April 29th, 2019
Daily Market Commentary
- Canadian Headlines
- When Parq Vancouver, a glimmering waterfront casino, opened amid much to-do in late 2017, few would’ve anticipated that a dirty money crackdown was about to throw the city’s roaring gambling business into turmoil. Vancouver-area casinos for years had been accepting millions of dollars in questionable cash from gamblers showing up with suitcases and hockey bags bulging with bills, according to British Columbia Attorney General David Eby. But new rules implemented last year to more tightly identify sources of funds have put a damper on that rollicking trade.
- Another billion-dollar U.S. cannabis company is going public in Canada, but this one will trade on a little-known bourse that’s beginning to compete with the pot-dominated Canadian Securities Exchange. Columbia Care Inc., which has operations in 14 U.S. states and territories plus Malta, will begin trading Monday on Toronto’s NEO Exchange under the symbol CCHW. The company will list via an acquisition by Canaccord Genuity Growth Corp., a special purpose acquisition company, or SPAC, with a valuation of about $1.4 billion.
- World Headlines
- European shares opened little changed as Spanish stocks fell after national elections and traders awaited fresh earnings and economic data. The Stoxx Europe 600 was steady as of 8:10 a.m. in London on Monday. Spain’s Ibex dropped 0.6 percent after its Socialist leader was re-elected with a near-majority coalition. Italy’s FTSE MIB advanced 0.1 percent after the country escaped a credit rating downgrade.
- U.S. index futures fluctuated at the start of a holiday-truncated week packed with data releases that will provide clues on global economic growth. Treasuries and the dollar were steady, while oil fell. Futures on the S&P 500 pointed to a steady U.S. open after the underlying index reached a record on Friday. Equities in South Korea and Hong Kong climbed, while those in China and Australia dipped.
- Oil fell again, extending its biggest retreat in two months, after U.S. President Donald Trump renewed his push for lower prices and Russia said it would soon resolve a problem with contaminated supplies. Futures retreated as much as 1.3 percent in New York in a fourth day of decline. Prices slumped 2.9 percent on Friday as President Trump said he’d personally pressed OPEC to keep prices down. Russia’s assurances it will resume normal oil flows to eastern Europe in two weeks after a chemical contamination also allayed concerns about supply.
- Gold is headed for the first decline in four days amid indications that the metal has lost some favor with investors. Hedge funds increased their net-short position to the most bearish in 21 weeks, CFTC data showed Friday, while holdings of exchange-traded funds backed by the metal have sunk to a four-month low.
- Economic confidence in the euro area dropped for a 10th month in April to the lowest in more than two years, indicating the region may struggle to pick up from its recent slump. The European Commission’s monthly survey showed an industrial morass is increasingly entrenched as companies continue to struggle with the global slowdown and homegrown difficulties, notably the upheaval in Germany’s car industry.
- Indonesia plans to relocate its administrative capital from Jakarta, with the move set to take up to a decade and cost as much as $33 billion. President Joko Widodo on Monday ordered ministers to formulate a financing plan for the move, with private investment set to play a key role. The plan envisages relocating government and its executive branch, ministries and the parliament while retaining the central bank as well as trade and investment functions in Jakarta.
- The next round of China-U.S. trade talks will get under way in Beijing this week with significant issues still unresolved, according to a senior Trump administration official. While both sides are eager to reach an agreement, the possibility remains that President Donald Trump would walk away from the negotiating table with China if he isn’t satisfied with how talks are progressing, the person said, who spoke on the condition of anonymity.
- Anadarko Petroleum Corp. said it will begin talks about a potential $38 billion takeover by Occidental Petroleum Corp., a move that threatens to scupper a previously agreed deal with Chevron Corp. Anadarko said Monday in a statement that the Occidental bid is a “superior proposal.” It added that an earlier agreement to merge with Chevron remains in effect.
- Spotify has reached 100 million paid subscribers, a first for any music service, adding more customers in the latest quarter than analysts expected and boosting confidence the company has lots of room to grow. Spotify Technology SA took on 4 million customers in the quarter, compared with the 3.3 million forecast by analysts. The stock jumped as much as 4.9 percent to $145.01 in premarket trading. Last quarter, Spotify doubled down on its podcast bet with two strategic acquisitions — Gimlet Media Inc. and Anchor — hoping to drive subscriber growth through mediums outside of music as record labels have begun demanding more money.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $58.3 million in the week ended April 26, compared with losses of $184.3 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $19 billion.
