August 9th, 2018
Daily Market Commentary
- The decision by Saudi Arabia to halt new investments and unload assets in Canada is likely to have limited impact. Saudi assets in Canada are confined mainly to stakes in upscale hotel operators, some small stock holdings in companies like Canadian National Railway Co., and grain facilities. Most investments have been made by Saudi billionaire Prince Alwaleed Bin Talal through his Kingdom Holding Co., a Riyadh-based conglomerate with investments in hotels, real estate and equities. The company’s international hotel unit joined Bill Gates’s Cascade Investment and Canadian Isadore Sharp in a 2007 buyout of management company Four Seasons Hotels Inc., taking a 47.5 percent stake.
- Bank of Nova Scotia is seeking to make its newly acquired Jarislowsky Fraser wealth business a little more worldly. There is “a willingness and an openness” to expand offerings beyond the traditional Canadian balanced products the Montreal-based money manager was best known for, said Glen Gowland, Scotiabank’s executive vice president of global wealth management. He sees the potential for more global investing by the business, increasing the appeal for wealth clients.
- Chilean environmental authorities gave Teck’s Quebrada Blanca expansion project final approval in a meeting Wednesday in the city of Iquique.
- European equities retreated, with energy majors declining as oil held losses near a seven-week low as China vowed to retaliate against the U.S. administration’s latest tariffs. The Stoxx Europe 600 Index fell 0.3 percent. Royal Dutch Shell tumbled 1.4 percent and BP dropped 0.9 percent.
- U.S. stock index futures pointed to a higher open Thursday as European shares struggled for traction, after a mostly positive session in Asia that saw Chinese equities shrug off the tariff to-and-fro between Beijing and Washington. The dollar was steady, while crude oil hovered near a seven-week low. Futures on the S&P 500, Nasdaq and Dow Jones edged higher before the release of jobs and price data later Thursday.
- Asian stocks rose for a third straight day as Chinese shares advanced on a sentiment boost from earnings, offsetting concerns over China’s latest move in its ongoing trade clash with the U.S. The MSCI Asia Pacific Index added 0.1 percent to 167.01 as of 4:01 p.m. in Hong Kong. The Shanghai Composite Index climbed and the Hang Seng Index posted a fourth straight gain after falling every day last week.
- Oil traded near a seven-week low as China retaliated against the U.S. administration’s latest tariffs, heightening trade tensions between the world’s two biggest economies. West Texas Intermediate futures fell 0.1 percent after sliding 3.2 percent Wednesday. China will slap 25 percent duties on an additional $16 billion worth of American goods, including petroleum products, from Aug. 23. Prices declined on Wednesday as Energy Information Administration data showed U.S. diesel and gasoline stocks gained and crude inventories dropped lesser than forecast.
- Gold holds steady after two days of gains as investors assess U.S. sanctions on Russia, an escalating trade war between U.S. and China and prospects for the dollar before data on U.S. jobless claims.
- China’s factory inflation held up in July even as commodity prices eased, and consumer prices gained slightly more than expected. The producer price index rose 4.6 percent from a year earlier, compared with a projected 4.5 percent increase in a Bloomberg survey of economists and a 4.7 percent gain in June. The consumer price index climbed 2.1 percent, the statistics bureau said Thursday, versus the forecast 2 percent rise.
- Investors haven’t run away from European equities with such speed since early 2017. Could this be a contrarian buy signal? The region’s equity funds have suffered outflows of about $55.8 billion in the five months through the end of July, the longest streak of redemptions since February 2017, according to data from EPFR Global. Investors have shunned Europe, rattled by political crises in both Italy and Spain, Brexit’s messy talks as well as a dip in European macro indicators.
- Philippine central bank Governor Nestor Espenilla delivered on his pledge for strong action to curb inflation, raising the benchmark rate by a bigger-than-usual half a percentage point, and promised to do more if needed. Bangko Sentral ng Pilipinas increased the overnight reverse repurchase rate to 4 percent, it said in a statement in Manila on Thursday. Twelve of the 17 economists in a Bloomberg survey predicted the decision, with the rest expecting a 25 basis-point hike.
- Blackstone Group LP is buying a large stake in TaskUs, a startup that handles customer service and content moderation for many Silicon Valley companies, in a deal that values the company at more than $500 million, the companies said early Thursday morning. Blackstone is investing $250 million, according to a person familiar with the deal who asked not to be identified because some details remain private. The startup’s valuation does not include money raised, the company said.
- Exxon Mobil Corp. is courting refiners with rare long-term U.S. crude export deals, according to people familiar with the matter, as the company expands its trading scope. The oil giant has approached several refiners to discuss contracts for exports of light, sweet crude from the prolific Permian Basin starting as early as this year, said the people, who asked not to be identified because the discussions are private. The talks are in early stages, with volumes, timing and price still to be determined.
