April 30th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks were mixed Monday after closing unchanged the previous week. An underperformance by miners outweighed marijuana stocks’ gains. The S&P/TSX Composite Index fell 0.08 percent to 16,600. Miners were the biggest losers as metal prices declined. Health care stocks were among the best performers, together with technology and financials. Meanwhile, U.S. stocks rose above Friday’s record high at the start of a week packed with data that will provide clues on global economic growth. Benchmark Treasury yields climbed after a large five-year block sale, while the U.S. dollar was little changed and the euro rallied.
- Maintenance at oil-sands mines may achieve what Alberta’s mandatory production curtailments have so far failed to accomplish: drain Western Canada’s storage tanks. Inventories in the region were 34 million barrels the week before last, Richard Kruger, Imperial Oil Ltd.’s chief executive officer, said in an earnings call Friday, citing Genscape data. That figure is little changed from when Alberta’s outgoing government announced mandatory production cuts at the beginning of December to alleviate a glut.
- The European Union’s free trade accord with Canada overcame one more obstacle after the bloc’s highest court dismissed Belgian concerns over the pact’s dispute settlement process. The Belgian region of Wallonia, using its leverage over Belgium’s federal government in commercial matters, in 2016 nearly torpedoed the so-called Comprehensive Economic and Trade Agreement, or CETA. The delay raised concerns that the EU would have difficulty concluding other deals, such as the EU’s landmark trade accord with Japan that took effect in February.
- World Headlines
- European stocks eased as Danske Bank’s woes weighed on banking stocks and commodities-related sectors also declined, while investors readied themselves for economic growth figures on a jam-packed earnings day. Europe’s Stoxx 600 index was down 0.1 percent at 8:15 a.m. in London. Danske Bank dropped 6.6 percent after cutting its outlook, and miner Glencore dropped 3 percent after lowering its 2019 production forecasts for copper. On the positive side, Standard Chartered jumped 4.2 percent after announcing a $1 billion buyback with its first-quarter results, while BP advanced 0.9 percent after hitting targets for first-quarter profit estimates.
- U.S. equity futures and European stocks edged lower on Tuesday while Asian shares slipped after earnings at the world’s biggest phone maker and at Google parent Alphabet disappointed investors. Treasuries were steady a day before the next Federal Reserve policy decision. Futures on the S&P 500 also pointed to a soft open in New York. Tech stocks were poised to retreat following Alphabet’s worse-than-expected results after the Monday close, and after Korean giant Samsung Electronics’s profit missed analysts’ recently reduced estimates.
- After years of trading in line with American stocks, Asian equities are no longer moving in tandem. Asia’s regional benchmark has slumped about 6.8 percent in the past year, with the MSCI Asia Pacific Index still not recouping all of the losses during the global market rout if late 2018. By contrast, the U.S. S&P 500 is up 11 percent, hitting all-time highs as recently as Monday.
- Oil rose as Saudi Arabia signaled OPEC and its allies could extend supply cuts to the end of the year, while Venezuela’s opposition leader called for a military uprising. Crude futures added 1.5 percent in New York. Saudi Energy Minister Khalid Al-Falih said that the Organization of Petroleum Exporting Countries and its partners remain focused on reducing oil inventories, according to an interviewby RIA Novosti published on Tuesday. Last week, U.S. President Donald Trumpsaid the kingdom agreed to raise production as he tightens sanctions on Iran. In Venezuela, the government accused Juan Guaido of planning a coup after he appeared with soldiers in a video.
- Gold gained to trim a third monthly decline after the first official gauge of China’s manufacturing sector fell in April, signaling that the economic stabilization seen in the first quarter remains fragile. Still, with U.S. stocks rising to a record on Monday, risk appetite is damping demand for havens, with hedge funds increasing their net-short position in gold to the most bearish since November. Investors will also be closely watching the Federal Reserve’s policy-setting meeting on April 30-May 1, where officials are expected to hold interest rates steady.
- WeWork Cos., the world’s biggest co-working company, is planning to go public, joining a wave of highly valued technology startups moving to the U.S. markets. The New York-based company said Monday it filed paperwork confidentially with the U.S. Securities and Exchange Commission to hold an initial public offering. WeWork, which rents office space to companies and freelancers, would likely be the year’s biggest U.S. IPO after Uber Technologies Inc., which expects to start trading next week. WeWork, which also goes by the brand We Co., was most recently valued at $47 billion in a January investment from SoftBank Group Corp., its biggest investor.
- Apple Inc. has a lot to live up to with its earnings report coming on the heels of a rally that has added almost $300 billion of market value this year. The shares are up 44 percent from a 21-month low touched in early January after worse-than-expected iPhone sales prompted the company to cut its fiscal first-quarter revenue forecast. The rebound was partly driven by Apple’s new digital services. But Wall Street has grown increasingly skeptical of the gains. With only 22 of 46 analysts assigning buy ratings, the stock has the smallest percentage of bullish recommendations in at least two years, according to data compiled by Bloomberg.
- Alphabet Inc. reported first-quarter revenue that missed analysts’ estimates and sparked fears that advertisers are shifting some spending to digital rivals. Shares of Google’s parent company were down 7.8 percent during pre-market trading in New York Tuesday. The stock closed at a record $1,296.20 on Monday shortly before its earnings were published. Sales came in at $29.5 billion, excluding payments to distribution partners, Alphabet said in a statement on Monday. Wall Street was looking for $30.04 billion, according to the average of analysts’ estimates compiled by Bloomberg.
