August 23rd, 2017
Daily Market Commentary
- Royal Bank of Canada showed it’s not immune to the trading slowdown that affected U.S. rivals. Revenue from trading at Royal Bank fell 15 percent to C$835 million ($664 million) in the fiscal third quarter, led by declines in fixed income, currency and commodities, the Toronto-based firm said Wednesday in a statement. That’s the second straight quarter of year-over-year declines at the bank, which runs the biggest trading operation among Canadian lenders. Royal Bank generated more than C$3 billion in revenue from trading last year.
- Any move by the Toronto Stock Exchange owner to stop settling trades for marijuana companies with U.S. operations would undermine the market’s regulatory system, according to one Canadian pot company. CannaRoyalty Corp. already went through a “very formal” review with the Ontario Securities Commission in which its operations and assets were scrutinized before being allowed to list on an exchange.
- BHP Billiton Ltd. may have frozen plans to build the world’s biggest potash mine as slumping prices cast doubt on the project’s profitability, but it can’t stop digging yet. The largest mining company will spend half a billion dollars completing shafts at the Jansen site in Canada, adding to the $2.6 billion in costs it already ran up expanding into the once-lucrative market for the fertilizer ingredient. The 1,000 meter (3,300-feet) holes, two of them, must be reinforced and lined to prevent flooding.
- The euro was one of the standout gainers in an otherwise listless day in markets, as strong European data boosted confidence in the region’s growth. Gold and yen benefited as comments from President Donald Trump provoked another bout of investor caution. The surprise gain in a gauge of euro-region manufacturing did little to spur the Stoxx Europe 600 Index, however, which retreated led by WPP Plc after the world’s largest advertising company cut its revenue forecast.
- The S&P 500 Index added 1 percent on Tuesday amid reports the Trump administration and lawmakers are making progress on overhauling the tax code. A growing number of key congressional Republicans are considering a way to allow about $450 billion of tax cuts without offsets, according to people familiar with the discussions.
- Reports that the Trump administration and lawmakers may be making progress toward pro-business reforms pushed Asian equities higher Wednesday, extending gains to a third day. The MSCI Asia Pacific Index advanced 0.1 percent to 159.81 as of 5:12 p.m. in Hong Kong, led by technology and consumer discretionary stocks.
- Oil halted gains near $48 a barrel as U.S. industry data showed gasoline stockpiles rose, offsetting a further decline in crude inventories. Futures lost 0.3 percent in New York after rebounding Tuesday from the biggest drop in a week. Motor fuel stockpiles gained by 1.4 million barrels last week, while crude inventories fell by 3.6 million barrels.
- Gold traded little changed near resistance at $1,300 as U.S. President Donald Trump said he may end the North American Free-Trade Agreement, with investors also focused on an annual gathering of central bankers in Jackson Hole, starting Thursday.
- The deregulation winds blowing through Washington could add $27 billion of gross profit at the six largest U.S. banks, lifting their annual pretax income by about 20 percent. JPMorgan Chase & Co. and Morgan Stanley would benefit most from changes to post-crisis banking rules proposed by Donald Trump’s administration, with pretax profit jumping 22 percent, according to estimates by Bloomberg based on discussions with analysts and the banks’ own disclosures.
- Indonesia’s central bank surprised most economists on Tuesday by lowering interest rates, reflecting its relative comfort with the currency and inflation outlook. The benchmark rate was cut by a quarter point to 4.5 percent, with all but six of the 28 economists surveyed by Bloomberg predicting it would stay on hold. Bank Indonesia reduced borrowing costs six times last year, making it Asia’s biggest rate cutter.
- Lowe’s Cos. has been benefiting from the multiyear rebound in remodeling, though not as much as bigger rival Home Depot Inc. Adjusted earnings were $1.57 a share last quarter, Mooresville, North Carolina-based Lowe’s said Wednesday. Analysts estimated $1.62 on average.
- Severe Typhoon Hato made landfall in China after it lashed Hong Kong with heavy winds and rain, forcing the city to issue the highest storm warning and its stock exchange to cancel trading for the day. The Hong Kong Observatory issued the No. 8 signal at 2:10 p.m., after hoisting signal No. 10 for five hours. It’s the first time since Typhoon Vicente in July 2012 that the city raised its highest-level warning.
