August 31st, 2017

 

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks rose for a second day, led by industrial, consumer and financial shares ,as the economy of Canada’s largest trading partner grew at the fastest pace in two years. The S&P/TSX Composite Index added 50 points or 0.3 percent to 15,133.13, its highest close in three weeks. Industrials rose 1.1 percent, led by a 3.3 percent gain at CAE Inc., which was upgraded to outperform at BMO.
• Toronto-Dominion Bank, Canada’s largest lender by assets posted a 13 percent increase in profit from domestic personal and commercial banking in the fiscal third quarter, its best performance since the second quarter of 2015. Firmwide net income rose 17 percent to C$2.77 billion, or C$1.46 a share, from C$2.36 billion, or C$1.24, a year earlier, the bank said Thursday in a statement. Adjusted profit, which excludes some items, was C$1.51 a share, beating the C$1.37 average estimate of 12 analysts.
• Tropical Storm Harvey is being felt thousands of miles to the north as shutdowns of Gulf Coast refineries hurt prices for the Canadian oil-sands crude they’d normally process. Since Friday — when Hurricane Harvey first struck Texas — Western Canadian Select’s discount to West Texas Intermediate futures has expanded 19 percent to $11.75 a barrel. That marks the biggest discount since March.

 

 

World Headlines

• After the longest stretch of quarterly gains in U.S. equities since 2015, investors are looking toward emerging markets as they seek fresh opportunities. The S&P 500 Index has rallied 28 percent since end Sept. 2015, beating the MSCI All World Index. However U.S. equity funds had $2.6 billion in outflows in the week of Aug. 23, while emerging markets attracted about $200 million, Bank of America Merrill Lynch reported last week
• European shares gained a second day after data underscored the resilience of the American and Chinese economies, and billionaire investor Warren Buffett said he still prefers stocks to bonds. The dollar was steady as Treasury yields rose a second day.
• Asian stocks advanced for a second day after data showed the economic resilience of U.S. and China, outweighing the Trump administration’s mixed signals on North Korea’s latest missile provocation.
• Gasoline surged above $2 a gallon in New York, extending its longest rally since 2013 as an important conduit of fuel from the Gulf of Mexico to the U.S. East Coast began to close due to the effects of Tropical Storm Harvey. Motor fuel prices climbed as much as 6.6 percent in New York, advancing for an eighth session, while crude oil was little changed. Harvey has shuttered about 23 percent of U.S. refining capacity, potentially cutting U.S. fuel-making ability to the lowest level since 2008 and depriving the Colonial Pipeline of supplies.
• Gold pares biggest monthly gain since Feb. as fears over North Korean missile threats are overtaken by speculation on U.S. jobs figures due Friday.
• A ton of top-tier 65 percent content ore was about $100 this week compared with less than $50 for 58 percent ore, while benchmark 62 percent material was between the two at about $76, according to Metal Bulletin Ltd. At the start of last year, the gap between 58 and 65 percent ores was less than $10.
• The euro fell against the dollar late in the London session after it was reported that some European Central Bank officials are concerned about the currency’s strength. The common currency dropped as much as 0.3 percent to $1.1844 after Reuters said recent gains in the currency worried a number of ECB policy makers, raising the chances QE tapering will be only slowly implemented.
• President Emmanuel Macron’s political and economic strategy for the next five years might just depend on the reaction to a press conference due around midday Thursday in Paris. Prime Minister Edouard Philippe will be setting out his plans to give French companies more power to negotiate working hours and pay, slash the number of workers’ committees and limit penalties for wrongful dismissal.
• The approval of Novartis AG’s breakthrough therapy for a deadly form of leukemia opened the door to a new class of treatments even as its $475,000 price tag reignited the debate on how to value potentially life-saving drugs. Demonstrating its willingness to clear medicines faster, the U.S. Food and Drug Administration on Wednesday approved a radical new one-time treatment from the Swiss drugmaker, weeks earlier than expected.
• Japan Post Bank Co. plans to spend an initial 100 billion yen ($904 million) directly buying stocks — when it finds the right opportunities. The nation’s second-largest bank by deposits, which currently invests in equities only through passive investments in funds, is eventually aiming to boost active stock holdings to several hundred billion yen in the next five to 10 years, said Katsunori Sago, executive vice president at the Tokyo-based company.
