September 14th, 2017


Daily Market Commentary


Canadian Headlines

  • A Canadian marijuana producer is forging ahead with a U.S. expansion, despite being caught in the cross hairs of a regulatory review weighing the validity of company investments south of the border where the drug is illegal federally. Aphria Inc. has applied for a license to cultivate medical marijuana in Ohio and also plans to apply to process and distribute the drug in the Midwestern state, said Chief Executive Officer Vic Neufeld.
  • Canadian natural gas, locked in a fierce battle for market share with U.S. shale, may stage a modest recovery as output from some longtime producers wanes and pipeline maintenance ends. While Canadian gas will almost always trade for less than U.S. gas — due mostly to the cost of moving the fuel to markets in Texas and the American Midwest — the discount recently widened to the most since 2005.
  • Canadian stocks fell despite a surge in crude prices that lifted energy shares to their biggest gain since July, as falling copper prices weighed on materials shares. The S&P/TSX Composite Index fell 17 points or 0.1 percent to 15,126.81. Materials saw the the biggest decline, tumbling 1.8 percent as copper prices also lost 1.8 percent amid rising stockpiles.



World Headlines

  • Asia’s benchmark stock index, which has outperformed the U.S., held close to its highest level since December 2007 ahead of American inflation data later Thursday. The MSCI Asia Pacific Index fell 0.1 percent to 162.57 as of 5:47 p.m. in Hong Kong, dragged by materials and telecom stocks. China’s Shanghai Composite Index closed lower after industrial output and retail reports suggested an unexpectedly slower pace of growth in the world’s second-biggest economy, while Japan stocks erased early gains.
  • The cost of rolling Euro Stoxx 50 futures expiring this week to the next maturity appears cheap relative to their fair roll, while it’s rich for CAC 40 contracts, according to Bloomberg calculations adjusting for interest rates and dividends. Euro Stoxx 50 futures roll of 15 compares with 15.8 fair roll. Open interest of contracts expiring this week is ~1.81m vs ~2.26m for next maturity
  • Oil traded near a five-week high after the International Energy Agency and OPEC boosted their forecasts for crude demand. Futures were steady in New York after rising 3.8 percent in the previous three sessions.
  • Gold holds drop on strong dollar and record U.S. equities. Bullion for immediate delivery little changed at $1,323.22/oz by 9:56am in London. Gold -0.7% Wednesday with Bloomberg Dollar Spot Index +0.4%, lifted by slight increase in expectations for further U.S. tightening and President Trump’s push for bipartisan support on tax reform
  • North Korea threatened to use a nuclear weapon against Japan and turn the U.S. into “ashes and darkness” for passing fresh United Nations sanctions earlier this week — fiery rhetoric that is likely to exacerbate tensions in North Asia.
  • Apple Inc. is playing the role of kingmaker in the contentious battle for Toshiba Corp.’s memory chips business. The iPhone maker is in talks to provide about $3 billion in capital for Bain Capital’s bid for the unit, adding to financial support from Dell Inc., Seagate Technology Plc and SK Hynix Inc., according to people familiar with the matter.
  • While the national spotlight has largely focused on the battles involving Keystone XL and Dakota Access, another pipeline clash is emerging in middle America. And this time it’s just a replacement line. Enbridge Inc.’s $2.9 billion Line 3 renewal project faces an uncertain regulatory path in Minnesota after the state’s commerce department said it wasn’t needed, and held no benefit for the state. In it’s statement, the agency cited an independent analysis showing refineries aren’t running short of crude.
  • The Bank of England’s Monetary Policy Committee is grappling with a familiar trade-off and something might have to give soon. The U.K.’s inflation rate is on the rise again — nearing a five-year high last month — while wage growth remains stubbornly low, hurting consumers. That’s sharpening the dilemma Governor Mark Carney and fellow policy makers face as they try to assess whether they need to begin unwinding some of the Brexit stimulus they put in place last year.
  • Saudi Arabia is preparing contingency plans for a possible delay to the initial public offering of its state-owned oil company by a few months into 2019, according to people familiar with the matter. While the government is still aiming for a Saudi Aramco IPO in the second half of next year, that timetable is increasingly tight for what’s likely to be the biggest share sale in history.
