October 24, 2017
Daily Market Commentary
- Canadian stocks were little changed after giving up earlier gains, as declines in energy shares offset increases in most other sectors. The S&P/TSX Composite Index closed down 1 point or less than 0.1 percent to 15,855.76 after earlier rising as much as 0.3 percent. The energy sector was the biggest decliner, losing 0.6 percent as gains in the price of crude moderated throughout the day. Baytex Energy Corp. fell 4.4 percent.
- The Canadian government will unveil a budget update widely expected to show shrinking short-term deficits, as Finance Minister Bill Morneau looks to turn the page on questions about his own finances. Morneau will deliver his Fall Economic Statement at about 4 p.m. Tuesday in Ottawa. The midyear update to the March budget will reflect the improving picture for government finances, driven by surprisingly strong growth. Over the past four quarters, the economy expanded by an average 3.7 percent, the best performance in a decade.
- Europe’s key stock benchmark is little changed as individual equities dominate moves amid earnings reports, while investors also await euro-zone manufacturing data. The Stoxx Europe 600 Index falls less than 0.1%, ahead of an ECB meeting later this week. AMS rises 15% after the chipmaker forecast strong revenue growth, while Boliden drops 9.9% on worse-than-expected profit.
- Moves among major currencies were largely contained, but the greenback strengthened against most peers and U.S. equity futures edged higher amid continued speculation over who will lead the Federal Reserve, and as optimism over tax reform proved resilient. The dollar gained a third day, the euro also rose and European stocks edged lower.
- Asian stocks were poised to rise for a second day, taking a different tack than U.S. markets as Japanese equities extended a record. The MSCI Asia Pacific Index climbed 0.1 percent to 167.20 as of 4:31 p.m. in Hong Kong. Nintendo Co. partner DeNa Co. gained 7.8 percent on optimism over the “Animal Crossing” game.
- Oil held gains near $52 a barrel before U.S. government data forecast to show crude stockpiles extended declines. Futures were little changed in New York after advancing a second session Monday. Inventories probably dropped by 3 million barrels last week, a fifth straight decrease.
- Gold held above its 100-day average as dollar trades around highest since July before European Central Bank meeting Thursday.
- Copper’s red hot. Prices have surged more than 50 percent in the past 12 months, hitting the highest level in over three years and making it the top performer on the Bloomberg Commodity Index. The metal is known as Dr. Copper because it’s often seen as a barometer of the global economy. Prices popped again on Tuesday, rising as much as 1.7 percent to $7,123 a metric ton on the London Metal Exchange.
- Noble Group Ltd.’s sale of its oil business to Vitol Group probably buys the embattled commodity trader time. But even if it survives long enough to complete the deal, there’s still an almighty struggle ahead: the near-inevitable restructuring of over $3 billion in debt.
- India is intensifying its crackdown on dubious companies after it unearthed over $1 billion in suspicious cash deposits as part of its investigations into corruption and efforts to boost foreign investment, a minister said. While the government has already revoked permissions for over 200,000 companies and restricted their bank accounts, it is now working on limiting property transfers to trace any further generation of black money.
- The euro-area economy maintained its strong momentum at the start of the final quarter of this year, with rising workloads encouraging companies to take on new staff at the sharpest pace in more than a decade. A Purchasing Managers’ Index for manufacturing and services slipped to 55.9 in October from 56.7 in September, IHS Markit said on Tuesday. Economists surveyed by Bloomberg predicted the measure would drop to 56.5.
- As OPEC negotiates the extension of its oil production cuts until the end of 2018, it’s also quietly started working on an exit strategy in an effort to reassure investors it won’t flood the market once the curbs finally expire, according to people familiar with the deliberations. The talks, still at a preliminary stage, are complementary to the cuts and designed to improve their impact in 2018. The group is likely to endorse the outlines of the plan when they meet in Vienna on Nov. 30, but the full strategy probably won’t be unveiled until later in 2018.
- As the Bank of England considers raising interest rates for the first time in a decade in November, policy makers will be mindful that the history of central banking is littered with premature hikes. Banks including UBS AG and UniCredit have expressed concern that tightening now would be a mistake, and business groups such as the British Chambers of Commerce have called on the BOE to wait.
