April 9th, 2018
Daily Market Commentary
- Canadian stocks ended lower, erasing earlier gains in an increasingly familiar pattern of wild swings as investors evaluate the latest trade risks. The S&P/TSX Composite Index fell 149 points or 1 percent to 15,207.41, bringing its total loss for the week to about 1 percent. Health-care stocks were the biggest decliners Friday, losing 2.4 percent as cannabis shares fell for a fourth of five days.
- Canada’s oil-sands industry suffered a major blow as Kinder Morgan Inc. halted most work on the Trans Mountain pipeline expansion, throwing into doubt a project that could have helped alleviate shipping bottlenecks plaguing the nation’s energy producers. The pipeline company is suspending all non-essential activities and ceasing to commit more resources to the project, which has faced opposition from the coastal province of British Columbia, whose land it traverses. Still, Houston-based Kinder said it will consult with stakeholders to try to reach agreements that will allow the project to proceed and set a May 31 deadline on the talks.
- Stocks in Europe climbed and futures pointed to a higher opening in U.S. markets as investors looked to China’s Xi Jinping to calm atrade dispute between the world’s two largest economies. Treasuries fell and the dollar climbed. Healthcare and technology companies led European stocks to a three-week high, mirroring gains in Asia.
- After a deep selloff in U.S. stocks on Friday, U.S. equity-index futures pointed to a higher open as investors assess President Donald Trump’s order for a review of more tariffs that prompted an aggressive response from China. Futures on the S&P 500 Index advanced as much as 0.8 percent Monday after all major U.S. equity indexes on the cash market ended last week in the red as data showed March payrolls were cooler than economists forecast. Contracts on the Nasdaq 100 rose as much as 1 percent, while those on the Dow Jones Industrial Average gained 0.9 percent.
- Japanese stocks advanced as investors bought domestic demand-related shares that are less vulnerable to trade friction after the U.S. administration defended its threats to impose tariffs on Chinese imports. The Topix reversed an early decline, with banks and food and beverage companies providing the most support for the benchmark gauge, while machinery makers and trading houses dropped.
- Oil traded near the lowest in more than two weeks in New York on concerns that the trade conflict between the U.S. and China will undermine economic growth. Futures in New York traded below $63 a barrel after dropping 4.4 percent last week. While U.S. President Donald Trump predicted the Asian nation will be first to buckle as the world’s two largest economies teeter on the brink of a trade war, a speech by China’s Xi Jinping at a conference on Tuesday may shed some light on his plans. Meanwhile, money managers slashed bets on rising West Texas Intermediate crude by the most since August, while short-selling surged.
- Gold drifts lower as equities rally and haven demand subsides on expectations that Chinese President Xi Jinping will calm a trade dispute between the world’s top two economies.
- The world’s largest iron ore exporter delivered a mixed message on the outlook, raising near-term price forecasts but combining that revision with a more somber message that China’s gargantuan imports are set to level off as steel production eases in the coming years. Iron ore will average $61.80 a metric ton this year and $51.10 in 2019, Australia’s Department of Industry, Innovation and Science said in a quarterly report on Monday. That compares with projections of $52.60 and $48.80 in the previous outlook.
- Investors are losing faith in the strength of the euro-area economy after a string of numbers that fell short of expectations. A monthly report from research group Sentix said their view of the economy has turned negative for the first time since July 2016. It said the downward dynamic was “even more pronounced” for Germany, where separate data on Monday showed a sharp drop in exports in February.
- Novartis AG agreed to acquire AveXis Inc. for $8.7 billion to gain a promising drug to treat a rare disease that afflicts infants, hastening a shift toward gene therapy and precision medicines. Shareholders of the Bannockburn, Illinois-based company will receive $218 a share in cash in a tender offer, Novartis said in a statement Monday. The price is 88 percent above where AveXis closed Friday.
- China is evaluating the potential impact of a gradual yuan depreciation, people familiar with the matter said, as the country’s leaders weigh their options in a trade spat with U.S. President Donald Trump that has roiled financial markets worldwide. Senior Chinese officials are studying a two-pronged analysis of the yuan that was prepared by the government, the people said. One part looks at the effect of using the currency as a tool in trade negotiations with the U.S., while a second part examines what would happen if China devalues the yuan to offset the impact of any trade deal that curbs exports.
- Rolls-Royce Holdings Plc plans to sell its L’Orange fuel-injection business to U.S. manufacturer Woodward Inc., disposing of an industrial-components operation outside its main jet-engine focus. The deal has an enterprise value of 700 million euros ($859 million), and the companies will continue to work together, they said Monday in astatement. People familiar with the matter told Bloomberg in January that Rolls-Royce intends to maintain close ties to Stuttgart, Germany-based L’Orange, whose products include diesel systems used in ships and industrial applications for customers including marine-engine producer Wartsila Oyj.
