September 12th, 2018
Daily Market Commentary
- Canadian stocks have started September on the back foot. The S&P/TSX Composite index bounced back from a three-month low in Toronto Tuesday, rising as much as 0.2 percent, after posting its longest streak of losses since Jan. 2016. The gauge’s 1.1 percent drop last week pushed it into the red for 2018, underperforming the S&P 500 Index, which has gained 8 percent.
- The Canadian government is poised to release a blueprint to reform the World Trade Organization as countries adjust to a newly protectionist America that has threatened to leave the organization entirely. Canadian trade officials, who spent August working on a draft of the proposal called “Strengthening and Modernizing the WTO,” are seeking to forge an alliance of like-minded countries to “restore confidence in the multilateral trading system and discourage protectionist measures and countermeasures,” according to a copy of the draft obtained by Bloomberg.
- The U.S. and Canada continued to look for ways to bridge their differences as talks resumed to update the North American Free Trade Agreement, with Ottawa insisting it won’t sign a bad deal. “We had a very productive, constructive conversation. The atmosphere continues to be cordial. There continues to be goodwill on both sides,” Foreign Affairs Minister Chrystia Freeland said Tuesday after meeting U.S. Trade Representative Robert Lighthizer in Washington. “It is a truism of trade negotiations that nothing is done until everything is done.”
- European equities inched higher as energy shares rose along with crude prices and mining stocks bounced back from their recent sharp sell-off. The Stoxx Europe 600 Index was up 0.3 percent. BP climbed 1,2 percent and Shell rose 0.9 percent. Basic resources sector advanced 1 percent, led by Rio Tinto and ArcelorMittal. Miners and steelmakers recovered after tumbling on Tuesday following a metals slump as traders braced for an escalation in the U.S.-China trade war.
- U.S. stock index futures climb before the Federal Reserve releases its Beige Book report later on Wednesday. Oil futures extend gains as Hurricane Florence, which is expected to make landfall late Thursday or Friday in North Carolina, threatens supplies.
- It’s a losing streak investors haven’t seen since 2002. The benchmark MSCI Asia Pacific Index fell for a tenth consecutive day Wednesday, extending its recent decline to almost 5 percent and bringing the loss in value to almost $700 billion this year. And there’s a slew of reasons: trade, the U.S. dollar, emerging-market turmoil and the bear market in Chinese stocks to name but a few.
- Brent crude traded near a two-month high as shrinking crude inventories pointed to an increasingly tight global market. While futures in London were little changed on Wednesday they surged 2.2 percent on Tuesday after industry data showed U.S. inventories slid 8.64 million barrels last week. The U.S. government cut its outlook for oil production due to pipeline bottlenecks. Meanwhile, Hurricane Florence threatens to disrupt fuel supplies as it moves toward North Carolina.
- Gold declines as investors weigh outlook for U.S. monetary policy, U.S.-China trade war. Silver gains after sinking to lowest since Jan. 2016 in previous session.
- The European Central Bank is set to tweak its forecasts lower for euro-area economic growth as global trade tensions damp external demand, according to officials familiar with the latest projections. The predictions for output have been cut slightly starting this year, the people said, asking not to be named because the assessment is still confidential. The U.K. and Turkey are among nations dragging on demand, though the U.S. outlook is still positive, the officials said.
- NIO Inc. sold stock in its U.S. initial public offering near the lower end of its target range, as investors scrutinize the Chinese electric-car maker seeking to take on the likes of Tesla Inc. The Tencent Holdings Ltd.-backed company raised about $1 billion selling 160 million American depositary shares at $6.26 apiece, the company said in a statement Wednesday distributed by Globe Newswire. The shares were offered at $6.25 to $8.25 each. The sale values NIO at about $6.4 billion.
- Florence continued its relentless advance toward North Carolina, promising to deliver days of drenching rain from what may be the most powerful hurricane to hit the state in 64 years. The storm, which is still 575 miles (925 kilometers) from the coast, is expected to make landfall Thursday or Friday and then stall, dropping as much as 40 inches of rain on North Carolina. The storm may trigger “catastrophic flash flooding,” according to the National Weather Service, and a storm surge of as much as 13 feet (4 meters).
- JPMorgan Chase & Co. is apportioning $500 million to promote inclusive economic growth in cities, as part of a larger pledge earlier this year to spread some of the money it saves under a U.S. tax cut. The bank will create a fund that will help offer job skills to workers, provide capital and expertise to women- and minority-owned enterprises and invest in efforts to revitalize distressed neighborhoods, the company said Wednesday in a statement. The announcement fleshes out part of JPMorgan’s pledge in January to earmark $20 billion over five years to boost employee wages, lend more and promote economic growth after its tax rate was slashed.