- The new U.S. sanctions placed on Russia may put the country’s longer-term crude production potential at risk. America’s ban on exporting certain “sensitive” goods and technologies, which will take effect later this month, may be a bitter pill for the Russian oil producers to swallow as the 11-million-barrel a day industry is heavily reliant on foreign drilling and refinery equipment. Earlier this month Nikolai Patrushev, secretary of Russia’s Security Council and close ally of President Vladimir Putin, called the dependancy “a serious problem,” as cited by Interfax.
- The Chinese owner of Lotus Cars is considering an investment of at least 1.5 billion pounds ($1.9 billion) to revive the iconic British brand featured in James Bond movies, according to people familiar with the matter. Zhejiang Geely Holding Group Co., which also controls Volvo Car Group, plans to add production facilities and research centers for Lotus Cars in the U.K., one of the people said, asking not to be identified because the deliberations are private. Geely is also in talks to increase its 51 percent stake in Lotus with its Malaysian partner Etika Automotive Sdn Bhd., which holds the remainder, another person said.
- Rural Electrification Corp., an Indian state-owned lender, plans to raise as much as $1 billion through a dollar bond sale, the third local firm seeking a foreign-currency issuance this quarter after Power Finance Corp. and State Bank of India. RECL is seeking $500 million to $1 billion from the offering of up to 10-year tenor, according to information from people familiar with the matter. The company is likely to hire banks this month for a so-called 144A/Regulation S offering, according to the people, who asked not to be identified.
- The grip of bears on Turkish assets tightened as the nation’s souring relationship with the U.S. added to investor concern over authorities’ inability to put a lid on inflation, sending its currency to a fresh record low and driving up bond yields. The lira plunged more than 3 percent to 5.4385 per dollar, taking this year’s losses to almost 30 percent, after a U.S. official who spoke on condition of anonymity said a Turkish delegation refused to commit to releasing an American pastor. That raises the prospect of an escalation in the diplomatic row between the NATO allies, which has already taken a toll on Turkey’s assets.
- China Mobile Ltd.’s profit rose more than analysts estimated during the first half as the world’s largest mobile-phone carrier by subscribers kept attracting users for its 4G and broadband services. Net income rose 4.7 percent to 65.6 billion yuan ($9.6 billion) in the six months ended in June, the company said in a statement Thursday. That compares with the 63.4 billion yuan average estimate of five analysts surveyed by Bloomberg. Operating revenue gained 2.9 percent to 391.8 billion yuan.
- The autonomous-vehicle gap between Ford Motor Co. and its rivals from Detroit and Silicon Valley can be measured in years. Yet even a company playing catch-up in the race to turn self-driving technology into high-margin businesses is drawing interest from outside investors, an indicator of just how much money is pouring in.
- Saudi Arabia’s purchase of a stake of about $2 billion in Tesla Inc. is only the latest high-profile investment by its sovereign wealth fund since 2016. The Public Investment Fund built up a less-than 5 percent stake in the electric carmaker in recent months, according to a person familiar with the matter, just as Elon Musk considers taking the company private. PIF’s move comes as it seeks to turn into a $2 trillion powerhouse and help diversify Saudi Arabia’s oil-dependent economy.
- Rite Aid slides 14 percent pre-market after the company and Albertsons terminated their deal in the face of opposition from shareholders before a vote that was scheduled for today.
- Dun & Bradstreet Corp., the 177-year-old provider of commercial data, agreed to be bought by investors including Thomas H. Lee Partners in a transaction valued at $6.5 billion. Dun & Bradstreet shareholders will receive $145 in cash for each share, according to an Aug. 8 statement from the buyers. That’s 18 percent higher than the latest closing price.
- Chinese stocks haven’t been this volatile in years as traders struggle to decide whether the $6 trillion market has bottomed out. Buffeted by crosscurrents ranging from the trade war and rising defaults to monetary stimulus and cheapening valuations, the Shanghai Composite Index has recorded seven straight swings of 1 percent or more — the longest such stretch since Chinese markets crashed in 2015. Intraday moves in the index have grown the most extreme in 30 months, while the country’s market capitalization fluctuated by at least $97 billion for six consecutive trading sessions through Wednesday.
- Sinclair Broadcast Group Inc.’s bid to become a nationwide powerhouse collapsed as Tribune Media Co. withdrew from a planned merger that drew the ire of federal regulators. Tribune announced its withdrawal from the $3.9 billion transaction in a emailed statement Thursday, three weeks after regulators questioned Sinclair’s honesty. Tribune said it has filed a lawsuit in the Delaware Chancery Court against Sinclair seeking compensation for losses incurred as a result of “Sinclair’s material breaches” of the merger agreement.
- Diamondback Energy Inc. is expanding its footprint in the biggest U.S. oil field by agreeing to buy Kelso & Co.-backed Ajax Resources LLC for $1.2 billion in cash and stock. Midland, Texas-based Diamondback said Wednesday in a statement it will pay $900 million in cash and 2.58 million shares in exchange for drilling rights to 25,493 acres in the Permian Basin. The deal is expected to close by the end of October.
*All sources from Bloomberg unless otherwise specified