April 10th, 2018
Daily Market Commentary
- Canadian stocks closed higher but gave up much of their earlier gains on another trading day that saw markets weaken toward the end of the session. The S&P/TSX Composite Index rose 20 points or 0.1 percent to 15,227.70 after earlier gaining as much as 0.7 percent.
- Canadian pot stocks, most with little or no revenue, are quickly becoming among the most actively traded stocks on the country’s exchanges, topping blue-chip companies like BCE Inc. and Manulife Financial Corp. Canopy Growth Corp. and Aurora Cannabis Inc. were the fourth- and fifth most-traded stocks by value on the S&P/TSX Composite Index over the past three months, with only the three biggest banks posting higher dollar volume. The two pot stocks alone combined for more than C$500 million ($394 million) a day in trading activity, providing a boost to the exchanges and to the banks that are ramping up lending and support to the nascent industry as legalization approaches this year.
- Canada’s biggest printer says its latest deal opens the door to making Amazon.com Inc. a customer as the online retail giant tries to break into the fresh-food delivery business. Transcontinental Inc.’s proposed $1.32 billion purchase of Coveris Americas, announced last week, will bring on board several food suppliers that rely on Coveris for packaging, Chief Executive Officer Francois Olivier said. Several of those suppliers are in talks with Amazon about supplying food packaging for the e-commerce platform, which could provide a new revenue stream for Transcontinental, he said.
- Norwegian Air Shuttle ASA has shelved flights between Europe and Canada until next year after delivery delays afflicting Boeing Co. 737 Max narrow-body jets left too little time to market the planned routes. Services won’t now begin until spring 2019 following a slippage of about four weeks in the handover of two 737s, Norwegian Air Chief Executive Officer Bjorn Kjos said in an interview. Ticket sales had been authorized to start last month with flights due from July 23, according to the Canadian Transportation Agency.
- Even as the recent market rout pushed down the prices of European stocks, analysts were increasing their profit estimates for the region. Twelve-month earnings projections for the Stoxx Europe 600 Index are hovering around the highest level since 2008, Bloomberg data show, while valuations have retreated from a January peak. Investors betting on earnings growth see the cheaper prices as a buying opportunity.
- U.S. stock-index futures extended gains after China’s President Xi Jinping reiterated pledges to open sectors from banking to auto manufacturing in a keynote address at the Boao Forum in Asia. Futures contracts on the S&P 500 Index gained as much as 1.5 percent after Xi said China is moving forward on economic globalization. Nasdaq 100 futures increased as much as 2 percent, while those on the Dow Jones Industrial Average climbed 1.5 percent.
- Financial markets in mainland China and Hong Kong rose as President Xi Jinping delivered a speech that was keenly followed for his comments on the trade dispute with the U.S. Xi’s pledge to embrace globalization and further open up Chinese industries was well received, with benchmarks in Hong Kong and Shanghai advancing during his keynote address to the Boao Forum. They held on to gains after the speech and through the afternoon: the Hang Seng Index and the Shanghai Composite Index both closed 1.7 percent higher. The yuan strengthened 0.2 percent against the dollar.
- Oil advanced above $64 a barrel after Chinese President Xi Jinping’s conciliatory tone in a closely watched speech raised hopes that U.S.-China trade tensions may ease, lifting risk assets around the world. Futures in New York erased earlier losses to rise as much as 1.5 percent as Xivowed to open sectors from banking to auto manufacturing, increase imports and lower foreign-ownership limits. That came after U.S. President Donald Trump expressed optimism on reaching a deal with China. Markets from global equities to metals gained on expectations that a trade war between the world’s two largest economies can be averted.
- Gold recovers earlier losses to trade steady, while investors increased exchange-traded fund holdings for a 4th day, the longest run since January.
- The European Central Bank’s top officials lined up to express cautious confidence in the euro-area economy after a series of reports pointing to a surprisingly weak start to the year, while reiterating that they’ll move only slowly toward the end of stimulus. President Mario Draghi and three of his most-senior colleagues signaled on Monday that while inflation remains too low and a global trade spat poses a new threat, the region’s economic upturn is still solid. The comments come just over two weeks before the Governing Council meets to discuss how and when it might end its bond-buying program.
- Trade talks between the world’s biggest economies broke down last week after the Trump administration demanded that China curtail support for high-technology industries, a person familiar with the situation said, signaling that a resolution may be some ways off. Liu He, a vice premier overseeing economics and finance, told a group of officials Thursday that Beijing had rejected a U.S. request to stop subsidizing industries related to its “Made in China 2025” initiative, the person said. The U.S. has accused China of using the policy to force companies into transferring technology in areas like robotics, aerospace and artificial intelligence.
- California Resources Corp. will become the sole owner of the state’s largest natural gas field after buying out Chevron Corp.’s stake. The Los Angeles-based producer paid Chevron $460 million in cash plus 2.85 million of its shares, worth more than $50 million at the close on Monday, according to a statement. The Elk Hills field in the San Joaquin Basin was discovered more than a century ago and for decades served as the U.S. Naval Petroleum Reserve.
- Norway’s government again declined to allow its $1 trillion wealth fund to invest in private equity, saying it would pose a challenge to its transparency and cost level. “The management of our common savings is good,” Finance Minister Siv Jensen said in a statement. “It’s transparent, responsible, long-term and cost-effective.” The government went against both the wishes of the fund and the recommendation of a government-appointed expert group. The fund has been seeking to add new asset classes to spread risk. Last year, it was allowed to raise the portion it invests in stocks to 70 percent from 60 percent as it struggles with record-low interest rates.
