April 23rd, 2019
Daily Market Commentary
- Canadian Headlines
- The Canadian dollar gained broadly as oil prices rose to the highest since late October after the Trump administration sought to limit trading in Iran-sourced crude. The loonie was up against all its G-10 peers, while the U.S. dollar was mixed against the group; the Australian and New Zealand dollars were among the biggest losers on the day, along with the Swiss franc
- Acreage Holdings Inc. plans to use its pending acquisition by Canopy Growth Corp. to bulk up in the U.S. even before the deal closes, using the clout and spending power it’s gained to dominate an accelerating cannabis land grab. “Since announcing this deal, we’ve had a number of folks come to us and say, ‘We had contemplated a sale of our business, we had entertained a number of partners, and we would now like to redirect our efforts towards you and align with you guys,”’ Acreage Chief Executive Officer Kevin Murphy said in a phone interview Monday.
- Lululemon Athletica Inc. has given investors reasons to jump on board. Now it wants to give them reasons to stay. The upscale yogawear maker is hosting its first analyst day since 2014 on Wednesday, when it’s expected to share its strategy for the next few years and disclose new financial targets. Key for investors will be how the Vancouver-based company plans to keep up momentum after reporting in March the fastest annual sales growth in six years and an upbeat outlook, which boosted the stock to a record last week.
- Teck Resources reported adjusted earnings per share for the first quarter that beat the average analyst estimate.
- 1Q adjusted EPS C$1.00, estimate C$0.95 (range C$0.70 to C$1.31) (Bloomberg data)
- 1Q adjusted Ebitda C$1.3 billion, estimate C$1.30 billion (range C$1.16 billion to C$1.38 billion) (BD)
- Reaffirms 2019 Guidance
- Targets first production from QB2 for 2H of 2021
- World Headlines
- Oil rose toward $75 in London after the U.S. announced a tougher crackdown on Iran, seeking to choke off the OPEC member’s crude exports. Brent futures advanced 0.8 percent to the highest since November after Secretary of State Mike Pompeo said that U.S. sanctions will apply to all purchases of Iranian oil as of next month, ending the waivers currently granted to several customers. Even though Saudi Arabia promised to help ensure global markets remain adequately supplied, the move stirred fears of shortages and escalating military tensions in the Gulf.
- European stocks declined slightly on Tuesday, beginning an earnings-heavy week just below 2019’s highs, though gains across energy stocks stemmed losses after the U.S. said that it won’t renew Iran sanctions waivers. The Stoxx 600 dipped 0.2 percent as both the tech and banking sectors fell. Oil majors Royal Dutch Shell Plc and BP Plc both rose around 1.2 percent, while Tullow Oil Plc and John Wood Group Plc gained more than 3.5 percent after the Trump administration said that it will no longer give exemptions to buyers of Iranian crude after they expire.
- U.S. stock index futures are little changed ahead of the open, with many exchanges in Europe having just reopened following an extended Easter weekend. Investors brace for more earnings from major companies with very little news from the trade spat front.
- The biggest buyers of Iranian oil are being struck by deja vu, and it’s not conjuring up pleasant memories. Six months ago they were scrambling to secure alternative supplies as the U.S. prepared to impose sanctions on Iranian oil exports, though last minute waivers eventually gave them a reprieve. Now, the Donald Trump administration says it won’t renew those same waivers, forcing the buyers to find a replacement for the Persian Gulf barrels. Asia is more dependent on oil imports than any other region and has been repeatedly buffeted by America’s campaign to isolate Iran, once OPEC’s second-largest producer. While they’ll be able to find other supplies, they face the prospect of having to pay more, potentially accelerating inflation and putting pressure on their economies.
- Gold hovers near the lowest level this year, weighed down by a stronger dollar and wavering haven-asset demand as European markets reopened after the Easter long weekend. Investors are watching progress in the U.S.-China trade talks, an oil-price rally, a full week of earnings news and the health of the U.S. economy with first-quarter GDP data due Friday. Still, gold will remain in high demand from central banks this year amid a “de-dollarization trend,” according to Citigroup Inc.
- Twitter Inc. topped first-quarter sales projections and reported strong user growth, bolstered by changes to its social-media service that are drawing a wider audience of consumers and advertisers. The shares surged. The San Francisco-based company reported $787 million in revenue, an 18 percent increase from the year-earlier period. Analysts, on average, estimated $775 million, according to data compiled by Bloomberg. The microblogging site also posted an increase in monetizable daily active users to 134 million, beating analyst predictions for about 128.4 million. That compares with 126 million in the fourth quarter.
