in Latitude Management Real Estate Investors, which manages $1.2 billion across credit funds, said Jason Kern, LaSalle’s chief executive officer for the Americas. Latitude provides short-term, or bridge, loans to borrowers focused on commercial property in regions of the U.S. that are deemed to be growing, including San Francisco and Denver. It targets the so-called middle market, lending $5 million to $35 million to income-producing multifamily, office, hotel, retail and industrial properties that can be improved in some way.
  • NTT Docomo Inc. led a 3.8 trillion yen ($34 billion) stock rout of Japan’s top three mobile carriers after it appeared to cave in to pressure from the government, which has long claimed the nation’s phone bills are among the highest in the world. Docomo, which said Wednesday it may cut rates 40 percent and “return” 400 billion yen to customers, plunged as much as a record 15 percent in Tokyo trading on Thursday. Rival KDDI Corp. tumbled as much 17 percent, and SoftBank Group Corp. slumped as steeply as 9.1 percent amid concern that they will follow suit.
  • India and South Korea agreed with the U.S. on the outline of deals that would allow them to keep importing some Iranian oil, according to Asian officials with knowledge of the matter. No final decision has been made and an announcement is unlikely before U.S. sanctions on Iran are reimposed Nov. 5, the officials said, asking not to be identified because the information is confidential. That opens the possibility that the terms could still be modified or the deals scrapped entirely.
  • British and European officials are playing down reports that a Brexit deal has been reached for banks that would provide access to the single market after the U.K. leaves the bloc. The pound pared gains. Officials, speaking on condition of anonymity, described an article in the Times newspaper in London as unsubstantiated. One EU official also denied that any agreement had been reached that would allow guaranteed access to banks based in Britain.
  • China’s policy makers will likely allow the yuan to hit the key level of 7 per dollar within the next six months without conducting heavy intervention, according to Goldman Sachs Group Inc. While the authorities may guide sentiment by issuing stronger fixings, they won’t likely sell the dollar heavily to defend the currency as they did in the aftermath of a shock devaluation three years ago, according to MK Tang, a senior China economist at Goldman in Hong Kong. That is because the conditions for the yuan to hit 7 are “more mature” than in the past as capital outflows remain contained, he added.
  • Ping An Insurance Group Co., China’s biggest insurer by market value, is planning a Hong Kong initial public offering of its health-care technology unit that could raise about $2 billion, people with knowledge of the matter said. A listing of Ping An Healthcare Technology, which provides platforms used by hospitals, insurers and pharmacies, could take place as soon as next year, according to the people. The Chinese insurer is talking to potential advisers about the planned share sale, the people said, asking not to be identified because the information is private.
  • Italy’s Alitalia SpA attracted bids from European discounter EasyJet Plc and U.S. giant Delta Airlines Inc., as the government renews attempts to sell the bankrupt flag-carrier. U.K.-based EasyJet said in a statement Wednesday that it submitted a revised expression of interest in unprofitable Alitalia, while Delta also presented a proposal, according to the Ansa news agency. Italian state railway company Ferrovie dello Stato said it also made an offer.
  • BlackRock Inc. is in talks to buy a majority stake in China International Capital Corp.’s mutual-funds unit, people with knowledge of the matter said, as the world’s largest asset manager steps up expansion in the nation’s fast-growing fund industry. No firm agreement has been reached between Beijing-based CICC and BlackRock, and BlackRock is also in talks with other domestic players that are licensed to run public fund operations in China, one of the people said, asking not to be identified because the details are private.

*All sources from Bloomberg unless otherwise specified