October 26, 2017
Daily Market Commentary
- Canada’s stock benchmark posted its biggest drop in two weeks amid declines in industrial, energy and financial shares, while the loonie fell to its lowest since July. The S&P/TSX Composite Index lost 50 points or 0.3 percent to 15,854.77. The industrial sector was the biggest decliner, falling 0.8 percent as shares of Bombardier Inc. tumbled 4.9 percent. Moody’s cut the company’s debt rating, citing high leverage and execution risk.
- Barrick Gold Corp. reported a surprise net loss in the third quarter on a tax provision related to operations in Tanzania. An export ban at a unit in the African nation amid a contractual dispute also dragged down production and revenue for the world’s biggest gold miner. Barrick lowered the top end of its 2017 production guidance to 5.5 million from 5.6 million ounces, it said Wednesday in a statement.
- Teck Resources Ltd., Canada’s largest diversified miner, reported earnings that missed estimates as copper sales fell more than expected and its home currency strengthened. Third-quarter net income rose to C$600 million ($469 million) from C$234 million a year earlier, Vancouver-based Teck said Thursday in a statement. Profit excluding one-time items was C$1.08 a share, missing the C$1.20 average of 18 analysts’ estimates compiled by Bloomberg.
- Suncor Energy Inc., Canada’s largest oil company by market value, produced more crude in the third quarter than analysts estimated after restoring its Syncrude operation to full capacity. Total output climbed to a record 739,900 barrels of oil equivalent a day, the Calgary-based company said Wednesday. Analysts projected 712,700 barrels.
- The world’s still awash in fertilizer, according to one of the world’s largest producers. Potash Corp. of Saskatchewan Inc., posted disappointing third-quarter earnings on Thursday as rising supplies of nitrogen and phosphate-based crop nutrients weighed on prices. Profit excluding one-time items was 9 cents a share, trailing the 12-cent average of estimates compiled by Bloomberg.
- Europe stocks are little changed as investors assess earnings reports and await cues on the future of quantitative easing from an European Central Bank meeting. The Stoxx Europe 600 Index falls 0.1%. Technology shares drop the most, with Nokia leading losses after warning that demand for network equipment will probably continue to drop next year.
- U.S. stocks dropped the most in seven weeks as an uneven batch of corporate earnings reports thwarted a risk-on rally. The S&P 500 Index fell from near a record high, closing down about one half a percent to 2,557.15.
- Asian stocks slid slightly amid mixed earnings reports after their U.S. counterparts fell the most in seven weeks. The MSCI Asia Pacific Index slipped less than 0.1 percent to 166.79 as of 4:36 p.m. in Hong Kong, with declining stocks outpacing gainers by only two shares.
- Oil steadied near $52 a barrel as an increase in U.S. crude supplies was countered by a plunge in gasoline inventories, showing the rebalancing of the global market remains a slow process. Futures were little changed in New York after falling 0.6 percent on Wednesday. Crude inventories climbed by 856,000 barrels last week while gasoline supplies lost 5.47 million, the first drop since mid-September.
- Gold advances before European Central Bank meeting, with some haven demand creeping back into markets after U.S. equities fell.
- Comcast Corp. showed resilience against the twin threats of hurricanes and TV competition. The biggest U.S. cable provider beat analysts’ estimates for third-quarter profit, and matched projections for revenue, even after the storms Harvey and Irma took a toll on subscriber gains. Comcast held steady in part by getting customers to pay more — the average monthly bill climbed 2.1 percent from a year earlier to $151.51.
- The European Union agreed to start internal preparations for the possibility of Brexit negotiations failing to reach a breakthrough at a crunch December summit, as the former British envoy to the EU said the U.K.’s trade goals were unrealistic. At a meeting in Brussels on Wednesday, the EU’s 27 governments without Britain approved work to start on their response to the prospect of the U.K. and the EU not making enough progress over the next two months to allow trade talks to begin at the end of the year.
- U.K. retail sales are falling at the fastest pace since the depths of the recession in 2009 and worries about the housing market could exacerbate the weakness in consumer spending seen this year. The Confederation of British Industry said its measure of sales plunged to minus 36 in October — the lowest since March 2009 — from a positive 42 in September. Sales for the time of the year were slightly below the usual seasonal rates, it said.
- Saudi Arabian Crown Prince Mohammed bin Salman backed the extension of OPEC production cuts beyond March 2018, making it all but certain the cartel and its allies will roll over the curbs at a meeting next month. The prince, who’s become the kingdom’s dominant political force, said in an interview with Bloomberg News that “of course” he wanted to extend the cuts into 2018. “We need to continue stabilizing the market,” he said.