- Global currency traders and compliance officers who monitor them were put on high alert after a New York jury convicted a former HSBC Holdings Plc executive of fraud for front-running a large client order. The verdict is a victory for U.S. prosecutors in their first attempt to hold individuals accountable since a global currency-rigging probe that led to banks paying more than $10 billion in penalties. Mark Johnson faces a maximum sentence of 20 years in prison, although he’s likely to get much less.
- The U.S. is considering new sanctions on Myanmar after nearly a million Rohingya Muslims fled the Southeast Asian nation’s Rakhine state to neighboring Bangladesh. In a statement issued on Monday, U.S. State Department spokeswoman Heather Nauert said that since Aug. 25, the U.S. had ceased consideration of JADE Act travel waivers for current and former Myanmar military leaders, and was assessing further economic options available to target individuals associated with any atrocities.
- Aker BP ASA, the oil company formed by the merger of billionaire Kjell Inge Rokke’s Det Norske Oljeselskap ASA and BP Plc’s Norway unit, agreed to buy Hess Corp.’s Norwegian operations for $2 billion to continue a growth strategy started three years ago. Aker BP shares climbed to a record as the company said the transaction, which lets it carry forward a tax loss of $1.5 billion, will allow it to boost dividends by 40 percent.
- Aker BP ASA, the company formed last year by merging the Norwegian oil businesses of billionaire Kjell Inge Rokke and BP Plc, agreed to buy Hess Corp.’s operations in the country for $2 billion. Shares rose the most in almost a year on Tuesday and were headed for a record close as Aker BP said the tax loss of $1.5 billion it can carry forward from the deal will help it to boost dividends by 40 percent.
- Facebook Inc. could be in the firing line of data privacy regulators across the European Union if the bloc’s top court follows the opinion of an adviser who said the social media giant may be policed by authorities in the country where users are based.
- Potlatch Corp., a U.S. timberland owner and lumber producer, agreed to buy Deltic Timber Corp. for about $1.16 billion to add trees and factories in Arkansas and Louisiana as demand strengthens on the back of a recovering U.S. housing market.
- The U.S. Justice Department is moving to scale back the use of orders forcing technology companies to turn over customer data without alerting users to the clandestine interception of their information. Microsoft Corp., which sued the government over the practice last year, and other internet giants have argued that the future of cloud computing is in jeopardy if customers can’t trust that their data will remain private.
- Covestro AG, the German plastics and chemicals maker spun out of Bayer AG in 2015, plans to buy back as much as 1.5 billion euros ($1.8 billion) worth of shares after a search for acquisitions came up empty. “In the current external environment, we cannot find anything that is truly value-creating,” Chief Executive Officer Patrick Thomas said in an interview Tuesday with Bloomberg TV.
- Traders in the $14.2 trillion Treasuries market have found a way to avoid fighting the Federal Reserve, or at least its imminent leadership change. Whether President Donald Trump nominates Fed Board Governor Jerome Powell, Stanford University economist John Taylor or even Chair Janet Yellen to lead the central bank, one trade is foolproof in the eyes of many on Wall Street: betting on a flatter U.S. yield curve. By most measures, the spread between short- and long-term Treasuries is already the slimmest in a decade as the Fed raises rates in the face of tame inflation.
- The Federal Aviation Administration said it’s watching for potential fallout in the U.S. from Kobe Steel Ltd.’s fake-data scandal as the company considers pulling its earnings forecast. The U.S. aviation regulator said it’s “continuing to monitor the situation” and working with its counterpart in Japan, the Civil Aeronautics Bureau.
- Carillion Plc arranged new credit lines and agreed to sell a unit for 50 million pounds ($66 million), progressing on a turnaround after multiple profit warnings and writedowns through 2017 left the British building and services company reeling.
- UniCredit SpA, Italy’s biggest bank, reported a six-fold jump in third-quarter profit, driven by the sale of its Pioneer Global Asset Management unit. Net income rose to 2.82 billion euros ($3.32 billion) in the three months through September from 447 million euros a year earlier, the Milan-based bank said in statement Tuesday. Revenue fell 3.9 percent to 4.65 billion euros on lower income from trading and lending, partly offset by higher revenue from fees and commissions.
*All sources from Bloomberg unless otherwise specified