October 27, 2017
Daily Market Commentary
- 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. The company, which is planning to complete its merger with Agrium Inc. by the end of the year, lowered its full-year forecast for gross earnings for the two products.
- Canadian cheesemaker Saputo Inc. agreed to buy Australia’s biggest dairy processor, Murray Goulburn Co-operative Co., in a A$1.31 billion ($1 billion) deal. Saputo will acquire all of the farmer-owned firm’s operating assets and liabilities in the transaction, which includes about A$114 million of milk supply commitments for active suppliers, according to a Murray Goulburn statement Friday.
- Nexa Resources SA, Votorantim group’s renamed mining assets, raised $496 million in the largest initial public offering for a mining company in North America in almost a decade. The company priced 31 million shares at $16 apiece, at the low end of a downsized range, according to terms reviewed by Bloomberg. Nexa originally sought to price its shares at $18 to $21 each before reducing the range to $16 to $18 this week. The proceeds from the offering are earmarked for expanding zinc operations in Brazil and Peru.
- European stocks climb for a second day, poised for their biggest weekly gain in a month, amid positive corporate results and lingering bullish sentiment from Thursday’s dovish ECB update. The Stoxx Europe 600 Index rises 0.5%, with most industry groups in the green.
- Asian equities rose as investors cheered results corporate results from India to Japan. The MSCI Asia Pacific Index climbed 0.3 percent to 167.12 as of 4:15 p.m. in Hong Kong, on track for its fourth-straight weekly gain. India’s United Spirits Ltd. led gains, surging 22 percent after reporting higher margins, while Fuji Electric Co. jumped 15 percent to the highest in 26 years after raising its profit forecast.
- U.S. stock-index futures advance ahead of U.S. GDP release and pending recommendation from the Italian Prime Minister for the country’s central bank governor. E-Mini futures on S&P trading up 0.2%. E-Mini futures on Dow Jones up 0.1%. E-Mini futures on Nasdaq up 0.4%
- Gold heads for sixth weekly decline in seven, trading near the lowest close in more than two months, as the dollar extends rally. Bullion for immediate delivery little changed at $1,267.31/oz
- Brent oil held gains near the highest level in more than two years as Saudi Arabia’s Crown Prince Mohammed bin Salman backed the extension of OPEC-led output cuts. Futures were little changed near $60 a barrel in London, up 2.6 percent for the week.
- Catalan separatists are making a last-ditch effort to win concessions from Madrid that would help persuade their increasingly agitated supporters to accept another regional election as lawmakers prepare to vote on a declaration of independence. President Carles Puigdemont is holding out for a sign from the central government that it would suspend the process of seizing direct control of the rebel region if he called a snap vote, according to a person with knowledge of the maneuvers.
- German shampoo and detergent maker Henkel AG announced its third acquisition in hair care in North America since 2014, bringing the total value of companies bought to more than $5 billion in two years. Henkel is paying $485 million for Zotos International Inc., the North American hair-care business of Shiseido Co. of Japan, which had $230 million in sales last year. Its brands include Joico and Zotos Professional.
- European Central Bank policy makers implicitly assume their newly-extended bond-buying program will be tapered to a halt by the end of next year so long as the inflation outlook improves, according to officials with knowledge of the discussions. The Governing Council, which met on Thursday, focused on the first nine months of next year for its quantitative-easing program and didn’t formally debate options for what to do after that, said the people, asking not to be named because the talks are private. While tapering would be possible, extending the program without changing the pace of purchases is also a credible option if inflation doesn’t show sufficient progress, one of them said.
- Nissan Motor Co. had been conducting its current inspection procedures for vehicles sold in Japan — a process deemed faulty by the government last month– since at least 1979, according to a person familiar with the situation. The finding will be part of a report from an external investigation team commissioned by the carmaker, said the person, who asked not to be identified because the information isn’t public. Nissan’s manufacturing division will likely take responsibility, the person said.
