May 31st, 2018
Daily Market Commentary
- Canadian stocks rose the most in a month as investor concern faded about Italy and the state of the EU, while the Canadian dollar spiked after the central bank paved the way for a new round of rate increases. The S&P/TSX Composite Index added 126 points, or 0.8 percent, to 16,048.66, snapping a six-day decline. Energy stocks rose 1.6 percent, the most in six weeks, as crude prices rebounded after a week of declines.
- Canadian Trade Minister Francois-Philippe Champagne says Thursday that any U.S. tariff on steel and aluminum would be “unacceptable” as the exemption his country is benefiting from along with the EU and Mexico could be lifted on June 1, in an interview with Bloomberg TV.
- Malaysia’s Petroliam Nasional Bhd. agreed to take a 25 percent stake in a proposed liquefied natural gas project in Canada led by Royal Dutch Shell Plc. The Canadian unit of Shell will hold a 40 percent stake, while subsidiaries of PetroChina Co. and Mitsubishi Corp. will have a 15 percent share each, according to a statement Thursday from Petronas. A unit of Korea Gas Corp. will hold 5 percent. The proposed C$40 billion ($31 billion) export facility at Kitimat near Prince Rupert — North America’s closest port to Asia — could eventually have capacity to ship 26 million tons a year of liquefied gas.
- European stocks drifted following an Asian equity bounce as investors struggled to rebuild their confidence amid a muddled political outlook in Southern Europe and an uncertain global trade picture. The dollar fell while the euro climbed, and Italian bond yields declined. The Stoxx Europe 600 Index pared a gain as Italy’s populists battled to revive plans for a coalition government, Spain’s prime minister teetered on the brink and the region braced for potential U.S. tariffs.
- Asian equities climbed from a 15-week low, paring a monthly loss, as the global panic triggered by Italy’s political crisis moderated. Japan rebounded from its longest losing streak since 2012, while Hong Kong and South Korea halted a two-day slump. The MSCI Asia Pacific Index rose 0.8 percent to 172.00 as of 5:16 p.m. in Hong Kong, rebounding from its biggest slump since March and cutting this month’s slide to 1.3 percent.
- Oil fell, compounding a monthly decline, after U.S. crude inventories were said to rise by more than expected. Futures in New York fell 0.6 percent, set for the first monthly drop since February. On Wednesday, the American Petroleum Institute was said to report a 1 million barrel increase in crude stockpiles, double the gain forecast in a Bloomberg survey of analysts. Prices have declined about 4 percent since Saudi Arabia and Russia last week proposed to phase out supply curbs by OPEC and its allies.
- Gold extends advance on weaker U.S. dollar and global trade-war fears mount, but is still on track for its first back-to-back monthly decline since October.
- U.S. steel stocks may gain Thursday after reports that President Donald Trump may impose tariffs on steel and aluminum products from Canada, Mexico and Europe as the temporary exemptions are due to expire Friday.
- Nickel is heading for its best month so far this year as bulls focus on a global deficit, tumbling stockpiles and rising demand. The metal rose as much as 1 percent to $15,275 a metric ton on the London Metal Exchange, extending May’s gain to 12 percent. Nickel has rallied 70 percent in the past 12 months, making it the top performer in the Bloomberg Commodity Index.
- Euro-area inflation hit the fastest pace in more than year, some good news for European Central Bank officials debating the future policy path just as turmoil in Italy revives memories of the debt crisis. The 1.9 percent rate, effectively in line with the ECB’s goal, was up from just 1.2 percent in April and above the 1.6 percent reading forecast by economists. The core measure rose to 1.1 percent, also better than anticipated.
- Emery 68 LLC, which had already secured a chunk of shipyard claims against Seadrill Ltd., bought another $464 million of them through Barclays Plc, setting it up to become a significant shareholder in the offshore oil driller. Holders of unsecured claims will get a stake in the new Seadrill, which is set to emerge from bankruptcy protection by the middle of July after a Texas court approved a reorganization plan last month for the driller controlled by billionaire John Fredriksen. The claims will be converted into a minority stake in the company, and also provide subscription rights to new secured notes and an equity issue.
- President Donald Trump’s net worth slipped to $2.8 billion, a decline of $100 million over the past year, as revenue at his namesake Fifth Avenue tower and golf courses fell. The drop, the second in two years, is based on figures compiled by the Bloomberg Billionaires Index from lenders, property records, annual reports, market data and a May 16 financial disclosure. It occurred as Trump began his second year in the White House and his name was stripped from buildings in Toronto, Manhattan and Panama.
- Malaysia said it’s working with Singapore to recover money believed to have been embezzled from its state investment company 1MDB, as Prime Minister Mahathir Mohamad’s administration acts on a pledge to cooperate with probes underway around the globe. Investigators on both sides met near Kuala Lumpur on Thursday, where they also discussed collecting evidence, identifying Singapore witnesses and mapping a money trail to detect funds and assets that still exist, according to a statement from a Malaysian task force overseeing 1MDB probes. Singapore has seized hundreds of millions of dollars in assets and jailed bankers over transactions linked to the scandal-plagued fund.
- The European Union is bracing for President Donald Trump to open another front in his confrontation with the bloc, as the EU’s top negotiator prepares for the U.S. to impose either tariffs or quotas on metals imports from America’s closest allies. Trump slapped 25 percent tariffs on imported steel and 10 percent on aluminum in March, but granted a reprieve to the EU, Canada and Mexico until June 1 for further talks to take place. EU Trade Commissioner Cecilia Malmstrom met with U.S. Commerce Secretary Wilbur Ross in Paris on Wednesday in a last-ditch attempt to reach a compromise.