• Daiichi Sankyo Co. shares jumped the most in nine years after a report that U.K. pharmaceuticals giant AstraZeneca Plc made an unsuccessful takeover bid last year for the Japanese drug company. Daiichi Sankyo rejected the bid, which would have given AstraZeneca access to the Japanese drugmaker’s portfolio of new cancer medicines, Nikkei Business reported, citing a person it didn’t identify. But the possibility of a purchase still remains, the newspaper said, without saying where it got the information. Daiichi Sankyo had a market value of 1.75 trillion yen ($15.8 billion) before Thursday’s stock surge.
• Bankers may be leaving London, but Britain’s exit from the European Union could still offer opportunities to buy U.K. commercial real estate with the market in flux, according to Australia’s largest pension fund. AustralianSuper Pty., which has A$120 billion ($95 billion) in assets, is looking to invest more overseas, with real estate and infrastructure in the U.K., Europe and the U.S. of particular interest, Melbourne-based Chief Investment OfficerMark Delaney said.
• The Bank of Japan lowered the range of its planned bond purchases in September for the first time in four months, following a decline in benchmark yields. The BOJ cut its purchase range for securities due in five-to-10 years to between 300 billion yen ($2.7 billion) and 500 billion yen for each operation in September, from 350 billion yen to 550 billion yen this month, according to itsstatement on Thursday. The monetary authority kept the estimated buying amounts for the other categories unchanged.
• Arkema SA of France said its plant in Crosby, Texas, damaged by Hurricane Harvey has suffered explosions after a major flood knocked out power supplies, needed to refrigerate volatile chemicals. Having already lost its electricity supply and backup generators, two explosions and black smoke were reported at 2:00 a.m. local time, the company said in a statement on Thursday. Arkema had already evacuated workers, and local authorities had cleared the area prior to the blow.
• Russia, the world’s biggest wheat exporter, is about to grab even more customers in the fast-growing economies of Asia — a region that normally gets most of its imported grain from somewhere else. A farm industry that emerged from the former Soviet Union to become a wheat-trade powerhouse is poised to expand its market share in countries like China, Indonesia and Japan. That’s because droughts are eroding production in Australia, the U.S. and Canada. Those are the dominant suppliers of wheat to Asia, which accounts for about a third of global imports.
• Toshiba Corp. disclosed it’s in talks with three consortiums for its memory chip unit and that it’s still unable to make a final decision on a buyer. There’s one group that includes Western Digital Corp., a second that includes Hon Hai Precision Industry Co. and a third comprised of Bain Capital, the Innovation Network Corporation of Japan and Development Bank of Japan.
• U.S. authorities are investigating China Petroleum & Chemical Corp. over allegations that the state-controlled oil producer paid Nigerian officials about $100 million worth of bribes to resolve a business dispute, according to people familiar with the probe.
• The Brexit negotiations are deadlocked. From the large issues like Britain’s divorce bill, to the small technical ones like reciprocal health care, progress is scarce. That makes the chances of the U.K. being allowed to move on to trade talks in October increasingly slim, according to Guy Verhofstadt, the European Parliament’s Brexit coordinator. The European Union blames Britain’s reluctance to set out its positions; Britain says the EU isn’t flexible enough to compromise.
• Carrefour SA shares fell the most on record after France’s biggest retailer warned the second half of the year will be as tough as the first, giving new Chief Executive Officer Alexandre Bompard an even bigger challenge to turn around the company.
• UBS Group AG is leaning toward Frankfurt for its trading headquarters inside the European Union after Brexit, according to four people with knowledge of the matter. The Swiss firm’s investment bank employs about 4,800 bankers globally and could move 250 or more jobs out of London to Frankfurt and other European locations, two of the people briefed on the deliberations said, asking not to be identified as the talks are private.
• Sasseur Group, a Shanghai-based developer of outlet malls, is planning a Singapore initial public offering of some of its properties in a deal that could raise as much as S$600 million ($442 million), according to people with knowledge of the matter.

 

*All sources from Bloomberg unless otherwise specified