October 20th, 2018
Daily Market Commentary
- Rogers Communications reported adjusted earnings per share for the third quarter that beat the average analyst estimate. 3Q adjusted EPS C$1.21, estimate C$1.17.
- A slowing economy and rising borrowing costs will probably push Canadian delinquency rates higher in coming months, according to the country’s largest credit reporting firm. Bill Johnston, vice president of data and analytics at Equifax Canada, predicts the rate of late payments on consumer debt — credit cards, auto loans and other non-mortgage liabilities — will begin rising in late 2018 or early 2019.
- Stantec’s divestiture of MWH Constructors is expected to close in 4Q. Terms of the deal weren’t disclosed. Concludes review of construction services announced in April.
- Bank of Nova Scotia sold a EU1.75b note this week — a size only one issuer has surpassed in 2018. BNS’s 5Y bond accounted for about half the week’s volume and it was the largest deal from Canada this year; marketwide, it only trails a EU2b ABN Amro note sold in January, while matching a EU1.75b ING tranche issued in April.
- European stocks fell as investors weighed the outlook for corporate profits against the positive mood from China, where equities rebounded from a four-year low. Italian assets dropped after the European Union ramped up criticism of the nation’s draft budget.
- Japanese stocks declined for a third week as investors mulled issues from a brewing conflict between the U.S. and Saudi Arabia to the U.S.-China trade war’s impact on economic growth, to the start of the earnings season. Chinese stocks rose, headed for the steepest gain in a month, after the heads of the central bank, banking and insurance regulator and securities regulator all issued statements voicing support for the battered equity market.
- U.S. stock index futures signaled slight gains as major equities benchmarks in Europe fell, dragged lower by auto shares and renewed market jitters over Italy. The dollar was little changed along with benchmark U.S. Treasury yields.
- Oil headed for a weekly loss as plentiful supplies helped offset worries that tensions between Saudi Arabia and the U.S. over the disappearance of a journalist could lead to the use of crude production as a political weapon.
- Gold is heading for a third straight week of gains, the longest stretch since January, amid renewed interest in the precious metal as a safe haven. Volatility in equity markets and tensions in the Middle East have spurred demand for bullion, with holdings in exchange-traded funds backed by the metal expanding to the highest level in more six weeks.
- China’s economic growth slowed more than expected in the third quarter, as weak industrial output data and what the government called the “severe international situation” challenged efforts to stabilize the economy and reach its growth targets. Gross domestic product increased 6.5 percent in the three months through September from a year earlier, compared to 6.6 percent in a Bloomberg survey and down from the 6.7 percent pace in the previous quarter. That’s the slowest since the aftermath of the global financial crisis in 2009.
- The European Central Bank will end its negative interest-rate policy in January 2020 and start paying for deposits eight months after that, according to a Bloomberg survey of economists. Liftoff is predicted for September next year, and the deposit rate is seen climbing to 0.25 percent, from minus 0.4 percent currently, by the end of 2020. No change in monetary policy is predicted at the Governing Council’s meeting on Thursday.
- The gloves came off in Italy’s fight with the European Union, as several of the bloc’s leaders attacked the populist government in Rome and the EU’s executive warned that its budget draft won’t fly. Markets took fright at the prospect of more upheaval in the euro area’s most indebted nation after Greece, with the Five Star Movement-League coalition setting itself on a collision course with Brussels over its spending plans.
- The European Union is weighing closer regulatory ties with the U.S. for industries including pharmaceuticals, medical devices and marine equipment, part of a push for a market-opening accord to keep the threat of American automotive tariffs at bay. The EU is also considering stronger trans-Atlantic cooperation on standards for new technologies including for cars, according to a document drafted by the European Commission, the bloc’s executive arm in Brussels.
- China and the EU have joined a group of countries asking the World Trade Organization to investigate the Trump administration’s decision to impose metals tariffs on national security grounds. In a separate filing, the U.S. asked the WTO to review those nations that retaliated against its duties. The move sets the stage for a showdown at the Geneva-based trade arbiter that some fear could either lead to a U.S. exit or a flood of new protectionist measures invoking what has until now been a rarely used national security loophole in global trade rules.
- Russia has begun discussions with Exxon Mobil Corp. on possible new oil and gas projects, potentially creating a dilemma as the U.S. government mulls more sanctions against the country. The talks could lead to increased cooperation between the U.S. energy giant and state-run Rosneft PJSC, Russian government officials said, asking not to be named discussing confidential information. Several options have been prepared for Exxon, including in natural gas, refining and chemicals, none of which are currently subject to American sanctions, two officials said.
- A Chinese airline that’s been an exclusive operator of Boeing Co. jets for more than 30 years is in talks with Airbus SE on a potential plane purchase, amid growing trade tensions between Beijing and the U.S., according to people familiar with the matter. Executives at Xiamen Airlines, which is majority owned by the state-run China Southern Airlines Co., met with a high-powered Airbus delegation visiting China from Europe last month to advance the negotiations, said the people, who asked not to be identified because the process isn’t public.
- Tesla Inc.’s long-promised $35,000 version of the Model 3 sedan is still nowhere to be found, but it’s inching closer to that price point. The electric-car maker has started taking orders for a mid-range battery Model 3 that goes about 260 miles between charges for $45,000. That’s about $4,000 less than the starting price of the sedan that went on sale last year, excluding incentives or options.
- President Donald Trump said it “certainly looks” like missing journalist Jamal Khashoggi is dead and warned of “very severe” consequences for the killing. Trump told reporters Thursday that his administration is “waiting for the results of about three different investigations” as it decides how to respond amid reports that the U.S.-based journalist was ambushed inside the Saudi consulate in Istanbul, then tortured, killed and dismembered.
- The list of luminaries shunning a Saudi Arabia investment conference expanded Thursday, with Goldman Sachs Group Inc. and Treasury Secretary Steven Mnuchin canceling while Fox Business pulled out as a media partner. Goldman was among the latest firms to withdraw after reports emerged that journalist and government critic Jamal Khashoggi had been tortured and killed by Saudi agents in the country’s Turkish consulate. Mnuchin withdrew as the Trump administration shifted course under increasing pressure to hold Saudi Arabia’s leaders accountable.
- The U.K. and the European Union are inching towards a plan that could help unblock Brexit negotiations and clear the path to a deal, raising hopes of progress after months of stalemate. While the EU summit in Brussels fell far short of the breakthrough it was long touted to be, a glimmer of hope emerged from the gloom that has descended on the process in recent weeks.
- Fast-dwindling cash is casting doubt on whether Sears Holdings Corp. can firm up its survival plan in time to avoid liquidation. Sears is expected to bleed $220 million in just the first month of its bankruptcy, court filings show, cutting deep into the $300 million loan it secured this week from senior lenders. The crunch could become more acute if Sears doesn’t get an additional $300 million it’s counting on from Chairman Eddie Lampert to keep operating beyond the next 15 days.
- The humdrum business of helping companies pay suppliers and collect funds from customers has turned into a battleground between banks and technology upstarts, with $250 billion of revenue at stake, according to Oliver Wyman. Fintech firms such as TransferWise Ltd. and Revolut Ltd. are capturing market share from the banks that once had a stranglehold over the wholesale payments and cash-management industry, the consulting firm said in a report Friday. While high costs for building and maintaining payment platforms previously kept competitors out, advances in technology have helped reduce barriers to entry, it said.
*All sources from Bloomberg unless otherwise specified