October 25, 2017


Daily Market Commentary

Canadian Headlines

  • Canadian stocks came within a point of their all-time closing high before moderating their gains, with energy stocks moving into the red. The S&P/TSX Composite Index rose 49 points or 0.3 percent to close at 15,905.14. The benchmark rose as much as 0.4 percent earlier in the trading day.
  • Wednesday’s Bank of Canada meeting is set to revive a six-month surge in the loonie that’s stalled in recent weeks, according to the country’s biggest lenders. That’s good news for speculators who remain near the most bullish on the currency since 2012.
  • A strong economy has helped Prime Minister Justin Trudeau whittle down Canada’s projected budget deficit, providing enough wiggle room to boost transfers to low-income Canadians. The Liberal government cut its deficit projection for the fiscal year ending March 31 to C$19.9 billion ($15.7 billion), down from C$28.5 billion in the March budget, figures released Tuesday show. It also introduced C$7.7 billion of new spending over six years.
  • PAI Partners and British Columbia Investment Management Corp. agreed to buy Dutch soft-drink bottler Refresco Group NV for 1.6 billion euros ($1.9 billion) after an activist shareholder pressured the company to reconsider a sale. The buyers will pay 20 euros a share in cash, Refresco and British Columbia Investment said in a statement Wednesday.



