November 5th, 2018
Daily Market Commentary
- Canadian stocks closed lower amid conflicting messages on trade from the White House but still managed to post their biggest weekly gain since May. The S&P/TSX Composite Index lost 0.2 percent to 15,119.28 Friday, reversing an earlier gain. The benchmark posted a weekly gain of 1.6 percent, the most in six months, as global stocks recovered somewhat from October’s rout.
- Toronto’s housing market showed more signs of stability in October as prices for condos and semi-detached homes jumped even as unit sales were little changed. The average selling price rose 1 percent last month from September to a seasonally adjusted C$810,881 ($619,419), the first gain in three months. The benchmark price, which adjusts for the types of houses sold, rose 2.6 percent from the same month last year. Sales declined by a seasonally adjusted 1 percent on the month to 6,920 and were down 3.3 percent from a year earlier, the Toronto Real Estate Board reported Monday.
- Alphabet Inc.’s digital city on Toronto’s waterfront is in danger of becoming surveillance city unless data is stripped of personal details from the get go, according to one of the world’s leading privacy experts. Ann Cavoukian will meet with Waterfront Toronto, the government organization overseeing the project, this week to seek a commitment that information collected will be “de-identified at source.” Cavoukian resigned as an adviser to Sidewalk Labs LLC, a unit of Google parent Alphabet, last month in protest over privacy concerns but said she would consider returning if this principle is ensured.
- European equities were little changed at the open and industrials fell as the optimism from a possible trade pact began to dissipate. The Stoxx Europe 600 Index was down 0.1 percent. BHP Billiton Plc fell 0.7 percent and Ashtead Group Plc was down 3.5 percent. Industrials and miners both outperformed last week.
- U.S. equity futures reversed a drop and European stocks rose as investors looked ahead to the American elections this week, with a trade deal between the world’s biggest economies seemingly off the table for now. Treasuries edged higher, while the pound strengthened amid signs the U.K. and European Union are closer to breaking the Brexit deadlock. Futures on the Dow, S&P 500 and Nasdaq all eventually turned higher, while telecom and healthcare companies were among the biggest advancers as the Stoxx Europe 600 Index climbed in relatively thin trading.
- Japanese stocks declined as investors mulled the chances for the U.S. and China to reach a trade deal. Electronics and chemicals makers weighed the most on the Topix index. U.S. equities fell on Friday after White House economic adviser Larry Kudlow downplayed the potential for a quick deal. Chinese President Xi Jinping said during a speech in Shanghai that China intends to cut import taxes further.
- Oil traded near a six-month low as the prospects of a tight global market at the end of year further receded after the U.S. softened the restart of sanctions against Iran. Crude in New York slipped 0.4 percent, falling for a sixth day. Sanctions against Iran snapped back on Monday, though eight countries were allowed to continue buying some crude from the country, according to U.S. Secretary of State Michael Pompeo. Hedge funds reduced bullish bets for an eighth week as extra supplies from OPEC and the U.S. assuaged concerns of a potential shortfall.
- Gold was little changed, with the dollar steady, as markets await the U.S. midterm elections on Nov. 6 to provide fresh direction. Platinum gained for the fifth day to a four-month high on prospects for a trade deal between the U.S. and China.
- Euro-zone companies are increasingly running into capacity constraints that will boost inflation, the European Central Bank said in a report. That outlook should provide some solace to governors as they prepare to decide whether to halt their bond-buying program this year as planned. A slew of disappointing data have shown the euro-area economy losing momentum, with the latest measure on Monday putting investor sentiment at the weakest in more than two years.
- U.S. sanctions lifted as part of the 2015 nuclear accord with Iran snapped back at midnight New York time as President Donald Trump fulfills his vow to ramp up pressure on the Islamic Republic over its “malign” behavior in the Middle East, its ballistic missile tests and its nuclear program. Secretary of State Michael Pompeo is scheduled to announce the list of eight countries that will get temporary waivers to keep importing Iranian oil at 8:30 a.m. Washington time on Monday.
- The most expensive midterm campaign in U.S. history raced to a finish ahead of Tuesday’s election, as both sides braced for a possible split decision that would hand the House to Democrats and leave Republicans holding onto or expanding their Senate majority. Partisans were preparing for the unexpected, though, two years after Donald Trump stunned the nation with his surprise win. As candidates, surrogates, outside groups and the two parties frantically worked to turn out their voters, strategists for each party agreed the outcome will be determined by the composition of an electorate that’s showing signs of being larger than normal for a midterm year.
