August 7th, 2018
Daily Market Commentary
- The Canadian Securities Exchange has been publishing personal information of investors on its website for 15 years, including home addresses and amounts of their investments, a practice one shareholder rights advocate calls a “disturbing” breach of privacy. The CSE, a small stock exchange that’s raised its profile by becoming the go-to listing spot for many cannabis companies, has had an internal rule in place since 2003 that requires it to publish data on its website for all private placement transactions.
- Justin Trudeau’s attempts to export his “sunny” progressive ways have hit another roadblock, this time with Saudi Arabia. Yet unlike in recent spats with China and India, Canada’s prime minister may get a slight boost at home for his support of women’s rights. Saudi Arabia suspended diplomatic ties and halted new trade dealings late Sunday following comments by Canadian Foreign Minister Chrystia Freeland criticizing the kingdom for arrests of women’s rights activists. The standoff pits Trudeau, an outspoken champion of women’s advancement, against a Saudi government that’s taking a harder line more recently after making some reforms to help women.
- European equities advanced at the open, led by miners and automakers, which have been the biggest victims of trade-war concerns. The Stoxx Europe 600 Index added 0.2 percent after closing little changed on Monday. Glencore climbed 2.2 percent as the company is expected to report its most profitable six months ever on Wednesday. Switzerland’s OC Oerlikon Corp. soared 9 percent after raising guidance for the year.
- Five weeks of gains have pushed the S&P 500 Index within 23 points of making up the 292 it shed over two weeks in January. At its closing level of 2,850.4 Monday, the equity benchmark is 0.8 percent away from its all-time record of 2,872.87, reached on Jan. 26. It’s taken 192 days to claw this much back — eight fewer than the average during corrections since the bull market began in March 2009.
- Asian stocks rose on Tuesday, led by telecommunication stocks, as earnings season continued and Hong Kong and China’s shares outperformed the region. The MSCI Asia Pacific Index added 0.9 percent to 166.43 as of 4:50 p.m. in Hong Kong. The main sub-gauge for telecommunication stocks advanced 1.8 percent, the steepest increase in more than three months. Japan’s Topix index gained 0.8 percent, while stocks in South Korea also closed higher. Singapore’s equities surged the most in four months.
- Oil’s trading in a tight range as investors weigh falling U.S. inventories and potential supply curbs in the Middle East against escalating trade tensions between the world’s two largest economies. Futures in New York were little changed after a 0.8 percent gain Monday. They have traded within a $3 range so far in August, the tightest spread since 2003 based on monthly data. While expectations for falling U.S. stockpiles during the summer driving season and fears over lower Iranian exports have supported gains, concerns that a trade war between China and America will hurt consumption have kept a lid on prices.
- Gold recovers from the lowest close in almost 17 months as dollar weakens and as investors weigh global trade tensions, outlook for U.S. rates. Platinum rallies.
- Natural gas prices could be poised to double this winter as exports from the nation’s shale basins help push demand to a record high, draining stockpiles. Inventories are poised to start the heating season — when gas stowed in salt caverns and aquifers is used to augment supplies sent via pipeline from production fields — at a 13-year low, according to four analysts and traders surveyed by Bloomberg News. A sweltering summer has kept air conditioners humming, driving power plants to burn more of the fuel than ever for the time of year as nuclear reactors and coal-fired generators have shut.
- China’s foreign currency holdings increased last month despite a weakening currency and worsening outlook for exports growth. Reserves rose $5.82 billion to $3.118 trillion in July, the People’s Bank of China said Tuesday. That was higher than all estimates in Bloomberg’s survey of economists, where the median forecast was $3.107 trillion. $1.2 billion of the increase was due to valuation effects, according to Bloomberg Economics.
- U.K. Prime Minister Theresa May is resisting the European Union’s timetable for Brexit talks and is calculating that U.S. President Donald Trump might help her. While EU officials are signaling they want September to be a showdown moment in negotiations, the U.K. is aiming for a later deadline, according to a person familiar with the situation. May’s team thinks that by the end of November the EU will be so preoccupied with the prospect of Trump disrupting a Group of 20 summit that they will want to get the Brexit deal wrapped up, the person said.
- HNA Group Co., the Chinese conglomerate unwinding a global acquisition spree, is in advanced talks to sell a minority stake in jet lessor Avolon Holdings Ltd. to Japan’s Orix Corp., people with knowledge of the matter said. Orix has been discussing the purchase of about a 25 percent to 30 percent stake in Avolon from HNA’s Shenzhen-listed arm Bohai Capital Holding Co., according to one of the people. The sale could fetch more than $2 billion, the person said, asking not to be identified because the information is private.
- Glencore Plc may have had a nightmarish year so far, but the world’s top commodity trader is still raking in mountains of money. The company is facing a U.S. corruption probe, got mired in a dispute with its billionaire former partner in the Democratic Republic of Congo and has been caught in the fallout from new U.S. sanctions on Russia — among other issues. Yet despite all the bad news, Glencore is expected to report its most profitable six months ever when the company publishes first-half results Wednesday.
