November 23rd, 2018

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks failed to gain traction following Wednesday’s rally, closing slightly lower on holiday-hit trading volumes. The S&P/TSX Composite Index fell less than 0.1 percent to 15,091.58 Thursday, fresh off the heels of Wednesday’s 1.5 percent surge. Volume was about 60 percent lower than average due to the U.S. Thanksgiving holiday. Health-care stocks were the biggest decliners, losing 1.2 percent amid weakness in the pot sector. Offsetting that was a 0.5 percent gain in materials, boosted by rising gold stocks.
• Canada Goose Holdings Inc. is pushing ahead with its China expansion, betting its strategy of selling premium coats directly to customers will help overcome a proliferation of knockoffs and the nation’s consumption slowdown. The Toronto, Canada-based company has dealt with counterfeits soon after it started selling globally two decades ago, CEO Dani Reiss said in an interview in Beijing on Friday. “We’re used to it,” he said. “It’s very important for us to protect our brand and educate the consumer so they won’t be fooled into buying a fake jacket.”
• Fiera Capital Corp.’s property unit wants to go global. Quebec’s biggest publicly traded asset manager is looking to make its first real-estate foray outside of Canada by the start of the next decade to diversify its holdings, according to Pierre Pelletier, a senior vice president at the company. All of Fiera Properties’ assets under management, which are valued at about C$3 billion ($2.3 billion), are located in Canada.

 

 

