September 26th, 2019

Daily Market Commentary

Canadian Headlines

  • Canadian stocks fell for a third session as gold declined and the U.S. dollar strengthened amid signs of easing trade tension between U.S. and China. Even Shopify’s bounce back after an eight-day loss couldn’t help the index eke out a gain. The S&P/TSX Composite Index was down 0.08 % to 16,784. The MSCI AC Americas Index advanced 0.6%. Materials stocks led the market lower, as 5 of 10 sectors fell. Barrick Gold contributed the most to the index decline, falling 3.4%. Eldorado Gold had the largest drop, falling 8.1%. Shopify provided the biggest boost to the index and had the largest gain, advancing 6.9%. Meanwhile, Fairfax Financial Holdings Ltd.’s Prem Watsa lost more than C$160 million ($121 million) just in his top five listed Canadian investments, according to the latest filings compiled by Bloomberg on Tuesday. BlackBerry’s abysmal fiscal second-quarter earnings, which saw one of its staunchest bulls join the bear camp, was the prime offender. The stock fell 23% on Tuesday and extended declines Wednesday to the lowest in six years.
  • The founder of software company Lightspeed POS Inc. has made it easy to check progress in his mission to create Canada’s next great technology company. Beneath the vaulted ceilings of a converted rail hotel in Montreal, Dax Dasilva has hung screens showing minute-by-minute information on everything from website views to new customers. The fixation on data has led to one of North America’s most successful initial public offerings this year. Now the pressure is on for Dasilva to keep the momentum going. That’s no easy feat when you have shareholders with different priorities.

