April 22nd, 2019
Daily Market Commentary
- Canadian Headlines
- Canada’s trove of overseas assets, including airports and roads owned by pension funds, is helping to protect the country’s top credit rating, according to Fitch Ratings. Foreign assets held by Canadians reached C$4.96 billion ($3.71 billion) at the end of 2018, exceeding foreign liabilities by C$528.6 billion and making the country a net creditor to the rest of the world. That’s helping to support the credit rating, despite a mountain of public-sector debt and persistent current account deficits that would typically undermine a nation’s creditworthiness, Fitch said. The current account includes trade in goods and services, as well as net earnings on cross-border investments and transfer payments.
- The election of a new government in Alberta promises to usher in an era of polarization over oil pipelines, climate change, and resource wealth across Canada. Alberta will give itself the power to cut gasoline shipments to British Columbia, consider a referendum on money transfers to poorer provinces and stop trying to win a “social license” from across Canada for oil pipelines, United Conservative Party leader and Alberta premier-designate Jason Kenney said in interviews following his April 16 victory.
- World Headlines
- In Europe, most markets remained closed for Easter holiday and will resume trading Tuesday with a heavy load of earnings set for this week, including those of Credit Suisse, UBS and Deutsche Bank.
- U.S. equity-index futures dropped on Monday while stocks in Asia were mixed as the Easter holiday weekend continued in many countries. Oil jumped on a report America scrapped waivers allowing the purchase of some Iranian crude. Contracts on the S&P 500, Dow Jones Industrial and Nasdaq indexes all pointed to declines at the open, though trading was subdued on what remains a holiday for most investors across Europe.
- In Asia, Chinese stocks and bonds fell as investors wagered future stimulus will be limited, while shares in Japan swung between gains and losses before finishing slightly higher. The dollar held steady alongside Treasuries. In Sri Lanka, bonds and the rupee slipped after Easter Sunday’s terrorist attacks.
- Oil rose to the highest level in almost six months as the U.S. government was said to eliminate sanction waivers that allowed buyers to import Iranian crude. Futures in London jumped as much as 3.3 percent to the highest intraday price since early November. Secretary of State Mike Pompeo on Monday will deliver the decision that no waivers from sanctions will be renewed to importers of Iranian oil, according to four people familiar with the matter. The U.S. will also announce offsets through commitments from other suppliers such as Saudi Arabia and the United Arab Emirates.
- Gold rose from near the lowest this year as investors weighed risk sentiment amid the long Easter holiday weekend in many countries, with a slew of major companies set to deliver results in the coming days. “Some caution” has set in at the start of the week as investors await the releases, according to Jingyi Pan, market strategist at IG Asia. Still, there are several bearish factors hurting haven demand, including prospects for a U.S.-China trade deal, gains in equities and outflows from exchange-traded funds.
- Iron ore roared out of the blocks on Monday after a further steep drop in inventories in China pointed to a tightening market in the top user, reversing the loss triggered by the restart of a major mine in Brazil. Futures for benchmark material rallied as much as 3.5 percent to $92.30 a ton in Singapore, as the contract in Dalian also gained. Total port holdings sank 2.7 percent last week, with the Australian holdings plunging by the most on record. Iron ore’s price gains got additional support from rising steel prices.
- Donald Trump returned from a long Easter weekend in Florida to a new political landscape, one where his administration is at last freed from Robert Mueller’s pursuit yet laid bare in all its dysfunction by the special counsel’s report. Trump arrived Thursday to his Mar-a-Lago resort with the swagger of a conquering hero, after Mueller reiterated that he had found no evidence of a conspiracy between Trump and Russia to interfere in the 2016 election. The president high-fived supporters at the Palm Beach airport and pumped his fists.
- The world’s best performing stock market is suddenly looking a lot more vulnerable after Beijing officials signaled they’re less amenable to adding stimulus. The CSI 300 Index of equities traded in Shanghai and Shenzhen sank 2.3 percent on Monday, its biggest loss in a month, with five stocks falling for each that rose. Property developers led the plunge, along with companies reliant on consumer discretionary spending and so-called old economy shares such as banks and industrial companies.
