September 20th, 2017
Daily Market Commentary
- Canadian stocks turned positive for the year, surpassing their 2016 closing price for the first time since June in a broad-based rally led by telecom and financial stocks. The S&P/TSX Composite Index rose 56 points or 0.4 percent to 15,292.97, bringing its year-to-date gain to less than 0.1 percent. All sectors advanced except utilities, which slipped 0.1 percent.
- A Malaysian governor and his family are accused in a lawsuit of funneling proceeds of corruption into Canadian real estate, with a Swiss environmental group pressing some of Canada’s biggest financial firms to turn over information on how the money flowed. Sarawak Governor Abdul Mahmud Taib’s family used the money to fund the expansion of the Ottawa-based real estate company Sakto Group’s C$250 million ($204 million) real estate empire, according to a lawsuit unsealed this week by an Ontario judge and provided to Bloomberg by the nonprofit and its law firm.
- Asian stocks swung between gains and losses as investors awaited the U.S. Federal Reserve’s decision on rates and unwinding its balance sheet. The MSCI Asia Pacific Index rose 0.2 percent to 164.44 as of 4:32 p.m. in Hong Kong, even as most shares declined, after earlier falling by the same magnitude; the gauge closed Tuesday at its highest level since December 2007. Telecommunications and energy stocks advanced, while utilities and consumer shares slipped.
- Major U.S equity benchmarks padded all-time highs, the dollar fell and Treasuries edged lower after Donald Trump gave a speech to the United Nations and as the Federal Reserve began a two-day meeting. The S&P 500 Index climbed for a third day, though equities remain stuck in one of the tightest ranges in decades.
- Oil rose on signs the pace of U.S. stockpile gains is slowing as refiners resume operations after Hurricane Harvey, boosting crude demand. Futures climbed as much as 1.1 percent in New York after declining 0.9 percent Tuesday.
- Gold holds near lowest this month as investors await the Fed meeting and focus on possible plans to start shrinking its $4.5 trillion balance sheet. Bullion for immediate delivery +0.3% at $1,314.55/oz in London after +0.3% Tuesday.
- A rate increase by the U.S. Federal Reserve may limit excess bullishness in financial markets, OECD Chief Economist Catherine Mann said. Fed officials are widely expected to leave rates unchanged on Wednesday as they announce a start date for the gradual unwinding of the U.S. central bank’s $4.5 trillion balance sheet. The decision is scheduled for 2 p.m. in Washington.
- U.K. retail sales rose in August at their fastest pace in four months, providing further evidence of a tentative pickup in consumer spending. The quantity of goods sold in stores and online increased 1 percent from July, as did sales excluding auto fuel, the Office for National Statistics said Wednesday. The increase far exceeded the median forecast of economists and marked the first run of three consecutive gains since 2015.
- The euro gained for a fifth day to trade above $1.20 as investors added long exposure ahead of the Federal Reserve’s policy decision. Expectations of a large move in the euro after the Fed decision are elevated as shown by the options market: overnight volatility in euro-dollar rose to its highest level for a Fed decision day this year, while in dollar-yen it hit the strongest level since April.
- Hurricane Maria was on course to hit Puerto Rico just two weeks after Irma caused as much as $1 billion in damages on the bankrupt island. The agency forecast the storm will cross Puerto Rico on Wednesday and then move just north of the coast of the Dominican Republic later in the night and on Thursday.
- A 7.2 magnitude earthquake struck near Mexico City, killing scores throughout the region, reducing buildings to rubble and sending thousands fleeing in panic during the second temblor this month. At least 248 people were confirmed dead, including 72 in Morelos, 117 in Mexico City and 43 in Puebla
- Thyssenkrupp AG and Tata Steel Ltd. reached a tentative deal to merge their European steel businesses in a bid to create the region’s second-largest producer and tackle overcapacity in the industry. The two foresee annual synergies of 400 million euros ($480 million) to 600 million euros and the venture will be closer in size to Europe’s top producer, ArcelorMittal.