- Turkey’s MetCap Enerji Yatirimlari and Qatar’s Fusion Dynamics formed an equal partnership to invest $5.2 billion in petrochemicals and energy projects in Turkey. The deal underscores improving relations between the two countries, and will benefit from Turkish government incentives to be announced Monday. The joint venture sets up the new MetCap Petrochemicals company to build a $4 billion petrochemicals complex in Turkey’s Thrace basin. Separately, Fusion Dynamics will partner with MetCap Enerji to finish two gas-fired plants in central Turkey, valued at $1.2 billion.
- Russian stocks headed for their biggest drop in four years and the ruble slumped the most in the world after the U.S. slapped new sanctions on Kremlin-connected billionaires and tensions with the U.S. spiraled following the latest chemical attack in Syria. The benchmark MOEX Russia Index sank 7.2 percent on Monday, the steepest slide since March 2014, when Moscow’s annexation of the Crimean peninsula triggered international penalties. The currency and local bonds headed for their biggest drop since November 2016 and the cost of insuring sovereign notes against default was set for the sharpest increase since December 2014.
- Japanese investors offloaded U.S. sovereign bonds for a fifth straight month in February, with the sales being the second-highest on record, amid a weaker dollar and rising hedging costs. Investors from the Asian nation sold a net 3.6 trillion yen ($33.6 billion) worth of U.S. bonds, according to the balance of payments data released by the Ministry of Finance Monday. That’s near the record 3.7 trillion yen they dumped in April 2017. The five-month streak makes for the longest run of sales since 2013.
- The appointment of Christian Sewing as Deutsche Bank AG’s chief executive officer to replace an embattled John Cryan after less than three years — and three turnaround plans — answered just one of the questions hanging over the struggling institution. There’s the fate of Chairman Paul Achleitner and whether a divided board can close ranks behind the new CEO. Sewing also confronts a decision on scaling back the investment bank — both Deutsche Bank’s biggest source of revenue and a perennial laggard against U.S. giants — and winning over long-suffering shareholders.
- Ceva Logistics AG, which provides transportation and logistics services around the world, plans to raise as much as 1.3 billion Swiss francs ($1.4 billion) in an initial public offering in Zurich as it seeks to slash debt and bolster its balance sheet. Ceva Logistics, whose executive team is based in Baar, Switzerland, aims to list shares in the second quarter, the company said in a statement on Monday. With 2017 revenue of $7 billion, it employs 56,000 people in 160 countries.
- President Donald Trump lashed out at tariffs placed on American cars sold in China, saying the trade structure disproportionately hurts the U.S. In a Twitter posting Monday morning, Trump said the current system levies a 2.5 percent tariff on every Chinese car imported to the U.S., while placing a 25 percent duty on cars going the other way. He assailed what he said has been an historic imbalance.
- Goldman Sachs Group Inc. is taking on the exchanges to win the business of fund managers eager to keep their stock trades hidden in the era of MiFID II price transparency. The bank has set up a so-called periodic auction service that matched its first trades on March 21, allowing investors to buy and sell shares without tipping their hand to the rest of the market. Exchanges began offering the service earlier. Europe’s largest dark pool, run by Cboe Global Markets Inc., is now doing more business through periodic auctions than it is through its dark markets.
- Abu Dhabi’s financial holding company Mubadala Investment Co. is close to hiring Rothschild & Co. to help divest a stake inCepsa Trading SA, a Spanish oil company valued at about 10 billion euros ($12 billion), according to people with knowledge of the matter. Mubadala is also interviewing more banks for roles in assisting with a sale or initial public offering for the wholly owned asset, the people said, declining to be identified as the deliberations are confidential. The listing in Madrid would be a preferred option, they said.
- Exxon Mobil Corp. got such a “favorable” deal from Guyana, home to the biggest new deepwater oil play, that the tiny South American country should rewrite its tax laws, the International Monetary Fund said. While Guyana should honor the existing deal, future contracts should ensure the state gets a higher portion of crude proceeds, the fund said in a report seen by Bloomberg News. The country, South America’s third poorest with an average per capita income of around $4,000, has little experience of dealing with multinational behemoths such as Exxon.
- The Venezuelan debt crisis could be on the verge of a new milestone as a $650 million bond matures Tuesday with little hope it’ll get paid. The notes from the state-run electric utility were always considered among the country’s riskiest securities because the downsides to a default are relatively minor. They don’t contain any cross-default rules that would affect sovereign debt or notes from the state oil company, and the utility doesn’t have any overseas assets that investors could try to seize.
- Qatar’s sovereign wealth fund has brought back $20 billion from abroad to shore up domestic banks and mitigate the impact of the Saudi-led boycott, according to the country’s latest bond prospectus. The Qatar Investment Authority placed billions of dollars with local banks immediately after the diplomatic crisis broke in June as some lenders in Saudi Arabia, the United Arab Emirates and Bahrain started withdrawing funds, according to the document, a copy of which was seen by Bloomberg. Almost $30 billion of non-resident deposits left the country, the document shows.
*All sources from Bloomberg unless otherwise specified