August 16th, 2018
Daily Market Commentary
- Canada and the U.K. are among six countries preparing the first carbon trades under the landmark Paris Agreement on climate change, part of an effort to unlock as much as $4 billion for the fight against global warming. The nations are assessing projects to cut greenhouse-gases in exchange for emission credits that can be used to comply with goals they set under the United Nations pact sealed in 2015, according to the World Bank Group, which is overseeing the program.
- President Donald Trump has made no secret that he wanted the North American Free Trade Agreement gone. A year of on-again-off-again negotiations without a clear view of an endgame has demonstrated the pact’s staying power. The survival of Nafta was hardly a given exactly a year ago, when negotiators from the U.S., Canada and Mexico gathered at a hotel in Washington. Their task was to start hammering out a fast update to the 24-year-old pact, which governs $1.2 trillion in trade.
- Air France-KLM Group directors haven’t even voted on hiring Ben Smith as the company’s new chief and already its French unions are preparing a lively welcome for the Canadian executive. Recruiting a foreign boss is “inconceivable,” nine unions said Thursday before a board meeting at which Smith probably will be chosen as chief executive officer. Labor groups will meet Aug. 27 to decide next steps in a long-running dispute over pay that’s led to 15 days of strikes and lost flights this year.
- The Stoxx Europe 600 Index rose, with most sectors in the green, while futures on the S&P 500, Dow and Nasdaq indexes all gained. The greenback, which has seen recent strength on its role as a haven, fell for the first time in six days.
- The dollar fell while European stocks climbed alongside U.S. equity futures on renewed hopes for trade tensions to ease. The yuan jumped and Treasuries dipped. The potential for a breakthrough in the trade standoff between China and the U.S. is helping shake off some of the caution that’s weakened risk assets over the past week. The lira rallied for a third day ahead of an investor call with Turkey’s Treasury and Finance Minister later Thursday that may provide clues about any further policy action.
- Asian shares declined for a second day, as earnings disappointment sank Tencent Holdings Ltd., the heaviest-weighted member of the regional benchmark. The MSCI Asia Pacific Index fell 0.5 percent to 160.94 as of 4:05 p.m. in Hong Kong, heading for its lowest close since September 2017.
- Signs of easing tensions between the world’s two largest economies have done little to lift oil as surging U.S. stockpiles offset potential gains in crude futures. Oil in New York was little changed while crude in London rose just 0.2 percent despite the announcement that the U.S and China are to resume trade talks in an attempt to diffuse geopolitical tensions between the two countries.
- Gold steady as commodities claw back losses after a rout spurred by a strong dollar and fears that Turkey’s financial crisis and U.S.-China trade tensions will dent global growth. Palladium rallies.
- Walmart Inc. bounced back from a lackluster start to the year with the strongest sales gain in more than a decade fueled by its grocery business, brightening the outlook for the overall retail sector. The stock jumped in early trading. Comparable sales at U.S. Walmart stores rose 4.5 percent in the three months ended in July, the company said Thursday, more than double analysts’ estimates. Grocery sales rose the most in nine years thanks to improved fresh-food offerings, and web revenue growth accelerated from the the previous period. The world’s biggest retailer also boosted its full-year forecasts for comparable sales and adjusted profit.
- Bayer AG shares continued their slide after the company failed to block California’s move to list the herbicide Roundup as a known carcinogen. The California Supreme Court declined on Wednesday to hear arguments by Monsanto, recently acquired by Bayer, as to why Roundup, the world’s most widely used weed killer, doesn’t belong on the state’s list of chemicals known to cause cancer. The California Court of Appeal, Fifth District, had rejected the U.S. company’s arguments in April.
- MTN Group Ltd. is exploring a sale of shares in African online retailer Jumia and values the company at as much as $1 billion, according to people familiar with the matter. Africa’s largest wireless carrier is considering an initial public offering of the Amazon.com Inc.-style business on the Nasdaq or New York Stock Exchange, said the people, who asked not to be named as the information isn’t public. Johannesburg-based MTN is the biggest shareholder in Jumia with a 40 percent stake, and smaller investors including German startup backer Rocket Internet SE are also open to selling stock, they said.
- The Trump administration’s push to more quickly approve energy infrastructure could spell trouble for future natural gas pipelines, with two Appalachian projects already facing major setbacks after environmental reviews were found to be deficient. In a rare move, the Federal Energy Regulatory Commission halted work on both the $3.7 billion Mountain Valley and the $6 billion to $6.5 billion Atlantic Coast pipelines in the course of a week. The orders followed court decisions that vacated key permits for the projects, which judges decided hadn’t been adequately reviewed by agencies under the Interior Department.
