September 18th, 2017
Daily Market Commentary
- U.K. PM Theresa May, Canada PM Justin Trudeau are expected to agree that the EU-Canada Comprehensive Economic and Trade Agreement should be swiftly transitioned to form a new bilateral arrangement between the two countries after Brexit, according to statement on U.K. government website.
- While volatility sank across regions and asset classes last week, leveraged exchange-traded products that benefit from increasing market turmoil gathered the most money since last year. The VelocityShares Daily 2x VIX Short Term ETN and ProShares Ultra VIX Short-Term Futures together saw $337 million of weekly inflows, with the number of their shares outstanding surging to a record as short interest fell. Equity volatility dropped the most among asset classes in the five days ended Sept. 15, with a 16 percent slide in CBOE’s VIX index.
- European stocks rise in a broad rally led by banks, telecoms and utilities, while travel & leisure shares underperform as Ryanair falls after saying it plans to cancel flights amid crew issues. The Stoxx Europe 600 is up 0.5%, reaching its highest level since Aug. 8. The FTSE 100, recently hit by a surge in the pound, is up 0.4%.
- Asian equities rose more than a percent, the most in two months, tracking another record-breaking Wall Street session on Friday amid optimism the U.S. will pursue a peaceful resolution to North Korea’s nuclear threats. The MSCI Asia Pacific ex-Japan Index added 1 percent as of 4:39 p.m. in Hong Kong to trade close to its highest level since December 2007. The Philippines benchmark gauge, South Korea’s Kospi index and Hong Kong’s Hang Seng Index are the three biggest gainers Monday with an advance of more than 1 percent each.
- Oil traded near $50 a barrel in New York, close to a three-month high, as a further reduction in U.S. drilling added to signs the global crude surplus is abating. West Texas Intermediate futures were little changed after advancing 5.1 percent last week.
- Gold fell, touching the lowest since the end of August, as equities advanced, limiting demand for havens. Bullion for immediate delivery fell as much as 0.6 percent to $1,312.51 an ounce, the lowest since Aug. 31. The metal was at $1,314.57 at 10:59 a.m. in London, according to Bloomberg generic pricing.
- Northrop Grumman Corp. agreed to buy Orbital ATK Inc.for $7.8 billion, bolstering the missile and space businesses of one of the U.S.’s largest defense contractors. Orbital holders will receive $134.50 a share in cash, the companies said in a statement Monday. The price is 22 percent above the stock’s closing level Friday. Northrop also will assume $1.4 billion in net debt.
- China’s central bank is drafting a package of reforms which would give foreign investors greater access to the nation’s financial services industry, according to people familiar with the matter. The People’s Bank of China will convene an internal meeting on Tuesday to discuss its proposals and get feedback from Chinese institutions, said the people, who asked not to be identified as the matter is private. The meeting will also discuss the timetable for opening up the financial sector and the lessons learned from previous cooperation with foreign firms, the people added.
- Saudi Arabia is considering a plan to phase out subsidies for gasoline and jet fuel in November at the latest, as the world’s biggest oil exporter pushes a program to curtail public spending after a global slump in prices. The government would boost gasoline to parity with varying international prices under the plan, according to a person with knowledge of the matter. At current levels, this could result in a hike of about 80 percent for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), the person said on condition of anonymity.
- U.K. house prices grew at the slowest annual pace in more than five years this month as a slump in London weighed on the market. Asking prices rose 1.1 percent from a year earlier, Rightmove Plc said on Monday, down from 3.1 percent in August. While the autumn traditionally sees prices pick up after a summer lull, this year had the first month-on-month decline in September in four years as values in London slumped.
- Banks competing to defend or increase their share of equity-trading revenues after sweeping European regulations start next year may drive down the cost of execution in a price war, according to three executives. The collapse in prices, which one manager projected could cut the industry’s revenue pool from executing trades by as much as 40 percent, would play out if big investment banks were willing to sustain losses until smaller rivals give up, according to the people, who asked not to be identified. The larger firms may see an opening to push out competition because margins are already thin in stock trading, the people said.
- Iron ore could face a long, hard winter. Abundant global supply, signs of weakening demand and a slowing Chinese economy may combine to hurt prices that have already posted losses in recent weeks, with futures in China nearing a return to bear market territory after a swift drop.
- Indian shares advanced, with the benchmark index rising for an eighth day, following a record-breaking Wall Street session. The S&P BSE Sensex added 0.5 percent at the close in Mumbai, within 0.5 percent of its Aug. 1 record. The benchmark capped its longest winning streak since June 2015.
- Japanese Prime Minister Shinzo Abe said he’ll decide on calling a snap election after he returns from a trip to the U.S., confirming media reports that he was considering calling a vote more than a year early. Abe intends to dissolve parliament on Sept. 28 to pave way for an election on Oct. 22, Yomiuri newspaper reported on Monday, without saying where it got the information. Sankei newspaper reported on Sunday that the vote is probable on Oct. 29.
- The rupee has little to fear from India’s worst current-account deficit in four years. While data Friday showed the gap widened to $14.3 billion in the April-June quarter, the largest since 2013, analysts say capital inflows being drawn by the nation will keep the deficit fully funded and hold the balance of payments in surplus. That’s even as investors have punished the peso this year, making it Asia’s worst-performing currency, amid projections the Philippines will post its first such shortfall in 15 years.
- Foreign Secretary Boris Johnson is again the focus in British politics after his challenge of Prime Minister Theresa May sparked a round of speculation over whether he’s willing to resign if she softens her stance on the Brexit bill or if he could be fired for insubordination.
- Slack Technologies Inc. closed a $250 million funding round led by SoftBank Group Corp.’s Vision Fund, giving it more ammunition for expansion in an increasingly competitive market for workplace messaging services. Slack Technologies Inc. closed a $250 million funding round led by SoftBank Group Corp.’s Vision Fund, giving it more ammunition for expansion in an increasingly competitive market for workplace messaging services.
- A weakened Hurricane Jose could graze the Northeast as Hurricane Maria tears through the Caribbean, gaining strength and possibly heading toward the U.S. in a week. Jose will probably be downgraded to a tropical storm as it comes close to Massachusetts Wednesday — threatening shipping and real estate along the East Coast — before veering farther out into the Atlantic, the U.S. National Hurricane Center said.
- London’s black cabs going electric shows the new wave of automobile technology is already reshaping the metals industry. After being closed for three years due to a weak market, Sapa SA’s aluminum plant in south Wales will reopen this week to supply lightweight parts for automakers such as London Electric Vehicle Co., the maker of black cabs. It’s part of a revival in aluminum, a key component of new car technology. Prices have soared almost 40 percent since the start of 2016 amid a Chinese crackdown of illegal capacity and new sources of demand. The industry was plagued by oversupply problems at the start of the decade, and the metal is still 37 percent below the record in 2008.
- The Bloomberg Dollar Spot Index rose for the first time in three days, with higher Treasury yields lending support to the currency as investors’ focus turns to the Federal Reserve meeting that begins on Tuesday. Given the dollar gauge holds its down-trend since the beginning of the year and is down 0.8 percent this month, there’s scope for investors to scale back their short exposure, according to traders in London and Europe. Currently, market pricing of a Fed hike by year-end stands just below 50 percent and traders expect Chair Janet Yellen to keep her options open for December.
*All sources from Bloomberg unless otherwise specified