- General Electric Co. burned less cash in the first quarter, giving Chief Executive Officer Larry Culp a boost in his effort to rejuvenate the ailing manufacturer amid a global slowdown in the power-equipment market. The shares jumped. Free cash flow in GE’s industrial businesses was negative $1.22 billion, the company said in a statement Tuesday as it reported quarterly earnings. That was better than Wall Street’s expectations for free cash use of $2.9 billion, and an improvement over last year’s burn of $1.76 billion.
- Japanese Emperor Akihito ended his three-decade reign on Tuesday, voluntarily stepping down due to health concerns to make way for his son in the country’s first abdication of the Chrysanthemum Throne since 1817. His 31-year imperial era known as Heisei, which can be translated as “achieving peace,” came to an end with a ceremony attended by about 300 political leaders and dignitaries at about 5 p.m. local time at the Imperial Palace in Tokyo. On Wednesday, his son, Crown Prince Naruhito, 59, will ascend the throne in ceremonies also at the palace.
- Europe’s economy began 2019 with an unexpected growth spurt as Spain outperformed and Italy shook off a recession, easing pressure on the European Central Bank to add stimulus. The 0.4 percent increase in euro-region gross domestic product during the first quarter reported by Eurostat was twice the pace at the end of last year and more than economists predicted. Strong investment in Spain, buoyant consumer spending in France and a faster-than-anticipated rebound in Italy gave a fillip to expansion in the 19-nation currency bloc.
- Standard Chartered Plc is buying back ordinary shares for the first time in more than 20 years as Chief Executive Officer Bill Wintersseeks to put misconduct and profitability woes behind the Asia-focused lender. The $1 billion purchase plan comes weeks after a settlement between the bank and U.S. regulators over its repeated violations of sanctions with Iran. Standard Chartered also on Tuesday delivered its latest quarterly results, which put it on course to deliver its key targets for shareholders. The shares jumped as much as 6.1 percent during morning trading in London, the most since October.
- Sirius Minerals Plc, which is building a potash mine in northern England, announced a plan to raise $3.8 billion through shares, bonds and announced new credit lines. The company will raise $400 million by selling new shares between 15 and 18 pence a piece. It also plans to offer $644 million in convertible debt and $500 million in bonds. It also announced a secured, revolving credit facility with a maximum of $2.5 billion.
- For months, Huawei Technologies Co. has faced U.S. allegations that it flouted sanctions on Iran, attempted to steal trade secrets from a business partner and has threatened to enable Chinese spying through the telecom networks it’s built across the West. Now Vodafone Group Plc has acknowledged to Bloomberg that it found vulnerabilities going back years with equipment supplied by Shenzhen-based Huawei for the carrier’s Italian business. While Vodafone says the issues were resolved, the revelation may further damage the reputation of a major symbol of China’s global technology prowess.
- President Donald Trump sued to block Deutsche Bank AGand Capital One Financial Corp. from complying with congressional subpoenas targeting his bank records, escalating the president’s showdown with Democratic lawmakers investigating his finances. The German lender has already begun the process of giving documents related to loans made to Trump or some of his businesses to the New York state attorney general, who is conducting her own probe, said a person familiar with the matter. The bank hasn’t yet handed over any client-related records to the House committees and will wait for the outcome of the legal proceedings, said the person, asking not to be identified in disclosing internal information.
- The U.S. Federal Aviation Administration on Monday took a potentially important step toward rebuilding confidence not only in the Boeing Co. 737 Max but also in the agency itself, convening a week-long summit of civil aviation regulators from Brussels to Beijing. Led by former National Transportation Safety Board Chairman Christopher Hart, delegates from eight overseas nations and the European Union are meeting in Seattle to examine the FAA’s original certification of the Max as safe to fly, including the automated flight control system linked to two crashes since October that killed a combined 346 people.
- Glencore Plc cut its full-year copper-output goal by about 3 percent and lowered production targets for other commodities from nickel to oil, as the world’s biggest metal trader deals with multiple problems across its operations. The shares fell. Glencore’s disappointing output results add to a growing list of headaches. The company announced last week that the U.S. Commodity Futures Trading Commission is investigating it for possible corrupt practices, adding to an existing Department of Justice probe.
- U.S. trade negotiators landed in Beijing Tuesday, seeking “substantial” progress in talks aimed at ending the tariff war, as weak economic data underscored the stakes for the global economy. Earlier, China’s first official gauge of the manufacturing sector in April fell, signaling that more work is needed to bed down the economic stabilization seen in the first quarter. Industrial production also tumbled in South Korea and Japan, and gross domestic product growth slowed a notch in Taiwan.
- SoftBank Group Corp. is close to making a $1 billion investment in Latin American delivery app Rappi, according to people familiar with the matter. The investment is likely to be led by the Japanese company’s newly formed Innovation Fund, which was launched by SoftBank Chief Operating Officer Marcelo Claure to focus on technology investments in Latin America, said the people, who asked not to be identified because the details aren’t public. It’s expected to invest alongside the conglomerate’s Vision Fund, the people said.
- Anadarko Petroleum Corp.’s market value has soared 56 percent since a bidding war for the American shale driller kicked off two weeks ago. Yet the company’s directors have managed to step on the toes of almost every player involved. Anadarko reopened talks with Occidental Petroleum Corp. on Monday after the board sided with investors who said the $38 billion offer was likely better than the agreed-upon deal with Chevron Corp. Though Occidental’s been making a run at Anadarko for more than a year, Chevron’s pursuit began in earnest just a few months ago. If Anadarko officially deems Occidental’s bid “superior,” Chevron will be forced to sweeten its offer or drop out altogether.
*All sources from Bloomberg unless otherwise specified