- The U.K. and the European Union are preparing for a special summit to sign the Brexit deal in November and the meeting could be announced within days, according to people familiar with the matter. While negotiators still need to resolve key disagreements, the EU is getting ready to schedule a one-off gathering in mid-November so leaders can formally agree to the terms of the divorce, the people said.
- The European Parliament will decide on Wednesday whether to take the unprecedented step of censuring Hungary for eroding democracy, with even some of Prime Minister Viktor Orban’s allies in Europe saying the time has come to push back against a populist surge. The most serious penalty — suspending Hungary’s vote in the bloc — would be unlikely as it would require unanimity by European Union leaders and Poland has pledged to shield Orban. But support for the censure motion by an overwhelming majority of EU Parliament members, including the Hungarian leader’s center-right family, would threaten to push him further toward Europe’s populist movement just before continent-wide legislative elections.
- Indonesian exporters must keep their earnings in the country to support efforts by the government to rein in the current-account deficit and shield the rupiah, Finance Minister Sri Mulyani Indrawati said. While legislation protects the free movement of capital, authorities want to tighten some rules on exporters amid a rout in the currency, Indrawati said in an interview with Bloomberg TV’s Haslinda Amin in Hanoi on Wednesday.
- S&P Global Ratings lowered its credit ratings by one notch on seven Chinese local government financing vehicles as it believes the likelihood of local government support “could weaken over time.” The firm said Wednesday morning the rating moves also reflected the gradual weakening of those financing platforms’ roles and links with their local-government parents. Moody’s Investors Service also cut its scores on five LGFVs on Wednesday afternoon as it sees “reduced likelihood of support for the sector as a whole.” Fitch Ratings took similar actions in June.
- Australia’s competition watchdog approved CK Group’s A$13 billion ($9.3 billion) bid for gas pipeline operator APA Group after the acquirers agreed to sell assets in Western Australia, bringing the Hong Kong-based conglomerate one step closer to completing its biggest overseas deal. The proposed asset sales addressed concerns about market dominance in that region, the Australian Competition & Consumer Commission said in a statement Wednesday. The cash offer, split among CK Asset Holdings Ltd., CK Infrastructure Holdings Ltd. and Power Assets Holdings Ltd., is still subject to approval from the Foreign Investment Review Board, which provides advice to the Treasurer on overseas investment.
- China’s Anta Sports Products Ltd. is gearing up for the Olympic Games in Asia with a 4.7 billion-euro ($5.5 billion) approach for one of the world’s biggest athletic gear makers.
- Abu Dhabi is set to cash in significant gains as its Mubadala Investment Co. pushes ahead with an initial public offering for Spanish oil firm Cepsa, in what could be the largest such deal in a decade. The state-owned investor decided to proceed with an IPO rather than a sale after potential bidders for the company were narrowed down to private equity firm Carlyle Group LP, people familiar with the matter said. Cepsa could announce the IPO as early as next week, pending final approval from the emirate’s rulers, the people said.
- Exxaro Resources Ltd. and Seriti Resources are among companies considering bidding for South32 Ltd.’s South African thermal coal operations, which have been valued at almost $800 million, according to people familiar with the matter. South32’s South Africa Energy Coal unit, the country’s third-biggest exporter of the fuel, was split into a standalone business earlier this year in preparation for a sale. South32 is soliciting expressions of interest for the assets and MTN Group Ltd. Chairman Phuthuma Nhleko’s Phembani Group is also considering an offer, said the people, who asked not to be identified because the information is not public.
- Saudi Arabian Oil Co. is in talks to acquire fuel stations company Naft, as part of a plan to launch its own retail operations in the country, according to people familiar with the matter. The state-owned company, known as Aramco, is also continuing with talks about a possible acquisition of Tas’helat Marketing Co., another Saudi service-station business, the people said, asking not to be identified as the information is private. Aramco could consider buying both companies and merging them, or just one of them, the people said.
- White Oak Global Advisors LLC raised about $2.1 billion to invest in loans to smaller firms, becoming the latest U.S. asset manager to tap demand for one of the debt market’s hottest corners. White Oak raised the cash through its Yield Spectrum fund and other vehicles, the San Francisco-based firm said Wednesday in a statement. Some of the more significant investments came from public and private pension funds, insurance companies and global family offices, according to the company, which had initially targeted raising $1.75 billion.
- Citigroup Inc. plans to almost double the number of private bankers serving wealthy Brazilians over the next two years as competition for that business intensifies and tax-amnesty programs unlock hidden wealth. Citi Private Bank expects to add 10 bankers, bringing the team to 25, according to Cesar Chicayban, who runs the business in Brazil. The company, which services 550 Brazilian families with at least $10 million to invest with the firm, has hired five bankers in the past year in Sao Paulo and New York, including Vivien Dias, who worked more than 10 years at JPMorgan Asset Management.
*All sources from Bloomberg unless otherwise specified