August 18th, 2017
Daily Market Commentary
- Commercial real estate prices, hovering at record highs in the U.S. following a six-year boom, are sustainable even as Chinese regulators tighten restrictions on overseas investment, according to Brookfield Property Partners LP. There is enough capital pouring into real estate from multiple regions — including Europe and the Middle East — to counter any potential slowdown in Chinese investment, Brookfield Property Chief Executive Officer Brian Kingston said.
- The booming demand for electric-vehicles will create demand for more than just lithium or cobalt over time. The switch from gasoline to electric will require a large amount of infrastructure, which takes a lot of copper and aluminum too. Electric cars contain about three times more copper than a regular vehicle, according to Glencore. Even more is needed for charging stations, with Exane BNP Paribas predicting infrastructure will add about 5 percent to demand by 2025.
- Nevsun Resources Ltd. will likely be able to fund the development of its copper-gold project in Serbia without selling shares, according to the Canadian company’s chief executive officer.
- Stocks in Europe extended declines after a terrorist attack in Barcelona added to unease about U.S. policy paralysis and lingering tensions over North Korea. Airlines and hotels led the decline of the Stoxx Europe 600 index along with banks, as industries across the board got caught in the downturn.
- Markets are balanced on a knife edge as the U.S. opening looms after the S&P 500’s second-biggest selloff this year. S&P futures were flat, signaling U.S. markets may steady after the underlying index plunged 1.5 percent Thursday.
- Asian equities fell, paring the week’s gain, after a terror attack in Barcelona added to concerns that U.S. President Donald Trump’s policy plans may be stymied by discord within his administration.
- Oil headed for a third weekly drop as U.S. crude output rose to a two-year high and Chinese refining slowed, signs that the world’s two biggest consumers may stymie OPEC-led efforts to trim a global glut.
- Gold futures broke above $1,300 an ounce, rising to the highest level since November, as global stocks dropped and investors fretted that turmoil in the White House will prevent President Donald Trump from delivering on his legislative agenda.
- Deutsche Bank AG’s legal issues haven’t all been one-way traffic. The German lender, which has posted two consecutive annual losses amid rising misconduct fines, booked a surprise windfall of more than 100 million euros ($117 million) in the first half related to an out-of-court settlement with a former billionaire who had sued the bank’s wealth management unit Sal. Oppenheim, according to people familiar with the matter.
- The U.K. is preparing to give further details of its approach to Brexit next week when it lays out positions in at least three different areas that it wants to negotiate with the European Union. Prime Minister Theresa May’s government will publish two papers on Monday with more expected in the following days, as Britain and the EU gear up for a fresh round of divorce talks at the end of the month, according to three people familiar with the plans.
- Private equity firm Energy Capital Partners and a consortium of investors has struck a deal to buy U.S. power generator Calpine Corp. for $5.6 billion in cash. Calpine investors will get $15.25 a share as part of the deal, the Houston-based company said in a statement. The investor group was led by Access Industries and Canada Pension Plan Investment Board.
- Private equity partners Bain Capital and Cinven succeeded in their renewed bid to acquire Germany’s Stada Arzneimittel AG for 5.4 billion euros ($6.3 billion) in a takeover quest that has spanned months and looked doomed to fail in recent weeks.
- Investors pulled $7.4 billion from equity funds between Thursday and Monday last week as a war of words between U.S. President Donald Trump and his North Korean counterpart over nuclear weapons reached its peak. A subsequent cooling of tensions meant stock funds finished the week ending Aug. 16 down $1.3 billion, the biggest outflow in 10 weeks, Bank of America Merrill Lynch strategists wrote in a note, citing EPFR Global data. Bond funds added $3.5 billion in a twenty-second week of inflows and precious metal funds attracted $500 million of new money.
- Japan’s Nanto Bank Ltd. is facing a dilemma. The company needs to cut holdings of foreign assets to meet new regulatory requirements, but it prefers them to local securities. Nanto Bank, the fourth-largest holder of foreign assets among the country’s 64 regional lenders, plans to trim overseas holdings by 80 billion yen ($730 million) by March. That’s about a quarter of the amount it owns.
- Hang Seng Indexes Co. has unveiled a plan to liven up its China benchmark by including non-state controlled firms such as Tencent Holdings Ltd. One company that won’t be on that list is Alibaba Group Holding Ltd., which decided in 2014 to sell shares in the U.S. rather than Hong Kong after the city’s regulator stood firm on a ban on dual-class listings.
