October 16th, 2018

Daily Market Commentary

Canadian Headlines

  • Justin Trudeau’s government is under increasing attack for its U.S. trade deal, but Canadians still see the prime minister as the best bet for dealing with Donald Trump. In a Nanos Research poll conducted for Bloomberg, 39 percent of Canadians say Trudeau is the best for managing ties with the U.S. president. Another 22 percent say none of the leaders are best suited, while 21 percent chose Andrew Scheer, a conservative who is Trudeau’s top rival.
  • Canadian business sentiment remains at elevated levels, with companies expecting to ramp up investment to build new capacity and accommodate demand, according to a survey by the central bank. The Ottawa-based central bank’s third-quarter survey of executives — which took place in August and September before Canada reached a deal with the U.S. to replace the North American Free Trade Agreement — shows an economy in which companies see their outlook for sales improving but continue to find it difficult to increase production.
  • Canadian home sales declined for the first time in five months as activity in Vancouver and Toronto weakened.



World Headlines

  • Stocks climbed and Treasury yields ticked higher on Tuesday as investors looked ahead to the next wave of corporate earnings and further developments across a host of geopolitical issues. The Stoxx Europe 600 Index advanced for a second day, led by shares in Italy which rallied with the country’s bonds after the government reached an agreement on a budget accord. In Asia, Japan’s equities outperformed, with Hong Kong and Chinese shares retreating.
  • Futures in the U.S. pointed to a firmer open as Netflix Inc. becomes the first large technology company to report results after today’s close.
  • Oil retreated before weekly U.S. inventory data even as the disappearance of a critic of the Saudi Arabian regime threatened to spark a diplomatic crisis. Crude in New York dropped 0.8 percent. U.S. stockpiles probably rose by 1.25 million barrels last week, the longest streak of gains since March 2017 if confirmed by government data Wednesday.
  • Gold trades steady near highest since late July as investors weigh geopolitical tensions, particularly between the U.S. and Saudi Arabia, and recent weakness in the dollar. Bullion holdings in ETFs rose a fifth day on Monday, when prices climbed for the fourth time in five days. Haven demand has been supported by tension between the U.S. and Saudi Arabia, as well as concerns about the U.S.-China trade war and uncertainty over Brexit.
  • Copper leads most base metals lower in London as concerns over impact of trade conflicts on economy grip the market and LME stockpiles gain. Copper’s move comes despite bullish commentary from Goldman Sachs and Codelco’s plan to suspend two of its four smelters, further tightening a market that’s seen London inventories shrink to the smallest in more than two years.
  • The fastest wage growth in almost a decade is a sign that inflation pressures are building, but the Bank of England may not act until it gets clarity on Brexit. Data from the Office for National Statistics Tuesday showed average earnings excluding bonuses rose 3.1 percent in the three months through August, the most since January 2009.
  • German investor confidence soured on the back of this month’s stock-market selloff and rising concern that global trade tensions will harm economic growth. The ZEW Center for European Economic Research said its measure of investor expectations for the region’s powerhouse fell to minus 24.7 in October from minus 10.6 in September, well below all estimates in a Bloomberg survey. A gauge for the euro area also declined.
  • Chinese consumer inflation accelerated for a fourth month in September, with food prices jumping by the most since February, while the rise in households’ non-food costs slowed. The consumer price index rose 2.5 percent from a year earlier, according to data from the National Bureau of Statistics.
  • The U.S. budget deficit grew to $779 billion in Donald Trump’s first full fiscal year as president, the highest since 2012 amid tax cuts and spending increases. The budget gap for the 12 months through September was 17 percent wider than the same 12-month period a year earlier, as spending rose 3.2 percent and revenue gained just 0.4 percent, according to a Treasury Department report released Monday.
  • Volkswagen AG’s Audi unit agreed to pay an 800 million-euro ($926 million) fine for its role in the diesel-cheating scandal that has disrupted the car industry for more than three years and landed Audi’s longtime leader in jail.
  • Volvo AB slumped after uncovering a faulty component in the emissions-control setup of trucks widely sold in Europe and the U.S., the manufacturer’s biggest markets.
  • Hungary’s central bank increased its gold reserves 10-fold, citing the need to improve its holdings’ safety, joining regional peers with relatively high ownership in the European Union’s east. Following a similar move by Poland, the central bank in Budapest now holds 31.5 tons of the metal, taking the share among total reserves to 4.4 percent, in line with the average in the region, according to a statement published on its website Tuesday.
  • Morgan Stanley reported investment banking revenue for the third quarter that beat the average analyst estimate.
  • J&J boosted its adjusted earnings per share forecast for the full year; the guidance midpoint beat the average analyst estimate.
  • Goldman Sachs Group Inc. is upbeat about the outlook for base metals, especially copper, even as the bank expects that demand growth will slow down next year and the U.S.-China trade confrontation drags on.
  • Trump administration officials are mulling allowing coal exports from military bases and other federal properties along the U.S. West Coast, an idea that drew swift condemnation from political leaders in the region. “This reckless, harebrained proposal undermines national security instead of increasing it, and it undermines states’ rights to enforce necessary health, safety and environmental protections in their communities,” Washington state’s Democratic governor, Jay Inslee, said in an emailed statement. “The men and women who serve at our military bases are there to keep our country safe, not to service an export facility for private fossil fuel companies.”
  • Australia is considering following U.S. President Donald Trump’s lead in moving the nation’s embassy in Israel to Jerusalem. “Australia should be open-minded to this,” Prime Minister Scott Morrison told reporters in Canberra on Tuesday. “We’re committed to a two-state solution but, frankly, it hasn’t been going that well.”
  • Timely delivery of Lockheed Martin Corp.’s $29 billion CH-53K King Stallion helicopter for the U.S. Marine Corps may be jeopardized by a potential shortage of specialized metal components two years after the bankruptcy of a key supplier. In an illustration of how even the biggest defense contractor depends on its supply chain, the Navy’s aircraft development and acquisition command has assembled a team with Lockheed to assess options for ensuring a steady supply of the parts. General Robert Neller, the Marine Corps commandant, is monitoring the issue.
  • Paul Allen, who co-founded Microsoft Corp. with fellow billionaire Bill Gates and used the fortune he made from the iconic technology company to invest in professional sports teams, cable TV and real estate, has died. He was 65.
  • Secretary of Defense James Mattis played down tensions with Beijing, saying the U.S. was “not out to contain China” and was cooperating whenever possible, but that there would be times they would “step on each other’s toes.”
    “Obviously, we’re not out to contain China. We’d have taken an altogether different stance had that been considered. It has not been considered,” he told reporters Monday on a plane en route to Vietnam.


*All sources from Bloomberg unless otherwise specified