  • European car sales growth accelerated in August as an expanding economy encouraged purchases and French manufacturers PSA Groupand Renault SA won buyers with new SUVs and hatchbacks. Registrations jumped 5.5 percent to 903,143 vehicles from 855,689 a year earlier, the European Automobile Manufacturers’ Association, or ACEA, said Thursday in a statement. That was faster than the 2.1 percent increase posted in June and 2.6 percent in July. Eight-month sales increased 4.4 percent to 10.6 million autos.
  • Australian employment growth is now outpacing the U.S. after hiring surged more than twice as much as expected in August. The jobless rate Down Under held steady as more people looked for work. Employment jumped by 54,200 in August, the 11th straight month of gains and longest streak in 23 years. Jobless rate held at 5.6%, matching estimates and limiting wage and price pressures in a labor market still with plenty of spare capacity
  • Rupert Murdoch faces months of fresh scrutiny over how he runs his media empire as U.K. authorities embark on a wider probe of21st Century Fox Inc.’s 11.7 billion-pound ($15.5 billion) pursuit of pay-TV company Sky Plc. Culture Secretary Karen Bradley on Thursday said she has made a final decision to ask the nation’s competition regulator to investigate Fox’s commitment to broadcasting standards and whether its takeover of London-based Sky would give the Murdoch family too much sway in the country’s media.
  • Tiny Baltic states are picking up slack in wheat amid faltering export power at some of their bigger neighbors. Lithuania, Latvia and Estonia, some of the smallest producers, are heading for the second-biggest combined wheat harvest in at least two decades. That’s opening up an opportunity for them to take business usually dominated by major producers, such as Germany and Poland, which are battling a poor quality crop this year.
  • President Donald Trump blocked a Chinese-backed investor from buying Lattice Semiconductor Corp., casting a cloud over Chinese deals seeking U.S. security clearance and spurring a call for fairness from Beijing. It was just the fourth time in a quarter century that a U.S. president has ordered a foreign takeover of an American firm stopped on national-security concerns.
  • Eastern European arms exporters are capitalizing on years of turmoil in the Middle East. Makers of bullets, assault rifles and guided missiles in countries including Bulgaria and the Czech Republic have seen demand surge as conflicts swept across the region in the wake of the Arab Spring. As well as selling weapons to nations actively involved in fighting, such as Iraq and Saudi Arabia, they’ve also struck deals with the U.S. and other third parties.
  • Ukraine’s central bank left borrowing costs unchanged for a third meeting as faster-than-expected inflation prevents it from trying to rescue fading economic growth. The National Bank of Ukraine kept its key policy rate at 12.5 percent, according to a statement Thursday.
  • Congressional tax writers want to offer U.S. companies an “unprecedented” way to slash their tax bills by investing in new equipment. But firms that stand to benefit most are saying no thanks, just give every company a bigger rate cut. A lobbying group for companies including AT&T Inc., Verizon Communications Inc. and Intel Corp. — all of which were among the biggest spenders on equipment and facilities over the past 12 months — says a major cut to the current 35 percent corporate tax rate is the better way to drive economic growth.
  • After years of maintaining that inflation expectations were stable and solidly grounded, Fed policy makers are starting to recognize a small but worrying softening in the outlook that consumers, businesses and investors have for prices.
  • JBS SA, the world’s largest meat producer, is accelerating internal discussions about who will be its next chief executive officer after its current boss was arrested by Brazilian police investigating insider-trading allegations. Potential candidates include Andre Nogueira, the CEO of JBS USA; Gilberto Tomazoni, the global head of operations; and Tarek Farahat, the JBS chairman, the people said. Brazilian media has speculated that Jose Batista Jr., the oldest of the three Batista brothers, could also be a contender.
  • ZhongAn Online P&C Insurance Co. has set tentative terms for a Hong Kong initial public offering that could raise as much as $1.5 billion, people with knowledge of the matter said, as it pursues the city’s first major fintech listing.
  • For all the weak spots in India’s economy, investor love for the nation’s offshore bonds endures. Companies have sold $10.6 billion of dollar debt so far in 2017, the most in three years, as one of the highest returns in Asia and prospects of a sovereign-rating upgrade prompt buyers to ignore data showing gross domestic product in the June quarter expanded at the slowest pace since 2014.



*All sources from Bloomberg unless otherwise specified