World Headlines

  • Europe’s equity benchmark is little changed amid mixed corporate earnings ahead of tomorrow’s ECB meeting. The Stoxx Europe 600 Index slides 0.1%. Kering jumps 6.1% as Gucci powers its 3Q sales growth, while Societe BIC tumbles 6.8% after its 3Q revenue misses the lowest analyst estimate.
  • U.S. Treasuries extended their declines and the dollar held at a three-month high amid continued optimism over the global growth outlook. Safe haven assets such as the yen and gold slipped, while stocks in Europe rose as the earnings season continued to unfold.
  • Japanese stocks fell for the first time in 13 days, while the Nikkei 225 Stock Average of blue chips snapped its record 16-day rally, as technical indicators suggested the advance was too rapid. Defensive stocks, including telecommunications and pharmaceutical companies, were among the heaviest drags on the Topix. Even after Wednesday’s declines, the 14-day relative strength indexes for both the Nikkei 225 and Topix remained well above the level of 70 that indicates shares are overbought.
  • Oil was little changed before the release of U.S. inventory data, while OPEC and its allies reassured traders that they’ll complete their strategy to clear a global crude surplus. Futures slipped 0.5 percent in New York after rising 1.1 percent on Tuesday. Government data Wednesday is forecast to show that inventories of crude oil fell and gasoline rose, both for the fifth week.
  • Gold heads for lowest close in almost three weeks as dollar strengthens and Treasury yields rise amid optimism over global economy and encouraging earnings reports.
  • The U.K. economy’s surprise acceleration has paved the way for the Bank of England to raise interest rates for the first time in a decade next week. The pound rose and investors increased bets on a tightening of monetary policy on Nov. 2 after initial data showed 0.4 percent growth last quarter, more than economists forecast and the fastest pace of the year so far. This is the last major economic report BOE officials will get on the health of the economy before their crucial meeting.
  • Visa Inc.’s rapid profit growth just keeps rolling. The company topped its own forecast for annual growth in revenue and profit in the fiscal year ended Sept. 30 as volume on its credit and debit cards jumped 10 percent in both the U.S. and Europe. Visa also said it expects adjusted earnings per share to increase by a percentage in the “high end of mid-teens” for 2018, a better forecast than some analysts expected.
  • Goldman Sachs Group Inc. is considering bulking up its research coverage of small- and mid-capitalization companies, even though Europe’s MiFID II rules are likely to shrink trading volumes in those stocks, bank representatives said on a conference call last week.
  • Blackstone Group LP’s Steve Schwarzman said his firm may double assets under management to $800 billion over the next five years as it expands into new investing areas.
  • Japan’s biggest life insurers plan to boost holdings of foreign bonds in the second half of the financial year to take advantage of yield differentials as the Federal Reserve looks set to raise interest rates. Nippon Life Insurance Co., the largest private life insurer by assets, will use most of the new money it gets in the October-March period to buy unhedged foreign bonds, Naoki Akiyama, general manager of the finance and investment planning department, said at a briefing in Tokyo on Tuesday.
  • AT&T Inc. met forecasts for wireless subscriber growth, joining industry leader Verizon Communications Inc. and T-Mobile US Inc. in reporting gains. The company added 102,000 regular monthly customers and 15,000 business customers in the third quarter, the company said Tuesday in an addendum to its earnings statement, in line with the 117,000 analysts had projected. AT&T said it was able to contain customer defections during the period.
  • India’s government has won a resounding reception from investors and credit-rating firms for its unprecedented pledge of 2.11 trillion rupees ($32 billion) in capital for the country’s beleaguered state banks. The move, which drove an index of government-run banks up as much as 26 percent, is part of Prime Minister Narendra Modi’s goal to help lenders meet tighter capital-reserve requirements.
  • British American Tobacco Plc laid out its expectations for the buildup of its vapor products business as the world’s second-largest traded tobacco company seeks to catch up with rival Philip Morris International Inc. BAT expects e-cigarettes and products that heat tobacco without burning it to generate sales of more than 5 billion pounds ($6.6 billion) in 2022, a tenfold increase from this year. Sales are expected to more than double to at least 1 billion pounds next year. The stock rose as much as 2.8 percent.
  • The $2 billion that the U.S. Air Force wants to spend this fiscal year for the new B-21 bomber would go toward added staffing for contractor Northrop Grumman Corp., software development and producing detailed engineering drawings, according to a top service official.
  • Passporting arrangements for financial services are likely to continue during the Brexit transition phase, the U.K. government said in a move intended to reassure companies considering whether to move operations out of the country. Brexit Secretary David Davis said he expects financial-services firms to keep their existing passporting rights — which allow London-based lenders and insurance companies to sell their services anywhere in the European Union’s single market — during a two-year bridging period after March 2019.
  • Lloyds Banking Group Plc, Britain’s largest mortgage lender, is on track to meet its full-year targets and insisted that a quarterly rise in impairments isn’t a sign of a deeper trend. Bad loans rose by almost a third to 270 million pounds ($355 million) in the three months ended Sept. 30 from a year ago, because of a “single large corporate impairment,” and its acquisition of MBNA’s U.K. credit-card business, the London-based bank said in a statement Wednesday. That “doesn’t reflect anything regarding an underlying trend,” George Culmer, chief financial officer said on a call with reporters.
  • The European Union drew criticism for abandoning one of its most controversial efforts to rein in the banking industry since the financial crisis, as supporters of a law to break up too-big-to-fail lenders said they still pose a risk to the public. The European Commission, the EU’s executive arm, on Tuesday scrapped the proposal, saying there was “no foreseeable agreement” in parliament on the legislation, which would have potentially split the retail units from riskier investment banking arms of major lenders such as Deutsche Bank AG and BNP Paribas SA.
  • Cnooc Ltd. posted a 17 percent increase in third-quarter sales as higher crude prices countered sliding output, while spending by China’s biggest offshore oil and gas producer hasn’t yet reached the halfway point of its full-year target. Revenue from oil and natural gas was 35.9 billion yuan ($5.4 billion) in the three months ended Sept. 30, the Beijing-based explorer said in a statement to the Hong Kong stock exchange Wednesday. Cnooc, which doesn’t disclose quarterly profit, said output fell 1.3 percent from the previous year.
  • A week of pageantry in Beijing ended with President Xi Jinping cementing his status as China’s strongest leader in decades. The question now is whether he’ll use that power to finally implement much-needed reforms. Xi on Wednesday unveiled new leaders that included no clear successor to take over after his second term ends in 2022, disrupting norms that held for 25 years.
  • Investment fund Global Infrastructure Partners agreed to buy Equis Energy, a Singapore-based developer of renewable-power projects, for $5 billion including debt, a record for the industry. The deal includes $1.3 billion of liabilities and is expected to close in the first quarter, the companies said in a joint statement on Wednesday. Equis Energy’s portfolio of assets includes solar, wind and hydroelectric power operations in Australia, Japan, India, Indonesia, the Philippines and Thailand.
  • BP Midstream Partners LP is hoping investors will come for the energy pipeline company’s steady returns and stay for the potential asset growth. The Houston-based company formed by oil giant BP Plc is aiming to raise as much as $893 million Wednesday in an initial public offering, marketing 42.5 million shares for $19 to $21 apiece. BP created BP Midstream Partners as a master limited partnership, or MLP, to own, operate, develop and acquire pipelines and related assets.
  • TIAA’s $929 billion asset manager, Nuveen, is considering ways to create exchange-traded funds that feature illiquid assets, betting the securities will overtake mutual funds as investment vehicles of choice among investors in the future. The Chicago-based asset manager, which oversees about $200 billion in alternative assets such as agriculture, commodities and timber, is exploring how it can repackage some of its less liquid investment strategies into ETFs, said Margo Cook, President of Nuveen Advisory Services.
  • Daimler AG and Volkswagen AG sought to defuse fears of hefty fines from an alleged German auto cartel as the manufacturers struggle to rebuild credibility following VW’s emissions-cheating scandal. European Union antitrust investigators have searched offices of BMW AG, Daimler and Volkswagen in recent days as the watchdog stepped up a probe into allegations of decades-long collusion that surfaced in July.




*All sources from Bloomberg unless otherwise specified