August 28th, 2018

Daily Market Commentary

Canadian Headlines

• Investors are betting President Donald Trump’s trade threats against Canada will fizzle out. There are a few reasons why they might. Canadian stocks and the dollar, known as the loonie, extended gains Monday on news of the U.S.-Mexican agreement, shrugging off Trump’s threats that Canada might be frozen out and instead face auto tariffs. Shares of Canadian auto parts makers like Magna International Inc. and Linamar Corp. were among those to surge.
• Bank of Nova Scotia’s purchase of Jarislowsky Fraser is already paying off. The acquisition of the Montreal-based money manager, along with improved margins and lower provisions, contributed to record Canadian banking profit in the fiscal third quarter, Scotiabank said Tuesday. Earnings from domestic banking rose 8 percent to C$1.13 billion ($880 million) from a year earlier. The C$950 million purchase of Jarislowsky Fraser in May is one of six deals announced by Scotiabank in the past nine months, as the Toronto-based lender has committed about C$7 billion of capital to acquisitions at home and abroad.
• BMO Financial Group topped expectations for its third-quarter results, boosted by strength in its U.S. operations. The bank says it earned $1.54 billion for the quarter ended July 31, up from $1.39 billion in the same quarter a year ago. The profit amounted to $2.31 per share for the quarter, up from $2.05 per share in the same quarter last year.
• Brookfield Asset Management Inc. is betting against the retail apocalypse with its takeover of GGP Inc., slated to close Tuesday. The Toronto-based firm is paying about $15 billion for the second-largest mall owner in the U.S. as investors — and shoppers — shun brick-and-mortar retail. Brookfield, which already owned a third of GGP, was the only bidder that showed up when the company put itself on the block last year.

 

 