- Theresa May’s government will accept a “close cooperative relationship” with the European Court of Justice, in which both past and future rulings would still apply to the U.K. in a concession aimed at accelerating Brexit talks. This is a retreat from the prime minister’s pre-election rhetoric about ending the court’s jurisdiction over Britain. A position paper published Wednesday suggested the government was open to monitoring EU case law, abiding by past ECJ rulings, taking future ones into account, and even referring decisions to it.
- In global oil markets, Russia and Saudi Arabia have formed a rare alliance, joining forces to cut output to lift crude prices. But in the key Chinese market, they are fighting like never before for market share. Moscow, which was behind for years, has elbowed Riyadh out of the top position.
- WPP Plc shares had their biggest drop in 17 years after the world’s largest advertising company cut its full-year revenue forecast amid lower spending by customers, in particular consumer-goods manufacturers. The stock fell as much as 12 percent after WPP said like-for-like revenue growth is expected to be between zero and 1 percent in 2017. That’s down from an earlier 2 percent forecast.
- Wal-Mart Stores Inc. is teaming up with Google to let shoppers order by voice, the latest example of the world’s largest retailer finding a technology partner to catch e-commerce leader Amazon.com Inc. By the end of September, Wal-Mart customers can link their store accounts to Google’s Express shopping service and use voice-activated Google Home speakers to buy hundreds of thousands of items for delivery.
- China Unicom (Hong Kong) Ltd. will raise as much as HK$88.1 billion ($11.3 billion) by selling new shares to its parent as part of a government-led ownership overhaul of the nation’s second-largest wireless carrier. Unicom plans to sell as many as 6.65 billion new shares to unlisted China Unicom (BVI) Ltd. at HK$13.24 apiece, or 10 percent higher than the stock’s last closing price.
- Mario Draghi said central banks must be open-minded on policy innovations as they prepare for future economic developments — even if that concept is not clear to everyone. In a speech that avoided any specific signals on the European Central Bank’s current deliberations, the institution’s president said officials must be “unencumbered by the defense of previously held paradigms that have lost any explanatory power.”
- As India’s foreign-exchange reserves march toward the unprecedented $400 billion mark, its central bank faces a costly conundrum. To keep the rupee stable and exports competitive, it is having to mop up inflows that’s adding cash to the local banking system. Problem is, banks are flush with money following Prime Minister Narendra Modi’s demonetization program last year, leaving them already struggling to pay interest on the deposits in an environment where loans aren’t picking up.
- President Donald Trump threatened Tuesday to bring the U.S. government to the brink of a shutdown if needed to pressure Congress into funding the border wall that was a centerpiece of his 2016 campaign. Delivering a warning to Democratic lawmakers who have objected to his plans to construct a wall along the U.S.-Mexico frontier, Trump called them “obstructionists” and said that it was time for the U.S. to crack down on illegal immigration.
- Wall Street has been urging Washington for months to blunt the fallout from new European rules that banks say will upend their research businesses. The industry’s top U.S. regulator now appears poised to help. In recent weeks, the Securities and Exchange Commission has privately signaled to financial firms that it wants to disarm a tripwire that would make it difficult for U.S. brokerages to sell their market analysis to European money managers, according to industry representatives.
- Vodafone Group Plc is having preliminary discussions with BT Group Plc over a potential U.K. partnership to develop full-fiber broadband, according to a person familiar with the matter, as it considers options to expand its fixed network at home outside of a long-mooted tie-up with Liberty Global Plc.
- Steinhoff International Holdings NV gave more details about the planned listing of its sub-Saharan African retail assets in Johannesburg, showing that profit has been growing at the low-cost clothing and furniture specialist with more than 51 billion rand ($3.9 billion) of annual sales.
- ComfortDelgro Corp. rose the most in almost nine years after Singapore’s largest taxi operator said it was in talks with Uber Technologies Inc. to form a partnership. The potential pact may include collaboration in fleet management and booking-software solutions, including ComfortDelgro’s taxis being made available on Uber’s app, the Singapore-based operator said in a filing after the market’s close Tuesday.
- Paratek Pharmaceuticals Inc. is exploring strategic options including a sale amid takeover interest from larger drugmakers, according to people familiar with the matter. Paratek, which develops antibiotics to fight drug-resistant infections, is working with advisers to review its options, the people said, asking not to be identified because the deliberations are private. No final decision has been made, and the Boston-based company may decide against a sale, the people said.
- VIPKid, an online education company that matches Chinese students with North American teachers, was valued at more than $1.5 billion in a round of funding from investors including Sequoia Capital China and Tencent Holdings Ltd., according to people familiar with the matter.
*All sources from Bloomberg unless otherwise specified