August 26th, 2019
Daily Market Commentary
- President Donald Trump’s twitter tirade upended markets globally Friday with the S&P/TSX Composite Index down 1.3%, for a second weekly decline. The slide in Canadian stocks wasn’t as painful as the plunge in their U.S. counterparts — the Nasdaq was down 3% — thanks to the heavy weighting of gold miners in Canada. The S&P/TSX Materials Index — which has an 11.9% weighting on the TSX — was the only winner with an 1.8% climb.
- Ontario will triple its pot-store count beginning in October, just two months before the introduction of new product formats that are expected to significantly boost sales in Canada’s most-populous province. While chatter about the next wave of legalization in Canada tends to focus on products like edibles and beverages, many of the biggest players entering the space say consumers will opt for the more conventional format of vapes. The Canadian market for vapes could be as big as C$600 million ($451 million) by 2021, according to Tim Pellerin, Pax Labs Inc.’s general manager of Canada.
- Europe’s stocks benchmark index reversed its losses in volatile trade as investors sought to interpret the latest comments from the U.S. and China on their trade dispute. The Stoxx Europe 600 Index gained less than 0.1% as of 1:15 p.m. CET, after earlier dropping as much as 0.6%, while S&P 500 futures vacillated. President Donald Trump said on Monday that China has asked to re-start trade talks during phone calls to U.S. officials. Global Times’s editor-in-chief Hu Xijin said the contact doesn’t have the significance Trump suggested.
- U.S. equity-index futures turned higher along with shares in Europe after a down session in Asia on Monday as investors assessed the latest developments in the Sino-American trade war. The dollar strengthened. Contracts on all three main U.S. equity indexes rose after President Donald Trump said that prospects for a deal with China were better now than at any time since talks began last year, even as a top state-media editor in Beijing questioned his version of events.
- Asia trading mostly closed before Trump’s latest comments, and stocks fell broadly, led by Hong Kong. The onshore yuan weakened for an eighth straight session. The trade war’s latest twsts and turns punctuated an already tumultuous August, with markets buffeted by signs of slowing global economic growth and violent protests in Hong Kong. Regardless of Monday’s developments, the risk of recession may have crept higher when protectionism moves escalated on Friday, when Trump announced fresh levies on Chinese imports and called for American companies to pull out of Asia’s largest economy after China said it would impose retaliatory tariffs on U.S. goods.
- Oil jumped after U.S. President Donald Trump said that China wanted to restart trade talks, potentially easing escalating tensions between the two countries. Futures in New York rose as much as 0.8%, snapping the longest run of declines in more than five weeks. Trump’s comments reversed a drop of as much as 2.2% that had looked set to continue the streak of losses for a fifth day. Trump’s words cooled concern that China’s plan to halt purchases of American crude and threats of tougher U.S. levies would worsen an already shaky global demand outlook.
- Gold pared gains after U.S. President Donald Trump said China was willing to resume trade talks, easing demand for the traditional haven metal. Bullion futures traded down 0.1% at $1,536.40 an ounce after earlier surging as much as 1.8% on the Comex in New York, to the highest since 2013. The metal jumped Friday as the world’s two biggest economies traded blows.
- Amgen Inc. will pay $13.4 billion for a blockbuster psoriasis drug from Celgene Corp., which is shedding the asset in order to win antitrust regulators’ sign-off for its $74 billion merger with Bristol-Myers Squibb Co. For Amgen, the all-cash deal will give it a growing product at a time when its biggest blockbusters — the complex biotechnology drugs it made its name on — are beginning to fade. For Celgene and Bristol-Myers, the divestiture will pave the way to one of the pharmacuetical industry’s largest mergers of the past decade. The price is $11.2 billion once future cash tax benefits are taken into account, Thousand Oak, California-based Amgen said in a statement Monday. Bristol-Myers also expanded a share buyback plan to $7 billion, from $5 billion.
- Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week. This was the seventh straight week of outflows. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $972.3 million in the week ended Aug. 23, compared with losses of $3.01 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $109.9 million.
- Naspers Ltd. said a newly created entity containing assets including a stake in Chinese internet giant Tencent Holdings Ltd. will be valued at about $100 billion. Africa’s largest company by market value received shareholder backing last week to proceed with the listing of Prosus NV in Amsterdam next month. Alongside the Tencent stake, the new company will hold businesses from Brazil to Germany in industries such as online food delivery and classified advertising. A value of $100 billion would make only Royal Dutch Shell Plc and consumer-goods giant Unilever bigger in Amsterdam by market capitalization. The company would overtake ASML Holding NV, a semiconductor gear-maker priced at about 80 billion euros ($89 billion).
