September 14th, 2018

Daily Market Commentary

Canadian Headlines

  • With less than three weeks to go before the Oct. 1 election, an upstart alliance that’s pledging to reduce immigration is favored to oust the Liberal Party that’s governed the French-speaking Canadian province for all but two of the past 15 years. Coalition Avenir Quebec, the eight-year-old party led by former airline executive and education minister Francois Legault, is leading in the polls — though recent surveys show it may lack the support required to win a majority.

World Headlines

  • European equities climbed at the open as technology shares followed the U.S. rally while miners and automakers advanced on speculation of U.S.-China trade negotiations. The Stoxx Europe 600 Index added 0.3 percent, poised for a 1 percent gain this week, the biggest since July 27.
  • U.S. stock index futures point to a higher open as the week ends on optimism that trade talks with China may resume and after the efforts of the Turkish central bank to shore up the currency.
  • Asia’s benchmark equities index headed for its sharpest back-to-back gain in 19 months as most stock markets in the region gained, led by a rally in technology companies. The MSCI Asia Pacific Index rose 1.2 percent to 162.19 as of 4:28 a.m. in Hong Kong. A gauge of the region’s technology companies jumped 2.1 percent, the biggest boost to the benchmark.
  • Oil headed for a weekly gain as threats to supply in Iran and Venezuela overshadowed risks to demand, while an uncertain outlook heightened volatility. Futures in New York are on course for a 1.4 percent advance this week amid growing signs that looming U.S. sanctions are taking a toll on Iranian crude exports. Volatility headed for the biggest weekly increase since May as a warning from OPEC on the risks to demand in emerging economies was countered by the International Energy Agency’s prediction of an increasingly tight market.
  • Gold poised for first weekly gain in three as dollar weakens after investors weigh U.S. data offering mixed signals for inflation.
  • Hurricane Florence forced lumber and paper mills in the Carolinas to close temporarily as strong winds and a deluge of rain hit the coast. Major lumber and paper mills are in the Category 2 storm’s path, and producers are racing to secure equipment and sites as Florence makes landfall, said Ewell Smith, executive director of the Carolina Loggers Association. Lumber futures rebounded from a 12-month low as companies from Domtar Corp. to Canfor Corp. shut facilities that may suffer damage.
  • Mark Carney gave a stark warning of the dangers of a no-deal Brexit that could see mortgage rates raised even as economic output and house prices tumble. The Bank of England governor joined the U.K. cabinet, chaired by Prime Minister Theresa May, to share worst-case economic scenarios used by the central bank, people familiar with the matter said. He told those present that crashing out of the European Union without an agreement would lead to a fall in the pound and higher tariffs, pushing inflation higher.
  • Near-record U.S. stocks still have scope to zoom to new highs, according to Robert Shiller, the Nobel laureate who’s famed for his analysis of asset-price bubbles and who last year warned that the market was over-priced. “The stock market could get a lot higher before it comes down,” Shiller said in an interview with Bloomberg Television Thursday. “It’s highly priced, but it could get much more highly priced. It’s a risky market now.”
  • About 8,000 people in three towns near Boston were displaced after more than three dozen explosions and fires along NiSource Inc.’s natural gas network, which killed a teenager, injured at least 13 and potentially left more than 100,000 people without power. The Massachusetts State Police reported 39 incidents on the network in Lawrence, Andover and North Andover on Thursday. Some residents in Andover have been told they can return to their homes, city officials said about 12:30 a.m. local time Friday. Lawrence Mayor Dan Rivera had asked impacted residents to evacuate.
  • For days now, Super Typhoon Mangkhut has been churning across the Pacific, keeping the millions of people potentially in its path on tenterhooks. The powerful cyclone is forecast to make landfall between the Philippine provinces of Cagayan and Isabela on Saturday morning, prompting Filipinos to brace for the worst. Five years ago, Haiyan, one of the strongest typhoons ever recorded struck the country and killed more than 6,300 people.
  • China’s economic momentum weakened again in August, presenting its policy makers with a test of nerve as they prepare for a potential new round of trade talks with their U.S. counterparts. Fixed-asset investment growth in the first eight months slowed to the lowest pace since at least 1999 and infrastructure investment rose just 4.2 percent, the weakest expansion since the data series started in 2014. That indicates policies to expedite such spending are taking time to feed through, even as industrial output held up in August and retail sales quickened.
  • Hurricane Florence was on the brink of making landfall near Wrightsville Beach, North Carolina, battering the region with water and wind, threatening to unleash widespread destruction and stranding some people. The center of the Category 1 storm’s eye was “about to make landfall,” bringing maximum sustained winds of 90 miles (150 kilometers) an hour and menacing the coast with life-threatening storm surges and heavy rains. The storm was just 5 miles east of nearby Wilmington, the National Hurricane Center said in a bulletin at 7:05 a.m. local time.
