October 15th, 2018

Daily Market Commentary

Canadian Headlines

  • French utility Engie SA and a Canadian pension fund plan to offer as much as $9 billion (34 billion reals) for Petrobras’s natural gas pipeline network, potentially a $1 billion boost from their initial bid, according to people with knowledge of the matter. Petroleo Brasileiro SA is now finalizing terms with Engie and the Canadian fund, Caisse de Depot et Placement du Quebec, the people said, asking not to be named because the talks are private.
  • After Canada legalizes recreational marijuana on Oct. 17, it will only take a quarter or two for clear winners and losers to emerge, according to investors and analysts who follow the sector. This means investors will have to get choosier as the days of highly correlated stock moves draw to a close.



World Headlines

  • European equities extended their decline to the lowest level since the end of 2016 as investors continued to shift away from stocks amid rising bond yields.
  • The Shanghai Composite Index fell 1.5 percent to its lowest close since November 2014. A gauge of consumer-related shares dropped the most after data showed purchases of passenger vehicles and online appliance sales slumped in September.
  • U.S. stock index futures fell as investors turned cautious again amid rising political tensions between Washington and Riyadh, while trade frictions worsened between the U.S. and China.
  • Oil rose as traders assessed a threat by Saudi Arabia, the world’s biggest crude exporter, to retaliate against any punishment over the disappearance of a government critic. Futures climbed as much as 1.9 percent in New York as traders viewed the Saudi Foreign Ministry statement as a warning that the kingdom could use oil supplies as a political weapon. Yet gains later eased amid doubts that OPEC’s most powerful member would take such an extreme course
  • Gold climbed to the highest in more than two months as concerns about economic growth to mounting tension between America and Saudi Arabia boosted the metal’s appeal as a haven.
  • By midnight Monday, the guardians of the European Union’s rule-book will finally get their first proper look at a draft of Italy’s populist budget. After weeks of conflicting messages from Rome, market turmoil, and an early warning that the spending plans would breach EU rules, the European Commission will start reviewing Italy’s plan to start delivering on costly election promises.
  • Chancellor Angela Merkel faces a new round of coalition turbulence after her Bavarian sister party dropped to a historic low in a regional election that exposed the scope of voter disaffection with Germany’s political establishment.
  • President Donald Trump threatened to impose another round of tariffs on China and warned that Chinese meddling in U.S. politics is a “bigger problem” than Russian involvement in the 2016 election. Asked in an interview with CBS’s “60 Minutes” whether he wants to push China’s economy into a depression, Trump said “no” before comparing the country’s stock-market losses since the tariffs first launched to those in 1929, the start of the Great Depression in the U.S.
  • Bank of America Merrill Lynch reported third-quarter earnings Monday,  beating expectations with adjusted earnings per share of $0.66. Analysts had expected the bank to report adjusted earnings per share of $0.62.
  • Sears Holdings Corp., the 125-year-old retailer that became an icon for generations of American shoppers, filed for bankruptcy, saddled with billions of dollars of debt racked up as it struggled to adjust to the rapid shift toward online consumption. The company filed for Chapter 11 protection from creditors with the U.S. Bankruptcy Court in White Plains, New York, early Monday and said Eddie Lampert is stepping down immediately as chief executive officer.
  • Harris Corp. and L3 Technologies Inc. are combining to become the sixth-largest U.S. defense contractor, continuing a trend in the industry to create bigger companies that can take advantage of President Donald Trump’s increased military spending. The newly formed L3 Harris Technologies Inc. would be an entity with a total market value of $33.5 billion. Each company is known for its capabilities in communications and electronics and gets more than two-thirds of its revenue from the U.S. government.
  • The growing diplomatic row over the disappearance of Saudi columnist Jamal Khashoggi reverberated through the country’s bond market. The yield on the kingdom’s $5 billion debt due 2028 jumped to a record and 12-month riyal forwards headed for the biggest increase in more than three years in the offshore market.
  • Walt Disney Co. made concessions to the European Union regulators examining its purchase of entertainment assets from 21st Century Fox Inc., the EU said on its website. The EU authority didn’t give details of the companies’ offer. Businesses sometimes pledge to divest overlapping units or to change the way they operate to allay antitrust concerns about a deal. Officials now have a Nov. 6 deadline to approve the deal or open a longer probe lasting several months.
  • Carlyle Group LP is acquiring a firm that buys and leases commercial airplanes, adding a new business line to its expanding credit group. The Washington-based alternative asset manager plans to purchase Apollo Aviation Group, which has $5.6 billion in assets including 243 aircraft that it owns, manages or has committed to buy, according to the company. The firm also has 11 aircraft engines and leases to airlines in 58 countries.
  • U.K. government says the Irish backstop is the main obstacle in Brexit talks, as the European Union is continuing to insist on a proposal Britain has long called unacceptable. U.K. remains “confident” of securing a Brexit deal this fall. EU continues to insist on the possibility of a customs border in the Irish Sea, dividing Northern Ireland from mainland Britain. May and Parliament consider that unacceptable.


*All sources from Bloomberg unless otherwise specified