October 26th, 2018

Daily Market Commentary

Canadian Headlines

  • The Canadian cannabis industry is still reeling from sky-high demand in the second week of legalization, with growers expressing frustration at the length of time it’s taking to get licensed as shelves sit empty. The process of getting a sales license from Health Canada is onerous, according to Durkacz. After receiving a cultivation license, a grower must produce two full crops, send them off for testing, get its sales software audited, and then submit a completed application for the sales license, which can take up to 341 days to process, he said.



World Headlines

  • European shares fell on Friday, dragged down by losses in basic resources and technology sectors. The Stoxx Europe 600 Index fell 0.9 percent, with the technology sector pressured by developments overnight in the U.S., where so-called FAANG firms Amazon and Google-owner Alphabet Inc. missed expectations and chipmaker Intel Corp. saw shares pare gains after trade war comments.
  • Downbeat results from Amazon.com Inc. and Alphabet Inc. weighed on S&P 500 index futures after the underlying gauge had climbed for the first time in seven days Thursday. Markets remain on edge after more than $6.7 trillion was lost from global equities’ value since late September, as lofty expectations for earnings were tested amid heightened trade tensions and tightening financial conditions. The focus now turns to U.S. GDP, consumer-price and consumption data later Friday amid debate about the Federal Reserve’s policy path.
  • Asian shares sank deeper into a bear market, with Japanese stocks sliding more than 5 percent this week. Core European bonds gained and gold rose to a three-month high as the risk-off mood spread.
  • Oil is poised for the longest weekly declining run since August as equity markets resumed their slide and OPEC sent conflicting signals on supply. Futures in New York slipped as much as 1.3 percent, on course for a third weekly drop. Stocks in Europe fell along with U.S. futures while Asian shares sank deeper into a bear market. OPEC signaled Thursday it could cut output next year due to concerns about rising oil inventories and economic uncertainty, changing its position from just a few days ago of pumping flat out.
  • Gold is up for a fourth week, set for the longest run of gains since January, as sentiment on the precious metal becomes increasingly bullish with investors adding to their holdings. Gold traders and analysts are their most bullish for a month in Bloomberg’s weekly survey, while holdings of gold-backed exchange traded funds increased to their highest since late August. The gains come despite the dollar climbing to the strongest in almost 17 months, which traditionally would have been a brake on gold prices.
  • Norway’s $1 trillion wealth fund’s U.S. stock holdings helped lift returns as it struggles to navigate increasingly turbulent markets amid disputes over trade and slowing economic momentum. The Oslo-based fund posted a gain of 2.1. percent, or $21 billion, in the third quarter. North American stocks gained, while the rest of the global equity markets had a weaker development, the fund said.
  • The growth engines of Amazon.com Inc. and Alphabet Inc., the world’s largest internet companies, sputtered last quarter, and after weeks of stock market jitters, investors were in no mood to give them a pass. Amazon, the biggest online retailer, reported a second consecutive quarter of sales that fell short of estimates — the first back-to-back revenue miss in almost four years. The company on Thursday also gave a disappointing revenue and profit forecast for the busy holiday period, sending shares down as much as 9.4 percent in extended trading. Even its highly profitable cloud-computing business, Amazon Web Services, didn’t grow as fast as it had in the previous three months.
  • Saudi Arabia must hand over the 18 suspects Turkish investigators have identified in the murder of journalist Jamal Khashoggi in a sign of its goodwill, Turkey’s president said on Friday, as he announced that the kingdom’s chief prosecutor would visit over the weekend. “If you want to eliminate this suspicion, the key point for our collaboration is those 18 people,” Recep Tayyip Erdogan said. “If you are unable to make them speak, since the incident took place at the consulate in Istanbul, hand them over to us and let us prosecute them.”
  • A little-known Chinese company that styles itself one of the world’s biggest smartphone manufacturers is acquiring Dutch chipmaker Nexperia for 25.2 billion yuan ($3.6 billion), a mega-deal that needs U.S. approval at a time American concerns about the Asian country’s rise run high. Wingtech Technology Co. is acquiring effectively 75.86 percent of Nexperia, which NXP Semiconductors NV sold to a consortium of Chinese investors in 2016. It consolidates control of the Dutch chipmaker under a company that assembles devices for smartphone brands from Huawei Technologies Co. to Lenovo Group Ltd. and Xiaomi Corp.
