November 6th, 2018
Daily Market Commentary
- Canada has a challenger to its status as the pot-stock capital of the world — the scrappy over-the-counter market in the U.S. There are now 136 cannabis-related securities on OTC Markets Group Inc.’s main and venture market. That compares with 144 companies on Canadian exchanges. With marijuana illegal at the federal level in the U.S., the big exchanges like the NYSE and the Nasdaq only allow listings from companies that don’t have American operations, including five Canadian producers. Rules on the New York-based OTC markets are less stringent and allow companies on qualified foreign exchanges to trade without registering with the Securities and Exchange Commission. Fees are also lower.
- Randgold Resources Ltd. Chief Executive Officer Mark Bristowsaid the company formed by its merger with Barrick Gold Corp. will focus on high-quality assets to generate cash to boost dividends and shareholder value. The merger between Barrick and Randgold will also provide momentum for further consolidation within the gold industry, which needs to better compete for global investors, Bristow said in an interview after the release of his company’s third-quarter results.
- Oat prices are close to the highest in almost four years after weather woes cut yields and damaged crops in Canada, the world’s largest exporter. On Monday, oat futures in Chicago rose as much as 3.4 percent to $2.94 a bushel. Three weeks earlier, the most-active contract reached $3.07, the highest since January 2015. Inventories in Canada are poised to fall after drought and snow cut yields, and adverse weather hampered production in major suppliers including Europe and Australia.
- The Stoxx Europe 600 Index lost traction after a positive start and technology, retail and construction were among the sectors to drag the gauge down. It was a mixed picture across global stock markets on Tuesday, with investors seemingly entering a holding pattern as they await the U.S. midterm elections. European equities turned lower alongside American futures while Asian shares advanced. Treasury yields and the dollar edged up.
- Contracts on the S&P 500, Dow Jones and Nasdaq also all turned lower as the morning wore on. Politic events loom large for traders this week as U.S. congressional elections, seen as a referendum on the policies of President Donald Trump, take place Tuesday. Democrats are expected to take control of the House of Representatives but fall short in the Senate. Meanwhile, investors have one eye on the U.K., where Theresa May is redoubling efforts to reach a Brexit deal.
- The mood in Asia was more upbeat and equities climbed in Japan, Australia, South Korea and Hong Kong, but underperformed in China even as the country’s vice president said Beijing remained ready to discuss a trade solution with Washington. European government bonds were mixed and range-bound. The euro reversed a small gain on disappointing manufacturing data.
- Oil held near the lowest level in seven months as concerns over a supply crunch eased after the U.S. granted waivers to eight governments to continue buying some Iranian crude. Futures in New York slid as much as 0.7 percent after declining around 7 percent in the past six sessions. More details emerged on the amount of Iranian crude some nations can buy under American sanctions, after Secretary of State Michael Pompeo confirmed on Monday that China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey have been given temporary exemptions from the restrictions. Meanwhile, U.S. crude inventories are forecast to have risen a seventh week.
- Gold prices held ground before the U.S. congressional elections and investors continued adding to bullion-backed exchange traded funds. Investors and analysts were skeptical the election will be a significant market driver. Franklin Templeton said concerns the Fed will continue raising rates will overshadow any short-term boost to haven demand.
- General Electric Co. agreed to sell its commercial-lighting division to American Industrial Partners, continuing to sell businesses as the industrial giant streamlines its manufacturing portfolio. The purchase of the unit, which is known as Current, is expected to close early next year, GE AIP, a private equity firm, said in a statement Tuesday. Financial terms weren’t disclosed. The Boston-based company has announced at least $10 billion in asset sales over the last 12 months, including its century-old rail business in May. The company sold the bulk of its international and automotive lighting businesses earlier this year.
- Midterm elections are always a referendum on the president, but Donald Trump has worked especially hard to make this one about him. Trump didn’t appear in many ads from candidates, Democratic or Republican, during the 2018 campaign, but he’s a presence in voting booths as Americans cast their ballots for House and Senate races. Just ask him: “I’m not on the ticket, but I am on the ticket,” he joked at a rally last month. Attitudes toward the most disruptive and divisive president in recent U.S. history will shape the choices of the 236 million Americans eligible to vote on Tuesday. The ballot will mark the first chance for voters to speak their minds since Trump shocked the world by winning in 2016.