World Headlines

  • A wave of green swept over European shares on Thursday, following overnight gains on Wall Street, with utilities and construction companies among the best performers. The Stoxx Europe 600 Index rose 0.7% as of 10:14 a.m. in London, with all 19 industry groups advancing. Shares are rebounding after political risks in the U.S. and the U.K. weighed on stocks on Wednesday.
  • U.S. equity futures edged higher with Asian stocks on Thursday while European shares jumped as investors awaited the next developments in a week dominated by political dramas and a lack of clarity over trade. In a sign of the mixed sentiment, Treasuries also climbed, continuing a choppy few days. Contracts for the S&P 500 Index, Nasdaq 100 and Dow Jones Industrial Average all fluctuated before turning modestly higher, pointing to more gains on Wall Street after the underlying gauges rallied on Wednesday.
  • The Topix index rose, though closed off its intrady high, bolstered by positive sentiment surrounding the prospects of U.S. trade deals with China and Japan. Automakers provided the biggest boosts to the benchmark gauge. President Trump, speaking in New York, said both China and U.S. want to make a deal and there’s a “good chance” they will. Separately, Trump and Prime Minister Shinzo Abe signed the “first stage” of an initial trade pact after meeting at the United Nations General Assembly in New York, as the U.S. withdrew the threat of imposing auto tariffs on Japan for now.
  • Oil was steady as investors weighed prospects of a thaw in the U.S.-China trade war against indications Saudi Arabia is recovering quicker than expected from the biggest attacks ever on its energy industry. Futures rose 0.4% in New York after sliding 3.7% over the previous two sessions. President Donald Trump said Wednesday that a deal with Beijing could happen “sooner than you think,” offering a glimmer of hope for global oil demand. Saudi Arabia has boosted total production capacity to more than 11 million barrels a day, according to people with knowledge of the matter, beating its own target by about a week.
  • Gold edged higher after posting the biggest decline in almost three weeks, as investors weighed renewed optimism on trade against political tensions in the U.S. and signs of continuing slowdown in Chinese economy. Platinum and palladium also advanced amid supply concerns. The dollar’s jump on Wednesday, coupled with President Donald Trump’s comments that a deal with China could happen “sooner than you think,” sent gold tumbling. That prompted warnings from some industry watchers that prices might be close to forming a technical trading pattern that suggests more near-term weakness.
  • Boris Johnson sparked a backlash across Parliament with his attacks on opposition politicians, accusing them of “surrender” as he ratcheted up divisions over Brexit. His rhetoric will alienate the people he needs to get a divorce deal passed, but it sets up the prime minister’s strategy for a Parliament versus People election in the fall — if he can secure one.
  • Ericsson AB said it expects to pay $1 billion to resolve investigations by U.S. authorities into business ethics breaches in six countries, including China, in one of the costliest corruption cases on record. The Sweden-based telecommunications equipment maker said in a statement Thursday it has made a provision of 12 billion kronor ($1.2 billion) to cover the penalty, and this will dent third-quarter earnings. Ericsson said it can’t comment on details of the process with the U.S. Securities and Exchange Commission and Department of Justice.
  • The year keeps getting worse for Imperial Brands Plc shares, 2019’s biggest decliner among European personal and household-goods stocks, as a backlash against smoking alternatives batters the tobacco industry. The stock suffered a blow on Thursday after the company revised down its full-year revenue forecast and earnings expectations, citing a deterioration in the U.S. vaping market. That follows underwhelming results in May, when first-half sales for next-generation products missed analysts’ expectations. Imperial Brands shares have lost about a third of their value since reaching a 12-month high in November, a few days after the U.K. maker of Blu vaping devices announced additional investment in its next-generation products, which have been touted as a future driver of growth.
  • McDonald’s Corp. picked Beyond Meat Inc.’s faux-meat patties for the test of a new experimental burger in Canada, lifting the start-up’s shares. The fast-food giant said it will sell the new product, featuring a plant-based burger crafted exclusively for McDonald’s, at 28 restaurants in Ontario. Shares of Beyond Meat surged 13% in premarket trading. The new sandwich will be assessed for 12 weeks to “learn more about real-world implications of serving the P.L.T,” which stands for plant, lettuce and tomato. Rival Burger King has picked the faux-meat market’s other prominent start-up, Impossible Foods Inc., for a veggie burger in the U.S.
  • British Airways-owner IAG SA warned pilot strikes and lower ticket prices will hurt annual profit, the latest in a series of bad news for the European travel and leisure industry. Operating profit before exceptional items will be 215 million euros ($235 million) lower than 2018 on a pro forma basis, IAG said in a statement on Thursday. Full-year capacity growth is expected to be about 4%, compared with an earlier forecast of 5%. The shares fell as much as 3.5% in early trade in London, extending the decline for the year to 20%.
  • Peloton shares will debut on the Nasdaq stocks exchange Thursday after the fitness and tech company raised $1.2 billion in an initial public offering that drew solid interest from Wall Street. Peloton priced its IPO at $29 per share, hitting the top end of the $26 to $29 dollar per share range that investment banks had used to market the deal to investors, in a move that values the New York-based group at just over $8.1 billion. Goldman Sachs, Bank of America Merrill Lynch, Barclays and JPMorgan lead the deal, Peloton said.
  • Baidu Inc. is selling about a third of its stake in online travel site International Ltd., generating around $1 billion to counter a slowing economy and intensifying competition in its key advertising business. Ctrip announced Thursday a proposed secondary offering of 31.3 million American depositary shares held by Baidu. That represents around 30% of its stake in Ctrip and is equivalent to around $1 billion according to Ctrip’s current share price.
  • The yen looks set to end September as the worst-performingGroup-of-10 currency. And those betting on a turnaround by the end of the year have the weight of history against them. The fourth quarter has proved a bane for yen bulls over the last decade, with the currency weakening an average 3.6%, and falling in seven out of 10 years. JPMorgan Chase & Co. sees it slipping to as low as 110 per dollar by the year-end, which is a 2.1% drop from current levels. Strategists are bearish also because the yen’s seasonal weakness this year is coinciding with large redemptions of Japanese government bonds. With local yields near record lows, a bulk of this money is seen being reinvested in assets overseas.
  • A new money-laundering scandal, this time at Dutch lender ABN Amro Bank NV, adds yet another burden to European banks already struggling to improve profitability amid negative interest rates and lackluster economies. State-controlled ABN Amro disclosed a criminal probe over alleged failures to check on clients and report suspicious transactions, joining an ever-growing list of European lenders under investigation for similar shortcomings. The broadening scandal puts even more pressure on a European banking industry hit by negative rates, which force them to pay to park their money overnight at the European Central Bank. That’s eating into profits and forcing the lenders to pass rising costs on to customers. The probes have also exposed weaknesses in the region’s efforts to fight the flow of illicit funds and prompted calls for better regulation on a Europe-wide basis.
  • Takeda Pharmaceutical Co. is close to selling some assets in emerging markets and western Europe, people familiar with the matter said, a move that would help the Japanese drugmaker reduce its debt pile. Takeda may announce a sale of over-the-counter and prescription drugs in Latin America, the Middle East, Africa, Russia and Asia as early as in the coming weeks, the people said, asking not to be identified because the matter is private. A sale of the drugs, which Takeda acquired through its 2011 purchase of Swiss rival Nycomed, could fetch about $3 billion in total, Bloomberg News first reported in January.

*All sources from Bloomberg unless otherwise specified