August 22nd, 2017
Daily Market Commentary
- The August doldrums hit Canadian stocks, leaving them little changed on low trading volume as a continued rally in mining shares was offset by falling oil prices. The S&P/TSX Composite Index fell half a point or less than 0.1 percent to 14,951.88, its lowest close in nine months. Trading volume was 23 percent below the 10-day average.
- Toronto-Dominion Bank has picked Dublin for its expanded trading hub inside the European Union in preparation for Britain’s departure from the economic bloc. The bank’s TD Securities unit plans to establish a bond-trading business there, subject to regulatory approval, according to a statement on the Irish development agency’s website Tuesday. The unit of Canada’s largest lender by assets already has a fully licensed operation in the Irish capital, where it has been operating for more than 20 years, and has an office in London.
- Toronto-Dominion Bank, Canada’s largest lender by assets, is in talks with Cadillac Fairview to occupy more than half the space in an office tower now under construction in Toronto’s south core. The bank is seeking about 500,000 square feet (46,450 square meters) of the planned 879,000 square feet at 16 York.
- European stock investors and strategists are predicting a pickup in the region’s equities, saying the worst of the drag from a rising euro may be coming to an end. Strategists have boosted their year-end forecasts for European gauges in August, predicting an upside of 5.8 percent for the Euro Stoxx 50 Index from Monday’s close.
- U.S. equity-index futures were also in the green after the S&P 500 Index halted a two-day decline on Monday. Investors seem to be getting over some of the sensitivity that characterized the past few days following political turmoil in Washington, fresh terrorist attacks in Europe and ongoing tension between the U.S. and North Korea.
- Asian stocks rose as investors turned their attention back to company fundamentals ahead of a meeting of central bankers later this week. The MSCI Asia Pacific Index advanced 0.1 percent to 159.51 as of 4:49 p.m. in Hong Kong as about three stocks rose for every two that fell.
- Oil rose toward $48 a barrel before data forecast to show a further reduction in U.S. crude inventories, which would signal that a global surplus is receding. Futures in New York added 0.8 percent after slumping 2.4 percent Monday. Inventories probably dropped by about 3.5 million barrels last week.
- Gold falls as investors eye key annual gathering of global central bankers later this week in Jackson Hole, Wyoming. Palladium touches fresh 16-year high.
- Iron ore’s mid-year rally has been so powerful that the raw material just clocked up a 50 percent surge in less than 50 days, rewarding bulls for their optimism about Chinese demand while handing bears further reason to be cautious about the outlook for 2018 as supply may expand.
- China’s Ministry of Finance will roll over about $90 billion worth of government bonds coming due next week that were used to help set up the nation’s sovereign wealth fund a decade ago. The ministry will issue 400 billion yuan ($60 billion) of seven-year notes and 200 billion yuan of 10-year securities on Aug. 29 to “relevant banks” at coupon rates of 3.6 percent and 3.62 percent, respectively, according to statements posted on its website.
- The pound declined the most in a week against the dollar amid lingering uncertainties about how long it will take for the U.K. to forge post-Brexit trade agreements with the European Union. Sterling, which depreciated against most Group-of-10 peers, also reached a 10-month low versus the euro.
- Britain is in a hurry to get Brexit talks to envelop trade. Not so fast, the European Union says. Prime Minister Theresa May’s government is issuing on Tuesday its third position paper in two days on how it sees its future relationship with Europe. The latest details focus on civil judicial cooperation — covering disputes from cross-border business to divorce and child custody — ahead of a much-anticipated document Wednesday on the role of the EU Court of Justice.
- German investor confidence declined for a third month amid concern that the widening diesel scandal and the strengthening euro will weigh on Europe’s largest economy. An expectations index, which aims to predict economic developments six months ahead, fell to 10 from 17.5 in July, according to the ZEW Center for European Economic Research. That’s the lowest level since October and compares with a median estimate in a Bloomberg survey for a drop to 15.
- Donald Trump vowed as a presidential candidate to reduce America’s military involvement abroad and quickly defeat Islamic State terrorists. His announcement of an open-ended commitment to Afghanistan to battle jihadists is a concession that as president he cannot meet either promise.
- KKR & Co. is close to clinching a $3 billion commitment from New York City’s pension system to invest in deals across the alternative-asset manager’s platforms, people with knowledge of the matter said. The pledge is the latest in a string of separately managed accounts over $1 billion that have been formed to invest pension money in multiple strategies. The accounts are run by a single manager and typically offer breaks on fees.