- Barclays Plc and the U.S. Justice Department, engaged in a legal battle over the suspected fraudulent sale of mortgage securities a decade ago, have revived discussions about reaching an out-of-court settlement, according to people with knowledge of the situation. The Justice Department has responded in recent weeks to requests from the London-based bank to reopen negotiations, said the people, who asked not to be identified speaking about a confidential process. If successful, the lender would avoid a protracted trial and remove a major misconduct issue weighing on its share price.
- Private equity firm CVC Capital Partners is buying TMF Group for 1.75 billion euros ($2.04 billion) after owners of the business services company abandoned an initial public offering in London. DH Private Equity Partners, previously known as Doughty Hanson, decided to pull the planned sale of shares in TMF after receiving poor investor demand, people familiar with the matter said. Instead, the deal with CVC is due to reach completion in the first half of 2018, subject to regulatory approvals, TMF said in a statement.
- Prime Minister Malcolm Turnbull sought to shore up confidence in his government after Australia’s High Court ejected his deputy from parliament, wiping out his one-seat majority and spooking investors. The court ruled Friday that Barnaby Joyce and four other lawmakers were ineligible to sit in parliament because they were dual citizens when they were elected, in breach of the constitution. Joyce, the leader of Turnbull’s coalition partner the Nationals, has since renounced his New Zealand citizenship and will re-contest his seat on Dec. 2.
- Iron ore’s feeling the chill as winter approaches in China. The raw material is in retreat amid gathering concern that the unprecedented curbs on steelmakers’ output in the months ahead will hurt demand in the biggest producer just as miners add cargoes. In China, futures fell for a fifth day to post the longest losing run since August 2016, sinking 5.6 percent on the Dalian Commodity Exchange to the lowest close since June.
- Ireland’s government could seek to delay Brexit talks moving ahead unless it wins guarantees that no border on the island of Ireland will be reimposed, the nation’s foreign minister suggested. Irish authorities are keen to use their leverage in the first part of the negotiations to extract maximum concessions on the border issue, three people familiar with the matter said. That could mean turning U.K. and EU aspirations to avoid a hard border into a concrete commitment following Brexit, the people said.
- Investors continued to show an appetite for U.S. equities on tax reform expectations yet turned cautious on emerging-market assets as Treasury yields rose, according to Bank of America Merrill Lynch, citing EPFR Global fund flow data. They poured $6.1 billion into funds tracking U.S. stocks in the week to Oct. 25, the bank said in a research report, the second “chunky” week of inflows. U.S. stock portfolios have posted $13.4 billion of inflows in the past four weeks.
- Clariant AG and Huntsman Corp. called off their planned merger to create a transatlantic industrial chemical company, handing a victory to an activist investor that rallied other shareholders to oppose the deal. An investor group called White Tale Holdings built a stake of more than 20 percent in Clariant, and some other shareholders joined the firm in opposing the deal, leaving it unclear whether the company could get the two-thirds support for the tie-up to go through, Huntsman and Clariant said Friday in a joint statement. The deal would have created a company with a value of about $20 billion including net debt, and with annual sales of about $13.2 billion.
- Razer Inc., the gaming device maker backed by Intel Capital Corp., has set the terms for a Hong Kong initial public offering that could raise as much as $545 million, according to people with knowledge of the matter. Shares of the California-based company will be offered at HK$2.93 to HK$4.00 apiece, the people said, asking not to be identified because the information is private. The price range implies a post-offering market value of $3.3 billion to $4.5 billion, according to the people.
- Russia’s central bank reduced borrowing costs for a fifth time this year, decelerating the pace of monetary easing in an acknowledgment that an unprecedented period of disinflation may be coming to a close. The one-week auction rate was lowered to 8.25 percent from 8.5 percent, following a cut of half a percentage point last month, according to a statement on Friday.
- WeWork Cos., the $20 billion shared-office business, is in exclusive talks to buy a 12-building campus in the City of London financial district from Blackstone Group LP, two people with knowledge of the plan said. New York-based WeWork has agreed to pay more than 600 million pounds ($785 million) for Devonshire Square, a group of former warehouses close to Liverpool Street rail station, the people said, asking not to be identified as the deal is not yet signed.
*All sources from Bloomberg unless otherwise specified