August 24th, 2017
Daily Market Commentary
- Canadian stocks rose as U.S. stocks fell, a divergence that hasn’t happened since July, as strong earnings from Royal Bank of Canada boosted financials. The S&P/TSX Composite Index rose 78 points or 0.5 percent to 15,063.16. By contrast, the S&P 500 Index fell 0.4 percent, the first time Canadian stocks have gained in the face of U.S. losses since July 31.
- Canadian Imperial Bank of Commerce’s pace of mortgage growth shows no signs of slowing. Average mortgage balances at the country’s fifth-largest lender by assets soared 13 percent in fiscal third quarter, the biggest year-over-year increase since 2007. CIBC has been an outlier among Canada’s largest lenders recently for its rate of mortgage growth. The Toronto-based bank has pointed to its decision to beef up its mobile sales force to about 1,200 advisers after exiting its FirstLine mortgage broker business in 2012 as a reason for the jump.
- Mitsui Sumitomo Insurance Co. agreed to buy Singapore’s largest commercial property and casualty insurer for $1.6 billion from Fairfax Financial Holdings Ltd. The two companies will also develop “a broad global partnership” including reinsurance relationships, they said in a statement in Toronto on Wednesday. Fairfax will retain a “meaningful” exposure to First Capital’s insurance portfolio, the statement said.
- Canadian real estate lender Firm Capital Corp. is helping to finance the country’s tallest condominium building. Firm Capital is lending C$135 million ($108 million) toward a first mortgage on The One, an 82-story tower under development in downtown Toronto, according to Chief Executive Officer Eli Dadouch. The company is the mortgage banker for the publicly traded Firm Capital Mortgage Investment Corp.
- European stocks climb ahead of a gathering of central bankers in Jackson Hole, Wyoming, that investors will watch for monetary-policy clues. The Stoxx Europe 600 Index adds 0.3%. The benchmark has fallen in four of the past five sessions, and is hovering near its 200-DMA. The Jackson Hole symposium kicks off today, with Fed Chair Janet Yellen and ECB President Mario Draghi scheduled to speak on Friday.
- Asian markets were mixed ahead of the Jackson Hole central-bank summit as Japan steelmakers retreated on reports of a Toyota Motor Corp. price cut while Hong Kong stocks continued to climb after trading resumed in the financial center.
- Oil steadied near $48 a barrel in New York after a further reduction in U.S. crude inventories was tempered by gains in the nation’s production. Futures were little changed after advancing for a second session on Wednesday. Crude stockpiles slid by 3.33 million barrels to the lowest level since January 2016, while gasoline supplies fell for the first time in three weeks
- Gold falls as investors await comments from leading central bankers at annual Jackson Hole gathering, which starts later Thursday in the U.S., on outlook for monetary policy, economic recovery, inflation.
- Brexit watchers doubt whether the U.K. has done enough to convince the European Union to allow trade talks to start as soon as October. Despite a swathe of policy documents, with a new one on data protection scheduled for release on Thursday, analysts say Prime Minister Theresa May’s government is still hazy on where it matters most to the bloc.
- China said it will encourage more consumption of information technology-related products and services to help promote innovation and support economic growth. The government plans to expand the scale of IT consumption by 11 percent a year to 6 trillion yuan ($900 billion) by 2020, the State Council said in a statement Thursday.
- PetroChina Co. plans to pay out its entire half-year net income to shareholders as the country’s biggest oil and gas producer benefited from higher global crude prices. The Beijing-based company is rewarding shareholders profits of almost 12.7 billion yuan ($1.9 billion), up from 531 million yuan a year ago, it said in a filing to the Hong Kong stock exchange Thursday.
- Rosneft PJSC won most of the damages it sought from billionaire Vladimir Evtushenkov’s investment company less than a year after the Russian state-run energy producer took over his former oil unit. The Bashkortostan Arbitration Court in Ufa awarded Rosneft 136 billion rubles ($2.3 billion) on Wednesday, according to Sistema PJSC. That’s less than Rosneft’s final claim of 170.6 billion rubles, though higher than the 106 billion rubles it initially sought. Sistema plans to appeal the ruling.
- Asia Pacific Exchange Pte, has received in-principle approval from the Monetary Authority of Singapore to start a third derivatives exchange in the city, according to people with knowledge of the matter. Apex is now working on getting final approval from the city’s regulator.
- Harvey, which is set to strengthen into the first hurricane to strike Texas since 2008, forced workers off Gulf of Mexico platforms, sent cotton rallying and has airlines preparing for flight disruptions. Now a tropical storm, Harvey “is expected to become a hurricane by Friday,” the National Hurricane Center said in an advisory issued at 4 a.m. Central Daylight Time.
