September 17th, 2018

Daily Market Commentary

Canadian Headlines

  • Canadian stocks were little changed, closing in the green for only the second time out of the past 11 sessions. The late rally wasn’t enough to pull shares higher for a week, with equities down 0.5 percent. On the trade front, no talks in Washington are expected before Monday, according to an official familiar with the plans. House Democratic Leader Nancy Pelosi told reporters earlier that a new Nafta deal should include Canada. The S&P/TSX Composite Index rose less than 0.1 percent, with health care leading gains as pot stocks recovered from a plunge on Thursday. Consumer staples and materials declined as gold prices extended losses for a second session.
  • U.S.-Canada trade talks are poised to come to a head this week, as negotiators bear down on their next deadline amid President Donald Trump’s threats to cut his largest export market out of the deal. High-level negotiations are expected to resume this week in a bid to reach a deal for Canada to remain in the three-nation North American Free Trade Agreement, a Canadian government official said, speaking on condition of anonymity. Congress is pressing for Canada to be kept in Nafta, after the U.S. and Mexico struck their own deal last month.
  • The world’s largest beverage company may be the next industry giant to jump into the cannabis drinks business. Coca-Cola Co. says it’s monitoring the nascent industry and is interested in CBD — the non-psychoactive ingredient in marijuana — for beverages as soda consumption slows. The Atlanta-based soft drinks maker is in talks with Canadian marijuana producer Aurora Cannabis Inc. to develop the drinks, according to a report from BNN Bloomberg Television.

