December 11th, 2017
Daily Market Commentary
- GGP Inc. has rejected Brookfield Property Partners LP’s initial $14.8 billion bid to acquire the stake Brookfield doesn’t already hold in the U.S. mall owner, but remains in talks to reach a deal, according to a person with knowledge of the matter. Brookfield last month offered $23 a share for the 66 percent of GGP it doesn’t own. That was about 21 percent more than Chicago-based GGP’s closing price on Nov. 6, the day before Bloomberg News reported that Brookfield had held discussions about taking the company private.
- Investors remain on alert over the threat of Nafta talks failing even as negotiators meet this week in Washington and seek minor victories on less contentious issues. The latest meetings to revamp the North American Free Trade Agreement will run through Friday, largely out of the spotlight. Cabinet-level officials won’t attend for the second time since negotiations began in August, and the Trump administration is preoccupied with efforts to push through tax cuts by year-end and avoid a government shutdown.
- Global risk-on sentiment spilled into Europe on Monday, with stocks rising in what is seasonally a good month for equities. The Stoxx Europe 600 Index gains 0.2% amid low volume, with banks extending their rally for a third day on relief over new capital rules.
- Bitcoin’s surge has produced the kinds of day-to-day swings that U.S. stocks have only experienced during crashes. The cryptocurrrency’s 10-day volatility reached 125 percent last week, according to data compiled by Bloomberg. The level surpassed the S&P 500 Index’s high of 102 percent in October 2008, when a financial crisis sent share prices tumbling. In October 1987, when the Black Monday plunge occurred, S&P 500 volatility peaked at 153 percent.
- Asian equities rose after better-than-expected U.S. jobs data bolstered investor optimism for global economic growth prospects. Japan’s shares climbed, sending the Nikkei 225 Stock Average to its highest since 1992. About two stocks rose for each that declined on the MSCI Asia Pacific Index, which was up 0.7 percent at 170.28 as of 5:27 p.m. in Hong Kong.
- Oil slipped to near $57 a barrel as U.S. drilling expanded and OPEC nations Kuwait and the United Arab Emirates signaled they can phase out production cuts if the market improves. Futures fell 0.4% in New York after climbing 2.5 percent in the previous two sessions. Drillers boosted the rig count by two to 751, a three-month high, according to Baker Hughes data on Friday. OPEC-led output curbs may end earlier than scheduled if the market re-balances by June, Kuwait Oil MinisterIssam Almarzooq said Sunday.
- Gold holds near lowest level since July amid optimism over growth after last week’s strong U.S. jobs report. Platinum rises from a 2-year low.
- A weekend of snowfall has brought an early Christmas for U.K. natural gas bulls. Same-day prices surged to their highest level in almost four years as demand jumped with a plunge in temperatures after snow covered much of the country over the weekend. The contract soared as much as 13 percent, the most since June, as forecasters predict more snow and colder-than-usual weather while outages curbed supplies to some terminals.
- Egypt and Russia plan to finalize on Monday a $30-billion deal to build North Africa’s first nuclear power plant as the Kremlin moves to further expand its influence in the region. Russian President Vladimir Putin arrived in Cairo to meet his Egyptian counterpart Abdel-Fattah El-Sisi. The visit would witness the signing of the deal to build a nuclear plant at El Dabaa after three years of talks, El-Sisi’s spokesman said.
- Wall Street economists are telling investors to brace for the biggest tightening of monetary policy in more than a decade. With the world economy heading into its strongest period since 2011, Citigroup Inc. and JPMorgan Chase & Co. predict average interest rates across advanced economies will climb to at least 1 percent next year in what would be the largest increase since 2006.
- Investors pumped money into exchange-traded funds that buy emerging market stocks and bonds in the 16th straight week of gains, as net inflows exceeded $11.5 billion during the streak. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $371.1 million, compared with $363.7 million in the previous period, according to data compiled by Bloomberg. Fund assets have grown $43.4 billion so far this year.
- Bitcoin has landed on Wall Street with a bang. Futures on the world’s most popular cryptocurrency surged as much as 26 percent from the opening price in their debut session on Cboe Global Markets Inc.’s exchange, triggering two temporary trading halts designed to calm the market. Initial volume exceeded dealers’ expectations, while traffic on Cboe’s website was so heavy that it caused delays and temporary outages.
- A strengthening U.S. economy may spur the Federal Reserve to raise interest rates twice in the next 3 1/2 months as a tight labor market pushes risks to the upside, a Bloomberg survey showed. Median results of the survey of 41 economists, conducted Dec. 5-7, showed economists still expect three rate hikes in 2018 but moved forward one of those projected moves to March from June. There was near unanimity the central bank will raise the target range for the federal funds rate a quarter percentage point to 1.25 percent to 1.5 percent after its two-day meeting starting Tuesday in Washington.