  • AT&T Inc. priced its debut Kangaroo bond sale in the Australian market Friday, with the biggest issuance by a U.S. borrower so far this year Down Under. The American telecom giant sold A$1.325 billion ($954 million) of notes, in the biggest issuance by a U.S. borrower since industry rival Verizon Communications Inc. priced a A$2.2 billion deal in August of last year, according to data compiled by Bloomberg. AT&T has also sold bonds in sterling, Canadian dollars, euros and U.S. dollar over the last three months.
  • 21st Century Fox Inc. and Comcast Corp., locked for months in a takeover battle for British broadcaster Sky Plc, are now in discussions to settle the rules of engagement for the final standoff. The contest between the U.S. media giants for the London-based pay-TV company is drawing to a close. If neither drops out by Sept. 22, the companies head to an auction overseen by regulators, according to U.K. takeover rules.
  • Russia’s central bank unexpectedly raised interest rates for the first time since 2014, following its counterparts across emerging economies as inflation risks mount with a slumping currency and threats of U.S. sanctions. The benchmark was raised to 7.5 percent from 7.25 percent, according to a statement on Friday. Only two of 42 economists surveyed by Bloomberg predicted an increase, with the rest seeing no change. Policy makers said they will also “consider the necessity of further increases.” Governor Elvira Nabiullina will hold a news conference at 3 p.m. in Moscow, followed by the release of updated economic forecasts.
  • Ukraine was given a boost in its fight with Russia over a defaulted $3 billion bond after the U.K. Court of Appeal ordered a full-blown trial in the case. London judges will need to rule on Russia’s “alleged threatening behavior” in a new trial, according to appeal court judge Peter Sales. He said Friday that a lower court was wrong to throw out claims brought by Ukraine, staving off Russia’s demands that the country repay part of the debt.
  • India’s finance ministry said a 25 percent safeguard duty on solar cells and modules imported from China and Malaysia has been imposed, providing some clarity on the protectionist move that had been caught up in court battles. The tariff will be imposed in accordance with a notification originally published July 30, the finance ministry said in a document posted on its website Thursday. The development follows a decision earlier this week by India’s Supreme Court that overturned a lower court stay on the tariff.
  • Local government officials in China’s Qinghai region are planning a bailout for a cash-strapped aluminum maker that has a dollar bond maturing in less than two weeks, according to a person familiar with the matter. The Qinghai government is weighing rescue options for Qinghai Provincial Investment Group Co. that include a takeover by Qinghai State-owned Assets Investment Management Co. or a merger of the two firms, the person said, asking not to be named as they’re not authorized to talk to the media. Alternatively, Qinghai Provincial’s management and operations may be transferred for a specified period to Qinghai State-owned Assets, which would also repay the former’s debt, the person said.
  • Mining giant Glencore Plc and Japanese utilities have resumed thermal coal supply negotiations, restarting talks that fell apart earlier this year as prices hovered near a six-year high. Glencore and Japan’s Tohoku Electric Power Co. are discussing an annual supply contract starting in October at $103 to $118 a metric ton, analysts at Credit Suisse Group AG wrote in a report this week. Previous efforts to reach a deal, for supplies starting in April this year, broke down.
  • Metro AG put its struggling domestic big-box chain Real up for sale to focus on its wholesale operations, the latest step in the breakup of a German retail empire that once spanned everything from groceries to electronics. “Wholesale is our heritage and wholesale is our future,” Chief Executive Officer Olaf Koch said on a call with journalists. The company previously rejected approaches for Real, he said, but now plans to seek a buyer. Metro shares rose as much as 2.9 percent.
  • Takeda Pharmaceutical Co. is weighing the sale of a Shire Plc eye care business once its $62 billion purchase of the U.K.-listed biotech firm is completed, as it seeks ways to cut the debt raised to fund the deal, people familiar with the matter said. The Xiidra drug, used to treat dry eye disease, is among potential divestments being assessed by Takeda, according to the people, who asked not to be identified because the matter is private. Takeda has also been discussing with banks about a possible sale of Shire’s Natpara medicine, used to control low blood calcium levels related to decreased parathyroid hormone, the people said.
  • Investec Plc is spinning off its asset-management unit after a strategic review found there is little synergy with its banking and wealth and investment divisions. The stock rallied the most in nine years. Investec Asset Management, which oversees 109 billion pounds ($143 billion) across its offices in the U.K., South Africa, Australia and the U.S., will be headed by the money manager’s founding chief executive officer, Hendrik du Toit, Investec said in a statement on Friday. The remaining businesses will be headed by Fani Titi.

*All sources from Bloomberg unless otherwise specified