June 20th, 2018

 

Daily Market Commentary

Canadian Headlines

• Canada is set to become the first Group of Seven nation to legalize recreational marijuana after a bill from Justin Trudeau’s government won the backing of the upper chamber. The Senate’s approval in a vote Tuesday night in Ottawa clears the way for the final step — a ceremonial approval from the governor-general — to officially make Bill C-45 law. The exact date it will take effect remains unclear, and ministers have said another 12 weeks beyond that may be needed for producers and retail stores to prepare for their first sales.
• Great Gulf Group is well aware it’s forging ahead with one of Canada’s ritziest condo projects in a market that appears to be cooling. In fact it’s bracing for the possibility. The developer plans to construct the country’s tallest residential buildings — two towers as high as 92 stories plus commercial space, designed by Frank Gehry, and projected to cost more than C$1 billion ($750 million). Chief Executive Officer Jerry Patava is confident demand for condos will remain strong in a city that’s a magnet for immigrants, even though sales have slumped.

 

 

World Headlines

• European equities rose at the open, reversing some of their recent sharp losses, as markets awaited the next development in the trade dispute between the U.S. and China, whose central bank called for investors to remain calm. The Stoxx Europe 600 Index gained 0.6 percent, after falling 0.7 percent on Tuesday following the U.S. administration’s threat to impose additional tariffs on Chinese goods.
• U.S. stock index futures climb, following global equities higher before existing home sales data. Investors digest developments in a trade dispute between the U.S. and China, whose central bank called for investors to remain calm. The People’s Bank of China Governor, Yi Gang, said late Tuesday that policy makers are prepared for outside shocks and that investors should take a rational view. Stock market turbulence is “mostly driven by sentiment,” he said, adding that China has “room to face all sorts of trade friction.”
• Asian stocks rose, as investors brushed past the trade war rhetoric between the Trump administration and China and looked for bargains in equity markets across the region. The MSCI Asia Pacific Index rose 0.6 percent to 169.73 as of 4:27 p.m. in Hong Kong, as the Hang Seng Index closed 0.8 percent higher. Japan’s Topix index erased its morning decline and gained 0.5 percent as pharmaceutical and food stocks boosted the benchmark.
• Oil traded below $66 a barrel as escalating trade tensions between the world’s two largest economies added jitters to a market that’s already nervous about the upcoming OPEC meeting on output policy. Futures in New York rose 0.5 percent. Prices fell 1.2 percent on Tuesday as China vowed to retaliate against President Donald Trump’s threat to slap tariffs on another $200 billion in Chinese imports, raising fears the growing spat could slow down economic growth and cut oil demand. Meanwhile, Iran put itself on a collision course with Saudi Arabia at this week’s OPEC meeting, rejecting a potential compromise that would see a small production increase.
• Gold trades near lowest since December as dollar holds gain and traders weigh trade tensions between U.S. and China. Platinum falls to a 2-year low.
• The European Union is on course to hand dozens of U.K.-based companies a pre-Brexit tax bombshell, according to people familiar with a state-aid probe that could lead to bills exceeding 1 billion pounds ($1.3 billion.) A decision in the European Commission’s investigation into a controversial tax break for U.K.-based multinationals will be ready later this year, well before Britain’s scheduled March 2019 departure from the EU, said the people, who asked not to be named because the process isn’t public.
• Iran put itself on a collision course with Saudi Arabia at this week’s OPEC meeting, rejecting a potential compromise that would allow a small oil-production increase to appease energy consumers. “I don’t believe in this meeting we can reach an agreement,” Bijan Namdar Zanganeh, the Iranian oil minister, told reporters upon his arrival to Vienna. That suggests the gathering on Friday could end without an agreement for the first time since 2011, although OPEC also has a history of last-minute deals.
• President Donald Trump’s steel import tariffs have offended the free-trade instincts of many fellow Republicans, but on northern Minnesota’s traditionally Democratic Iron Range he’s hoping they’ll pay political dividends. Trump is scheduled to arrive in northern Minnesota Wednesday evening for a campaign-style rally in the Lake Superior port city of Duluth, aiming to bolster Republican efforts to hold control of the U.S. House in the November election as well as his own bid for re-election two years from now.
• Rupert Murdoch’s 21st Century Fox Inc. is leaning toward starting negotiations with Comcast Corp., paving the way for a bidding war over its entertainment assets, people with knowledge of the matter said. Fox’s board, which agreed six months ago to sell the assets to Walt Disney Co.in an all-stock deal, is convening Wednesday to consider Comcast’s $65 billion all-cash proposal, Bloomberg News reported earlier. The meeting is likely to result in Fox kicking off a process to formally evaluate Comcast’s bid, the people said, asking not to be identified as the matter is private.
