July 11th, 2018
Daily Market Commentary
- CN Rail says it plans to invest about $315 million in Ontario this year to expand and strengthen the company’s rail network across the province. The company says planned projects include upgrades at CN’s intermodal terminal in Brampton northwest of Toronto — the company’s largest such facility — and the construction of a new train passing siding east of Sioux Lookout.
- JetBlue Airways Corp. is placing a big bet on Airbus SE’s newest jetliner. The carrier is ordering 60 of Airbus’s A220 jets, the freshly rechristened plane formerly known as Bombardier Inc.’s C Series. Tuesday’s sale, valued at $5.4 billion based on list prices before customary discounts, is the first since Airbus took control of the aircraft program last week from Bombardier.
- Just as European stocks seemed on the cusp of a firmer recovery, the trade scare returned. The Stoxx 600 snapped its longest rally since March on Wednesday after the U.S. threatened another round of tariffs on Chinese goods, escalating a trade war that had previously battered the export-sensitive European market. And it’s not just trade: in Europe, political risks are also on the rise, with U.K. Prime Minister Theresa May’s government tottering and Italy’s new populist agenda taking shape.
- A four-day, 81-point rally in the S&P 500 lost steam Wednesday, pausing on the eve of one of the best earnings seasons in a decade, as investors got a reminder that the trade war still exists. Futures on the equity benchmark were down 0.9 percent as of 04:00 a.m. in New York after earlier falling as much as 1.1 percent. Dow Jones Industrial Average contracts declined as much as 1.3 percent after the Trump administration released a new list of Chinese products that may face tariffs.
- Stock markets across Asia slumped after the Trump administration moved forward with plans to impose tariffs on an added $200 billion in Chinese goods. The MSCI Asia Pacific Index fell 0.9 percent to 164.27 as of 4:36 p.m. in Hong Kong after earlier falling as much as 1.4 percent. Equity benchmarks in Hong Kong and China led declines in the region, with the Shanghai Composite Index and Hang Seng Index dropping 1.8 percent and 1.3 percent respectively. On the flip side, the Philippine Stock Exchange Index rose 1.4 percent Wednesday and India’s Sensex Index rose 0.2 percent.
- Oil fell below $74 a barrel after U.S. President Donald Trump escalated a trade war with China, heightening fears that global economic growth could be caught in the cross-fire. Futures in New York fell 0.9 percent, slipping in tandem with equities and metals, after the Trump administration unveiled a list of $200 billion in Chinese goods that could face 10 percent tariffs once public consultations end in August. Losses were deeper for Brent crude, the European benchmark, as Libya’s national oil company lifted supply restrictions after it regained control of key ports from a splinter faction.
- Gold drops for second day as dollar strengthens after Trump administration releases biggest list yet of Chinese goods facing tariff increases.
- Rupert Murdoch’s 21st Century Fox Inc. boosted its bid for Sky Plc, raising the stakes for Comcast Corp. to retaliate in a battle for control of Britain’s top pay-TV company. Fox offered 14 pounds per share to value Sky at 24.5 billion pounds ($32 billion), 12 percent more than Comcast’s rival 22 billion pound offer. Sky shares fell as much as 2 percent as some investors had expected a higher counter from Fox, but are still trading above the latest Fox bid.
- U.S. President Donald Trump is pushing his trade conflict with China toward a point where neither side can back down. By Aug. 30, as the U.S. nears mid-term elections vital for Trump’s legislative agenda, the White House will be ready to impose 10 percent tariffs on $200 billion of Chinese-made products, ranging from clothing to television parts to refrigerators. The levies announced Tuesday — together with some $50 billion already in the works — stand to raise import prices on almost half of everything the U.S. buys from the Asian nation.
- Airbus SE and Boeing Co. split firm orders for 19 jets from the Indian affiliate of Singapore Airlines Ltd. that is seeking to start international flights and bolster local operations. Vistara, as the airline is known, will buy 13 of the A320neo and A321neo jets that have a list price starting at about $111 million each and six Boeing 787-9 Dreamliners at about $282 million apiece. The combined order is valued at $3.1 billion, excluding customary discounts, the carrier said in a statement Wednesday.
- Ford Motor Co. is killing its slow-selling Fusion sedan while keeping the name to affix to a sport wagon it is developing to take onSubaru’s popular Outback, according to people familiar with the automaker’s plans. The Fusion name probably will live on when the sedan exits early next decade, according to a spokesman. It will be replaced in the showroom by a high-roofed hatchback built on the same mechanical underpinnings, said two people who asked not to be identified revealing future product plans.
