October 4th, 2018

Daily Market Commentary

Canadian Headlines

·         Canadian stocks gained, alongside U.S. stocks which rose toward records after upbeat private jobs data bolstered confidence. Shares in Europe recovered on news that the Italian government may rein in spending.

·         A miner died after being trapped by a seat discharge chute at First Quantum Minerals Ltd.’s Sentinel Mine in Zambia on Tuesday, the Zambia Daily Mail reported.

·         Tilray Inc., the world’s largest publicly traded marijuana company, is seeking to raise $400 million to expand its coffers through a private placement of convertible bonds. Nanaimo, British Columbia-based Tilray, which has a valuation of about $15 billion, is planning to use the proceeds for working capital, future acquisitions and to repay the $9.1 million existing mortgage on its BC production facility, the company said Wednesday in a statement. The interest rate on the senior notes, due 2023, will be determined at the time of pricing and will be convertible into cash, shares or a combination of cash and shares, the company said.

·         Canada’s farmers say that a government pledge to cover dairy losses from a new trade deal struck with the U.S. will probably fall short of what they need. The pact, which also includes Mexico, will give the U.S. greater access to Canada’s protected dairy market, eliminate the nation’s new milk-pricing system and restrict the sector’s ability to export. While Prime Minister Justin Trudeau has promised to compensate farmers to cushion the blow, industry groups say past experience has shown that aid packages amount to a “pittance,” and the government won’t be able to cover the financial hit the industry is poised to take.



World Headlines

·         Asian equities and currencies sank as a spike in U.S. Treasury yields to levels unseen since 2011 tests investors’ nerves.

·         European equities declined as investors weighed their stock allocations amid surging U.S. Treasury yields and consumer shares paced the drop. The Stoxx Europe 600 Index fell 0.5 percent. LVMH retreated 1.7 percent and Unilever declined 1.5 percent. Oil stocks advanced, with Total and BP adding at least 0.8 percent, as Brent oil traded near $86 a barrel.

·         S&P futures hold declines after Bloomberg Businessweek reported that China used a tiny chip in a hack that reached U.S. companies including Amazon and Apple.

·         European bonds slid after Treasuries dropped as investors priced in a faster pace of U.S. interest-rate hikes. German bunds led declines in the euro area, with 10-year yields rising to a one-week high, while those on U.K. gilts approached the highest level in more than two-and-a-half years. Treasury yields climbed to the highest since 2011 after Federal Reserve Chair Jerome Powell said Wednesday interest rates may go past a long-term neutral level seen at 3 percent.

·         Oil traded near a four-year high as the U.S. urged OPEC to raise production amid growing alarm that American sanctions against Iran will squeeze global markets.

·         The U.S. State Department took the unusual step of issuing a statement on Wednesday asking the cartel to boost production by tapping the supply buffer it maintains in case of unexpected disruptions. It even gave a figure for how much more the group could pump — 1.4 million barrels a day. If the Organization of Petroleum Exporting Countries were to fill this request — and Saudi Energy Minister Khalid Al-Falih said on Thursday that it could — the oil market would be in uncharted territory. Even during the worst crises of the past two decades, including the U.S. invasion of Iraq and Libya’s civil war, the cartel has never been forced to pump flat out.

·         Gold is edging higher today after closing above the 50-dma mark earlier this week, adding to optimism that the yellow metal may be turning a corner following a six-month slide. A near-term, upside catalyst could come from India, the world’s second-biggest gold consumer.

·         The White House expressed confidence that nothing in a supplemental FBI investigation prompted by sexual misconduct allegations against Brett Kavanaugh would derail the Supreme Court nominee, as Senate Republicans press ahead with plans for a Friday test vote.

·         There’s a powerful person in Washington besides the president who can barely contain his enthusiasm for the U.S. economy. It’s the man Donald Trump appointed to head the Federal Reserve and whom he’s attacked for raising interest rates: Jerome Powell. In what Fed watchers say was unprecedented four public appearances over the past week, Powell repeatedly lauded the economy’s performance, calling it “remarkably positive,” “extraordinary” and “particularly bright.” And he said he expected the good times to continue.

·         Eli Lilly & Co. said an experimental diabetes medicine helped cut patients’ weight and blood-sugar levels in a study, spurring the U.S. drugmaker to consider its potential in related ailments such as obesity. The drug showed an average reduction of as much as 12.7 percent in weight and up to 2.4 percent in blood sugar in the midstage research, Lilly said in a statement Thursday. Shares of rival Novo Nordisk A/S fell as much as 7.2 percent in Copenhagen trading, the most since February, after the results were released.

·         Greece is weighing a plan to help banks speed up their bad-loan disposals, possibly including a government guarantee, in a bid to restore confidence in the battered sector, people familiar with the matter said. While the details are still being worked out, an asset protection plan would see lenders unload some bad loans into special purpose vehicles, taking them off banks’ balance sheets. The SPVs would issue bonds, some guaranteed by the state, and sell them to investors, the people said, asking not to be named as the information isn’t public.

·         Russia “almost certainly” hacked the U.S. Democratic National Committee’s 2016 presidential campaign, the U.K. said, blaming the Kremlin for a spate of “reckless and indiscriminate” cyber attacks in recent years. The evidence from the U.K.’s National Cyber Security Centre could feed into Special Prosecutor Robert Mueller’s investigation into Russian interference in the 2016 U.S. election and alleged cooperation by Donald Trump’s campaign.

·         Environmental groups are linking a second Duke Energy Corp. coal-ash site to arsenic pollution in North Carolina rivers after the facilities were flooded by Hurricane Florence. A water sample from the Cape Fear River near Duke’s Sutton power plant in Wilmington contained 710 micrograms of arsenic per liter, Waterkeeper Alliance said in a statement Wednesday. The state standard for drinking water supply and fish consumption is 10 micrograms.

·         American Tire Distributors Inc., buffeted by the defection of two big manufacturers, is filing for Chapter 11 bankruptcy in Delaware after reaching a deal with most of its bondholders to reduce its debt by about $1.1 billion.

·         Danske Bank A/S said the U.S. has started an investigation into a money laundering case involving Denmark’s biggest bank that has already toppled its chief executive officer and triggered numerous other probes.

·         Prime Minister Theresa May’s officials are drawing up plans to rush her Brexit deal through Parliament in an attempt to head off a rebellion from her own party, according to people familiar with the matter.


*All sources from Bloomberg unless otherwise specified