World Headlines

• European shares advanced, though a British holiday depressed volume. The strongest moves were in Asia after recent efforts by the Chinese central bank to shore up the yuan. That currency was largely stable in the offshore market as the dollar turned lower. The euro reversed a drop after a jump in German business confidence.
• U.S. stocks rose to fresh all-time highs and Mexico’s peso rallied versus the dollar as the Trump administration closed a bilateral trade deal with America’s southern neighbor. Treasuries fell. The S&P 500 Index closed just short of 2,900 and the Nasdaq Composite Index topped 8,000 for the first time as President Donald Trump unveiled details of the agreement that he says will replace Nafta.
• Asian stocks rose after U.S. President Donald Trump said he’s pursuing a new trade accord with Mexico to replace the North American Free Trade Agreement. The MSCI Asia Pacific Index rose 0.4 percent to 166.46 as of 4:26 p.m. in Hong Kong, set for its third consecutive session of gains. Seven out of 10 industry sub-groups on the benchmark advanced, led by materials stocks.
• Oil traded near the highest closing level in more than two weeks on estimates that U.S. crude inventories fell and as the prospect of a new U.S.-Mexico trade pact spurred wider financial-market optimism. Futures held near $69 a barrel in New York as President Donald Trump said the U.S. is pursuing a new trade accord with Mexico to replace the North American Free Trade Agreement. Meanwhile, American crude inventories are forecast to have fallen further last week after slumping more than expected in the seven days to Aug. 17.
• Gold touches a two-week high as investors weigh Trump’s comments on trade negotiations with China, and an agreement between the U.S. and Mexico to replace the North American Free Trade Agreement.
• The earliest indicators for China’s economy show that the pace of expansion slowed for a fourth month in August, highlighting the pressure for the government to push through pro-growth policies. The data suggest the economy weakened further as demand from trading partners lost steam, with the decline in stock prices reflecting worsening sentiment. That’s according to a Bloomberg Economics gauge aggregating the earliest available indicators on business conditions and market sentiment.
• Meituan Dianping, the Chinese restaurant review and delivery giant, has started gauging investor demand for a planned Hong Kong initial public offering, people with knowledge of the matter said. A stock offering from the company could raise more than $4 billion, said one of the people, who asked not to be identified because the details are private. Chinese social media giant Tencent Holdings Ltd., which already owns about a fifth of Meituan, plans to buy about $400 million of stock in the IPO as a cornerstone investor, according to different people familiar with the matter.
• Toyota Motor Corp. is investing $500 million more in Uber Technologies Inc., underscoring the Japanese automaker’s efforts to catch up on self-driving technology as General Motors Co. and Alphabet Inc.’s Waymo lead the race to upend the industry. As part of the accord announced late Monday, Toyota plans to manufacture Sienna minivans loaded with Uber’s software, with testing slated to begin on Uber’s ride-sharing network in 2021. Toyota’s stake is set to value the ride-hailing company at $72 billion, according to a person familiar with the matter, who asked not to be identified because the details are private.
• One longstanding U.S. ally still thinks North Korea poses an urgent nuclear threat. Another is steadily increasing economic ties with the regime. And Kim Jong Un is doing his best to exploit the divide. Less than three months after shaking Kim’s hand in Singapore, U.S. President Donald Trump is confronting an increasingly fractured diplomatic landscape as his two key allies — Japan and South Korea — pursue differing ends of his two-pronged North Korea strategy. In Tokyo, Prime Minister Shinzo Abe’s government reaffirmed Tuesday that North Korea posed a “grave and imminent” threat to Japan, despite Kim’s pledge on “denuclearization.”
• Alphabet Inc’s Google is partnering with four Indian banks to grant consumer loans online, as the fight for a $1 trillion digital finance market intensifies. The U.S. search giant is teaming with HDFC Bank Ltd., ICICI Bank Ltd., Kotak Mahindra Bank Ltd. and Federal Bank Ltd. to offer instant, pre-approved loans to customers “right within Google Pay in a matter of seconds,” it said in a statement.
• In the shadow of an escalating trade war, momentum is picking up to protect the World Trade Organization from turning irrelevant. The European Union will host trade ministers from the U.S. and Japan next month in Brussels, according to two officials with knowledge of the meeting. The gathering will be part of an effort to address China’s trade practices in a way that doesn’t marginalize the WTO, said the officials, who asked not to be identified because preparations are private. The meeting will precede about 10 high-level confabs around the globe over the next year aimed at calming trade tensions.
• GAM Holding AG said it will start paying back investors in its frozen bond funds in early September after winning approvals to start liquidating the strategies that were run by suspended bond manager Tim Haywood. The Swiss firm will initially return 74 percent to 87 percent of the assets in Luxembourg and Irish-domiciled funds, and 60 percent to 66 percent of the holdings in the Cayman master fund and the associated Cayman and Australian feeder funds, GAM said in a statement on Tuesday. The company expects to make a further distribution for each fund before the end of September and continue payments in coming months, depending on market conditions.
• The U.K. can still make a success of Brexit if it tumbles out of the European Union without a deal, Prime Minister Theresa May said, striking an upbeat tone as the clock ticks down on Britain’s departure from the bloc. Speaking to reporters on the plane as she headed to South Africa on a five-day visit to three African nations, May twice cited World Trade Organization Chief Roberto Azevedo, who told BBC radio last week that trade wasn’t going to stop if Britain and the EU failed to strike a deal. The U.K. last week published 24 documents outlining preparations for such a scenario.
• Tiffany & Co. is still shining bright on Wall Street. Tiffany is experiencing a renaissance after a lengthy period of same-store sales contraction that ended last holiday season. Chief Executive Officer Alessandro Bogliolo has been revamping the 181-year-old New York-based company to attract younger shoppers and spark new interest in the brand. More youthful advertisements and flashy products from design chief Reed Krakoff have succeeded in creating buzz that had been lacking in past years.
• U.S. farmers will get $4.7 billion in a first round of direct government aid to compensate for market losses caused by retaliatory tariffs from China and other trading partners. The move was largely bemoaned by agriculture groups even as they welcomed the assistance. Soybean growers, the hardest hit, will get $3.6 billion, according to the plan the government released Monday. Pork producers will receive the second-highest payments, totaling $290 million, and dairy farmers are also eligible for assistance, the U.S. Department of Agriculture said. The sorghum, corn, wheat and cotton industries will receive aid as well. Farm groups said the plan would aid producers even as they called for an end to the trade war.
• Apollo Global Management LLC agreed to acquire Aspen Insurance Holdings Ltd. as private equity firms seek to grow the assets they oversee. Apollo will pay $42.75 a share for the Hamilton, Bermuda-based insurer, a premium of 6.6 percent to Monday’s closing share price, in an all-cash deal. The acquisition is expected to close in the first half of next year.
• President Donald Trump said it’s not the right time for trade negotiations with China, denting expectations for a near term deal after a breakthrough agreement between the U.S. and Mexico. Speaking to reporters during his announcement Monday of the new Mexico accord, Trump said he is rejecting overtures from China to negotiate as he tries to achieve a less “one-sided” trade policy. “They want to talk,” Trump said. But “it’s just not the right time to talk right now, to be honest.”
• Atlas Copco AB has agreed to buy Brooks Automation Inc.’s cryogenic business to accelerate the Swedish industrial giant’s push into chip-making equipment. The $675 million acquisition, the biggest for Chief Executive Officer Mats Rahmstrom since he took over as CEO last year, includes cryo-pump operations in Chelmsford in the U.S. and Monterrey in Mexico, the Stockholm-based company said in a statement late on Monday. It also includes a global network of sales and service centers as well as Brooks Automation’s 50 percent share of Ulvac Cryogenics, Inc., or UCI.

*All sources from Bloomberg unless otherwise specified