  • Rolls-Royce Holdings Plc is running into production hurdles on the engine for Airbus SE’s new A330neo jet, just as the European planemaker rushes to meet delivery targets this year. Only 10 Rolls-Royce Trent 7000 engines will have been delivered by the end of October, the London-based manufacturer said in a letter to employees describing “technical and operational challenges.” The output is “far short” of the 30 engines promised to Airbus so it can hand over 15 of the wide-body planes to airlines by year-end, according to the memo.
  • Royal Bank of Scotland Group Plc set aside 100 million pounds ($128 million) to reflect greater uncertainty around Brexit, the first British bank to do so this quarter, as Chief Executive Ross McEwan said big companies are pausing investment as the talks drag on. While McEwan said his meeting with Prime Minister Theresa May alongside other CEOs last week gave him an “optimistic sense” on Brexit talks, he said the bank took the provision to reflect “quite a bit more uncertainty in the market.” The shares slid as much as 5.8 percent, the most in more than two years.
  • Lenders to Essar Steel India Ltd., the biggest mill being sold under the nation’s insolvency process, have chosen steel tycoon Lakshmi Mittal’s ArcelorMittal as the winning bidder for the asset, overlooking an attempt by the founders to thwart the sale by offering a higher payment. The world’s largest steelmaker ArcelorMittal and partner Nippon Steel & Sumitomo Metal Corp. were declared winners by the creditors, the two producers said in separate statements Friday. The acquisition will be subject to approval from courts, expected before the end of 2018, Arcelor said in its statement.
  • Japan’s biggest banks and brokerages agreed to set up a $1.8 billion fund with China’s state-run investment group to help companies enhance trade between the nations. The fund with China Investment Corp. is expected to raise between 100 billion yen and 200 billion yen ($1.8 billion), Nomura Holdings Inc. spokesman Kenji Yamashita said by phone. The other participants are Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc. and Daiwa Securities Group Inc.
  • The Trump administration is considering an order to block the entry of migrants at the southern border using the same authority as its earlier travel ban, a person familiar with the matter said, as thousands of Central Americans make their way toward the U.S. The action, if implemented, would effectively bar those seeking asylum from entering the country. President Donald Trump is weighing a range of possible options designed to prevent undocumented migrants from crossing the U.S.-Mexican frontier, according to a White House official familiar with the discussions. Both people spoke on condition of anonymity as no final decision has been made.
  • French car-parts maker Faurecia SA has agreed to acquire Japan’s Clarion Co. to add self-driving technology and auto sound systems, paying about 1.1 billion euros ($1.3 billion) to controlling shareholder Hitachi Ltd.
  • Yandex.Taxi, Russia’s largest ride-hailing service part-owned by Uber Technologies Inc., may be worth more than $6 billion ahead of a possible initial public offering of shares next year, according to reports by two investment banks. Uber completed a deal in February to cede operations in Russia and some neighboring countries to local search search engine Yandex NV’s ride-hailing unit, in exchange for an about 37 percent stake. The combined entity was then valued at $3.8 billion.
  • EQT Partners AB, the Swedish investment firm, is exploring the sale of Direct ChassisLink Inc., according to people familiar with the matter. EQT is working with an adviser on the sale of the Charlotte, North Carolina-based company, which could fetch more than $2.5 billion, including debt, said one of the people, who asked to not be identified because the matter isn’t public.
  • Bytedance Ltd. has closed $3 billion of funding from SoftBank Group Corp. and other major investors at a valuation of $75 billion, cementing its position as the world’s biggest privately backed startup, according to people familiar with the matter. The deal, which Bloomberg News reported earlier also involves KKR & Co. and General Atlantic, represents a major infusion of cash that will quicken the Chinese media giant’s expansion beyond its home turf. SoftBank aimed to invest about $1.8 billion depending on the availability of secondary shares, one of the people said, declining to be named because the talks were confidential.


*All sources from Bloomberg unless otherwise specified