- China will dispatch Vice Commerce Minister Wang Shouwen to the U.S. for low-level trade talks in late August, the first official exchanges since earlier negotiations broke down two months ago. The Chinese delegation led by Wang will meet with an American group led by David Malpass, under secretary for international affairs at the Department of the Treasury, at the invitation of the U.S., China’s Ministry of Commerce said in a statement on its website on Thursday.
- Russia halted a shift out of Treasuries held onshore in the U.S. after a mass exodus in the wake of sanctions in April. Figures published on Wednesday indicated Russia’s holdings of U.S. bills, notes and bonds were unchanged at $14.9 billion in June. The numbers for April and May showed a reduction of $81 billion, or about four-fifths of the total, leading to speculation that Russia is dumping American assets to protect itself from the growing risk of harsher U.S. sanctions.
- President Recep Tayyip Erdogan moved to shore up alliances in Europe and the Middle East, easing pressure on the battered lira, as the standoff between Turkey and the U.S. deepened. Efforts to rally support and bolster domestic markets include a call between Turkish Finance Minister Berat Albayrak and international investors. Erdogan was set to speak with French President Emmanuel Macron on Thursday, a day after talks with German Chancellor Angela Merkel and a $15 billion pledge of support from Qatar.
- Indonesian President Joko Widodo plans a record spending next year to support growth as he seeks to shield the $1 trillion economy from an emerging-market rout and brighten his chances of a re-election. Economic growth is forecast at 5.3 percent in 2019, Widodo, known as Jokowi, said in his budget speech at the parliament in Jakarta on Thursday. The budget deficit is forecast to shrink to 1.84 percent of gross domestic product from a revised estimate of 2.12 percent for this year, he said.
- China’s natural gas giant is linking up with its state-owned rivals to help the nation break away from crippling winter fuel shortages. China National Petroleum Corp., its largest gas supplier, is spending 26 billion yuan ($3.8 billion) to connect its pipelines with terminals owned by China National Offshore Oil Corp. and China Petrochemical Corp., also known as Sinopec, to deliver gas from the country’s south all the way up north.
- For years, Jim Coulter and David Bonderman, the billionaire co-founders of private equity titan TPG, flirted with the idea of selling shares in their own firm to the public. No longer. Coulter and Jon Winkelried, the former Goldman Sachs Group Inc. president who took over for Bonderman as co-chief executive three years ago, have decided to remain an old-school partnership. TPG has instead explored other private financing arrangements, including a possible sale of a stake in the company, according to people with knowledge of the deliberations.
- Cisco Systems Inc. gave a bullish forecast for the current quarter, signaling confidence that an overhaul of its computer-networking products will continue to boost corporate demand. The stock jumped as much as 6.8 percent in premarket trading Thursday after the company’s predictions for fiscal first-quarter sales and profit topped analysts’ estimates. Cisco, the maker of equipment that directs most of the world’s internet data traffic, also said demand around the world and across all of its products had lifted earnings in the July quarter above average projections.
- JD.com Inc. posted a blowout loss on higher spending and forecast sales below estimates, as rising competition in China’s e-commerce market slow efforts to attract new revenue. The net loss from continuing operations surged to 2.2 billion yuan ($319 million) in the June quarter, about 8 times larger than analysts expected. The Beijing-based company expects sales in the September quarter of between 104.5 billion yuan and 109 billion yuan, with the top of the range slightly below estimates. The stock slumped more than 6 percent in pre-market trade.
- Amazon.com Inc. is in the running to acquire Landmark Theatres, a move that would vault the e-commerce giant into the brick-and-mortar cinema industry, according to people familiar with the situation. The company is vying with other suitors to acquire the business from Wagner/Cuban Cos., which is backed by billionaire Mark Cuban and Todd Wagner, according to the people, who asked not to be identified because the discussions are private. The chain’s owners have been working with investment banker Stephens Inc. on a possible sale, the people said. No final decisions have been made, and talks could still fall apart.
- Emerging-market stocks fell again, dragging an index that tracks them to within a whisper of a bear market. But it’s a different picture for currencies, which rose after a decision to restart U.S.-China trade talks surprised investors. Concern over earnings of technology companies extended the MSCI Emerging Markets Index’s losing streak to a seventh day, bringing the gauge’s decline since a peak in January to 19.9 percent as of 10:33 a.m. in London. The threshold for a bear market is a 20 percent drop from the bull-run’s peak, based on closing prices.
- Deere & Co. has been riding high in recent months as American farmers finally replace pricey equipment after deferring purchases for years. But there are questions over whether that momentum is fizzling thanks to President Donald Trump’s trade war. U.S. crop sales are threatened by China’s retaliatory tariffs at a time when farmer debt is mounting. Even with $12 billion in federal aid promised by Trump, growers might choose to pay off existing bills rather than buy new tractors or combines, according to Cleveland Research.
*All sources from Bloomberg unless otherwise specified