- Anadarko Petroleum Corp. and Noble Energy Inc. have the most riding on an anti-drilling referendum unfolding Tuesday in Colorado, one of the biggest U.S. oil-producing states. The two explorers collectively control drilling rights to about 750,000 acres — assets they might not be able to drill if voters approve Proposition 112, a measure that would curb oil and gas development across more than half the Rocky Mountain state.
- The Air Force terminated a Boeing Co. contract to update the radar on its flagship Awacs surveillance aircraft after the company encountered major delays in developing hardware and software, according to budget documents. Instead of continuing the $76 million contract with Boeing, “the Air Force determined the best approach for providing this critical capability would be to replace the legacy radar processor and its related components,” Captain Hope Cronin, a service spokeswoman, said in an email. “Several companies responded to the Air Force’s request for information, and a request for proposal is currently being developed.”
- Stifel Financial Corp. will expand into Europe by buying the brokerage operations of Germany’s MainFirst Holding AG, ensuring that the U.S. firm can keep offering financial services in the European Union after Brexit. Stifel’s London-based European unit will acquire MainFirst’s businesses in Germany, Switzerland and the U.S. and add about 150 employees to the 300 it already has in the U.K. MainFirst holds a full German banking license, enabling Stifel to offer advisory, brokerage and investment banking services in the EU as well as clear and settle trades after Brexit, it said.
- Amazon.com Inc.’s yearlong search for a second headquarters is nearing an end, people with knowledge of the matter said. The e-commerce giant is close to agreements that would split the new headquarters between two locales, said one of the people, who asked not to be identified discussing non-public matters. One will be the Crystal City area of Arlington, in Northern Virginia, two people said. Another will be Long Island City, in the New York borough of Queens, other people said. An Amazon spokesman declined to comment. Amazon last year announced plans to invest $5 billion in a second HQ and hire as many as 50,000 people, setting off a frenzy of interest from cities in the U.S. and Canada. It has announced 20 finalists and is scheduled to make a final decision by the end of the year.
- Investors in a Schroders Plc real estate fund that owns some of London’s priciest offices are seeking to withdraw almost one-fifth of the 836 million pounds ($1.09 billion) pool as Brexit-related worries have mounted, people with knowledge of the matter said. Some 150 million pounds in redemption requests at the West End of London Property Unit Trust have prompted restructuring talks that could result in a sale of the fund or a change of manager, among other options, said the people, asking not to be identified as the negotiations are private.
- U.K. Cabinet ministers expect to be locked in a room to study the latest options for a Brexit deal in strict secrecy on Tuesday as Theresa Mayredoubles efforts to get a deal this month, according to people familiar with the matter. The prime minister is hosting her most senior team for a discussion on Brexit and the session on Tuesday morning is likely to focus on the vexed question of how to avoid customs checks at the Irish border with the U.K.
- Bill Gates thinks toilets are a serious business, and he’s betting big that a reinvention of this most essential of conveniences can save a half million lives and deliver $200 billion-plus in savings. The billionaire philanthropist, whose Bill & Melinda Gates Foundation spent $200 million over seven years funding sanitation research, showcased some 20 novel toilet and sludge-processing designs that eliminate harmful pathogens and convert bodily waste into clean water and fertilizer.
- Takeda Pharmaceutical Co. Chief Executive Officer Christophe Weber pushed back against dissident shareholders seeking to stop the Japanese drugmaker’s acquisition of Shire Plc, saying he won’t release minutes of boardroom discussions. A group including members of Takeda’s founding family opposes the planned $62 billion acquisition of the U.K.-listed biotech firm, which would rank as the biggest overseas takeover by a Japanese company. The investors plan to sue Takeda to obtain details of the board talks leading up to the May deal, trade publication DealReporter said last week.
- Telefonica SA is considering options including a sale of its data-center business as the Spanish telecom group seeks to pay down debt, people with knowledge of the matter said. The former telecom monopoly is working with financial advisers to gauge interest from potential buyers including firms that run data centers as well as infrastructure and private-equity funds, the people said. The sale could fetch $500 million to $1 billion, depending on which assets are sold, said the people, asking not to be identified as the information is confidential.
- GAM Holding AG parted ways with Chief Executive Officer Alex Friedman after a series of mishaps that culminated in the suspension of a star manager and left the investment firm fighting for its survival. David Jacob, an industry veteran and GAM board member, will run the business while the company scouts for a permanent successor. Shares of GAM went into a tailspin after the July suspension of bond manager Tim Haywood over risk management issues. The episode raised concerns about oversight and triggered billions of dollars in outflows. Assets under management slumped by $18 billion in the three months through September.
*All sources from Bloomberg unless otherwise specified