April 12th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks climbed for the eighth day in nine, pushed up by energy and information technology. One of the best performers was the online platform for merchants, Shopify Inc., which hit an all-time high. The S&P/TSX Composite Index added 0.02 percent to 16,399 in Toronto. Energy stocks extended Wednesday’s gains when crude traded near a five-month high. Health care was the worst-performing sector, as cannabis stocks dragged down the group. Shopify reached a record after Roth Capital said channel checks suggest growth in merchant’s businesses remained healthy in first quarter, implying another strong quarter when it reports results on April 30.
- Ontario plans to balance its budget in five years by relying on higher revenue and reining in spending on everything from education to social services as the world’s largest sub-sovereign borrower moves to bring its fiscal house in order. The government unveiled a budget plan that will eliminate the annual deficit by fiscal 2023-24, after a projected shortfall of C$11.7 billion ($8.8 billion) in the fiscal year that ended on March 31. For this fiscal year, the province’s 11th straight deficit is estimated at C$10.3 billion, including a buffer of C$1 billion.
- Manulife Financial Corp. said Chief Operating Officer Linda Mantia plans to leave at the end of July “to pursue her interests in innovation.” She will work in the meantime to help other executives assume her responsibilities, and the COO role will be eliminated, the Toronto-based company said Thursday in an emailed statement.
- World Headlines
- The Stoxx Europe 600 Index reversed earlier losses and U.S. futures extended gains after China reported better-than-expected lending growth, signaling a further firming of its nascent economic recovery. The shift in sentiment solidified after JPMorgan Chase & Co. said adjusted revenue for the first quarter beat analyst estimates.
- Stocks turned higher on Friday and Treasuries slipped with the dollar as credit growth in China and the first major U.S. bank earnings both beat expectations. The rally in equities since late December had been struggling for momentum, with a global gauge of stocks failing to break above a six-month high reached last Monday. Traders are now looking to company earnings to provide the next kicker as the reporting season in America gathers pace, though concerns about a global growth slowdown linger after central banks in Europe and the U.S. warned about the risks.
- A week of profit taking in China’s equity market has traders wondering whether the bulk of this year’s rebound is over. Investors pocketed gains even though improving economic data had only just started to lend legitimacy to the world-beating rally. A report showing exports rebounded in March provided only a brief boost to Chinese stocks on Friday. The Shanghai Composite Index had its worst week of the year, with analysts saying the government may want to contain the amount of leverage in the equity market. Margin debt is nearing 1 trillion yuan ($149 billion).
- Oil headed for a sixth weekly increase as falling OPEC production tightened global crude markets, offsetting concerns that slower economic growth will weaken demand. Futures rose 1.4 percent in New York on Friday and have gained 2.2 percent this week, heading for their best run since 2016. Libyan warlord Khalifa Haftarhas moved his forces to the gates of Tripoli, triggering alarm that the OPEC member could slide deeper into instability. Output from the Organization of Petroleum Exporting Countries is already plunging because of deliberate cutbacks and an escalating crisis in Venezuela.
- Gold remains headed for its first weekly increase in three weeks despite better than expected U.S. economic data trimming gains on Thursday. The metal was supported this week by concerns over global economic growth, rising trade tensions between Europe and the U.S. and dovish statements from the Federal Reserve. Platinum, which recently showed signs of emerging from the doldrums, rose Friday to head for a fifth weekly gain.
- China’s exports rebounded after the Lunar New Year holiday amid a pickup in trade talks optimism, while a continued slide in imports underscored the fragility of the domestic economy. Exports jumped 14.2 percent in March from a year earlier while imports fell 7.6 percent in dollar terms, the customs administration said Friday. That left a trade surplus of $32.65 billion, with the bilateral surplus with the U.S. rising to $20.5 billion in the month from $14.7 billion in February.
- President Donald Trump has said privately that he knows Herman Cain will have trouble getting confirmed to the Federal Reserve Board, people familiar with the matter said Thursday. Some of Trump’s closest advisers want the FBI to finish its background check before he makes his decision on whether to formally nominate Cain, but others said they are aware of the misgivings of GOP senators and that they wouldn’t be surprised if Cain withdraws.
- Uber drivers have complained over the years that they’ll get nothing when the company goes public, generating a windfall for its already-wealthy stockholders. That’s not entirely true. In a filing Thursday for its upcoming initial public offering, Uber Technologies Inc. said it would pay $300 million in cash bonuses, or what it calls “driver appreciation rewards.” About 1.1 million drivers will receive the payments in a couple weeks, with some in the U.S. getting as much as $10,000 each.
- Fiat Chrysler Automobiles NV rose to a two-month high on comments the carmaker will deliver on its guidance for this year with new Jeep and Ram models that’ll help offset an weaker start to the year in North America. Fiat will get a boost from the all-new Jeep Gladiator and a new Ram truck in North America during the second half of the year, Chief Executive Officer Mike Manley said at the Italian-American carmaker’s annual meeting in Amsterdam. The region generated more than 90 percent of profit for Fiat last year.
