September 11th, 2017

 

Daily Market Commentary

 

Canadian Headlines

• Canada’s sovereign active yield curve flattened in the week ending Sept. 8, more so than in fiscal 4Q ending Oct. 31 and similar to the U.S. Treasury curve. The curve is 57 bps flatter in the five- to 30-year tenors since the end of 2016, but 25 bps steeper in the three-month to one-year tenors. The flattening yield curve, particularly between one- and 10-year rates, continues to pressure Canadian banks’ net interest margin and interest income.
• Alamos to Buy Richmont Mines for 1.385 Shrs Per Richmont Share. Alamos Gold says Richmont shares will be exchanged on the basis of 1.385 Alamos common shares for each Richmont common share, for an implied consideration of C$14.20 per Richmont common share based on Sept 8 close.

 

 

World Headlines

• Reinsurers jumped in European stock markets amid signs that payouts for damage caused by Hurricane Irma will be lower than expected after the hurricane weakened and the most dire predictions proved wrong. Firms including Swiss Re and Munich Re were among the biggest gainers on theStoxx 600 Insurance Price Index on Monday, gaining the most in more than a year.
• Options to protect against volatility in U.S. financial shares have become the most expensive since January relative to the broader market. With a 2.7 percent decline in the Financial Select Sector SPDR Fund last week, one-month implied volatility on the exchange-traded fund rallied 26 percent, the most among industry groups. Options volume increased as investors sought to hedge on speculation the Federal Reserve may hold off increasing rates.
• Most Asian markets rallied after the perceived threat of a North Korean missile test at the weekend failed to materialize. The MSCI Asia Pacific Index gained 0.6 percent as to 162.53 as of 5:09 p.m. Hong Kong time, holding at its highest level since December 2007. Japan’s Topix had its steepest increase in more than three months as the yen weakened against the U.S. dollar. Hong Kong shares also advanced, with 40 of 50 Hang Seng Index members rising.
• Oil rose as Hurricane Irma weakened after hitting Florida, while Gulf Coast refining continued to recover following storm Harvey. Futures added 0.5 percent in New York after falling 3.3 percent on Friday.
• Gold declines as dollar recovers, concerns recede over extent of economic damage from Hurricane Irma. Traders also monitoring developments around N. Korea as United Nations prepares to vote on tougher sanctions. Bullion for immediate delivery -0.6% to $1,338.83/oz at 10:40am in London. Metal +1.6% last week, touched highest since August 2016 at $1,357.61/oz on Friday.
• Hurricane Irma weakened as it moved past Tampa, leaving in its wake at least 4.7 million without power and millions temporarily displaced. Enki Research’s estimate for total damages dropped to $49 billion from $200 billion earlier.
• Prime Minister Theresa May’s U.K. government is set to rally just enough lawmakers to back a key piece of Brexit legislation that will then face higher obstacles before it can become law. Support from Northern Ireland’s Democratic Unionist Party and a lack of opposition within her Conservative Party mean May will likely squeak to victory on a bill designed to allow her government to copy European Union law onto the domestic statute book. Once enshrined, the laws can be edited after Britainleaves the bloc in 2019.
• Teva Pharmaceutical Industries Ltd. named H. Lundbeck A/S’s Kaare Schultz as its new chief executive officer, ending a seven-month search for a new leader to revive sales and reduce debt at the world’s largest maker of generic drugs.
• China will set a deadline for automakers to end sales of fossil-fuel-powered vehicles, becoming the biggest market to do so in a move that will accelerate the push into the electric car market led by companies including BYD Co. and BAIC Motor Corp. The world’s second-biggest economy, which has vowed to cap its carbon emissions by 2030 and curb worsening air pollution, is the latest to join countries such as the U.K. and France seeking to phase out vehicles using gasoline and diesel.
• The U.S. has watered down a proposal to punish North Korea for its sixth and most powerful nuclear test, omitting an oil embargo and a freeze of Kim Jong Un’s assets, according to a European diplomat. While the U.S., U.K. and France are united on the latest proposal, it’s unclear whether Russia and China — the other veto-holding members of the United Nations Security Council — will back the text as it stands, said the diplomat, who asked not to be identified because the discussions are private.
• Japan will sell about 1.3 trillion yen ($12 billion) of shares in Japan Post Holdings Co., the country’s biggest public offering this century, as the government continues its privatization of the postal and financial-services giant.
• IndusInd Bank Ltd., the Indian lender pursuing a takeover of Bharat Financial Inclusion Ltd., is negotiating a potential deal valuing the microfinance provider at about $2.2 billion, according to people with knowledge of the matter. IndusInd, backed by the billionaire Hinduja brothers, is discussing a valuation of around 1,040 rupees per Bharat Financial share, according to the people. That price would represent an 11.3 percent premium to Bharat Financial’s Friday close, data compiled by Bloomberg show.
• European Central Bank Executive Board member Benoit Coeurewarned that the rising euro could depress inflation unless it’s offset by a strengthening economy, bolstering the case for keeping monetary policy loose for an extended period. The euro’s surge has become an additional headache for the ECB as policy makers try to determine the future of their bond-buying program, which is currently scheduled to expire by the end of this year.
• Italian industrial output unexpectedly increased in July, adding to signs the country’s economy may expand this year at a faster pace than previously estimated. Production gained 0.1 percent from June, when it rose 1.1 percent, statistics agency Istat said Monday in Rome. The median estimate in a Bloomberg survey of 19 analysts called for a 0.4 percent drop. On an annual, workday adjusted basis, industrial output was up 4.4 percent in July.
• Iran has received nearly two snap nuclear inspections a month and almost double the overall number of visits it had just five years ago, indicating the value of the deal the U.S. and its allies reached in 2015 to rein in the country’s nuclear program. The future of the deal has been under threat since U.S. President Donald Trumptook office. He pledged to tear up the agreement in his election campaign, and his United Nations envoy Nikki Haley last week questioned what the U.S. gets out of it.
• Investors added $1.8 billion to exchange-traded funds that buy emerging market stocks and bonds, the most since June, in a third straight week of inflows. Deposits into U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $1.79 billion in the week ended Sept. 8, compared with $913.8 million in the previous period, according to data compiled by Bloomberg.

 

 

*All sources from Bloomberg unless otherwise specified