- The U.S. Securities and Exchange Commission is reviewing whistle-blowers’ allegations that Aflac Inc. may have misled investors in reporting its financial results, according to two people familiar with the matter. The complaint filed with the SEC on behalf of former workers accuses the Columbus, Georgia-based insurer of inflating a measurement of how many associates were making sales and suggests the firm possibly manipulated earnings by shifting the timing of when it booked revenue, according to one of the people and the document, which was reviewed by Bloomberg News.
- Japan’s factory output rose less than forecast in April, adding to concerns about the strength of the economy following a contraction in growth during the first quarter. A sharp drop in production of electronic components and devices was cited as a factor.
- Global finance chiefs will be back in crisis-management mode this week as the Group of Seven grapples with the market shock waves from Italy’s political woes. Finance ministers and central bankers from the G-7 nations — who oversee almost half of the global economy — begin three days of meetings at the Canadian ski resort town of Whistler, British Columbia on Thursday hoping to stomp out a series of brush fires breaking out across the global economy.
- Fairfax Financial Holdings Ltd., the investment firm run byPrem Watsa, is preparing to increase its investment in Seaspan Corp. by $500 million to help fund the containership owner’s takeover ambitions. Fairfax plans to exercise warrants to buy 77 million shares in the Hong Kong-based company at $6.50 per share in two phases starting this summer, according to a statement Thursday. It will exercise half in July and the rest in January.
- Blackstone Group’s GSO Capital Partners and Solus Alternative Asset Management resolved a dispute over a financing plan for Hovnanian Enterprises Inc., ending an argument that had roiled the credit derivatives market. The fight stemmed from GSO’s agreement last year to lend money to the troubled homebuilder. As part of that deal, Hovnanian agreed to default on a chunk of its debt, a step that allowed GSO to profit from a separate credit derivatives trade. The money manager’s gains from credit derivatives allowed it to offer the builder relatively cheap financing.
- Uber Technologies Inc. is seeking an 18-month permit to operate in London as the company battles the city’s transport regulator to keep offering rides, according to a person familiar with the talks. The suggestion dates back to April, when Uber was giving evidence to London’s Westminster Magistrates’ court, and no formal application has been made, said the person, who asked not to be named because the discussions are private. The company posited that a license of such length would be appropriate to let the business show it was making positive changes in the city, the person said.
- Morgan Stanley and Nomura Holdings Inc. are joining other banks betting on a resurgence in complex derivatives, according to a person familiar with the matter. Both lenders have boosted sales of so-called synthetic collateralized debt obligations in the past month, said the person, asking not to be identified because the information isn’t public. Morgan Stanley marketed about $1 billion since mid-April, while Nomura offered $1.5 billion across three deals, said one of the people.
- The U.K. markets regulator began toughening rules on banks’ 2.3 billion-pound ($3 billion) overdraft business, while leaving more “radical options” for later. Lenders would need to make overdraft fees clearer and alert customers to potential charges under proposals the Financial Conduct Authority published on Thursday. The London-based regulator said it will now consider stiffer measures such as banning fixed fees and tackling steep prices for unarranged overdrafts.
- HDFC Bank Ltd. may extend its record run as global funds rush to snap up shares of India’s most-valuable lender before the regulator makes market structure changes, Macquarie Capital Securities (India) Pvt. said. On Friday, India will introduce a new system monitoring foreign ownership limits in real time. But for the next month, global investors will also retain access to a facility — set to be phased out on July 1 — that allows them to trade shares among themselves when those limits have been reached.
- Billionaire Jack Ma’s Ant Financial is lifting its fundraising target to more than $12 billion by bringing in existing Chinese shareholders in a yuan-denominated financing round, people familiar with the matter said. The online financial services giant is shooting for at least $2 billion of additional funding in a yuan round that lets Chinese investors participate, the people said, asking not to be named because the matter is private. That will come on top of a recent $10 billion round that valued Ant Financial at $150 billion and targeted overseas investors such as Warburg Pincus and Temasek Holdings Pte, the people said. Ant’s existing backers including sovereign wealth fund China Investment Corp. are considering taking part in the yuan financing, they added.
- Fluor Corp. is preparing to sell a stake in a joint venture working on a series of seven wind-farm projects that may require 9.3 billion pounds ($12.4 billion) to develop off the coast of Scotland, according to people familiar with the deal. The Texas engineering company wants to sell its 50 percent stake inSeagreen Wind Energy Ltd., which it set up with the utility SSE Plc, according to the people, who asked not to be named because the discussions are confidential. The two companies through Seagreen are working on the projects in the Firth of Forth, the estuary near Edinburgh where several rivers flow into the North Sea.
- HSBC Holdings Plc is seeking a new chief financial officer and has approached departing Royal Bank of Scotland Group Plc executive Ewen Stevenson for the role, according to a person with knowledge of the process. Chairman Mark Tucker has spoken with RBS CFO Stevenson and other candidates in recent weeks as it looks for a successor forIain Mackay, who has been in the role since December 2010, said the person, who asked not to be identified speaking about the confidential process.
- Exxon Mobil Corp’s Darren Woods says his company is at the center of a delicate balancing act between those who want a cleaner environment and those seeking economic growth that depends on rising energy demand. Exxon is planning to invest more than $200 billion in major oil and gas projects around the world over seven years, a signal that growth carries a bit more weight in company plans.
*All sources from Bloomberg unless otherwise specified