- Chinese stocks haven’t been this cheap relative to bonds in more than two years, and analysts say they’re about to get cheaper. The equity selloff in the world’s second-largest economy has left the Shanghai Composite Index’s earnings yield — the inverse of the more commonly used price-earnings ratio — at 7.6 percent on Monday, widening the gap with the yield available on five-year AAA rated corporate notes by the most since March 2016.
- SoftBank Group Corp. is considering seeking a valuation of about $90 billion for its Japanese wireless business in a planned initial public offering, people familiar with the matter said. The shares rose the most in two months. SoftBank is speaking to advisers about selling a third — or about $30 billion — of the business in the IPO, the people said, asking not to be identified as the talks aren’t public. Discussions are preliminary and the final valuation will depend on investors’ feedback, they said. SoftBank rose 6.5 percent in Tokyo, the biggest increase since June 9.
- Activist investor Carl Icahn said shareholders in Cigna Corp. should vote against the $54 billion takeover of pharmacy-benefits firm Express Scripts Holding Co. because the health insurer is “dramatically overpaying.” The insurer should pursue a multi-year partnership with an existing pharmacy-benefit manager such as Express Scripts instead of a takeover, and use its existing cash to buy back shares, according to Icahn, who said he owns 0.56 percent of Cigna shares.
- After decades working at some of the biggest media and technology companies in the world, Jeffrey Katzenberg and Meg Whitman have teamed up to entertain people while they wait at the doctor’s office. The pair — colleagues at Walt Disney Co. many years ago — have raised $1 billion for NewTV, a service that will offer short-form video made with TV-sized budgets. Madrone Capital Partners, backed by heirs to the Walmart Inc. fortune, leads a star-studded group of investors that also includes Alibaba Group Holding Ltd. and Goldman Sachs Group Inc.
- A federal judge rejected a request by Scana Corp. to immediately block a rollback of its electric rates, marking another setback to Dominion Energy Inc.’s planned acquisition of the troubled utility. Scana had asked the judge to prevent the cut approved by lawmakers in June from taking effect while it argues against the measure in court. The Cayce, South Carolina-based utility says the law — which slashes the amount customers must pay for a failed nuclear project — is unconstitutional.
- China wants to impose restrictions on the London-Shanghai Stock Connect that would help authorities curb capital outflows but may reduce the program’s appeal to investors, people familiar with the matter said. The proposed restrictions would limit investors’ ability to swap a dual-listed company’s shares in one market with those in the other, a feature known as fungibility, the people said, asking not to be identified because the discussions are confidential and no final decisions have been made. Fungibility was a key selling point in a London Stock Exchange Group Plc presentation outlining plans for the connect in May.
- Rosneft PJSC posted record cash flow in the second quarter as Russian oil companies hit a sweet spot of rising crude prices and a weakening ruble. Russia’s largest crude producer also posted the highest net income in almost five years and curbed its dollar-denominated debt, underpinning the share buybacks that helped lift its stock to the highest level since January 2017.
- Declining prices for generic drugs in the U.S. are hurting corporate earnings at drugmakers, medical distributors and pharmacy chains, rattling stocks and imperiling a major acquisition of one drugstore company. Prices have been driven down by consolidation among buyers, faster approval of competing pills by U.S. regulators and deals between manufacturers to further wring out costs. In June and July, generic drugs were 7 percent to 8 percent cheaper than a year before, according to Evercore ISI.
- Desperate measures are in the air in Turkey: trading rooms are awash with talk of a bailout by the International Monetary Fund and potential capital controls. But there’s a vacuum at the core. The central bank and government have been largely silent as the currency plummeted to record lows and the U.S. imposed sanctions and threatened more. The lira slipped for a seventh day against the dollar after falling by the most in a decade on Monday, while the yield on 10-year bonds surged above 20 percent to an all-time high.
- A small-cap biotechnology firm that took part in a red-hot summer for going public thinks its lead drug can compete with industry heavy-weights like Pfizer Inc. Eidos Therapeutics Inc. is set to release results from a mid-stage study of its drug for a rare, deadly disease in coming months. Investors will be looking for good news: shares dropped some 30 percent since just after going public less than two months ago.
- Steinway Musical Instruments Inc., the legendary piano maker controlled by U.S. hedge fund billionaire John Paulson, has attracted takeover interest from China Poly Group Corp., people familiar with the matter said. The state-owned conglomerate is holding preliminary talks about a purchase of Steinway, according to one of the people, who asked not to be identified because the deliberations are private. The company, whose iconic pianos have been used by virtuosos such as Lang Lang, could fetch about $1 billion in a sale, the people said.
- Japan Tobacco Inc. agreed to buy a Bangladeshi cigarette maker for 124.3 billion taka ($1.5 billion), taking its acquisition strategy to one of the fastest-growing economies in Asia. The Japanese company is acquiring the tobacco business of Akij Group, the second-largest cigarette maker in Bangladesh with about 20 percent share of the market, Japan Tobacco said in a statement Monday.
*All sources from Bloomberg unless otherwise specified