World Headlines

  • Stocks fell as investors grappled with the latest American threats to expand tariffs on Chinese goods. The dollar slipped after Friday’s gains and emerging-market currencies declined. The Stoxx Europe 600 Index swung from a loss to a gain and back, though fashion store Hennes & Mauritz AB beat forecasts to help retailers buck the generally downbeat mood. Italian bonds rallied while other European debt held steady with U.S. Treasuries. Sweden’s krona climbed versus major peers as
  • While last week’s rally saw the S&P 500 Index finish 0.3 percent from a record, it came with relatively shallow breadth. About 67 percent of members are trading above their 200-day moving average, compared with 72 percent when the benchmark hit its latest high in August and 83 percent during the high prior to that in January. Investors shrugged off reports that U.S. President Donald Trump wants to proceed with tariffs on a further $200 billion of Chinese goods, driving the benchmark up 1.2 percent, the most in nine weeks.
  • Asian stocks fell as concerns about trade relations between the two largest economies resurfaced. Typhoon Mangkhut also weighed on Macau casino stocks and airlines in the region. The MSCI Asia Pacific ex-Japan Index fell 1.2 percent as of 4:29 p.m. in Hong Kong after the Wall Street Journal reported that talks between China and the U.S. were at risk amid fresh threats from the Trump administration of tariffs on $200 billion of Chinese imports.
  • Oil traded above $69 a barrel as investors prioritize the loss of supplies in key OPEC nations against the threat to demand in emerging markets. Futures gained 0.8 percent in New York, extending Friday’s 0.6 percent increase. Supply concerns from losses in Venezuela and Iran are eclipsing the drag on demand from economic turbulence in emerging markets, according to Bank of America Corp. Russian Energy Minister Alexander Novak and his Saudi Arabian counterpart Khalid al-Falih met in Moscow Saturday to confirm their willingness to stabilize prices and react to any changes in the market.
  • Gold gains for the first session in 3 days as move is mirrored by decline in the dollar. Investors eye U.S.-China trade war, which shows signs of escalating with threat of fresh tariffs.
  • Iron ore’s top grade has surged to the highest level in a year as China steps up its fight against pollution, with a rally that offers a bounty for miners including Brazil’s Vale SA and contrasts with losses seen in other raw materials from the U.S.-China trade war.
  • UBS Group AG has picked Frankfurt as its post-Brexit European Union hub and has made preparations for the worst-case scenario of Britain crashing out of the bloc without a deal, Chief Executive Officer Sergio Ermotti said. The Swiss bank made the decision a few weeks ago, Ermotti said in a Bloomberg Television interview in Singapore on Monday. While Germany’s financial center will be the base, UBS will employ a multi-location strategy in the region, he said, naming offices in Madrid, Paris and Milan.
  • Chery Automobile Co., Jaguar Land Rover’s Chinese partner, plans to raise at least 7.91 billion yuan ($1.2 billion) from a sale of new shares to pare debt and fund operations. The carmaker will issue about 1.01 billion fresh shares, giving a new investor an 18.5 percent stake after the transaction, according to a filing to the Changjiang Equity Exchange on Monday. Unlisted Chery Automobile, which makes the iconic British marques for the Chinese market, didn’t name the buyer.
  • Hennes & Mauritz AB shares rose the most in 16 years after the ailing Swedish fashion retailer reported sales growth that took analysts by surprise, boosting optimism the H&M chain may have turned the corner. The stock surged as much as 11 percent Monday, adding 19 billion kronor ($2 billion) to the market value of the Stockholm-based retailer. H&M reported third-quarter revenue growth that exceeded the highest analyst estimate as it offered discounts to clear out inventory and received a boost from the weak krona.
  • Companies, regulators and environmental groups are waiting for record floods to recede so they can make a comprehensive assessment of damage from Hurricane Florence. Water levels, however, are headed in the wrong direction. Rivers throughout North and South Carolina are days from cresting as the deadly storm moves northeast, according to the National Weather Service. North Carolina will be dealing with flooding for at least two weeks, said Wylie Quillian, a hydrologist at the agency’s Southeast River Forecast Center in Peachtree City, Georgia.
  • The Turkish government will unveil measures to help banks tackle the expected pile-up of bad loans resulting from the lira’s plunge and soaring interest rates, according to people with knowledge of the matter. The plan will seek to mitigate the need for capital injections and propose carving out non-performing loans for transfer to a state-designated entity, said the people, who asked not to be named because the deliberations are confidential. The plan is likely to be announced Thursday, one of the people said.
  • Prime Minister Theresa May left no doubt she was prepared to be a “bloody difficult woman” in defense of her Brexit plans and intends to reach a “good deal” with the European Union — one that lawmakers would have a choice to accept or see Britain crash out of the bloc. “I believe we’ll get a good deal, we’ll bring that back from the EU negotiations and put that to Parliament,” May told the BBC in an interview to be broadcast later Monday. “I think that the alternative to that will be not having a deal.”
  • Go-Jek, Indonesia’s most valuable technology startup, is in talks to raise at least $2 billion to fuel an accelerated expansion overseas, according to a person with direct knowledge of the matter. The Jakarta-based company plans to close the funding round in several weeks, the person said, asking not to be identified because the information is private. The startup’s existing backers include Tencent Holdings Ltd., Temasek Holdings Pte and Warburg Pincus.
  • Och-Ziff Capital Management Group LLC is seeking to raise its largest real estate fund ever after a period of change for the firm, including new leadership. Billionaire Dan Och’s hedge fund firm is targeting $2 billion for its fourth fund focused on opportunistic property investments as soon as the end of the year, according to people familiar with the matter. New York-based Och-Ziff has also raised about $750 million for a real estate debt strategy and is gathering a $150 million affordable-housing investment pool, which would be exempt from taxes, said the people, who asked not to be identified because the information is private.
  • Pricing has been lowered on much of the $13.5 billion bond and loan financing backing Blackstone LP’s buyout of Thomson Reuters Corp. unit Refinitiv after investor orders grew to more than $30 billion. The cost of funds have been cut on three of the four bond tranches, as well as on both of the loan facilities on offer, according to people familiar with the matter, who asked not to be identified because the matter is private. Changes to the debt package also include $1.25 billion shifted from the bonds to the loans, which now total $9.25 billion.
  • Abu Dhabi is pushing ahead with an initial public offering for Spanish oil company Cia Espanola de Petroleos SAU, in what could be the largest such deal in a decade. The emirate’s Mubadala Investment Co. will offer a stake of at least 25 percent in Cepsa in the fourth quarter, the state-owned investor said Monday in a statement. The Madrid-based refiner will list on Spanish exchanges. Mubadala is proceeding with an IPO rather than a sale after potential bidders were narrowed down to private-equity firm Carlyle Group LP, people familiar with the matter said previously. Cepsa could raise about 3 billion euros ($3.5 billion), people said, making it the biggest oil IPO in about 10 years, according to data compiled by Bloomberg.
  • Marc Benioff, the billionaire co-founder of software maker Inc., is making a play to project his influence far beyond Silicon Valley with the purchase of Time magazine. The 53-year-old entrepreneur and his wife, Lynne, agreed to pay $190 million in cash to Meredith Corp. for the venerable but struggling print publication, stoking comparisons to Inc.’s Jeff Bezos. Benioff, who’s long sought to burnish his image as a civic leader and is well-known in his company’s home city of San Francisco, may gain a higher level of national visibility in his new role of media baron.
  • KKR & Co. agreed to sell Singapore hard-drive component maker MMI Holdings Ltd. for about $645 million including debt, people with knowledge of the matter said, exiting the oldest Asian investment listed in its portfolio. KKR signed a deal to sell MMI, which it has owned for 11 years, to a Chinese buyout group led by an affiliate of Beijing HBH Innovation Industry Fund, according to the people. Cybernaut Investment Group, a private equity firm started by WebEx Communications Inc. co-founder Min Zhu, is also part of the consortium, the people said, asking not to be identified because the information is private.

*All sources from Bloomberg unless otherwise specified