April 18th, 2019
Daily Market Commentary
- Canadian Headlines
- Canopy Growth Corp. shares gained as much as 7.8 percent in pre-market U.S. trading after the Canadian cannabis producer was said to be near a deal to acquire Acreage Holdings Inc., a cross-border purchase that analysts say would be “a big positive.” The deal would allow Canopy to gain a toe-hold in the U.S. ahead of regulatory or legalization changes that would open up the world’s biggest potential marijuana market to operators, Jefferies analyst Owen Bennettwrote in a note. The timing would also allow the company to lock in a much lower price than if it waited until after legal changes, he said.
- Alberta’s incoming premier is already fighting pipeline law changes that are in the offing. Jason Kenney’s conservative party swept to power Tuesday in Canada’s oil heartland after a campaign in which he regularly took aim at Prime Minister Justin Trudeau. In his victory speech, Kenney also criticized Trudeau for “imposing new laws that will make it impossible to get pipelines approved in the future.” A trio of proposed laws affecting pipeline, environmental and oil shipping laws are working their way through Canada’s Senate as Trudeau’s Liberals gear up for an October election, trailing in the polls. The most controversial is known as Bill C-69 — Kenney’s predecessor in Alberta also opposed its current wording, but his election will add pressure to Trudeau to bow to concessions sought by the oil industry.
- Newmont Goldcorp reports successful conclusion of its transaction combining Newmont Mining Corp. and Goldcorp to form the world’s leading gold business. Newmont Goldcorp expected to immediately:
- be accretive to Newmont’s Net Asset Value per share by 27%, and to the combined company’s 2020 cash flow per share by 34%
- deliver the highest dividend among senior gold producer
- Canada increased its imports of U.S. crude in February, making it top buyer of American oil once again, after losing the spot to Netherlands, China and South Korea in recent months, according to Census Bureau and EIA data.
- World Headlines
- U.S. stock index futures pare declines as equities in Europe turn positive just before a long weekend for most markets. Treasuries rallied and the dollar advanced. Strong quarterly updates from staples Nestle and Unilever boosted European stocks, providing a stimulus ahead of the Easter weekend. Food and beverage stocks led a rally in the Stoxx Europe 600 Index, erasing earlier losses on the back of weak German and euro-area factory numbers. In Asia, South Korean shares led a decline as issues with a new Samsung Electronics Co. phone weighed on the biggest stock in the main index. American Express Co, Honeywell, Philip Morris and Schlumberger are among companies reporting earnings.
- European equities were little changed at the open as retail stocks dropped, with Kering slumping after first-quarter sales. The Stoxx Europe 600 Index was down less than 0.1 percent. All the European stock markets are closed tomorrow for a holiday. Kering dropped 5.5 percent after reporting first-quarter sales of 3.79 billion euros as Citigroup said that results may not be enough to drive earnings momentum. LVMH fell 1.1 percent.
- Oil steadied below $64 a barrel in New York as ongoing threats to supply from political crises were offset by disappointing indicators on the global economy. West Texas Intermediate futures gained 12 cents, bringing their gain this week to 0.2 percent. A Purchasing Managers’ Index, which measures private-sector activity in the euro area, unexpectedly slid in April, and German factory numbers came in lower than forecast. Still, an escalating crisis in OPEC nation Libya threatens to add to disruptions in Venezuela and Iran at the same time that other members are deliberately restraining production.
- Gold headed for the longest run of weekly declines in eight months amid speculation the U.S. and China are nearing a trade deal. Officials are scheduling more face-to-face talks in an effort to reach an agreement by early May that Donald Trump and Xi Jinping could sign later that month, two people familiar with the plans said.
- Strategists can’t believe the European equity rally will keep going. According to the average response in a Bloomberg poll, the Stoxx Europe 600 Index is likely to fall 8.9 percent from Wednesday’s close, to 355 points, by the end of 2019. The Euro Stoxx 50 Index, home of the euro-area’s biggest companies, is seen retreating 6.4 percent from current levels, to 3,255, the survey shows.
- Blackstone Group LP plans to convert to a corporation from a publicly traded partnership, a step that opens up the stock for inclusion in indexes, after watching two rivals benefit from the move. The shares jumped in early trading.
- Deutsche Bank AG is working on an alternative strategy to present to investors should takeover talks with rival Commerzbank AG collapse, according to people familiar with the matter. Some top shareholders want the bank to prepare options as obstacles to a combination pile up, according to people familiar with the matter. Chief Executive Officer Christian Sewing is considering two basic scenarios: a small update that would mainly consist of more and accelerated cost cuts including at the investment bank, and a bigger strategy shift that would create upfront costs, said one of the people.
- The Turkish lira weakened the most in the world as the central bank struggles to explain recent moves in its foreign-currency reserves, fueling concern about the state of the nation’s finances amid the looming prospect of more political upheaval. The lira sank as much as 1.9 percent after the Financial Times reported the central bank used short-term swaps with local lenders over the past month to bolster its net international reserves, which stood at $28.4 billion as of April 12. Data complied by Bloomberg show the outstanding amount on these transactions was $12.7 billion as of the end of last week.
- German manufacturing remained in a slump at the start of the second quarter, casting a cloud over the euro-area economy as well as the European Central Bank’s hopes for a quick recovery. Factory output in Europe’s largest economy contracted for a fourth month running in April, according to a survey on Thursday. Manufacturing in the euro area also shrank, while a broader gauge of economic activity in the region declined.
- If BlackRock Inc. chief executive officer Larry Fink is right and global stocks are poised for a “melt up” scenario, several of Asia’s markets may be candidates to help lead that charge. Most participants are still underinvested in the markets globally, Fink said in an interview with CNBC Tuesday after his company reported earnings. “We have a risk of a melt up, not a melt down,” he said. The head of the world’s largest investment firm, with $6 trillion of assets under management, said “huge pools of money” is sitting on the sidelines as investors haven’t rushed back into equities even as the stock market bounced back this year.
- Samsung Electronics Co.’s out-sized weighting in the Kospi index was enough to drag the benchmark index to become the worst performer in Asia today. Reports of a flaw in the company’s new foldable phones and a rival chipmaker’s forecast for another weak quarter helped push the stock to its biggest drop in seven weeks.
- Ancestry.com LLC is readying an initial public offering, according to people familiar with the matter, preparing to take advantage of growing consumer interest in DNA tests and investors’ appetite for new health and technology stocks. An IPO of the Lehi, Utah-based company could take place in the second half of the year, according to the people, who asked not to be identified because the matter is private.
*All sources from Bloomberg unless otherwise specified