- Tesla Inc. investors might be eagerly awaiting the company’s first-quarter results, but the electric-vehicle maker is looking further into the future. The company is hosting an investor day on Monday, expected to focus on the progress of its technology for self-driven vehicles. Later in the week, Tesla will report quarterly earnings, estimates for which have been pared back significantly. After Tesla reported disappointing delivery figures earlier this month, the average analyst estimate has fallen to a loss of 90 cents a share from an estimated profit of 37 cents a share a month ago, according to Bloomberg data. Shares are down more than 2 percent in pre-market trading.
- Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week, ending four weeks of inflows that reached $852 million. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $183.9 million in the week ended April 18, compared with gains of $121.8 million in the previous week, according to data compiled by Bloomberg. This was the biggest outflow since investors withdrew $461 million during the week ended Oct. 12. So far this year, inflows have totaled $19 billion.
- The Trump administration won’t renew waivers that let countries buy Iranian oil without facing U.S. sanctions, according to four people familiar with the matter, a move that roiled energy markets and risks upsetting major importers such as China and India. U.S. Secretary of State Michael Pompeo planned to announce the decision Monday morning in Washington, said the people, who asked not to be identified discussing a plan that hasn’t been formally unveiled. The current set of waivers — issued to China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey — expire May 2.
- Six months after the U.S. rocked oil markets by letting Iranian exports continue, its decision to end sanctions waivers that allowed shipments is also set to reverberate across the globe. The U.S. is said to announce Monday morning in Washington that it won’t renew exemptions from its sanctions to buyers of Iranian crude after they expire on May 2. It marks a change in direction from November last year, when the Donald Trump administration granted waivers to eight importers as it sought to temper fuel prices ahead of American mid-term elections.
- China’s cash-strapped companies are going to new lengths to raise money from the booming stock market, even if it comes at a cost to existing shareholders. Nine firms have said they plan to raise a combined 40.5 billion yuan ($6 billion) through rights issues since January, almost twice the amount announced all of last year, according to data compiled by Bloomberg. That includes Tianqi Lithium Corp. and Xinjiang Tianrun Dairy Co., whose shares slumped 5.4 percent and 10 percent immediately after their respective announcements.
- Sri Lanka’s government has blamed local jihadist group National Thowheed Jamath for one of Asia’s deadliest terrorist attacks in years, and said other nations had shared intelligence ahead of the blasts. The death toll rose to 290 in the coordinated attacks on Easter Sunday at churches and luxury hotels, which the government said had been carried out by seven suicide bombers. The Easter Sunday assaults targeted foreign tourists and Christians, marking a shift from the violence that fueled a three-decade civil war on the Indian Ocean island.
- The 2020 Democratic presidential race moves into a crucial new phase this week as the release of the Mueller report and the expected entry of former Vice President Joe Biden into the fray reshape the debate and reset what’s been a fluid field of contenders. Biden’s entry comes just as Special Counsel Robert Mueller’s conclusions from his two-year investigation of Russian election interference delivered a trove of material for attacks by the Democratic contenders on President Donald Trump–- if they choose to use it.
- The first few weeks of trading in Lyft Inc.’s stock have not gone well, and that’s unlikely to change any time soon. Lyft’s share price has dropped nearly 19 percent since debuting late last month, prompting some investors to sue the company, alleging the ride-sharing service provider overstated its market position when it went public. Questions about growth and market share have also swirled thanks to multiple Wall Street analysts covering the stock, a trend that may continue when a host of firms initiate research coverage starting Tuesday.
- French energy company Engie SA is weighing a takeover of construction and facilities services firm Emcor Group Inc. as it seeks to expand in the U.S., according to people familiar with the matter. Engie is working with advisers as it considers pursuing a deal for Emcor, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made and the French company could decide against an offer, they said.
- Uber Technologies Inc. secured a $1 billion investment from three Japanese companies, ahead of an initial public offering expected next month. Denso Corp., Toyota Motor Corp. and SoftBank Group Corp.’s Vision Fund bought stakes in the self-driving unit, valuing the arm at $7.25 billion, according to a statement. The deal will help Uber, which tallied a $3 billion operating loss last year, to continue funding a very costly endeavor. Uber publicly filed a prospectus to go public last week and is expected to begin a road show to promote the stock before the end of the month. The offering could value Uber at roughly $100 billion, people familiar with the matter have said. The autonomous-car investment is the second major deal struck in the weeks leading up to the IPO. Uber Chief Executive Officer Dara Khosrowshahi said last month that the company had agreed to acquireMiddle Eastern rival Careem for $3.1 billion.
*All sources from Bloomberg unless otherwise specified