September 4th, 2018

Daily Market Commentary

Canadian Headlines

  • President Donald Trump’s effort to force Canada into signing on to a new Nafta on his terms is facing new hurdles thanks to growing opposition at home to his threat to proceed without the U.S.’s northern neighbor. Trump’s frustration spilled into the open over the holiday weekend as he railed against Canada on Twitter — as well as its many supporters in both political parties. The president has threatened to leave Canada out of a new trade deal already negotiated with Mexico, but without congressional support he lacks leverage to force Ottawa to make concessions in talks that are due to resume Wednesday.
  • Ontario Municipal Employees Retirement System has offered A$3.3 billion ($2.4 billion) for Australian property company Investa Office Fund, topping a bid from Blackstone Group LP. The offer values Investa Office shares at A$5.50 each, 2.8 percent more than Blackstone’s bid, the Canadian pension fund’s Oxford Properties Group unit said in a statement Tuesday. Investa Office last traded at A$5.32.



World Headlines

  • European equities climbed at the open, with banks leading the advance as concerns about the Italian economy shifted to the sidelines after Fitch Ratings maintained the nation’s rating. The Stoxx Europe 600 Index added 0.4 percent, the second day of gains. HSBC Holdings Plc, BNP Paribas SA, Banco Santander SA and Intesa Sanpaolo SpA paced the increase.
  • The dollar rose as trade tensions persisted and as emerging markets came under pressure, with turmoil in currencies spreading from Turkey and Argentina to South Africa. The greenback’s fourth daily advance added pressure to emerging market shares, and a gauge of the currencies headed for its lowest close this year. South Africa’s rand was the worst performer as the country entered a recession.
  • Asian stocks slipped for a fourth day, with the regional gauge set for its longest string of losses in two months, as tensions between U.S. and trading partners and contagion risk to emerging economies from Argentine and Turkey continued to deter investors. The MSCI Asia Pacific Index fell 0.2 percent to 163.93 as of 4:34 p.m. in Hong Kong.
  • Oil traded above $70 a barrel in New York as Tropical Storm Gordon approached offshore oil fields along the U.S. Gulf Coast. Futures rose as much as 1.9 percent from Friday, skipping Monday because of the U.S. Labor Day holiday. Anadarko Petroleum Corp. evacuated two Gulf of Mexico platforms as Gordon neared the mouth of the Mississippi River. The risk of impact pushed up prices despite data showing rising OPEC output.
  • Gold falls to lowest in more than a week as dollar strengthens before key data reports this week. Silver drops to lowest since February 2016.
  • Short sellers of TPG Telecom Ltd. are heading for the exit after its decision to combine with mobile phone operator Vodafone Hutchison Australia Pty. lessened the risk on plans to build its own cellular network and raise capital. Short interest as a percentage of TPG Telecom’s equity float fell to its lowest since October 2016 earlier this week, before rebounding slightly, according to the most recent Australian Securities and Investments Commission data. The deal with Australia’s third-largest mobile network operator will create a company worth as much as A$10.9 billion ($7.8 billion).
  • MTN Group Ltd. said Nigeria is seeking about $2 billion in back taxes from the embattled wireless carrier after refusing to accept the results of a self-assessment by the company. The office of Nigeria’s attorney general calculated that the South African company owes $2 billion related to the import of foreign equipment and payments to suppliers over the past 10 years, MTN said in a statement on Tuesday. The company believes it has settled all tax obligations, it said.
  • Meituan Dianping started taking orders for a Hong Kong initial public offering that could raise as much as $4.4 billion as it warned there was no guarantee it would ever become profitable. The restaurant review and delivery giant backed by Tencent Holdings Ltd. is offering 480.27 million new Class B shares at HK$60 to HK$72 apiece, according to terms for the deal obtained by Bloomberg on Tuesday. Five cornerstone investors including Tencent have agreed to buy a combined $1.5 billion of stock in the offering, the terms show.
  • French reinsurer Scor SE spurned an 8.3 billion euro ($9.6 billion) unsolicited takeover offer from its biggest shareholder Covea, which said it’s still interested in pursuing a deal. Scor shares climbed the most in almost a decade. Covea, a French mutual insurer that already has an 8.2 percent stake in Scor, offered to buy the remaining stock for 43 euros a share, which is 21 percent more than Scor’s closing price on Monday. Scor’s board met Thursday and refused to enter talks, Covea said.
  • Years of losses and strategic drift have cost Deutsche Bank AG a seat among Europe’s elite companies. Germany’s largest lender has dropped out of the Euro Stoxx 50 index for the first time since its inception in 1998, according to documents seen by Bloomberg. The index, compiled by Deutsche Boerse AG, provides a cross-section of the biggest and most liquid stocks in the euro area.
  • I Squared Capital, an infrastructure-focused private equity firm founded by former Morgan Stanley executives, has raised $7 billion for its second fund, exceeding its original target as competition for investor capital heats up. The fund, known as ISQ Global Infrastructure Fund II, will make equity investments that average $300 million for energy, utilities, transport and telecommunications deals around the world, according to Chief Investment Officer Sadek Wahba. There’s one restriction: no more than one-third of the fund can be invested in countries that aren’t in the Organization for Economic Cooperation and Development. Non-OECD countries include India, Guatemala and El Salvador.
  • Tropical Storm Gordon will grow into a hurricane as it grazes offshore natural gas and oil fields, where it has already sparked evacuations, before coming ashore over the lower Mississippi Valley later on Tuesday or early Wednesday. Gordon, with top winds of 65 miles (100 kilometers) per hour, was about 230 miles east-southeast of the mouth of Mississippi River, and the center of the tropical storm will move across the eastern Gulf of Mexico Tuesday, according to a National Hurricane Center advisory at 5 a.m. New York time.