- Contenders to succeed German Chancellor Angela Merkel as party chief will criss-cross the country to campaign ahead of a convention in December, giving an early taste of the choices for the next potential leader of Europe’s pivotal country. The process agreed among the Christian Democratic Union’s leadership signals that Germany is headed for another inward-looking period as the post-Merkel era takes shape. Merkel, 64, reiterated Monday she’s ready to serve out her fourth term and her replacement as party chief, who would be in pole position to be the CDU’s chancellor candidate in the next election, will help determine whether she can.
- China will set up a new trading venue in Shanghai that will make it easier for high-tech companies to access funding, as President Xi Jinping vows more opening measures to boost the world’s second-largest economy. The Shanghai Stock Exchange will also start a pilot program on a registration-based system of initial public offerings, Xi said at the opening ceremony of the China International Import Expo on Monday, without elaborating on either initiative.
- An International Monetary Fund team will arrive in Islamabad on Wednesday to examine Pakistan’s financial position and negotiate terms of a proposed bailout. IMF representatives will stay for two weeks and then take Pakistan’s loan request to its executive board for approval, Noor Ahmed, a spokesman for Pakistan’s Finance Ministry, said by phone on Monday. Despite securing a $6 billion support package from Saudi Arabia last month, Pakistan needs more funding to plug a shortfall in its finances after foreign exchange reserves plunged more than 40 percent this year, the current account deficit widened and its currency lost a quarter of its value since December.
- Indebted Chinese developer Guangzhou R&F Properties Co. could raise as much as $1.4 billion by selling shares in Hong Kong. The extra money would strengthen the company’s finances, improve its credit rating outlook and help to lower funding costs, it said on Monday. The timing isn’t set.
- KKR & Co.’s car-parts company Calsonic Kansei Corp.expects orders to rise as much as 40 percent in three years after the completion of its purchase of Italian rival Magneti Marelli as the two businesses leverage each other’s sales networks, Calsonic’s chief executive officer said. The $7.1 billion purchase from Fiat Chrysler Automobiles NV will help the merged entity expand and diversify its customer base, Calsonic’s Beda Bolzenius, who will lead the combined company, said in his first interview after the deal was announced last month. The merger creates a more formidable contender to bigger rivals such as Continental AG and Denso Corp.
- Nasdaq Inc. expects listings activity on its Nordic stock exchanges to pick up in the final two months of this year, after market volatility led to a significant slowdown in the second half. Nasdaq’s Nordic main market and alternative First North platform for smaller companies are on their way to “somewhere close to a hundred” listings this year, Nasdaq Nordic President Lauri Rosendahl said in an interview in Stockholm. With a total of 66 listings so far this year, that means there is scope for more than 30 additional ones in November and December.
- Kuwait Petroleum Corp. is in talks with local banks to raise a 1 billion dinar ($3.3 billion) revolving loan to help fund its expansion plans, according to two people with knowledge of the matter. KPC is expected to finalize the financing by the end of the year, the people said, asking not to be named because talks are private. The company has a $105 billion investment strategy for the next five years and plans to finance half with debt and the rest with equity, one of the people said.
- U.S. cybersecurity experts are bracing for possible attempts to attack the midterm election by Russia or another adversary hoping to engineer a disruption that casts doubt on the integrity of the vote. Interference may range from altering websites used by state and local election authorities, to spreading propaganda through social media, to hacking at polling places intended to complicate the casting of ballots.
- The next online dating company to go public probably won’t be cheap, but might need to reach some middle-ground with investors on its valuation, according to an analyst and a portfolio manager. An initial public offering in Bumble could value the millennial-focused courtship app at as low as $1.1 billion, below the $1.5 billion figure it was reportedly seeking in January, according to calculations by Synovus Trust senior portfolio manager Dan Morgan.
- General Electric Co. Chief Executive Officer H Lawrence Culp JR bought $2.19 million of shares, according to a filing with the U.S. Securities & Exchange Commission. Culp purchased 225,000 indirectly owned shares at an average price of $9.73 on Nov. 1, 2018, according to the filing. The transaction increased the indirectly owned shares by 62 percent to 585,800 shares. Culp bought the shares after GE dropped 30 percent in the past month.
*All sources from Bloomberg unless otherwise specified