World Headlines

• Banks and technology companies helped the Stoxx Europe 600 Index eke out a small advance. The dollar climbed and the euro reversed earlier gains as data showed Germany’s growth outlook weakened. The pound handed back much of Thursday’s gains after Spain said it may vote against the Brexit plan. Italian bonds led an advance in European debt markets.
• U.S. equity futures pointed to a weaker open and Asian benchmarks declined on Friday, while European stocks edged higher. Oil fell and headed for a seventh weekly loss on signs of oversupply, leading commodities lower. Contracts on the Dow, S&P and Nasdaq all pointed to markets reopening with a drop following the Thanksgiving holiday. Chinese Chinese equities led regional declines in Asia, with the technology sector weak on concern the U.S. is ratcheting up a campaign against Huawei Technologies Co.
• It was supposed to be a quiet day for Asian stocks — and it is, except for China. With Japan and India closed for holidays (and the U.S. has a shortened trading day), it’s no surprise that volume is well below average. But even though the regional benchmark gauge is little changed, you can’t ignore the plunge in Chinese shares. The Wall Street Journal reported earlier that the U.S. government was contacting key allies to get them to persuade telecommunications companies in their countries to avoid using equipment from China’s Huawei Technologies Co. At the open, benchmarks in the city and mainland slumped. The Shanghai Composite Index closed a staggering 2.5 percent lower and the Hang Seng Index fell as much as 2.6 percent before paring losses.
• Oil slumped to the lowest in a year after Saudi Arabia signaled its output may have reached a record high and growing U.S. stockpiles stoked concerns over a potential supply glut. New York futures dropped 5.3 percent from their Wednesday settlement price in a trading session lengthened by the Thanksgiving holiday in the U.S., set for a seventh weekly decline. Traders are focused on the growing risks of a new glut of crude: Saudi Arabia’s oil minister said Thursday production from the world’s largest exporter climbed further this month after a surge in October, and U.S. stockpiles have risen for nine straight weeks.
• Platinum is set for its worst run of weekly losses in three months as a strengthening dollar helps push precious metals lower. Platinum has declined 9% this year, with demand dropping as consumers prefer gasoline cars, and exchange-traded-fund holdings are hovering around the lowest in 5 years. The World Platinum Investment Council releases a report next week that will include its outlook for 2019. Silver led declines among precious metals, extending this year’s drop to 16%. The metal faces its highest physical supply surplus in 8 years, according to Refinitiv GFMS.
• The euro-area economy stumbled again this month, with a key indicator falling to the lowest in four years, denting expectations for an economic pickup after a summer slowdown. Adding to worries, the composite PMI from IHS Markit also showed that employment and orders growth slowed and companies’ expectations dropped. The euro, which plunged earlier after a weak reading in Germany, was down 0.3 percent against the dollar.
• U.S. President Donald Trump and Chinese leader Xi Jinping have indicated they’re both ready for a highly anticipated meeting at the Group of 20 summit in Argentina next week. The world’s biggest economies have been engaged in an escalating trade war that is starting to have a greater impact on financial markets and global growth. On Thursday, Trump told reporters that China wants to make a deal “very badly” after his administration placed tariffs on on about $200 billion worth of Chinese goods.
• iDreamSky Technology Holdings Ltd., a Chinese game distributor, has attracted Sony Corp. and JD.com Inc. as cornerstone investors for its planned Hong Kong initial public offering, people with knowledge of the matter said. The Shenzhen-based company plans to start taking investor orders Monday, the people said, asking not to be identified because the information is private. The firm has been discussing a fundraising target of about $200m, the people said.
• Pakistan’s Prime Minister Imran Khan said Friday’s assault on China’s diplomatic mission in Karachi was due to trade deals signed between the two nations earlier this month. “The failed attack against the Chinese Consulate was clearly a reaction to the unprecedented trade agreements that resulted from our trip to China,” Khan said on Twitter. “The attack was intended to scare Chinese investors — these terrorists will not succeed.”
• The U.S. government is contacting key allies to get them to persuade telecommunications companies in their countries to avoid using equipment from China’s Huawei Technologies Co., the Wall Street Journal reported. Officials from the U.S. have reached out to counterparts and executives in countries including Germany, Italy and Japan about perceived cybersecurity risks, the Journal said, citing unidentified people familiar with the matter. The U.S. may boost aid for telecommunications development in countries that shun Huawei equipment, some of the people said.
• Greek lenders recouped some of this month’s losses Friday after the Bank of Greece released details of a complex plan to lift much of the burden of their bad loans. The Athens benchmark bank index rose as much as 3.6 percent after hitting a record low earlier in the week. Eurobank Ergasias SA, which reported a third-quarter profit on Thursday, rose as much as 4.9 percent, while Piraeus Bank SAgained 4 percent. The Bank of Greece’s plan, published late Thursday afternoon, foresees the transfer to a special purpose vehicle of a significant part of banks’ non-performing loans at net book value, along with a portion of the deferred tax credits booked on the lenders’ balance sheets.
• The Chinese consulate in Karachi was assaulted by militants on Friday in an attack that killed at least seven people in Pakistan’s largest city and financial hub. An explosive-laden vehicle was driven outside the consulate and in an exchange of fire two policemen guarding the building and all three assailants were killed, Amir Shaikh, a senior police official, told reporters in Karachi. Two civilians collecting visas also died. Pakistan’s Foreign Minister Shah Mahmood Qureshi later told lawmakers in Islamabad that a suicide bomber had detonated explosives while trying to enter the building.
• The great cryptocurrency crash of 2018 is heading for its worst week yet. Bitcoin sank toward $4,000 and most of its peers tumbled on Friday, extending the Bloomberg Galaxy Crypto Index’s decline since Nov. 16 to 23 percent. That’s the worst weekly slump since crypto-mania peaked in early January.
• Tencent Music Entertainment Group, the online-music arm of China’s largest social-media company, tentatively plans to start taking investor orders on Dec. 4 for its planned U.S. initial public offering, according to people with knowledge of the matter. The music-streaming firm aims to begin trading Dec. 12 in New York, the people said, asking not to be identified because the information is private. Timing of the offering hasn’t been finalized and could change depending on market conditions, the people said. A deal from the Tencent Holdings Ltd. unit would add to the $7.9 billion of first-time share sales from Chinese companies in the U.S. this year, more than double the same period in 2017, data compiled by Bloomberg show. The year’s biggest China IPO in New York came from Netflix-style video streaming service iQiyi Inc., which raised $2.4 billion in March, the data show.
• Porsche AG has an ambitious plan to boost operating profit by 6 billion euros ($6.8 billion) over eight years by streamlining operations as the automaker spends more to develop and manufacture electric cars, according to people with knowledge of the matter. Porsche aims to boost earnings before interest and taxes by about 750 million euros annually over a timeframe starting this year and running through 2025 by increasing efficiencies, cutting costs and boosting earnings from new business such as digital offerings, said the people, who asked not to be identified because the discussions are private. The increase is necessary to maintain the Volkswagen AG brand’s target of a 15 percent return on sales. Porsche declined to comment.
• Nissan Motor Co. will seek a review of the shareholding structure of its alliance with Renault SA, moving to create a more equitable partnership between the two carmakers just days after Carlos Ghosn’s shock arrest, according people familiar with the plans. The review will cover the issue of voting rights, the people said, asking not to be identified as the information isn’t public. Renault has more influence in Nissan than the Japanese company has in its French partner, creating an imbalance in their two-decade-long relationship.
• Climate aid from the world’s richest countries to the poorest reached more than $70 billion in 2016, still some way short of a 2020 target for $100 billion to help developing nations combat global warming. The assessment from an official United Nations group monitoring the flows shows progress that rich countries led by the U.S. and European Union are making on the goal they set in 2009. While the amount of funds has been rising, both the U.S. and Australia have stopped contributing to the Green Climate Fund, raising concerns that their pledges won’t be met.

*All sources from Bloomberg unless otherwise specified