- Finnish utility Fortum Oyj plans to offer 8.05 billion euros ($9.7 billion) for EON SE’s legacy fossil fuel and trading business, Uniper SE, as consolidation in the European power sector accelerates. Fortum is in advanced talks about buying EON’s remaining 47 percent stake in the business, it said in an exchange filing Wednesday in response to a Bloomberg story. If Fortum reaches an agreement with EON, it plans to make a voluntary takeover offer of 22 euros per share in cash to all Uniper investors, it said.
- The global economy is getting stronger and more stable, according to the latest analysis from the Organisation for Economic Cooperation and Development. The Paris-based group sees global gross domestic product rising 3.5 percent this year and 3.7 percent in 2018, up from 3.1 percent in 2016. Growth was last stronger in 2011.
- Bitcoin is looking increasingly likely to splinter off again in November, creating a third version of the world’s largest cryptocurrency as miners and developers pursue separate visions to scale its rapidly growing marketplace.
- Aluminum is on a roll. This year’s best performing commodity just extended its sizzling rally to the highest in five years on a report of a smelter closure in China, helping drive fresh gains across the board in industrial metals and producer shares. The metal used in cans and autos jumped as much as 3.1 percent on the London Metal Exchange to $2,191.50 a metric ton, the strongest intraday level since September 2012.
- Bain Capital is seeking more financial support from Apple Inc. as it tries to seal its acquisition of Toshiba Corp.’s memory chips business, according to a person familiar with the matter. The U.S. buyout firm is now asking the iPhone maker for about $7 billion in capital, up from a previous agreement for about $3 billion, said the person, who asked not to be identified because the matter is private.
- A.P. Moller-Maersk A/S has agreed to sell its tankers unit to Maersk’s holding company as the owner of the world’s biggest container shipping line moves ahead with a plan to divest all its energy assets. Maersk Tankers will be sold for $1.17 billion to APMH Invest A/S (APMHI), the company said in a statement on Wednesday.
- Spain’s government intensified its crackdown on Catalan separatists, raiding offices and arresting nine officials on Wednesday, and investors took it in their stride. The nation’s benchmark 10-year government bonds were steady, in line with similar securities of Italy and Germany, as traders refrained from big changes to positions ahead of today’s Federal Reserve policy decision. While Spain’s IBEX 35 was the biggest decliner in Europe, dropping as much as 0.9 percent, about one-third of that move was due to Inditex SA, which missed earnings estimates.
- Commonwealth Bank of Australia is nearing the sale of its life insurance operations to AIA Group, according to people with knowledge of the matter. AIA could pay about A$4b for the business, one of the people said, asking not to be identified because the information is private
- China’s riskiest borrowers are ramping up sales of short-term dollar debt again, reigniting speculation the authorities will clamp down on what has become a way to raise cash under the radar. Such short-term notes only started to appear in 2017, and after spiking to around around $3 billion in June and July, sales tailed off in August amid the summer lull and as the NDRC approved some longer-term debt.
- In the U.S, government-backed insurance plans help compensate farmers for losses after natural disasters. Unfortunately for the produce growers that were ravaged by recent hurricanes, a lot of the nation’s vegetable and fruit crops aren’t covered. Hurricanes Irma and Harvey, which devastated parts of Florida, Texas and the Gulf Coast, also hit some of the nation’s least-insured crops, based on data the U.S. Department of Agriculture is releasing in a report Wednesday. Nationwide, only 16 percent of peppers and 2 percent of strawberries, both key Florida products, are covered by insurance.
- A general election expected in Japan as soon as next month will substantially delay the submission of legislation laying out plans for casino resorts, according to two people with knowledge of the plans. Japanese officials had been planning to submit a casino implementation bill to parliament by the end of this year, in line with a law legalizing gambling resorts passed in December. Industry analysts have forecast up to $25 billion in potential annual revenue from Japanese casinos, making it one of the most lucrative opportunities for the industry in years, thanks to the nation’s wealthy middle class and the proximity to China.
- New Zealand’s ruling National Party surged back into the lead over the main opposition Labour Party in an opinion poll published three days before a general election. National had 46 percent support in the One News/Colmar Brunton poll broadcast Wednesday in Wellington, up from 40 percent in the previous survey published Sept. 14. Labour’s support fell to 37 percent from 44 percent. The poll of 1,000 voters was conducted the past four days.
*All sources from Bloomberg unless otherwise specified