- EssilorLuxottica SA shares rose to a record on prospects for a strategy shakeup at the maker of RayBan sunglasses after a report that activist shareholder Dan Loeb’s firm Third Point is building up a stake. Third Point is still buying shares in the French-Italian company and has met with EssilorLuxottica Chairman Leonardo Del Vecchio, Reuters said Sunday, citing unidentified people close to the situation. The shares rose as much as 1.9% Monday morning in Paris. A leadership dispute between the French and Italian sides of the 57 billion-euro ($64 billion) company has weighed on progress following last year’s merger. Investors and analysts have expressed concern about delays to the promised savings of as much as 600 million euros.
- Apple Inc.’s reliance on China is looking increasingly like its biggest handicap. The world’s most influential consumer electronics company shed $44 billion of market value Friday after a pair of pronouncements from Beijing and Washington cast a spotlight on its massive Chinese production base, from which almost all of the world’s iPhones are made. U.S. President Donald Trump this weekend “ordered” American companies to immediately start looking for alternatives to manufacturing in China, which is something Apple is thoroughly unprepared for, according to analyst Daniel Ives of Wedbush Securities Inc.
- U.S. President Donald Trump said the prospects for a deal with China are better now than at any time since negotiations began last year, even as a top state-media editor in Beijing questioned his version of events. Speaking at the Group of 7 meetings in Biarritz, France, Trump said last night China called “our trade people and said let’s get back to the table.” He also lauded President Xi Jinping as a “great leader” and said “anything’s possible” when asked if he would delay tariff increases on China. Still, a spokesman for China’s foreign ministry wasn’t able to immediately confirm the details of the phone calls on Monday. Later, Hu Xijin, editor-in-chief of China’s Global Times newspaper, said in a tweet that top trade negotiators hadn’t spoken by phone in recent days and that Trump was exaggerating the significance of the trade contacts.
- PDC Energy Inc. agreed to buy rival Colorado crude producer SRC Energy Inc. for about $971 million in stock, the latest merger among small or mid-sized U.S. oil producers amid pressure from investors to cut costs and improve returns.
- India is considering relaxing local sourcing norms for foreign companies that sell only their own brand, a move that is likely to encourage Apple Inc. to set up stores, people with knowledge of matter said. According to the proposal, export of goods from a foreign company’s factory in India will be accounted as local sourcing, the people said, asking not to be identified as as the matter is not public. The time needed to meet the sourcing norms will be raised to eight years from five years. The change, piloted by the commerce and industry ministry, will be approved by the cabinet soon.
- The U.S. and Japan agreed in principle on a trade deal that would slash Tokyo’s tariffs on American beef, pork and other agricultural products, while delaying for now the threat of additional levies on Japanese auto exports to the U.S. U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe announced the agreement Sunday on the sidelines of the Group of Seven summit in Biarritz, France, following a bilateral meeting earlier in the day. In announcing the deal, Trump also said Japan would purchase large quantities of U.S. wheat and corn.
- Demand for steel in India could grow at the slowest pace in three years as an economic slowdown in the global industry’s bright spot deepens. Steel consumption in India is likely to increase by less than 6% this fiscal year, according to ICRA Ltd., the local arm of Moody’s Investors Service. That would make it the slowest pace since a 3.1% increase in the year ended March 2017.
- Global banks will this week start making their case on why they should be hired for what’s set to be the world’s biggest initial public offering, according to people with knowledge of the matter. Dealmakers representing advisory firms from around the world will from Tuesday travel to Saudi Aramco’s headquarters in Dhahran in the kingdom’s Eastern Province to compete for a role on the offering that’s planned for as early as 2020, the people said, asking not to be identified as the information is private.
- Haci Omer Sabanci Holding AS plans to sell its 58% stake in textile unit Yunsa Yunlu Sanayi ve Ticaret AS, adding to a series of asset disposals by the Turkish conglomerate. Yunsa shares jumped the most in more than a year. Sabanci Holding decided to sell all of its 16.9 million Yunsa shares, according to a statement. The holding was valued at 68.2 million lira ($11.8 million) based on the closing price Friday, when Sabanci Holding’s board decided to sell the stake. The company didn’t say how it will carry out the sale or when it expects to complete the divestiture.
- Tesla Inc. will raise vehicle prices in China this week, two people familiar with the matter said, a reaction to the trade war that weighs on the country’s currency and threatens to once again lead to higher import tariffs. Price hikes that were originally planned for September will now take place this Friday, a sales representative and another Tesla employee said, asking not to be named as the increase hasn’t been announced. A spokesperson for the U.S.-based electric-car maker declined to comment.
*All sources from Bloomberg unless otherwise specified