- Pfizer Inc. agreed to delay implementation of planned price increases for certain drugs a day after President Donald Trump launched an attack on the company, saying it should be “ashamed” of the move. Trump said on Tuesday evening that the New York-based company would be “rolling back price hikes” after he spoke with its chief executive officer, Ian Read, and his administration’s top health official.
- There are so far no charges or convictions, but analysts are already guessing how big a fine Danske Bank A/S might have to pay following allegations it became a major hub for money laundering in Europe. A potential penalty could be as high as $4.7 billion or as low as $315 million, and estimates average out at $670 million, based on numbers submitted by five analysts. At least two of the analysts said it was possible Danske would avoid a fine altogether.
- Qatar is seeking to raise more than $4 billion from banks to finance the purchase of Eurofighter Typhoon combat jets, according to people with knowledge of the matter. The government is working with financial advisers on the deal that will be backed by export credit agencies, the people said, asking not to be identified because the talks are private. Qatar has invited lenders to participate in the loan and a transaction could be finalized within a month, they said.
- Confronted with a plunging lira, Turkey’s central bank last month urged the general public to borrow in the currency in which they are paid. That warning came too late for the country’s energy companies. Turkish power producers are emerging as one of the biggest risks to the nation’s banks after they plowed billions of dollars into new power generation, distribution projects and deals over the past 15 years. Now, with the lira depreciating faster than they can raise electricity prices, some utilities earn less per year than what they have to repay in foreign-currency loans, according to the Ankara-based Electricity Producers’ Association.
- Facebook Inc. could be fined a symbolic 500,000 pounds ($664,000) by the U.K.’s privacy regulator after the social network giant failed to prevent key user data falling into the hands of a political consultancy that helped get President Donald Trump elected. The U.K. Information Commissioner’s Office is threatening the company with the maximum penalty allowed, it said Wednesday when issuing its first findings in a probe that looked at some 30 organizations, including social media platforms such as Facebook. The tech giant is accused of not properly protecting user data and not sharing how people’s data was harvested by others.
- Tesla Inc. and the Shanghai government have left out a crucial detail in announcing a groundbreaking deal for the biggest name in electric cars to build its vehicles in China: how much it’s all going to cost. Chief Executive Officer Elon Musk sealed a crucial agreement Tuesday to start building its second car assembly plant in the world. Construction will begin soon after approvals and permits are secured, and the first vehicles will roll off the line within roughly two years, a Tesla spokesman said in an email. It’ll take another two to three years for the factory to reach its capacity to build about 500,000 vehicles annually.
- Goldman Sachs Group Inc. is using its position in the $800 billion market for exchange-traded bond funds to build a business that its Wall Street rivals now want to emulate. The bank has this year almost tripled the volume of ‘‘credit portfolio trades,’’ whereby it buys or sells large scale blocks of securities through ETFs, to around $20 billion globally from $7 billion in all of 2017, according to people familiar with the matter. It’s able to do this because it acts as a so-called authorized participant, whose responsibilities include supplying the securities underpinning the funds, according to the people who asked not to be identified because it isn’t public.
- Masayoshi Son said he had no money for deals (he’s thinking of a second $100 billion fund), Brian Roberts (locked in a bidding war with Disney) said he had nothing to say and Steve Case gave advice on how not to do a deal (remember AOL-Time Warner?). Media and tech titans turned up in good spirits at the billionaire’s summer camp at the Sun Valley Resort in Idaho, even though the U.S. just started a trade war with China and their private jets faced the worst delays within the continental U.S. on Tuesday. They gave little away though, as Allen & Co.’s annual conference officially kicked off with a Western-themed, early evening barbecue.
- Blackstone Group LP plans to start raising its next global private equity fund three years after gathering about $18 billion from investors for its last pool. The firm is expected to seek more than $20 billion when it starts marketing its eighth buyout fund later this year, according to people familiar with the matter who asked not to be named. New York-based Blackstone’s prior vehicle wasn’t even a third invested as of March 31, according to a regulatory filing.
- The owners of Viva Energy Australia Ltd., a fuels business backed by a Vitol Group consortium, has raised about A$2.65 billion ($2 billion) after selling shares in its initial public offering at the bottom end of a marketed range, people with knowledge of the matter said. The Vitol-led group sold shares at A$2.50 apiece and retained a 45 percent stake in Viva Energy, said the people, who asked not to be identified as the details are private. Shares in the IPO, the country’s largest since 2014, were offered at A$2.50 to A$2.65 each. The owners said they planned to keep a stake of 40 percent to 50 percent, a copy of the prospectus shows.
*All sources from Bloomberg unless otherwise specified