- California utilities are now rushing to cut off a wave of revenue losses, potentially topping $1 billion annually, likely to come from community choice aggregation. CCA programs allowed Marin County and others to replace PG&E as the energy provider, though the utility still charges for wire delivery service. Assuming Edison’s CCA exposure is similar to that of PG&E, which estimates an annual revenue shortfall of $500 million by 2020, utilities’ total revenue losses in California could surpass $1 billion a year.
- Tepco says 157 people filed lawsuit with U.S. District Court of the Southern District of California on Aug. 18 local time, seeking a foundation worth at least $5b and payment of damages to each individual.
- Chancellor Angela Merkel may struggle to convince Germany’s tax-cutting Free Democratic Party to join her government a second time even if the math works out on election night. Polls suggest that Merkel, the front-runner since the spring, will have a choice of coalition partners after the election on Sept. 24. If Merkel wins a mandate for a fourth term, whichever party joins her government will have an impact on the euro area’s future, according to Carsten Brzeski, an economist at ING-Diba in Frankfurt.
- Deutsche Bank AG has halved the price of its fixed-income and macro research as competition mounts in the run-up to Europe’s MiFID II regulations, three people with knowledge of its plans said. The German lender proposes to charge asset managers 30,000 euros ($35,000) a year for up to 10 users, said the people, who asked not to be identified because the information is private. This was cut from the 60,000 euros it had initially planned after other banks revised their prices lower.
- Seadrill Ltd., the offshore driller controlled by billionaire John Fredriksen, warned investors for the first time that they could be left with nothing after a restructuring of the industry’s biggest debt load. The company said shareholders are “likely to receive minimal or no recovery for their existing shares” as it reported a second-quarter net loss on Thursday. Seadrill had previously only used the term “minimal recovery.”
- Toshiba Corp. bond prices surged after Japanese media reports that the firm may be nearing a resolution of its conflict with Western Digital Corp. over a sale of its memory business in which the two companies are partners. Yield premiums on the Tokyo-based electronics manufacturer’s notes due next year and in 2020 have dropped to the lowest in six months. Toshiba shares also rallied, reaching a two-month intraday high.
- China Life Insurance Co. said its new business value jumped 32 percent in the first half after doubling in the past two years, as the nation’s largest insurer expanded its sales force further and sold more profitable policies. New business value, which gauges the future profitability of new policies, rose to 36.9 billion yuan ($5.5 billion) in the six months ended June 30 from a year earlier, the Beijing-based company said in a statement to the Shanghai stock exchange Thursday.
- Cromwell European REIT is preparing to test demand for Singapore’s first euro-denominated initial public offering as it seeks to tap interest in overseas real estate exposure, people with knowledge of the matter said.
- Australia’s third-largest oil and gas producer is aiming to cut debt further, raising questions about future payouts to shareholders after saying it won’t pay a dividend for the first half of this year. Adelaide-based Santos Ltd. cut its net debt to $2.9 billion at June 30 from $3.5 billion at the start of the year, it said in a statement Thursday. That compares with $6.6 billion two years ago that was mostly tied to its Gladstone liquefied natural gas facility in Queensland.
- While automakers around the world covet Jeep for its strong growth and fat profits, Fiat Chrysler Automobiles NV sees potential for much more, banking on the rugged brand to vie with global giants like Toyota, Volkswagen and Ford. The Italian-American automaker is forecasting Jeep’s annual sales to jump about 30 percent next year to 2 million vehicles and predicts the brand could eventually deliver 7 million units a year as appetite for SUVs surges worldwide.
- Beacon Roofing Supply Inc. agreed to buy an interior building-products division from CRH Plc of Ireland for $2.63 billion to expand its footprint in New York and cement its position as one of the U.S.’s largest distributors of construction materials.
- Abu Dhabi National Energy Co., the state-controlled oil and gas investor, approached local and international banks to explore options on raising about $1.5 billion, part of which will help refinance bonds coming due in October, according to two people familiar with the matter.
- Yield premiums on Toshiba debt have plummeted to multi-month lows following Japanese media reports that the co. has entered talks to sell its memory business to Western Digital.
- State Street Corp., with $2.6 trillion of assets under management, is strengthening the hand of investors that want companies to explain the risks posed by climate change. As shareholders pass climate proposals at companies including Exxon Mobil Corp. and Occidental Petroleum Corp. for the first time, State Street Global Advisors is urging boards to provide clear climate goals and carbon price assumptions.
*All sources from Bloomberg unless otherwise specified