- Dennis Muilenburg is used to presiding over sleepy annual meetings as chief executive officer of Boeing Co., basking in the glow of a soaring share price. This year, the aerospace giant’s CEO can expect a grilling from investors and reporters. Outside the Chicago gathering, protesters are expected to rebuke the company for a safety crisis that has engulfed the best-selling jet of the world’s largest planemaker. Until an Ethiopian Airlines 737 Max 8 slammed into the ground shortly after takeoff March 10, Muilenburg’s Boeing had dominated the Dow Jones Industrial Average with a strategy best known for containing risk and returning cash to investors. Boeing still trails only Microsoft Corp. in share gains on the 30-member Dow since Muilenburg took over in July 2015.
- Socialist Pedro Sanchez is set to return as prime minister of Spain with his left-leaning allies close to a majority, though he may still rely on Catalan separatists to govern. The Socialists won 123 seats in Sunday’s election, up from 85 in 2016. Its left-wing ally Podemos has another 43 seats while the Basque Nationalists, another group likely to support Sanchez, has six. That would give Sanchez 172 seats. He needs 176 for a majority.
- Britain’s appetite for natural gas usually declines in the summer, but this season is different with a record number of LNG tankers due to land this month. The incoming cargoes show no sign of slowing, and will keep the pressure on benchmark prices already trading below their five-year seasonal average. That’s good news for factories and households as Brexit clouds the nation’s economic outlook.
- China’s biggest banks are seeing soured credit grow the fastest since at least 2017, as the country’s economic slowdown leaves its mark on the financial sector. The nation’s four largest lenders said in recent days that non-performing loans hit fresh multi-year highs in the latest quarter, reflecting risks to China’s banks as the government pushes them to lend more. The increase in delinquent debt may give policy makers pause even though bad loans as a share of total lending fell slightly, thanks to expanded balance sheets. While China’s banks are seen as key to reinvigorating the economy, especially by lending to traditionally riskier smaller and private companies, some have expressed concerns that soured loans could continue to rise.
- China’s $941 billion sovereign wealth fund estimates that its overseas investment portfolio lost 3 percent to 4 percent last year, people with knowledge of the matter said, as global equity markets fell the most in a decade. China Investment Corp. is still compiling returns on its holdings of alternative assets and direct investments, and the loss estimate for 2018 may change, according to the people, who requested anonymity because the numbers aren’t yet finalized. The Beijing-based fund typically releases final data in its annual report in July.
- Marriott International Inc. is expanding its home-sharing business to the U.S. as Airbnb Inc. siphons away travelers, according to a person with knowledge of the matter. The world’s largest hotel company plans to launch the U.S. home-sharing business in May, said the person, who asked not to be identified before a formal announcement is made. Marriott, which declined to comment, already operates a home-sharing business in a handful of European cities, including London, Paris and Rome.
- When General Electric Co. reports on the first quarter of its “reset year” on Tuesday, the cash flow of the troubled manufacturer will likely attract more attention than its earnings. After a long and painful unraveling of the company over the past two years, GE is now in a rebuilding mode, a process that Chief Executive Larry Culp said would be a “game of inches.” Accordingly, the profit per share might just be a footnote, with the cash situation expected to reveal the pace and state of the recovery.
- Burger King-owner Restaurant Brands International Inc.fell after reporting first-quarter earnings that missed analysts’ estimates amid an unexpected decline in sales at its Tim Hortons chain. Same-store sales, a key performance metric for restaurant companies, fell 0.6 percent at Tim Hortons. Analysts had projected growth of 1.9 percent, according to Consensus Metrix. Restaurant Brands’s earnings per share of 55 cents was 3 cents lower than the average projection.
- Over the past decade, Uber Technologies Inc. proved itself to be one of the most prolific young fundraisers ever. It pulled together more than $20 billion from private investors. After burning through more than half that amount in just the last three years, Uber will soon see whether it can recreate that magic on the stock market. The ride-hailing company entered the final stretch of the ultimate capital-raising exercise on Friday, when it disclosed details of an initial public offering expected to net the company and its backers another $8 billion or more. Executives and bankers plan to hit the road next week to promote the stock to public investors and then ring the bell on the New York Stock Exchange floor on May 10, when the shares start trading, according to a plan obtained by Bloomberg.
- Meicai, a Chinese startup that helps farmers sell vegetables to restaurants, and supermarket operator Wumart Stores Inc. are among firms picked for the next round of bidding for German food wholesaler Metro AG’s $1.5 billion Chinese business, people with knowledge of the matter said. Local grocery chain Yonghui Superstores Co. and Suning Holdings Group, the parent company of Chinese electronics retailer Suning.com Co., were also invited to make second-round offers, the people said. Bids are expected to be submitted by late May or early June, said the people, who asked not to be identified as the information is private.
*All sources from Bloomberg unless otherwise specified