- Two HNA Group Co. units were sued in a New York court on claims they failed to complete a $325 million acquisition of a U.S. technology company because the Chinese group provided false and inconsistent information about its ownership to the Treasury’s national security-review panel. Ness Technologies Sarl, which has its principal place of business in New Jersey, is seeking at least $65 million in damages from HNA’s Pactera Technology International Ltd. and HNA Group International Co., according to a complaint filed last week with the Supreme Court of New York. HNA’s failure to properly answer questions asked by the Committee on Foreign Investment in the U.S. by the deal’s Oct. 27 deadline caused the acquisition to collapse, according to Ness.
- BAE Systems Plc won an order from Qatar for 24 Eurofighter Typhoon combat jets valued at 5 billion pounds ($6.7 billion) as the isolated Persian Gulf state beefs up air defenses. Delivery of the aircraft to the Qatar Emiri Air Force will start in late 2022, according to a statement Monday from the London-based manufacturer. The contract is subject to financing conditions and first payment coming no later than the middle of next year. The deal is the biggest export contract for the Typhoon in a decade, U.K. Defense Secretary Gavin Williamson said in a separate statement.
- HSBC Holdings Plc said its five-year-old deferred prosecution agreement with the Department of Justice has expired, signaling the U.S. is satisfied with the bank’s improvements to its compliance systems after it was ensnared in a money-laundering scandal in Mexico. The Justice Department will file a motion with a court in the Eastern District of New York seeking the dismissal of charges after HSBC “lived up to all of its commitments” to improve its anti-money laundering and sanctions compliance capabilities, the London-based bank said in a statement Monday. Once dismissed, the bank can no longer be criminally prosecuted for the matter.
- Bonds of a unit of HNA Group Co. have fallen to record lows after fresh signs that the debt-laden Chinese conglomerate is facing increasing difficulties raising funds. HNA Group International Co.’s $300 million 8.875 percent securities slid to 95 cents on the dollar on Monday, their lowest level since they were sold last month, according to Bloomberg-compiled prices.
- Steinhoff International Holdings NV Chairman Christo Wiese, seeking to stabilize the embattled retailer, is negotiating a standstill agreement on a 1.5 billion-euro ($1.8 billion) margin loan under which banks would suspend the sale of stock until next year, according to people with knowledge of the discussions. The owner of Mattress Firm in the U.S. and Poundland in the U.K. needs a lifeline after its stock plunged last week when it delayed publication of its financial results because of possible accounting irregularities that prompted the resignation of its chief executive officer.
- U.K. bonds headed for the biggest gain in a week as the Brexit compromise agreed last week between Prime Minister Theresa May’s government and the European Union began to show cracks. Gilt yields fell and the pound edged lower even after a Brexit deal over the divorce bill, citizens’ rights and the Irish border. Ministers including Brexit Secretary David Davis sent signals over the weekend that the U.K. wasn’t really committed to what it signed up to last week, following rushed four-way talks between London, Dublin, Brussels and Belfast.
- Fitch Ratings raised the Philippines’ sovereign rating by one level, providing an endorsement of President Rodrigo Duterte’s economic plans, which include a tax reform aimed at strengthening the fiscal outlook. The rating on the nation’s long-term foreign currency-denominated debt was raised to BBB with a stable outlook, Fitch said in a statement on Monday. The upgrade puts the Philippines on par with Italy and ahead of Indonesia.
- Uber Technologies Inc.’s London fate won’t be decided until mid-way through 2018 after a judge said that she will schedule an appeal hearing in either April or June, meaning the company can operate in its busiest European market until then. Judge Emma Arbuthnot proposed two starting dates, April 30 or June 25, for the five-day trial at a short hearing in London Monday.
- Billionaire Masayoshi Son may be getting closer to achieving his dream of making SoftBank Group Corp. the world’s biggest investor in technologies. The reason has to do with the main patron of Son’s $100 billion investment plan, Saudi Arabia’s Crown Prince Mohammed bin Salman. The Saudi prince has been the largest investor in the SoftBank Vision Fund, contributing almost half of the money Son has been raising to accelerate his dealmaking around the world. And since November, Prince Mohammed has been at the center of an unprecedented purge of officials and political rivals in the oil-rich nation, leading to a consolidation of his power.
- A bidding war has emerged for Australian oil and gas explorer AWE Ltd. after Perth-based Mineral Resources Ltd. made an all-share takeover offer, challenging an increased all-cash bid by China Energy Reserve & Chemicals Group Co. Mineral Resources, which mines lithium and iron ore, offered 1 share for every 22.325 AWE shares, valuing the bid at 80 Australian cents a share, AWE said Monday in a filing. The offer, which is not conditional on due diligence, tops a revised 73 cents a share bid made Friday by China Energy Reserve.
- Cleanaway Waste Management Ltd., Australia’s biggest garbage removal company, on Monday agreed to buy Toxfree Solutions Ltd. for A$671 million ($504 million) in cash. Toxfree’s shareholders will receive A$3.425 per share, about 21 percent more than Friday’s closing price, according to a statement. The deal will be funded through a A$590 million equity raising and debt.
*All sources from Bloomberg unless otherwise specified