April 15th, 2019
Daily Market Commentary
- Canadian Headlines
- Bank of Canada Governor Stephen Poloz indicated he’s all but abandoned any bias for higher interest rates, saying officials are simply focused on keeping policy aligned with current economic conditions. Asked at a press briefing Saturday in Washington whether he’s done with hiking, Poloz said: “That’s a very data dependent question.” He also dismissed the idea the central bank has any specific target for borrowing costs, even though policy makers estimate interest rates would probably need to be higher were the economy not facing headwinds.
- Lundin Mining Corp. agreed to buy a copper mine in Brazil for $800 million from gold producer Yamana Gold Inc. Lundin will pay cash for the Chapada mine, it said Monday in a statement. It will make further payments based on the price of gold, which is also mined at the project, and Yamana will retain a smelter royalty. The acquisition shows Lundin remains keen to expand in copper. The company lost out on a two-year pursuit of a project in Serbia when its offer for Nevsun Resources Inc. was topped by China’s Zijin Mining Group Co.
- World Headlines
- Stocks in Europe edged higher alongside U.S. equity futures Monday as investors turned modestly optimistic over the next batch of corporate earnings. Treasuries held steady with the dollar. The Stoxx Europe 600 Index erased an earlier loss and turned higher, with gains in banks offsetting declines in miners.
- Futures on the S&P 500 nudged up after spending most of the session in the red, as results from Goldman Sachs Group Inc. and Citigroup Inc. loomed. With Chinese trade and lending data showing signs of improvement for the world’s second-biggest economy, investors are turning to the U.S. earnings season to confirm the resilience of corporate America in the face of numerous challenges to growth. JPMorgan Chase & Co. posted strong first-quarter results last week, and Bank of America Corp. is up on Tuesday.
- Chinese stocks fell, with traders betting that additional stimulus is unlikely after last week’s data showed the economy is improving. Sovereign bonds trimmed their declines. The Shanghai Composite Index fell 0.3 percent at the close, erasing an earlier gain of as much as 2.1 percent. Utilities and information technology stocks were among the worst performers on the mainland. The Hang Seng China Enterprises Index lost 0.2 percent in Hong Kong after earlier reaching its highest level since June. The Hang Seng Index dropped 0.3 percent.
- Oil retreated in New York after its longest run of weekly gains in three years, as traders and investors awaited more clarity on the strength of the global economy and demand. West Texas Intermediate futures slid 0.9 percent after adding 1.3 percent last week in a sixth straight weekly increase. Global finance ministers and central bankers issued a statement over the weekend that they’re willing to “act promptly” to shore up global growth, which the International Monetary Fund expects will be the weakest in a decade this year. China will release data on gross domestic production for the first quarter on April 17.
- Gold declined to trade near the bottom of its recent range, after U.S. stocks rose to near an all-time high on Friday and data from China eased concerns over economic growth. Investors are also weighing the latest developments in the U.S.-China trade talks between the two countries, amid indications that they may be edging closer to a deal.
- China is considering a U.S. request to shift some tariffs on key agricultural goods to other products so the Trump administration can sell any eventual trade deal as a win for farmers ahead of the 2020 election, people familiar with the situation said. The step would involve China moving retaliatory duties it imposed starting last July on $50 billion worth of U.S. goods to non-agricultural imports, said the people, who asked not to be identified because the discussions were private. The shift is because the U.S. doesn’t intend to lift its own duties on $50 billion of Chinese imports even if an agreement to resolve the trade war between the two nations is reached, one the people said.
- Waste Management Inc. agreed to acquire Advanced Disposal Services Inc. for about $4.9 billion including debt as the U.S. trash collection-and-recycling company looks to expand its network and customer base. The Houston-based company will pay $33.15 a share in cash for Advanced Disposal, the companies said in a joint statement on Monday. The offer represents a 22 percent premium to Advanced Disposal’s closing price of $27.14 on Friday.
- Publicis Groupe SA made its boldest move yet into digital marketing with the French advertising group’s $4.4 billion purchase of Alliance Data Systems Corp.’s Epsilon unit. The shares rose the most intraday in six months. The owner of agencies Saatchi & Saatchi and Leo Burnett Worldwide is betting Epsilon’s trove of consumer data from loyalty programs and email campaigns will help it shift away from traditional TV commercials and billboards, where sales are falling as consumer giants spend more online.
- Former Volkswagen CEO Martin Winterkorn is among five managers charged by Braunschweig prosecutors for their role in the diesel-rigging scandal. Winterkorn and other suspects are accused of serious fraud. These are the first criminal charges in the case since Winterkorn was charged by American authorities in 2017.
- The European Union gave the green light to start trade negotiations with the U.S., as both economies seek to rebuild frayed relations a week after threatening each other with billions of dollars in new tariffs over a 14-year-old aviation dispute. EU ministers on Monday authorized talks to eliminate tariffs on industrial goods, following through on a political accord reached in July between President Donald Trump and European Commission President Jean-Claude Juncker. The EU sought the agreement with the U.S. president, in part to avoid levies Trump threatened on foreign automobiles and car parts.