  • The world’s top oil buyers are discovering that U.S. sanctions on Iran will squeeze their trade flows whether they agree with America or not. It was only about three months ago that India’s foreign minister said that the country won’t adhere to unilateral restrictions and will continue buying Iranian crude. China also made similar comments and was said to have rejected an American request to cut imports. Japan and South Korea have held talks with the U.S. aimed at securing exemptions.
  • China is exploring a merger between two of the nation’s three wireless carriers to speed up the development of 5G mobile services amid a race with the U.S. over the technology, according to people familiar with the matter. The country’s top leaders are reviewing a proposal to combine China United Network Communications Group Co. and China Telecommunications Corp. but no decision’s been made and a merger may not happen, said the people, who asked not to be identified discussing a private matter.
  • One year after the state took over Bank Otkritie FC in the biggest bailout in Russian history, the former Finance Minister in charge of the rescue said it’s taught him a thing or two about how business works in Russia. Lesson one: salvaging value from the wreckage is harder than at first thought. The central bank has said it hoped to recover up to 60 percent of some 2.2 trillion in rubles ($32 billion) in bad assets held by Otkritie and two other lenders that subsequently collapsed. Otkritie’s Chief Executive Officer Mikhail Zadornov thinks that’s optimistic.
  • ING Groep NV agreed to pay 775 million euros ($900 million) to settle an investigation by the Dutch prosecutor into issues including money laundering and corrupt practices in one of the biggest fines ever given to one of the country’s banks in a criminal case. The settlement consists of a 675 million-euro fine and a 100 million-euro “disgorgement” payment, with the total amount taken as a one-time charge in the bank’s third-quarter results. Executive Board members will give up their bonuses in 2018, according to a statement from the Amsterdam-based bank on Tuesday.
  • Turkish banks may have to pay up once again as they rush to meet $6 billion of financing deadlines amid the country’s worst economic crisis in years. At least nine lenders have to complete annual dollar loan syndications by year-end, leaving an industry heavily reliant on overseas funding little time and few options to conclude deals often involving dozens of global banks. Akbank Turk AS, Turkiye Is Bankasi AS and state-owned Export Credit Bank of Turkey are at the head of the queue, as they are yet to finalize deals that entered syndication in July, days before the nation’s crisis began.
  • House Republicans had planned to use a second phase of tax cuts to force Democrats into a difficult vote ahead of mid-term elections. Now, party leaders may drop the effort, fearing it could backfire by antagonizing voters in some hotly-contested Congressional districts. The proposal would make the individual changes in last year’s overhaul permanent — including the $10,000 annual cap for state and local tax deductions, one of the law’s most disputed provisions. That would put Republican lawmakers in high-tax states like New York, New Jersey and California in the tricky position of either supporting the cap, or voting against tax cuts backed by their party.
  • Transocean Ltd. agreed to buy Ocean Rig UDW Inc. in a cash-and-stock transaction valued at about $2.7 billion including debt to expand the company’s ultra-deepwater drilling fleet. The transaction values Ocean Rig at about $32.28 per share, or a 20 percent premium over its closing share price on Aug. 31, the companies said in a statement Tuesday.
  • Line Corp., Japan’s biggest messaging service, is selling 148 billion yen ($1.33 billion) in convertible bonds to help fund its expansion into financial services and products powered by artificial intelligence. The Tokyo-based company plans to spend 100 billion yen of the proceeds by the end of 2021 to develop Line Pay mobile payment service and other fintech services, with the rest going to AI products, it said in a statement Tuesday. The convertible bonds, the Line’s first equity financing since the initial public offering in 2016, will be sold to the public and its parent Naver Corp.
  • Unity Bank Plc sold 400 billion naira ($1.1 billion) of bad loans to clean up its balance sheet as it seeks to conclude talks for a cash injection aimed at stabilizing the Nigerian lender. The disposal to Frontier Capital Alternative Asset Ltd. of the toxic assets cut the ratio of non-performing loans to near zero from almost 50 percent and helped to shore up Unity Bank’s liquidity, Chief Financial Officer Ebenezer Kolawole said in an interview. The deal helped the Lagos-based lender sign an agreement with a foreign equity investor that it hopes to finalize during the first half of 2019, he said.
  • Special Counsel Robert Mueller’s investigation should have just gone out of business — or at least into a two-month deep freeze — if you take Rudy Giuliani’s word for it. Giuliani, President Donald Trump’s lawyer, has maintained for weeks that Saturday, Sept. 1, was a deadline under Justice Department guidelines for Mueller to finish his Russia probe to avoid improperly affecting the midterm elections on Nov. 6. “I always thought that was the day to make some decision,” the former New York mayor said in an interview.
  • Oaktree Capital Group LLC, the world’s biggest distressed-debt manager, is betting on China’s second largest province with its acquisition of 2.4 billion yuan ($351.2 million) of non-performing loans, according people familiar with the matter. The Los Angeles-based firm acquired 115 non-performing loans from China Huarong Asset Management Co, the people said requesting not to be named because the matter is private. Marbridge Group and PricewaterhouseCoopers LLP acted as advisers for the transaction, they said, while declining to disclose the amount paid for the deal.

*All sources from Bloomberg unless otherwise specified