- Glencore Plc, the world’s largest commodities trader, started to loosen ties with Russian aluminum tycoon Oleg Deripaska after the U.S. imposed harsh sanctions against his business empire. Glencore won’t proceed with a plan to swap its 8.75 percent stake in aluminum producer United Co. Rusal for shares in another one of Deripaska’s companies, London-listed En+ Group Plc. Chief Executive Officer Ivan Glasenberg has also resigned from Rusal’s board. In an indication that the sanctions will continue to reverberate through the global commodity market, the Swiss-based commodities giant said in a statement Tuesday that it’s evaluating other contracts with Rusal. The trader has a multi-year deal to buy Rusal’s metal, an arrangement that was worth $2.4 billion in 2017.
- BNP Paribas SA agreed to buy the core banking operations of Raiffeisen Bank International AG’s Polish unit for 775 million euros ($955 million) as France’s biggest bank expands its presence in the country. BNP Paribas, which has leading positions in both consumer and investment banking in several European countries, is one of the continent’s few big banks still hunting for acquisitions while rivals such as Deutsche Bank AG are saddled with extensive restructurings. BNP cemented its Polish presence in 2014 by buying Rabobank Groep’s local lender.
- Indonesia plans to narrow its fiscal deficit to below 2 percent of gross domestic product next year by boosting its revenue, according to an initial plan for the 2019 budget. Revenue is projected to increase 7.6 percent to 13 percent while spending will rise about 7 percent, the Cabinet Secretariat said in a statement, citing Finance Minister Sri Mulyani Indrawati following a meeting convened by President Joko Widodo in Jakarta on Monday.
- Tenneco to buy Federal-Mogul from Icahn in deal valued at $5.4B. Tenneco (TEN) will acquire Federal-Mogul (IEP) for $5.4 billion through a combination of $800 million in cash, 5.7 million shares of Tenneco Class A common stock, 23.8 million shares of Non-Voting Class B common stock and assumption of debt. Under the agreement, Tenneco can reduce the number of shares of Class B Non-Voting common stock by up to 7.3 million shares and increase the cash consideration proportionately at the closing.
- San Miguel Corp., the Philippines’ largest company, expects to raise as much as $3.6 billion selling shares of its merged food and drinks unit in the fourth quarter in what could be the country’s biggest share sale on record. San Miguel Food and Beverage Inc., which combined three businesses of the group, is now worth $12 billion, President Ramon Ang told reporters at a meeting in Manila on Tuesday. Selling a 30 percent stake may raise as much as $3.6 billion, while a 20 percent slice would generate about $2.4 billion, he said.
- Sentiment among U.S. small companies took a step back in March as a smaller share of owners said they expected business conditions to improve in coming months, a possible reflection of concerns about the economic impact from tariffs. Expansion plans and sales expectations also eased, pushing the index of small-business optimism to a five-month low of 104.7, according to the National Federation of Independent Business. In February, the group’s gauge of sentiment advanced to 107.6, the second-highest level in the survey’s 45-year history.
- Mark Zuckerberg has a well-worn strategy for fixing Facebook flaws. The company launches products, people complain, and then it decides if there’s anything it should change once the furor gets loud enough. That “move fast and break things” strategy will come under considerable scrutiny when Zuckerberg kicks off two days of congressional testimony on Tuesday. Lawmakers will grill Facebook Inc.’s chief executive officer on issues ranging from the troves of data vacuumed up by app developers and political consultant Cambridge Analytica to Russian operatives’ use of the social network to spread misinformation and discord during the 2016 U.S. presidential election.
- U.S. inflation is finally about to get the pickup that the Federal Reserve has been waiting for. A closer look at the math shows why it’s still too soon to declare mission accomplished. An unusual plunge in costs for mobile-phone services in March 2017 has weighed on the consumer-price index excluding food and fuel. That drag is now set to fade, dialing up the year-over-year comparisons: In the 12 months ended March, the core CPI rose 2.1 percent after climbing 1.8 percent in February, according to the median estimate in a Bloomberg survey ahead of Labor Department figures due Wednesday. The 0.3 percentage-point acceleration from a month earlier would be the biggest since 2004.
- Ant Financial is in talks to raise $9 billion in a funding round that could value the Chinese online giant controlled by Alibaba founder Jack Ma at close to $150 billion, the Wall Street Journal cited unidentified sources as saying. China’s largest internet financial services company is raising funds ahead of a highly anticipated initial public offering. Ant, in which Ma’s Alibaba Group Holding Ltd. plans to acquire a one-third stake, controls the country’s largest mobile payments service and its biggest money market fund, and has been moving deeper into areas from consumer lending to credit scoring.
- Xiaopeng Motors, the Chinese car startup that’s backed by Alibaba Group Holding Ltd. and Foxconn Technology Group, plans to raise more than 10 billion yuan ($1.6 billion) this year in a bid to take on rivals in the world’s biggest market for electric vehicles. The company plans to start pre-sales of its first model, the G3 crossover, by the end of this month, founder He Xiaopeng said in an interview at the Boao Forum in China. He didn’t elaborate on the fundraising plans.
- Carmakers from BMW AG to Toyota Motor Corp. got some good news from China after President Xi Jinping reiterated a pledge to reduce import tariffs on vehicles this year, heeding decades-long pleas from companies seeking better access to the world’s biggest auto market. China will “significantly lower car import tariffs” and “sincerely hopes to boost imports,” Xi said in a speech at the Boao Forum in Hainan Tuesday. Xi also reiterated plans to relax foreign ownership limits for car ventures and said the government will try to roll out the policies as early as possible. He didn’t offer details.
*All sources from Bloomberg unless otherwise specified