October 5th, 2018

Daily Market Commentary

Canadian Headlines

  • Precision Drilling is offering 0.445 shares to Trinidad Drilling shareholder for each issued & outstanding share. Total consideration comprises about C$540 million in Precision shares plus assumption of C$477 million in Trinidad debt. Combined entity will have enterprise value of about C$4 billion & operate under Precision name
  • Canadian crude plunged to a record low relative to U.S. crude, hurt by reduced capacity at American refineries and a jump in production from new oil-sands megaprojects that has overwhelmed the nation’s pipeline system.



World Headlines

  • Stocks in Europe fell and U.S. equity-index futures painted a mixed picture as Treasury yields resumed their upward march, rounding out a tough week in which a rout in technology shares roiled Asian equity markets. The dollar was steady ahead of the American payrolls report.
  • Gold heads for a weekly advance ahead of U.S. jobs data, in a surprisingly resilient showing given gains in the dollar and a surge in bond yields.
  • West Texas Intermediate futures in New York are set for a fourth weekly gain — the longest winning streak since January — yet they’re trading near the biggest discount in almost four months to global benchmark Brent crude in London.
  • Copper led declines among base metals amid a broader European decline after Asian stocks dropped. Miners were among the biggest losers in the Stoxx Europe 600 Index with copper producers KAZ Minerals Plc and Antofagasta Plc falling more than 5 percent.
  • An escalating face-off between the world’s two largest economies has caught Asian technology shares in the middle, hammering those with the most at stake. The MSCI AC Asia Pacific Infotech Index hit the lowest since July 2017 on Friday as investors digested a Bloomberg News report that Beijing had hacked American computer networks using a microchip built by its spies.
  • The U.S. labor market was at its most robust in decades until Hurricane Florence landed. Now, ahead of the Labor Department’s September jobs report due at 8:30 a.m. Friday in Washington, the question on economists’ minds is just how much the storm affected payrolls, wages and hours worked. They all agree that any weather-related distortions will prove temporary, one reason the initial results — should they be weak — won’t be taken as the most accurate signal of the employment picture.
  • The White House national security adviser said Chinese cyber attacks on the U.S. validate the Trump administration’s emphasis on offensive cyber operations of its own, after Bloomberg News reported that Beijing had hacked American computer networks using a microchip built by its spies. Separately, two Democratic lawmakers said the report shows the risk of Chinese cyber-espionage to U.S. companies and the government.
  • Another day, another tweet storm from Elon Musk that has the potential to cause major problems for Tesla Inc. Musk, with 22.8 million followers on Twitter, went into overdrive with about 15 tweets targeting the Securities and Exchange Commission and short sellers within five hours. Less than a week after settling a lawsuit with the SEC, he mocked the institution by referring to it as the “Shortseller Enrichment Commission” while also calling for short-selling to be outlawed.
  • Over the last decade, the challenge for mortgage bankers at U.S. lenders has been keeping up with the flood of refinancing applications. Now, it’s staying employed. Higher mortgage rates have sapped borrowers’ incentive to refinance debt and are starting to weigh on new-home buyers. With the Federal Reserve indicating that more rate hikes are coming, banks have responded with cuts across their mortgage departments.
  • Cable companies have begun offering mobile phone service — a trend that could ease the way for T-Mobile US Inc. and Sprint Corp. to merge. That’s because regulators are more likely to approve the deal if they conclude there will still be sufficient competition if the  third and fourth biggest mobile providers combine.
  • Honda Motor Co. and Waymo, the self-driving car unit of Alphabet Inc., were nearing a deal to jointly develop autonomous vehicles earlier this year when the Japanese company walked away, according to people familiar with the matter.
  • European and U.K. officials struck an upbeat tone on Friday about the prospect of getting a Brexit deal in the next few weeks, as European Commission President Jean-Claude Juncker said negotiators were working “day and night” to clinch it.
  • The yield on U.K. government bonds climbed to the highest in more than two years amid growing optimism that a Brexit deal will be reached.
  • Bond yields may be rising in Europe, but that’s not helping the region’s banks. Typically, euro-zone lenders’ relative performance moves in tandem with yields, since higher rates are good for profitability, but the two have decoupled lately. While that’s because concerns over Italy’s budget and emerging markets are weighing on the sector, the divergence from yields suggests room for outperformance later, according to Credit Suisse.
  • The U.S. Senate is closing in on sending Brett Kavanaugh to the Supreme Court, which would seal a conservative majority and close a bitterly fought confirmation process that hinged on allegations of sexual misconduct. The Senate on Friday morning will take a procedural vote that will determine if he has enough support for approval. If it goes in Kavanaugh’s favor, that would all but ensure he’ll be seated on the court, just a week after his prospects were in doubt. On Saturday afternoon, the chamber would hold a final vote.
  • Costco Wholesale Corp.’s information-technology problem, which roiled its bookkeeping and sent the stock tumbling on Thursday, was tied to workers getting access to financial data after they should have been cut off.


*All sources from Bloomberg unless otherwise specified