- Bayer AG’s strongest unit is out of the picture, and third-quarter results from its remaining businesses underwhelmed investors. Sales of a key drug plunged unexpectedly, and the consumer division’s quarter fell short of analysts’ projections. While the crop science business returned sales and profit in line with expectations, Bayer is no longer counting results from its former plastics unit, Covestro AG, which would have helped offset weakness elsewhere in the portfolio.
- Construction setbacks at a natural gas export terminal that Sempra Energy’s trying to build off the shores of Louisiana are weighing on its $9.45 billion utility takeover next door. On Wednesday, a Texas regulator said the troubled liquefied natural gas project was a concern because the utility owner is seeking to take on more debt to buy the state’s largest transmission operator, Oncor Electric Delivery Co.
- BlackRock Inc., the world’s largest money manager, has turned less bullish on local-currency bonds in Asia as it sees U.S. yields rising on the back of a Federal Reserve interest-rate increase in December. The 10-year Treasury yield may rise to as high as 2.50 percent by end-2017, according to Neeraj Seth, the head of Asian credit at BlackRock, which oversees about $6 trillion globally. The firm has become more selective on its investments in the region, given the divergence in monetary policy expectations and fiscal positions in different nations.
- Nordea Bank AB sank in Stockholm trading as the biggest Nordic lender announced additional costs to cover at least 6,000 job cuts needed to stay competitive. The bank said about 2,000 of those will be consultants. Nordea will need to take a “transformation cost” of as much as 150 million euros ($177 million) in the fourth quarter, to help deal with the cuts, Chief Executive Officer Casper von Koskull said in a statement on Thursday.
- The wait for a recovery in the wireless-network equipment business just got longer with Nokia Oyj’s dire third-quarter results. The Finnish manufacturer predicted a prolonged slump for the industry, sending its shares down as much as 16 percent — the most since 2012, when it was still struggling with an ailing handset business that was later sold to Microsoft Corp. Now focusing on networks, Nokia faces a tough market as phone carriers are largely done with building their newest systems, and time isn’t ripe yet to start spending on the next-generation, so-called 5G technology.
- China began marketing its first sovereign dollar bonds since2004 following a week when Chinese leaders in Beijing outlined a greater role for the nation on the world stage. The Ministry of Finance is offering $1 billion of five-year notes at a spread of 30 to 40 basis points over Treasuries, and the same amount of 10-year debt at a premium of 40 to 50 basis points, according to people familiar with the offering, who aren’t authorized to speak publicly.
- China’s central bank is said to have gauged demand for 63-day reverse repurchase agreements for the first time ever. The People’s Bank of China tested demand for the repos — open-market operation tools that add cash to the financial system — on Thursday, according to a trader at a primary dealer. The move came amid a tumble in sovereign debt, with the 10-year yield rising to the highest since 2014.
- Datto Inc. has agreed to sell itself to Vista Equity Partners to be combined with the technology-focused buyout firm’s Autotask Corp., Datto Chief Executive Officer Austin McChord said. The deal, which could be announced as soon as Thursday, will value the combined company at more than $1.5 billion, according to a person familiar with the transaction who asked not to be identified because the discussions are private.
- NTT Docomo Inc., Japan’s largest mobile phone carrier, plans to buy back as much as 300 billion yen ($2.6 billion) of its own stock to improve returns after two quarters of declining profit helped hold the shares’ performance below the benchmark this year.
- ConocoPhillips kicked off earnings season for the world’s biggest oil companies with a bang, more than tripling analyst profit estimates on the strength of higher crude prices and a crash diet of asset sales. The biggest independent oil explorer reported a third-quarter profit of $400 million, or 34 cents a share, more than three times the average estimate of analysts surveyed by Bloomberg. Conoco also boosted its projection for oil output and natural gas production this year, even while trimming its capital budget for the second straight quarter.
- Twitter Inc. beat sales estimates and added more monthly users, indicating signs of life at the social network that has struggled to attract new consumers and advertisers. The shares surged. Twitter has been battling the perception that it’s a niche media platform, despite its emergence as U.S. President Donald Trump’s favorite communications tool. The company reported that monthly active users gained 4 percent to 330 million in the third quarter, a positive sign for investors who view audience size as a measure of Twitter’s long-term health. Daily active users increased 14 percent, the fourth consecutive quarter of double-digit growth, the company said Thursday in a statement.
- With its buyout plans on hold, Nordstrom Inc. is under intense pressure to find answers to the department-store slump. Key to that effort is reviving what was once a long-time bright spot for the chain: Nordstrom Rack. The discount stores had been helping the company cope with a slowdown at its full-price formats, but now they are in need of their own jump-start. Same-store sales and traffic have stalled at Nordstrom Rack this year.
*All sources from Bloomberg unless otherwise specified