- Demand for Pratt & Whitney’s marquee jet engine is plummeting after a series of stumbles that marred its rollout, enabling rival General Electric Co. to capture market share in the race to supply a fast-selling Airbus SE plane. A competing GE turbine has won 10 times as many orders this year to power the A320neo, according to data provided to Bloomberg by Flight Ascend Consultancy. Pratt has signed just a single deal for its geared turbofan, a pact with British Airways owner IAG SA to outfit 47 of the Airbus planes — the only jet on which the engine maker competes head to head with GE’s new model.
- China State Construction International Holdings Ltd. plans to raise HK$6.36 billion ($813 million) from a rights issue for business expansion and general working capital. The company plans to issue 561 million rights shares on the basis of one rights share for every eight existing shares.
- BHP Billiton Ltd. is in talks with potential buyers of its U.S. shale assets — acquired in a contentious $20 billion deals spree in 2011 — and will delay a move into potash after months of public skirmishes with activist investors led by Paul Singer’s Elliott Management Corp.
- RHB Bank Bhd., Malaysia’s fourth-largest lender by assets, and AMMB Holdings Bhd. are planning to scrap their proposed merger, according to people with knowledge of the matter. RHB and AMMB had difficulty reaching agreement on terms, one of the people said, asking not to be identified because the information is private. The companies could announce as soon as Tuesday that they’ve decided to end talks about a combination, according to the person. RHB has a market capitalization of about $4.6 billion, while AMMB is valued at $3.3 billion in Kuala Lumpur.
- Exports of Venezuelan crude, the main source of income for the cash-strapped nation, dropped 24 percent in the first half of August, heightening concerns that the country won’t be able to make $3.53 billion in upcoming debt payments.
- OPEC will have little choice but to extend oil output cuts at current levels when they expire in March, according to Bank of America Merrill Lynch. Deepening the cuts would be too expensive and end up with a loss of market share to U.S. shale drillers, while increasing production would restart a price war that would be “devastating” for the finances of some of the members in the Organization of Petroleum Exporting Countries, Francisco Blanch, the bank’s global head of commodities research, said in a phone interview Monday.
- China’s money market is bracing for yet another squeeze. A record 2.3 trillion yuan ($340 billion) of negotiable certificates of deposit — a funding lifeline for medium and smaller banks — are set to mature next month, adding to the stress of an official deleveraging drive that has pressured onshore bonds lower in all but two months of this year.
- North Korea threatened the U.S. on Tuesday, saying it will face “merciless revenge” for ignoring Pyongyang’s warnings over annual military drills with South Korea. The isolated nation said it would be a misjudgment for the U.S. to think that North Korea will “sit comfortably without doing anything,” the state-run Korean Central News Agency said, citing an unidentified military spokesman. The ongoing drills and visits of U.S. military officials to South Korea create the circumstances for a “mock war” on the Korean peninsula, KCNA said.
- As many investors question a global stock-market rally that’s now in its eighth year, the world’s biggest wealth fund is prepared to splurge. Norway’s $970 billion wealth fund has been ordered to raise its stock holdings to 70 percent from 60 percent in an effort to boost returns and safeguard the country’s oil riches for future generations. Any short-term view on growing risks will play little part, according to Trond Grande, the fund’s deputy chief executive.
- Guangzhou R&F Properties Co. and the owner of London’s Cheesegrater tower have replaced Dalian Wanda Group Co. as buyer of a 470 million pound ($606 million) land plot in London, amid the Chinese government’s intensifying campaign against what it calls “irrational” outbound investments by its biggest dealmakers.
- Pakistan is preparing to sell a Sukuk or Eurobond of as much as $1 billion by the end of the year even as the disqualification of former Prime Minister Nawaz Sharif by the Supreme Court has heightened political tension in the country.
- Provident Financial Plc slumped the most on record after the British subprime lender forecast a full-year loss and revealed it’s being probed by regulators. Chief Executive Officer Peter Crook stepped down. The U.K. Financial Conduct Authority is investigating the Vanquis Bank credit-card unit, and the regulator had previously ordered Provident to stop offering a particular repayment product, the company said Tuesday. Provident scrapped its interim dividend and said a full-year payout is also unlikely. Manjit Wolstenholme will temporarily run the firm as executive chairman.
- Japan Tobacco Inc. agreed to buy assets of the Philippines’ No. 2 cigarette maker for about $936 million in its biggest acquisition in Asia as it continues an overseas push to counter a weakening domestic market.
*All sources from Bloomberg unless otherwise specified