- Parliament returns from the Easter recess with Theresa Mayfacing the latest challenge to her leadership. Her hopes of staying on long enough to deliver Brexit depend on cross-party talks with arch-rival Jeremy Corbyn, which resume on Tuesday. Key Developments:
- May is holding Cabinet meeting this morning
- Official says government planning to present Withdrawal Agreement Bill to Parliament next week
- Senior members of influential 1922 Committee of Conservative MPs expected to meet this afternoon
- Coca-Cola Co. jumped as the beverage giant’s earnings per share beat estimates, with the company fending off competition and diversifying beyond sugary drinks. Global unit case volume rose 2 percent in the first quarter, fueled by a 7 percent spike in Asia Pacific.
- European banks will probably get another urgent reminder why they need to rethink their strategies when they present results for the first quarter. Trading revenue, long a mainstay of earnings at big banks, will likely continue to slide and increase pressure on firms to shrink the business further. Slowing economies across Europe may lead to more bad-loan charges and prolong the period of record-low interest rates, eating into profit from lending and putting the banks at a disadvantage to their Wall Street peers. Nowhere are these pressures more pronounced than at Deutsche Bank AG, Europe’s biggest securities firm, which is in its sixth week of official merger talks with Commerzbank AG after several failed turnaround efforts. The outcome of those talks, which could be announced along with earnings on Friday, is looming large over this earnings season, and could shake up the entire banking industry in the region.
- Some Federal Reserve policy makers seem resigned to running a heightened risk of asset bubbles and other financial excesses as they seek to keep the economic expansion going. That’s one of the messages tucked inside the minutes of the Federal Open Market Committee’s March 19-20 policy making meeting. “A few participants observed that the appropriate path for policy, insofar as it implied lower interest rates for longer periods of time, could lead to greater financial stability risks,’’ according to the minutes, published April 10. Chairman Jerome Powell could be one of those officials. He’s publicly pointed out that the last two expansions ended not in a burst of inflation, but in financial froth, first a dot-com stock market boom, then a housing bubble.
- Tesla Inc.’s calling used to be bringing affordable electric cars to the masses. Elon Musk is now ripping up the script, vowing to pair self-driving technology with a sharing service that will make it crazy for consumers to buy other cars. The chief executive officer said that by the middle of next year, 1 million Teslas will be on the road that are fully capable of driving themselves. During an hours-long investor day presentation focused on autonomy, Musk said customers will be able to put their cars onto a shared network of robotaxis, which will be able to get around without a human inside.
- When Samsung showed off its folding smartphone in San Francisco, engineers back in South Korea popped bottles of bubbly to celebrate the culmination of eight years of research. Two months and an aborted commercial release later, employees are scrambling to figure out what went wrong. Samsung Electronics Co. on Tuesday scrapped what was to have been a crowning achievement, the launch of the world’s first mass-produced foldable smartphone. Instead of trumpeting its April 26 return to the forefront of global consumer electronics, the tech giant is now investigating how test versions of the $1,980 Galaxy Fold developed problems — including screen failures — after mere days of use.
- The world’s best performing stock market is looking vulnerable after Beijing officials signaled they’re less comfortable about 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. Property developers led the plunge, along with old economy shares such as banks and industrial companies. The gauge fell as much as 0.5 percent on Tuesday. After the CSI 300 surged almost 40 percent this year, investors have grown increasingly sensitive to whether the authorities will maintain the massive scale of stimulus seen in the first quarter. A statement late Friday from a meeting of the Politburo was interpreted by traders as meaning the economy is on a stable enough footing that extended support isn’t needed. Instead there was a focus on deleveraging and avoiding speculation in the housing market.
- A sense of anxiety is gripping local traders as Japanese markets approach the much-talked about extended Golden Week holidays. With memories of January’s flash crash still fresh, investors are putting checks in place to shield their portfolios from any gyrations during the 10-day break. The yen had climbed almost 4 percent against the dollar on Jan. 3, hitting a nine-month high of 104.87 in moves exacerbated by algorithmic programs and thin liquidity. As the April 27-May 6 shutdown nears, the currency is already showing some signs of relenting from a recent losing run. It rose as much as 0.3 percent to a more than one-week high of 111.65 on Tuesday. History also indicates that traders’ concerns aren’t unfounded. The yen strengthened during six of the last 10 annual Golden Week holidays, according to data compiled by Bloomberg. It weakened three times and was little changed in one instance in 2010. Economists surveyed by Bloomberg forecast Japan’s currency to appreciate to 110 by the end of June.
*All sources from Bloomberg unless otherwise specified