- The initial public offering of payment-service company Nexi SpA raised 2.01 billion euros ($2.3 billion), making it the biggest listing in Europe so far this year and the third major IPO of a payment-processing institution in the region in less than a year. Shares were offered at 9 euros each, giving the company a value of 7.3 billion euros including debt, the company said in a statement on its website. A mix of existing and new Nexi shares were sold to more than 340 investors from around the world, including more than 100 Italian investors. The offers includes a capital increase of 700 million euros.
- Stadler Rail AG shares jumped in their trading debut after the Swiss train maker, whose owner bought the business three decades ago with a 5 million-franc loan, was valued at more than 4 billion francs ($4 billion) in a heavily oversubscribed initial public offering. The stock rose as much as 12.9 percent to 42.90 francs in Zurich after investors paid 38 francs each for 35 million existing shares in the initial offering worth 1.3 billion francs. The deal is the second-biggest IPO in Europe so far this year and the largest in Switzerland since SIG juice-box maker Combibloc Group AG began trading in September.
- Chevron Corp. agreed to buy Anadarko Petroleum Corp. in a $33 billion bet on shale oil and liquefied natural gas that’s the industry’s biggest deal since 2015. Chevron will acquire all outstanding shares in Anadarko for $65 each, paying with a mixture of cash and its own stock. That’s a premium of 39 percent to the closing price on Thursday and Anadarko’s shares soared in pre-market trading.
- Wynn Resorts Ltd. has spent eight years and $2.6 billion trying to open a casino in Massachusetts, and now all that could come crashing down. Any day now, the five-member Massachusetts Gaming Commission is expected to hand down some punishment of the company following an investigation into its handling of sexual-harassment claims against founder and former Chief Executive Officer Steve Wynn. The panel has broad authority to fine the company and its current CEO Matt Maddox or even revoke their permission to do business in the state.
- ArcelorMittal’s plan to buy a bankrupt Indian steel company for $6 billion was halted by the nation’s top court, further delaying tycoon Lakshmi Mittal’s efforts to enter the world’s second-biggest market. The Supreme Court halted the deal pending a review by a bankruptcy tribunal hearing appeals related to Essar Steel India Ltd. Friday’s ruling was in response to petitions by banks, which are fighting over how money that’ll be received from the company’s sale should be distributed.
- The wall of worry surrounding Asia’s double-digit stock market growth this year just got another impetus: equity ETFs inflows have dwindled. Despite a 9 percent increase to $502 billion in assets under management for Asia equity exchange-traded funds so far this year, net inflows have been tapering off, according to data compiled by Citigroup Inc. On top of that, a monthly net outflow — the second time in more than two years — was recorded in March.
- SoftBank Group Corp. sold Japan’s biggest-ever local corporate bond on Friday, as billionaire founder Masayoshi Son fights perceptions about the conglomerate’s massive debt load. The company priced 500 billion yen ($4.5 billion) of notes maturing in April 2025, at a coupon of 1.64 percent, according to a filing. It tapped individual investors for the fundraising and will use the money to help pay down other borrowings. The company must repay 700 billion yen in bonds by Sept. 12.
- Behind the rally in global debt markets lurks a disaster just waiting to happen. At least, that’s what some long-time market watchers are warning. While dovish comments by the Federal Reserve and other central banks have prompted investors to pile back into bonds, two troubling developments could make buyers uniquely vulnerable to deep and painful losses, they say. One is the sheer amount of ultra-low yielding debt, which means investors have almost no buffer in the event prices drop. That’s compounded by the worry liquidity will suddenly evaporate in a selloff and leave holders stuck with losses on positions they can’t get out of quickly.
- Brimstone Investment Corp. will exit a deal led by an Israeli company to buy South Africa’s biggest dairy producer after protests by a pro-Palestinian activist group. The investment-holding firm is in “advanced talks” with a replacement shareholder that could see it exiting its entire shareholding in Milco SA — the entity that has offered 4.8 billion-rand ($343 million) deal to buy Clover Industries Ltd. — by the end of the year, it said in a statement Friday.
- KKR & Co. is launching four funds this year, tapping an appetite among institutions for private investments that shows no sign of waning. The giant firm, known mostly for buyouts, is rolling out two credit, a real estate and an infrastructure pool, according to a document seen by Bloomberg. That’s on top of at least six funds that KKR currently has in the market, with a total fundraising target of as much as $12.6 billion.
- Talks between General Motors Co. and electric-vehicle startup Rivian Automotive Inc. about the largest U.S. carmaker buying an equity stake have reached an impasse and may be dead, people familiar with the matter said. GM had negotiated potentially taking a stake in Rivian and forging a partnership that may have helped the Plymouth, Michigan-based startup bring fully electric trucks and SUVs to market faster. GM was widely expected to become a strategic investor alongside Amazon.com Inc., which in February led a $700 million equity raise by the closely held company.
- Federal Reserve Chairman Jerome Powell asserted the central bank’s independence in remarks to Democratic lawmakers, telling them the Fed doesn’t consider political pressure in any way, according to two people in the room for the closed-door event. Powell’s appearance Thursday night at a Democratic retreat in Leesburg, Virginia, came as many of the lawmakers gathered there have raised alarms about the Fed’s independence in the face of President Donald Trump’s frequent criticisms of the central bank.
*All sources from Bloomberg unless otherwise specified