September 13th, 2018

Daily Market Commentary

Canadian Headlines

  • A unit of Ontario Municipal Employees Retirement System sweetened its bid for Australian property company Investa Office Fund to A$3.35 billion ($2.4 billion), escalating a bidding war with Blackstone Group LP. The Canadian pension fund’s Oxford Properties Group real estate unit raised its bid to A$5.60 a share, topping Blackstone’s latest A$5.52 offer, according to a statement Thursday. Investa Office shares were unchanged at A$5.54 at 3:10 p.m. in Sydney.

World Headlines

  • Stoxx Europe 600 erased gains of as much as 0.3% as Turkish lira slides after country’s President Recep Tayyip Erdogan attacked central bank for continuously missing inflation targets just hours before rate decision.
  • U.S. equity futures rose with European stocks and Asian shares ended the longest losing streak in 16 years on the prospect of fresh trade negotiations between the world’s two biggest economies. The euro was flat before a rate decision, the pound climbed as the Bank of England kept borrowing costs unchanged, and Turkey’s lira surged as the country’s central bank raised interest rates.
  • Asian shares rose, with a regional benchmark poised to snap its longest losing streak in 16 years, on a report that the U.S. has asked China to resume trade talks. The MSCI Asia Pacific Index rose 0.9 percent to 160.26 as of 4:28 p.m. in Hong Kong, as telecommunications and energy stocks led gains. The U.S. proposed to hold another round of trade negotiations with Beijing, just days after President Donald Trump threatened to slap tariffs on nearly all goods from China.
  • Oil retreated from the highest close in almost two months on signs global markets remain comfortably supplied despite deepening losses in Venezuela and Iran. West Texas Intermediate futures fell as much as 1.9 percent amid speculation the 4.2 percent surge in the past two sessions wasn’t justified. While government data showed U.S. crude stockpiles tumbled last week, inventories of fuels like gasoline and distillates jumped. That’s overshadowing a warning from the International Energy Agency that prices may climb as American sanctions hit Iranian exports and Venezuela’s economy unravels.
  • Gold little changed on busy day of central bank meetings. Platinum rises for a fourth day, longest streak since late July.
  • The U.S. and Chinese governments are working out the details for a new round of trade talks, raising hope that the two sides may be able to ease tensions and avoid further escalation of Donald Trump’s trade war. China has received an invitation and is working on the details with the U.S., commerce ministry spokesman Gao Feng said at regular briefing in Beijing Thursday. That invite was recently extended by senior officials led by Treasury Secretary Steven Mnuchin, according to three people familiar with the matter, who spoke on condition of anonymity.
  • Poland’s Ostroleka power plant project will be in the black in every market scenario, one of its investors told analysts on Wednesday, seeking to allay concerns over profitability. State-controlled Energa SA, which together with Enea SA is planning the 6-billion zloty ($1.6 billion) coal-powered plant in Ostroleka, “declared that, according to its sensitivity analysis, the future Ebitda of this unit will not fall short of 300 million zloty in any market scenario,” Kamil Kliszcz, an analyst at MBank SA, who took part in the presentation, wrote in a note. Energa didn’t give any detailed assumptions, he added.
  • Apple Inc.’s introduction of its latest iPhones on Wednesday was largely in line with analyst expectations. The new product lineup, which offers higher average selling prices and dual-sim card support, may fuel stronger sales and profitability next year, they said. Apple shares gained 0.2 percent in pre-market trading in New York Thursday, retracing some of the 1.2 percent decline in the stock Wednesday following its event. Some of Apple’s Asian suppliers fell following the event. Japan’s Alps Electric Co. closed 4.8 percent lower, TDK Corp. slipped 3.9 percent and Hon Hai Precision Industry Co. dropped 1.3 percent.
  • Meituan Dianping raised about $4.2 billion after the Chinese food review and delivery giant priced its Hong Kong initial public offering near the top of a marketed range, according to people with knowledge of the matter. China’s second largest tech startup priced its sale of 480.27 million new Class B shares at HK$69 apiece, the people said, asking not to be identified because the information is private. That price tag, compared with an offer range of HK$60 to HK$72, values Meituan at roughly $48 billion, according to Bloomberg’s calculations.
  • General Electric Co. plans to sell MRA Systems, which makes aircraft engine components, to Singapore Technologies Engineering Ltd. for a net $440 million, in what is poised to be the biggest acquisition by the Singaporean company. The all-cash purchase is expected to close by the first quarter of 2019, pending regulatory approvals, ST Engineering said in a stock exchange statement Thursday. The deal value is the net amount the Singapore-based company would pay GE. Adjustments including underfunded pension payments will boost the size to $630 million, ST Engineering said.
  • Toyota Motor Corp. is preparing to divulge details of the hybrid-car engine technology it pioneered with the Prius to China in an attempt to catch up with rivals in the world’s biggest auto market. Chinese officials asked Toyota to share its gasoline-electric technology to help local companies meet stricter emissions targets, people familiar with the matter said, asking not to be named because the talks are private. Seeing this as a chance to make inroads in China, Toyota has engaged in advanced talks to license its hybrid system to Chinese carmaker Geely Automobile Holdings Ltd., two of the people said.
  • China agreed to extend a $5 billion credit line to cash-strapped Venezuela, the country’s finance minister said, as President Nicolas Maduro headed to Beijing. Venezuelan Finance Minister Simon Zerpa told Bloomberg News on Thursday that the country would pay back the loan with either cash or oil. The countries were expected to sign what Zerpa described as a strategic alliance on gold mining.
  • From Washington to Rome, the world faces a gauntlet of political risks in the months ahead — and that could mean a looming headache for policy makers in China, according to CLSA. A fresh blast of market stress could push the Asian country’s currency past levels against the U.S. dollar at which officials have previously been forced to intervene, reckons Chris Wood, chief equity strategist at the brokerage and investment firm. As America prepares for mid-term elections and a budget battle rages in Italy, potential catalysts aren’t hard to find.
  • The U.K.’s competition regulator is to investigate CME Group Inc.’s 3.9 billion pound ($5.1 billion) acquisition of billionaire Michael Spencer’s NEX Group Plc, potentially delaying the transaction. The Competition and Markets Authority is considering whether the transaction will result in a substantial lessening of competition, according to a statement.
  • After 12 years of ownership that included a bankruptcy and an abandoned merger, Apollo Global Management LLC finally found a home for U.S. chemical maker MPM Holdings Inc. KCC Corp., a South Korean paintmaker that counts Hyundai Motor Co. among its customers, led a consortium of buyers for the sealants and adhesives supplier known as Momentive in a deal valued at $3.1 billion, according to a joint statement on Thursday. Apollo acquired the asset from General Electric Co. in 2006 in a deal valued at about $3.8 billion.
  • As railroads across the nation race to complete a congressional deadline for installing safety technology, Amtrak is threatening to substitute buses for trains on lines that lack the equipment, triggering a furious response from the mostly rural areas. Amtrak says it’s just one measure being considered as it seeks assurances that local governments will help fund needed improvements. Local officials and U.S. lawmakers from Kansas, Colorado and New Mexico said such a move would be devastating to their communities.
  • Morgan Stanley plans to offer trading in complex derivatives tied to the largest cryptocurrency, according to a person familiar with the matter, joining other Wall Street firms in creating ways for clients to play the digital currency market. The U.S. bank will deal in contracts that give investors synthetic exposure to the performance of Bitcoin, said the person, who asked not to be identified because the information is private. Investors will be able to go long or short using the so-called price return swaps, and Morgan Stanley will charge a spread for each transaction, the person said.


*All sources from Bloomberg unless otherwise specified