August 27th, 2018
Daily Market Commentary
- The U.S. and Mexico are poised to resolve their bilateral Nafta differences as soon as Monday, creating an opening for Canada to rejoin talks covering $1.2 trillion in annual trade. Significant breakthroughs between Mexico and the U.S. came during the past several days on the contentious issues of automobiles and energy, according to three people familiar with the process who asked not to be named discussing private talks.
- Canada’s Federal Court of Appeal will issue a judgement in legal challenge by First Nations, the City of Vancouver and others to Kinder Morgan Inc.’s Trans Mountain Expansion project on August 30. Judgement set for 10:30 a.m. in Ottawa, according to Twitter notification.
- Bank of Canada Governor Stephen Poloz spent this year’s Jackson Hole gathering of central bankers playing down inflation worries and the prospect of aggressive interest rate increases. Late afternoon Friday in an interview with CNBC, Poloz argued that a recent spike in inflation was due to transitory factors that would eventually be reversed. A day later, speaking on a panel at the symposium in Wyoming, Poloz made the case for caution in hiking interest rates, in case the digital revolution is curbing inflationary pressures.
- Stock markets across the world started the week on the front foot, with U.S. futures rising alongside European equities after big gains for most Asian gauges. A British holiday overshadowed the European session, and trading activity was depressed.
- Oil held gains above $68 a barrel on slowing American drilling and investor optimism after a breakthrough in a trade standoff between the U.S. and Mexico.
- Gold holds advance after Federal Reserve Chair Jerome Powell signaled policy makers are sticking to gradual pace of interest rate increases.
- Copper treads water in New York, with the London Metal Exchange closed for a holiday, as markets weigh ongoing trade-war concerns and signals from China’s central bank that it’s taking action to support the yuan.
- Donald Trump’s surprise about-face on his top diplomat’s trip to North Korea — just a day after it was announced — reinforced a sense of drift in the administration’s strategy since the president proclaimed a June summit with Kim Jong Un an historic success. The tweets canceling a visit to Pyongyang by Secretary of State Michael Pompeo cited a lack of “sufficient progress” in denuclearization talks, two months after he proclaimed on Twitter that “there is no longer a Nuclear Threat from North Korea.”
- Remarks by Fed officials late last week at the symposium in Jackson Hole, Wyoming, confirmed the consensus market expectation that the U.S. central bank will hike interest rates two more times this year, delivering the biggest annual tightening in more than a decade. The increases would be carried out even as the Fed is reducing the size of its $4 trillion balance sheets. Yet, judging from the most important signal, the headline speech by Chairman Jerome Powell, this path may be far from set in stone.
- Tech megacaps may have jumped the shark and drugmakers are the new big fish. Health-care shares surpassed consumer discretionary as the most-loved sector for hedge funds while getting the biggest boost among mutual funds in the second quarter, regulatory filings compiled by Goldman Sachs showed. Meanwhile, tech’s ownership slipped, led by the FANG complex of Facebook, Amazon, Netflix and Google parent Alphabet.
- The selection of John McCain’s replacement in the Senate sets up a potentially defining struggle between competing factions within the Republican party — the old guard represented by the late Arizona senator, and the iconoclastic wing led by President Donald Trump. The state’s Republican governor, Doug Ducey, won’t make an announcement about the seat until McCain is laid to rest next Sunday at the U.S. Naval Academy in Annapolis, Maryland. Under Arizona law, McCain’s successor must be a member of his party.
- Apple Inc. is not only doubling down on the iPhone X, it’s tripling down. The world’s most valuable company plans to launch three new phones soon that keep the edge-to-edge screen design of last year’s flagship, according to people familiar with the matter. The devices will boast a wider range of prices, features and sizes to increase their appeal, said the people, who asked not to be identified discussing unannounced products.
- Pfizer Inc.’s pipeline may finally be delivering. A new study shows that patients with a rare condition that can lead to heart failure lowered their risk of dying by 30 percent after being treated with Pfizer’s tafamidis. The finding could give the biggest U.S. drugmaker another potential blockbuster medicine and challenge a biotech startup marketing its own groundbreaking treatment for the same disease.
- Shares of Tesla drop as much as 3.4% on Germany’s Tradegate exchange compared with Friday’s News York closing price. Elon Musk said in a posting on Tesla’s website Friday night, that he believes the “better path is for Tesla to remain public.
- Total to sell its 26% stake in Indian LNG terminal to Shell. The sale of the stake in the Hazira LNG terminal remains subject to the approval of regulatory authorities, Total says in a statement Monday.
- China’s ride-hailing giant Didi Chuxing is drawing criticism from state media for its safety practices after a second female customer of its carpooling service was allegedly killed by a driver.
- Angela Merkel marked her return to the political front line with a call for Europe to assert its interests more forcefully as President Donald Trump punches holes in the world order. In her first television interview after the summer break, the German chancellor said Europe needs to take on more global responsibility, including on defense. As Trump attacks Germany’s economic prowess and pursues a global trade war while Italy clashes with its European Union partners over migration, Merkel is being thrust into Europe’s pivotal role yet again.
- The U.S.’s trade war with China is about to get uglier. After a long, hot summer spent weighing risks and firing warning shots, the hawks in President Donald Trump’s administration have gained the upper hand — and they’re set to unleash a fall offensive. Talks in Washington between the world’s two largest economies yielded little visible progress last week toward a cease-fire. Looming instead are new tariffs that Trump has threatened to impose on some $200 billion in annual imports from China, and Beijing’s already-promised retaliation.
*All sources from Bloomberg unless otherwise specified