August 30th, 2018
Daily Market Commentary
- Toronto-Dominion Bank posted a record quarter in the U.S., thanks to Americans who took out more loans and turned to the discount broker services of a bulked-up TD Ameritrade. The Canadian lender reaped C$225 million ($174 million) from its investment in the U.S. brokerage, helping drive record profit of C$1.14 billion at its U.S. retail division, the Toronto-based bank said Thursday as it posted earnings that topped analysts’ estimates.
- Talks to update Nafta are edging toward their next deadline with signs of optimism from President Donald Trump and other key figures, as the U.S. and Canada push to resolve enough differences to trigger a countdown to sign a new deal. Key U.S. and Canadian government figures met again Wednesday, book-ended by meetings of lower-level trade officials set to work through the night. Trump and Canadian Prime Minister Justin Trudeau signaled Wednesday an accord could be reached.
- As Canada’s yield curve sits on the cusp inverting for the first time in more than a decade, the nation’s central bank believes there’s little cause for alarm. The world’s largest money manager isn’t so sure. Bank of Canada Governor Stephen Poloz says overwhelming demand for long-dated bonds is distorting the curve’s recession signaling mechanism. Yet BlackRock Inc. says banks will become increasingly reluctant to lend as Canada’s term structure turns negative. Even with data Thursday expected to show growth topping 3 percent in the second quarter, slowing credit creation will ultimately feed into the broader economy, potentially cutting short the country’s policy-tightening cycle.
- The Trans Mountain pipeline, which Justin Trudeau’s government is purchasing from Kinder Morgan Inc., faces a major test on Thursday as a court decides if the conduit’s long-awaited expansion can advance or gets delayed for years. Canada’s Federal Court of Appeal is scheduled to decide on a legal challenge brought by First Nations, the City of Vancouver and others, who say they weren’t adequately consulted on the National Energy Board’s approval of the project. The judgment is scheduled for 10:30 a.m. in Ottawa.
- Telecom companies led the retreat as almost every sector fell on the Stoxx Europe 600 Index. Treasuries edged higher as most European bonds drifted. Sterling and the euro slipped after the European Union’s chief negotiator warned the bloc must be prepared for a disorderly Brexit.
- U.S. equity futures and European stocks followed Asian shares lower on Thursday, as simmering trade and geopolitical issues weighed on sentiment. Contracts for the S&P 500, Dow and Nasdaq all pointed to a drop at the open, after America’s benchmark gauge on Wednesday closed above 2,900 for the first time in the wake of a better-than-expected reading on the economy and a rally in tech shares.
- Asian stocks fell after four consecutive sessions of gains as investors assessed news on global political tensions. The MSCI Asia Pacific Index lost 0.3 percent to 166.04 as of 4:30 p.m. in Hong Kong after U.S. President Donald Trump accused China of undermining U.S. efforts to pressure North Korea into giving up its nuclear weapons.
- Oil in New York traded near the highest closing price in a month after U.S. crude inventories declined by more than analysts forecast and as political tensions in the Middle East persisted. West Texas Intermediate futures added 0.1 percent, having climbed 1.4 percent on Wednesday after the Energy Information Administration reported U.S. crude stockpiles fell for a second week. With U.S. sanctions on Iran set to kick in in just over two months, the chief of staff of the Middle East nation’s armed forces warned that any attempt to block Iranian oil exports would have grave security repercussions.
- Gold heads for fifth monthly drop, longest stretch of losses since 2013, after U.S. equities rise to fresh record and the Federal Reserve sticks to rate-rise game plan.
- Brussels is willing to scrap tariffs on all industrial products, including cars, in its trade talks with the United States, Politico reports, citing comments made by EU trade chief Cecilia Malmstrom to the European parliament committee.
- Almost a year after MTN Group Ltd. thought it had been cleared over accusations of illegally taking money out of Nigeria, the issue has resurfaced with a vengeance. Late Wednesday, the country’s central bank ordered Africa’s largest wireless carrier to return $8.1 billion it says was repatriated improperly over eight years through 2015. The decision caught the company and its shareholders off guard and the shares plunged the most in 20 years to their lowest level since 2009.
- A massive dike to hold back storm-driven floods surging in from the Gulf of Mexico was first proposed after Hurricane Ike devastated the Houston-area coast a decade ago. Last year’s Hurricane Harvey disaster brought fresh enthusiasm for the languishing project – along with a wave of investor interest. Now city and state officials in Texas are studying a possible partnership with private industry to create a new kind of bond to help pay for a $15 billion system of seawalls and floodgates, as a warming climate piles more storm risk on the nation’s fourth-largest city.
- President Donald Trump has walked back some of the metal import barriers that heralded the start of his administration’s hawkish push on trade, granting exemptions to key suppliers of steel. Three countries — South Korea, Brazil and Argentina — will get “targeted relief” from quotas imposed on inbound shipments to protect U.S. producers. Aluminum from Argentina also won an exemption. Before this year, the three suppliers accounted for nearly a quarter of U.S. steel imports. The U.S. will keep its 25 percent tariff on steel imports and 10 percent duty on aluminum, applied under a Section 232 ruling in March to protect national security.
