August 21st, 2017
Daily Market Commentary
- Russia has emerged as one of the winners from the trade dispute between Canada and the U.S over lumber. The U.S. is importing more softwood lumber from overseas after it slapped tariffs on Canadian supplies, making them more expensive. Russian shipments are 42 percent higher so far in 2017, according to U.S. government data.
- ‘The scope and volume of proposals during the first round of the negotiation reflects a commitment from all three countries to an ambitious outcome and reaffirms the importance of updating the rules governing” the North American Free Trade Agreement, the three countries say in joint statement.
- European stocks are little changed, halting Friday’s selloff, as a drop in banking shares offset gains in mining, boosted by rallying commodity prices. Stoxx Europe 600 Basic Resources Index ends 2 days of losses, climbs as much as 1.1% in London as metals gain on optimism over the supply and demand outlook in China; sector is best-performer in broader index Monday.
- A standoff between the U.S. and North Korea and racial violence in the U.S. were enough to break a 21-week streak of flows into emerging-market funds. Investors pulled $1.7 billion out of developing-nation equity and bond funds in the week ending Aug. 16, the most this year, according to EPFR Global data. The geopolitical perils gave investors all the reason they needed to pare risk after lamenting for months that valuations are stretched.
- Asian equities opened the week mixed as investors favored growth markets in Hong Kong and Shanghai, while Australia and Japan declined. The Philippines is closed for a holiday.
- Oil traded near the highest closing level in a week as OPEC member Libya halted its biggest oilfield and as drilling by U.S. companies slowed the most since January. Futures were little changed in New York after rising 3.7 percent the previous two sessions. Libya declared force majeure, a legal clause that allows the suspension of deliveries, on supplies from the Sharara field after it was blocked on Sunday.
- Gold rises as investors monitor U.S. and South Korea military drills, and count down toward a key meeting of global central bankers.
- Brexit may dominate factors influencing the pound’s fortunes again this week, with the U.K. set to lay out its position in at least three areas of negotiation with the European Union. Uncertainty about the next round of Britain-EU talks due by month-end could weigh on sterling, which was the worst-performing Group-of-10 currency last week.
- Automatic Data Processing Inc. rejected activist investor Bill Ackman’s nominees for the board of directors, saying his candidates are no improvement on the current board members. ADP will instead nominate its 10 existing directors for re-election at the annual meeting, the Roseland, New Jersey-based company said in a statement Monday.
- Britain and the European Union are at odds over how soon the Brexit talks can pivot toward a trade deal just a week before negotiations are set to resume. Adopting a provocative posture, U.K. Prime Minister Theresa May’s government declared at the weekend that it’s “stepping up pressure” on the bloc to shift the discussions away from the terms of separation as soon as October.
- Already under pressure from discounters at home, major U.S. airlines are facing a tighter squeeze abroad as low-cost rivals ramp up service across the Atlantic. At American Airlines Group Inc., a measure of trans-Atlantic fares just plunged 9.1 percent, the most since right after the recession ended in 2009, as European budget carriers such as Norwegian Air Shuttle ASA added more flights. Delta Air Lines Inc. also recorded a sharp drop in the same yardstick. United Continental Holdings Inc. eked out a tiny gain.
- European private equity fund Triton Beratungsgesellschaft GmbH is in early talks with investors to raise up to 4 billion euros ($4.7 billion) for its fifth buyout pool next year, people familiar with the matter said.
- Everything’s bigger in Texas, including municipal-note sales. This week the Lone Star State is selling $5.4 billion of the short-term debt, which states and municipalities routinely use to cover expenses until revenue from taxes or other sources comes in. The note offering, the state’s first since 2014, will allow the government to avoid a “temporary cash shortfall” in its general fund in fiscal 2018, offering documents say.
- Rosneft PJSC and partners including Trafigura Group Pte finalized their $12.9 billion purchase of India’s Essar Oil Ltd. It took more than 10 months to complete the deal after it was announced last October and more than two years after Rosneft first confirmed it was in talks to buy India’s second-largest private oil refiner.