- Apple Inc. and Qualcomm Inc. have spent two years fighting around the globe over how much the chipmaker can charge for iPhones that use its patented technology, with neither landing a decisive blow. That could change with a trial starting Monday in San Diego. An out-and-out victory for either side could force the loser into concessions to settle the conflict that has spawned dozens of lawsuits on three continents. The outcome of the trial is so important that Apple Chief Executive Officer Tim Cook is expected to be called to defend the company’s business strategy and explain its relationship with Qualcomm, in what would be his first public appearance in a courtroom to discuss the issues underlying the fight.
- Both Theresa May’s government and the opposition Labour Party said Sunday that their talks represented the best chance of finding a Brexit solution and ending months of deadlock. But even as David Lidington, May’s de facto deputy, said there was common ground between the two sides, a former leader of May’s Conservative Party called on her to end the discussions, pull Britain out of the European Union and then resign as prime minister.
- Huawei Technologies Co.’s ability to make inroads into Europe’s future telecom infrastructure may be more about regulatory hurdles than outright bans. The U.S. has been engaged in a vocal campaign to keep Chinese tech companies out of advanced 5G networks that promise faster connections, enabling uses such as autonomous vehicles and remote surgery. U.S. President Donald Trump’s administration has claimed that the companies could be tools for state espionage. While no European agency has targeted Huawei by name, U.S. warnings haven’t exactly fallen on deaf ears: the region’s regulators have been tightening standards that may hit Huawei harder than Nokia Oyj and Ericsson AB, its main European rivals.
- The main idea behind breaking up the A.P. Moller – MaerskA/S empire was that each part would fare better on its own, unlocking wealth for its owners. By that measure, at least so far, the separate listing of Maersk’s offshore-drilling unit earlier this month has been a success. After seven full days of trading, the value of the two companies exceed Maersk’s last closing price before the spinoff by about 12 billion kroner ($1.8 billion).
- When China Three Gorges Corp. offered more than $10 billion last year to take over Portugal’s biggest power utility, bankers rejoiced that the flow of Chinese outbound acquisitions had started up again. It was only the third megadeal out of China since the heady days of 2016, when $239 billion of foreign purchases were announced. The fact that EDP-Energias de Portugal SA was being pursued by Three Gorges, a state-owned firm, was taken as a sign that Beijing would bless selective strategic deals while reining in inexperienced companies’ more frothy purchases.
- John Paulson has segregated most of his personal capital from that of outside investors in his hedge funds, setting the stage for a potential spinoff that would transform the billionaire’s advisory firm into a family office. Paulson & Co. has created what it calls a “side-by-side” management arrangement in which the firm conducts its flagship trading strategies through two separate sets of funds, according to a March regulatory filing. One group serves as proprietary trading vehicles for the 63-year-old founder; the other holds outside capital as well a smaller portion of Paulson’s money.
- An iPhone assembler, e-commerce emporium and real-estate developer typically don’t compete in the same business — except when it comes to electric vehicles in China. That’s because of a seismic shift toward EVs, which has spurred billions of dollars in investments by traditional carmakers, startups and titans of the internet, electronics and real-estate industries. The rush is on even as the government pulls back on the subsidies that juiced the industry to begin with. There are now 486 EV manufacturers registered in China, more than triple the number from two years ago. While sales of passenger EVs are projected to reach a record 1.6 million units this year, that’s likely not enough to keep all those assembly lines humming, prompting warnings that the ballooning EV market could burst and leave behind only a few survivors.
- Foxconn Technology Group Chairman Terry Gou said the iPhone will go into mass production in India this year, a shift for the largest assembler of Apple Inc.’s handsets that has long concentrated production in China. Gou said that Prime Minister Narendra Modi has invited him to India as his Taiwanese company plans its expansion in the country. Apple has had older phones produced at a plant in Bangalore for several years, but now will expand manufacturing to more recent models. Bloomberg News reportedthis month that Foxconn is ready to start trial production of the latest iPhones in the country before it starts full-scale assembly at its factory outside the southern city of Chennai.
- It began as an inquest into what went wrong. Now the Federal Reserve’s policy rethink may be widening to include the part the central bank thought it had gotten right. Inflation keeps falling short of the Fed’s target, and that was the trigger for what’s supposed to be a months-long review of strategy. Now, policy makers are being drawn into a conversation about the full-employment side of their mandate too. The record there looks impressive, with jobless rates near a half-century low. But Fed Vice Chairman Richard Clarida is hinting at another side of the story, one which may bolster the case against further monetary tightening.
- Spotify Technology SA tumbled more than 4 percent in early trading after Billboard reported late Friday that Amazon.com Inc. is in talks to start a free ad-supported music service. Amazon would market the music service through its Echo speakers, and it could become available as early as this week, Billboard reported, citing unidentified sources. The service would offer a limited catalog of music, Billboard said.
*All sources from Bloomberg unless otherwise specified