October 9th, 2018
Daily Market Commentary
- Al Gore’s Generation Investment Management LLP and Canadian pension fund Caisse de Depot et Placement du Quebec teamed up to acquire control of wealth-management services provider FNZ in one of the year’s largest fintech deals. The acquisition of a two-thirds stake held by the private equity firms General Atlantic and HIG Capital values FNZ at about 1.65 billion pounds ($2.2 billion), according to a statement from the companies Tuesday that confirmed an earlier report by Bloomberg News.
- Irving Oil Corp.’s refinery in New Brunswick, a major supplier of fuel to the northeastern U.S., was shut after an explosion and fire in a diesel unit. The hydrotreater, which removes sulfur from diesel to make fuel that meets environmental standards, was in the part of the refinery that was still running, while other units were shut for maintenance that had been planned for this month. Inventories along the East Coast of distillates, which include fuel used to heat homes, are already 15 percent below the five-year average, leaving homeowners vulnerable to higher bills.
- The supply of legal pot in Canada will only meet 30 percent to 60 percent of demand after legalization, keeping the black market very much alive and stunting the government’s tax take, according to a new study. Cannabis supply will reach about 210 tonnes, or 210,000 kilograms, in the first year after Canada legalizes marijuana this month, according to a study to be released next week by researchers at the University of Waterloo and the C.D. Howe Institute. Demand meanwhile, will be about 610 tonnes.
- Asian equities fell for a seventh day as escalating trade friction between the world’s two largest economies and a fresh seven-year high in U.S. Treasury yields continued to dampen the outlook for the region.
- Stoxx Europe 600 Index fall 0.4% to a session low as Italian shares reverse an early rebound and drop again amid brewing worries over the country’s budget.
- All eyes were on benchmark Treasuries on Tuesday as trading reopened in the wake of last week’s selloff and following a holiday on Monday. The 10-year yield crept up to a fresh seven-year high, while U.S. futures slid with stocks across Asia and Europe.
- Gold traded little changed following biggest decline in eight weeks after bond yields rose to seven-year highs, as traders weigh the outlook for global growth.
- Crude rose as storm Michael strengthened and shut some U.S. oil output, while the International Energy Agency called on producers to pump more as the market is “entering the red zone.” Futures in New York rose 0.6 percent. Michael, currently a category 1 storm, is strengthening as it heads toward Florida after shutting about 19 percent of oil production in the Gulf of Mexico.
- The International Monetary Fund said the world economy is plateauing as the lender cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets. On the eve of its annual meetings in Bali, Indonesia, the fund on Tuesday projected a global expansion of 3.7 percent this year and next, down from the 3.9 percent projected three months ago. It was the first downgrade since July 2016.
- Trump’s tariffs and the retaliation they provoke will shave 0.2 percentage point off U.S. growth next year, the IMF said in its autumn forecasts. The fund cut its outlook to 2.5% from its July projection, but left its estimate for this year at 2.9%. The IMF also shaved its projection for China next year to 6.2%. The euro area will expand 2% this year and 1.9% in 2019.
- Royal Dutch Shell Plc dropped plans to purchase a stake in KazMunayGas National Co. after a due diligence process that included discussions about the risk of corruption at the Kazakh state oil company, people with knowledge of the matter said. An investigation conducted on Shell’s behalf discussed the informal control one of Kazakh President Nursultan Nazarbayev’s sons-in-law exercises over the oil and gas producer, three people said, asking not to be identified as the issue is not public. U.S. law firm Debevoise & Plimpton LLP conducted the due diligence, one of them said.
- The VIX is stirring. After spending most of the summer below 15, the Cboe Volatility Index climbed as high as 18.38 on Monday, a level not reached since June 28. The so-called fear gauge climbed as much as 58 percent in the past three days, and its futures curve has inverted in each of the past two sessions, which suggests traders anticipate more near-term turbulence in stocks. That has strategists talking about what comes next.
- Apollo Global Management LLC agreed to acquire about $1 billion of equity investments in energy assets from a unit of General Electric Co., the latest move by the industrial firm to slim down its vast financial portfolio as it refocuses on industrial equipment.
- Google will unveil its widely leaked Pixel 3 and Pixel 3 XL at 11 a.m., and possibly new speakers and a tablet too. The company is seeking to boost revenue for a critically acclaimed phone that has yet to make a major sales impact. The products are rivals to Apple and Samsung’s premium devices.
- London’s CLO managers are set to get clarity from regulators about how skin-in-the-game rules will work after Brexit. In the arcane world of securitization regulation, Brexit has thrown doubt onto whether U.K.-based managers of collateralized loan obligations can keep being “sponsors” or have to fall back on the “originator” designation meant for managers from outside the Europe Union.
- Aviva Plc Chief Executive Officer Mark Wilson, who reshaped the company through a mix of asset sales and deals, has stepped down after the U.K. insurer’s stock stagnated for years. “It is time for new leadership to take the group to the next phase of its development,” Aviva said in a statement Tuesday. Chairman Adrian Montague will share the CEO duties with a committee of three senior executives, effective immediately, as the firm searches for Wilson’s replacement.
- Daimler AG is working with its biggest investor to start ride-hailing and car-sharing services in China, taking on industry leader Didi Chuxing on its home turf, according to people familiar with the matter. The German manufacturer is in talks with Li’s Zhejiang Geely Holding Group Co. in setting up a 50-50 joint venture to offer the services, said one of the people, who asked not to be named as the plan is private. The discussions haven’t been finalized, the people said. Spokesmen for Stuttgart-based Daimler and Geely, based in Hangzhou, declined to comment.
- A Colorado referendum to increase the setback requirement for oil and gas development would affect more than just where operators can drill. Proposition 112 also would apply to oil and natural gas processing, placement of pipelines carrying oil and gas from the fields and the treatment of associated waste, according to ballot guidance issued by the state legislature. Any new such development would have to be located at a minimum of 2,500 feet (760 meters) from occupied structures and any areas deemed “vulnerable” by the state or by local governments. That means that cities or towns could effectively bar any new infrastructure by giving public areas a “vulnerable” designation.
*All sources from Bloomberg unless otherwise specified