• Thailand’s Global Power Synergy Co. plunged the most since its listing in 2016 after announcing it agreed to purchase a majority stake in Glow Energy Pcl from Engie Global Developments BV for 97.6 billion baht ($2.98 billion). The Bangkok-based electricity and water utility tumbled as much as 7.7 percent to 66 baht and traded at 67.25 baht at 10:22 a.m. in Bangkok after saying it would buy 1.01 billion shares of Glow from Engie for 96.5 baht each, according to a Thai stock exchange filing. Glow Energy added 1.6 percent. The deal gives GPSC 69.1 percent of Glow’s total issued shares and it’s required to make a tender offer for the remaining after the deal is complete.
• Xiaomi Corp. has set tentative terms for the world’s biggest initial public offering in nearly two years, aiming to raise as much as $6.1 billion in Hong Kong, people with knowledge of the matter said. The Chinese smartphone maker and some existing investors plan to offer 2.18 billion shares at HK$17 to HK$22 apiece, according to the people, who asked not to be identified because the information is private. China Mobile Ltd., the nation’s biggest wireless carrier, and U.S. wireless-chip giant Qualcomm Inc. are among companies in talks to buy stock as cornerstone investors in the deal, the people said.
• The European Union triggered the first phase of retaliation against the U.S. over its metal-import tariffs imposed on national-security grounds, making good on more than three months of threats to hit American goods with tit-for-tat levies. The European Commission in Brussels gave final approval for a 25 percent duty on 2.8 billion euros ($3.2 billion) of EU imports of a range of U.S. products including Harley-Davidson Inc. motorcycles, Levi Strauss & Co. jeans and bourbon whiskey. A separate 10 percent levy is being applied to U.S. playing cards imported into the bloc.
• Altice Europe NV’s towers in Portugal are poised to be sold to Morgan Stanley’s infrastructure arm, while a minority stake in its French masts are likely to be sold to private equity firm KKR & Co., according to people with knowledge of the situation. The transactions could be announced as early as Wednesday, the people said, declining to be identified ahead of a public disclosure. The Portugal asset is worth as much as 700 million euros ($810 million), while the French stake could fetch up to 1.7 billion euros, they said.
• The U.S. economy is booming this quarter as tax cuts power consumers and businesses. Yet risks are mounting that the high will be short-lived. The housing market is struggling to build on its progress thanks to supply constraints and soaring property values, with data Tuesday showing an unexpectedly large drop in construction permits. Manufacturing is coming off the boil amid lengthening order backlogs and accelerating input prices, particularly for oil and partly due to tariffs on metals. On top of that, President Donald Trump has brought the U.S. to the verge of a trade war with China that could see levies on hundreds of billions of dollars in goods.
• Viva Energy Australia Ltd., backed by a consortium that includes independent oil trader Vitol Group, is seeking to raise as much as A$3.1 billion ($2.3 billion) in an initial public offering of its Australian fuel business that would be the country’s largest since 2014. Shares in Viva Energy will be sold at A$2.50 to A$2.65 apiece, according to a copy of the prospectus. The total number on offer will be 959.6 million to 1.15 billion shares, giving Viva Energy a market capitalization of as much as A$5.2 billion. Trading is scheduled to start on the Australian Stock Exchange July 13.
• General Electric Co. suffered a crowning ignominy Tuesday as overseers of the Dow Jones Industrial Average kicked the beleaguered company out of the stock gauge it has inhabited for more than a century. Once the world’s most valuable company, GE will be replaced by Walgreens Boots Alliance Inc., the Deerfield, Illinois-based drugstore chain created in a 2014 merger. The change will take effect prior to the open of trading next Tuesday. Down 26 percent, GE is the worst performer in the Dow in 2018, as it was last year, as well.
• Thailand’s central bank left its benchmark interest rate unchanged near a record low, bucking a regional trend as more central banks tighten policy amid a global emerging-market rout. Five of the six monetary policy committee members present at the meeting voted to hold the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to a statement on the Bank of Thailand’s website on Wednesday. One MPC member voted for a 25 basis-point hike. All 22 economists surveyed by Bloomberg predicted the rate would stay on hold.
• JCDecaux SA made an unsolicited bid for Australian billboard specialist APN Outdoor Group Ltd. for about A$1.1 billion ($810 million), in what would be the French outdoor advertising company’s biggest acquisition in almost two decades. The A$6.52-a-share cash offer is about 11 percent above APN’s closing price Wednesday in Sydney. The offer is in its early stages, no agreement has been reached and there is no certainty it will result in a deal, JCDecaux said in a statement. A representative for APN Outdoor declined to comment.

 

 

*All sources from Bloomberg unless otherwise specified