- U.S. utility owner Sempra Energy has agreed to buy control of Texas power distributor Oncor Electric Delivery Co. for $9.45 billion, topping a bid by Warren Buffett’s Berkshire Hathaway Inc. just last month. Sempra’s deal for Energy Future Holdings Corp., which owns 80 percent of Oncor, is valued at about $18.8 billion including debt, the San Diego-based company said in a statement dated Aug. 20.
- Cathay Pacific Airways Ltd. agreed to purchase 32 Airbus SE single-aisle jets in an order worth $4.1 billion as it seeks to upgrade and expand the fleet of its affiliate Cathay Dragon. The Hong Kong carrier entered into a non-binding preliminary agreement to buy the A321-200neo aircraft, it said in a statement to the city’s stock exchange Monday. The jets, scheduled to be delivered between 2020 and 2023, carry a list price of $127 million each, excluding discounts that are customary for huge orders.
- Rathbone Brothers Plc is in exclusive merger talks with Smith & Williamson Group Holdings Ltd. to create a U.K. asset manager overseeing more than 55 billion pounds ($71 billion). Its shares headed for the highest close ever.
- Shares of Unicom Group’s key units in Shanghai and Hong Kong rose after China’s second-largest wireless carrier announced a $11.7 billion stock sale as part of a government push to draw private capital into its state-owned enterprises.
- Intel Corp., the biggest maker of semiconductors, said its new processors are going to deliver the biggest bump in performance that personal computer users have experienced in years. The eighth generation of its Core line will provide as much as a 40 percent jump over its predecessor, according to the Santa Clara, California-based company. That’s a leap in performance that arguably only happens once in a decade, Intel said. New laptops built on the chips will come to market in September.
- Total SA agreed to buy the oil and gas unit of A.P. Moller-Maersk A/S, the French company’s biggest acquisition since 1999 and another sign of the accelerating pace of energy deals after a long downturn. Total will pay Maersk with $4.95 billion of its own shares and assume $2.5 billion of the Copenhagen-based company’s debt, according to a statement on Monday. The full transaction value of $7.45 billion is above what some analysts were expecting and Maersk shares jumped as much as 5.7 percent following the announcement.
- The U.S. said it’s slashing visa services in Russia after the Kremlin ordered it to cut two-thirds of staff at its embassy and consulates as relations between the former Cold War rivals spiraled. All non-immigrant visa operations will be halted from Aug. 23 and will resume “on a greatly reduced scale” from Sept. 1, with applicant interviews conducted solely in Moscow, the U.S. embassy said in a website statement.
- Robert Yuksel Yildirim had barely been at the family’s construction-materials business a year before the company won its first international contract. Now, it’s a conglomerate with interests in mining, ports and chemicals across 28 countries. Twenty four years after the deal to import coal directly from Russia was sealed, the impetus to expand Yildirim Holding AS beyond its Turkish home base is stronger than ever.
- Infosys Ltd. begins the search for a new chief executive officer this week with a tough set of requirements for any candidate: The person must be capable of leading a 200,000 employee organization, willing to tackle sweeping changes in the outsourcing industry and brave enough to drop in the middle of open warfare between the company’s board and co-founders.
- Chinese banks’ leverage fell for the first time in seven years as the government’s campaign to curb risks in the $40 trillion financial system started to bite. The balances of both interbank assets and liabilities at the end of June declined by 1.8 trillion yuan ($270 billion) from the beginning of the year, the China Banking Regulatory Commission disclosed at a press conference on Friday.
- Fiat Chrysler Automobiles NV’s fast-growing Jeep division has elicited takeover interest from a Chinese rival, the latest sign that the Italian-American company’s businesses may be up for grabs just as Asian carmakers hunt for European and U.S. assets. Great Wall Motor Co., China’s biggest SUV maker, is interested in buying Jeep and will continue to monitor the situation, said a spokesman for the Baoding-based automaker.
*All sources from Bloomberg unless otherwise specified