- Movie studios are considering whether to ignore the objections of cinema chains and forge ahead with a plan to offer digital rentals of films mere weeks after they appear in theaters, according to people familiar with the matter. Some of the biggest proponents, including Warner Bros. and Universal Pictures, are pressing on in talks with Apple Inc. and Comcast Corp. on ways to push ahead with the project even without theater chains, the people said. After months of negotiations, the two sides have been unable to arrive at a mutually beneficial way to create a $30 to $50 premium movie-download product.
- For the second time this month, the CBOE Volatility Index rallied more than 30 percent in one day as concerns over Donald Trump’s presidency on Thursday helped push the S&P 500 Index down the most since May. VIX jumps of that magnitude are rare but have already occurred three times in 2017, as much as in 2015 and 1990, and behind only 2011.
- Tens of thousands of troops from the U.S., South Korea and several other countries will conduct drills over the next few weeks to prepare for a possible war with Kim Jong Un’s regime. The annual Ulchi-Freedom Guardian military exercises starting Monday routinely spark condemnation from North Korea, and this year is no different. The state-run Korean Central News Agency this week called them “reckless saber-rattling” and warned that they could spark an accidental war.
- China home prices rose in fewer cities in July, adding to signs the property market is cooling. New-home prices, excluding government-subsidized housing, gained from the previous month in 56 of 70 cities tracked by the government, compared with 60 in June. the National Bureau of Statistics said on Friday. Prices fell in nine cities and were unchanged in five.
- The story of metal markets this week reads like a laundry list of achievements. Zinc crashed through the $3,000 barrier for the first time in a decade. Copper and aluminum reached three-year highs in London. Driving the gains was a combination of data showing faster economic growth, a weaker dollar and shrinking supply. Chinese capacity curbs have boosted aluminum, while stockpiles of zinc tracked by the London Metal Exchange have slumped to the lowest level since 2008.
- China laid down explicit rules restricting overseas investments, stepping up its campaign against what it described to be “irrational” acquisitions of assets in industries ranging from real estate to hotels and entertainment.
- Toshiba Corp.’s efforts to resolve a legal dispute with partner Western Digital Corp. over the sale of the Japanese company’s chip unit have ground to a halt after a meeting between top executives last weekend, according to people familiar with the matter.
- Deere & Co. is on course to have its best year since 2014 as more U.S. farmers visit dealerships to replace aging tractors and combines. The world’s biggest producer of agricultural equipment said Friday it now expects net income of $2.08 billion for the year through October, compared with a May projection for $2 billion. It also sees revenue from equipment sales rising 10 percent, up from an earlier view of 9 percent.
- A group led by Yunfeng Financial Group Ltd., the company backed by billionaire Jack Ma, agreed to buy an Asian unit from Massachusetts Mutual Life Insurance Co. to add insurance products to the array of financial services it offers to clients. The consortium, which includes Sina Corp., Giant Network Group Co., Ant Financial, a GIC Pte-managed entity and others, will pay HK$13 billion ($1.7 billion) for Hong Kong-based MassMutual Asia Ltd.
- Glencore Plc and Chevron Corp. are accelerating investments in Mexico’s nascent private fuel market as potential investors line up in anticipation of the end of government-regulated gasoline prices. “As part of the energy reform, we anticipate no price caps. As this is rolled out across the country, our intention is to be very competitive and have the best infrastructure,” said Alex Beard, the global head of oil at Glencore, in an interview with Bloomberg.
- HNA Group Co. has set a date for a long-awaited shareholder vote on its proposed $1 billion takeover of Singapore logistics operator CWT Ltd., people with knowledge of the matter said, in a sign that the beleaguered Chinese conglomerate is moving ahead with the deal.
- Infosys Ltd.’s Vishal Sikka has resigned as chief executive officer, a major loss for a company dealing with heightened acrimony between the board and a cohort of founders led by ex-chairman NR Narayana Murthy. The 50-year-old executive, who’d helped grow Infosys’ revenue about 25 percent since taking the helm three years ago, is leaving Asia’s No. 2 software exporter as the industry goes through a difficult transition to internet- and data-based computing.
*All sources from Bloomberg unless otherwise specified