- German unemployment extended its five-year slide, suggesting companies in Europe’s largest economy are confident in the outlook despite recently emerged risks. The number of people out of work fell by a seasonally adjusted 8,000 in August to 2.33 million, the Federal Labor Agency in Nuremberg said on Thursday. That’s in line with the median estimate in a Bloomberg survey of economists. The jobless rate held at a record low of 5.2 percent.
- Germans, long known for exceptional caution with their cash, have been quietly shifting into stocks and funds from traditional savings accounts in recent years. Now that risks snapping back. A combination of weaker markets and firmer consumer prices means inflation-adjusted returns so far this year are negative for the first time since 2011, according to Germany’s Bundesbank. With the European Central Bank expected to start raising interest rates in late 2019 — which some analysts say could spur further market declines — German households may opt to return to safety.
- China urged the Trump administration to back away from imposing new tariffs on another $200 billion tranche of its goods, as the end of a formal comment period on the measures nears. The U.S. should “take note of the calling from businesses and consumers in both countries, the fact that both countries are linked closely in the supply chain and the fundamental interest of the two peoples to make the right decision,” Ministry of Commerce spokesman Gao Feng said at a regular briefing in Beijing on Thursday. Over 90 percent of businesses consulted on the tariffs oppose them, Gao said.
- European Union chief negotiator Michel Barnier warned that a no-deal Brexit was still a possibility, after comments he made Wednesday were interpreted by investors as implying a successful outcome to talks with the U.K. was more likely. “Our responsibility is to be prepared for any and all the options,” Barnier told Germany’s Germany’s Deutschlandfunk radio Thursday. “That includes a no-deal scenario.”
- Shanghai Fuxing Group’s chairman was arrested overseas and escorted back to China on suspicion of manipulating stocks and other economic crimes, according to Shanghai’s police department. Zhu Yidong, 36, returned to China on Wednesday, the police said in a statement on their official social media account. He had disappeared to unknown countries after Fuxing missed an estimated 18 billion yuan ($2.6 billion) of payments to clients through private equity products from affiliated firms and itself, according to state broadcaster China Central Television.
- PetroChina Co. is rewarding shareholders with a higher — and symbolic — payout after its best half-year profit in more than three years. The nation’s biggest oil and gas producer raised total dividends for the first six months by almost one-third to 0.0888 yuan per share. The lucky payout — eight is widely considered an auspicious number in China like seven is in the U.S. — rounds out a banner earnings season for China’s three oil majors as crude’s rally allowed them to return more money to shareholders.
- Turnover in the offshore yuan has reached unprecedented levels, spurred by U.S. President Donald Trump’s broadsides against Chinese currency practices and the protracted trade dispute between the world’s two biggest economies. On the FX trading platform of Cboe Global Markets, average daily volume in dollar-offshore yuan jumped to a record $1.7 billion in July, from $421 million a year earlier. EBS Market, NEX Group Plc’s FX trading system, also saw a new high in offshore yuan transactions last month, exceeding the previous peak by 17 percent.
- President Donald Trump accused China of undermining U.S. efforts to pressure North Korea into giving up its nuclear weapons, indicating his trade war with Beijing is starting to exacerbate geopolitical tensions. “North Korea is under tremendous pressure from China because of our major trade disputes with the Chinese Government,” Trump said in a series of tweets Wednesday, which he called a White House statement. “At the same time, we also know that China is providing North Korea with considerable aid, including money, fuel, fertilizer and various other commodities. This is not helpful!”
- The European Union’s top defense and diplomatic officials convene in Vienna on Thursday with the teetering Iran nuclear agreement and Middle East stability at the top of their agenda. The meetings coincide with publication of the International Atomic Energy Agency’s quarterly Iran inspections report, which is due by Friday and will likely show the Islamic Republic continues meeting nuclear obligations made under an agreement jettisoned by President Donald Trump in May.
- Campbell Soup Co. is selling its international operations and fresh-food unit, falling short of expectations for a sale of the entire company and prompting a drop in premarket trading. Despite pressure from activist investor Dan Loeb to find a buyer amid a three-year sales slump and a sliding stock price, the struggling packaged-food maker will pursue a turnaround plan to ignite soup and snack growth in its key North American market, according to a statement Thursday. Shares fell as much as 6.2 percent in early trading.
- China’s Fosun International Ltd. is in talks to buy a 426 million-euro ($500 million) holding in beleaguered German wholesaler Metro AG from Ceconomy AG, according to people with knowledge of the matter. Metro’s shares jumped. Other suitors, including private equity firms, may also emerge for the asset, the people said, declining to be identified as the deliberations are in early stages. The talks regarding the 9 percent stake are preliminary and may not result in a deal, the people said. Representatives for Ceconomy, Metro and Fosun declined to comment.
- Apple Inc. has acquired Akonia Holographics LLC, a six-year-old maker of displays for augmented-reality glasses, as the iPhone-maker explores a foray into the burgeoning field. Apple, seeking a breakthrough product to succeed the iPhone, is said to be prepping to ship an AR headset or device as early as 2020. Akonia’s “HoloMirror” technology is designed to project full-color images onto the transparent glass lenses of augmented-reality headsets, according to its website, a capability that will dovetail with the U.S. giant’s own efforts. Apple confirmed the deal, first reported by Reuters, via the typical statement it uses to verify acquisitions of smaller startups.
*All sources from Bloomberg unless otherwise specified