December 20th, 2017
Daily Market Commentary
- Canadian stocks ended the day little changed after earlier gaining as much as 0.4 percent, in what appeared to be a classic case of buy the rumor, sell the news on the U.S. tax debate. The S&P/TSX Composite Index rose two points or less than 0.1 percent to 16,133.35. Consumer discretionary stocks added 0.4 percent as Great Canadian Gaming Corp. jumped 15 percent to the highest in three months. The company won a bid to operating gambling facilities in the Toronto area.
- BlackBerry Ltd. won new customers from government and private firms for its central software business in the third quarter, shoring up expectations the former smartphone maker can hit growth targets by the end of its fiscal year in March. Total revenue was $235 million, beating the average analyst estimate of $217.1 million, the company said in a statement. Software revenue hit a record $190 million as customers including the U.S. Department of Justice, NATO and Deutsche Bank AG bought BlackBerry’s security-focused business software. The shares jumped 7.6 percent in early trading.
- Grocery giant Loblaw Cos. Ltd. has admitted to participating in a scheme to increase packaged bread prices for more than 14 years, saying it will co-operate with a Competition Bureau investigation into the industry. And Loblaw says it will start offering $25 gift cards on Jan. 8 to customers who declare they bought certain (as yet unnamed) breads at some of its (as yet unnamed) chains before March 1, 2015 – a gesture that the company says could cost as much as $150-million (Globe and Mail)
- Europe stocks are little changed amid thin trading before the holiday season. The Stoxx Europe 600 Index falls less than than 0.1%. Gains in mining shares offset a slump in Steinhoff shares after the furniture retailer said lenders have started to cut off support. RWE leads Germany’s DAX Index higher after the departure of Innogy’s CEO sparked speculation around the company’s strategy.
- S&P 500 futures extend gains but fall short of yesterday’s high, in tepid reaction to the passage of the U.S. tax bill in the Senate. Treasury futures recover from a brief dip following the news, while the U.S. dollar comes under renewed pressure versus its G-10 peers as investors await a second House vote on the bill.
- Asian stocks were mixed on Wednesday, with markets in Japan and Hong Kong gaining ground as South Korean stocks fell, while investors waited for the final votes to overhaul the U.S. tax code. The MSCI Asia Pacific Index climbed 0.2 percent to 171.87 as of 11:15 a.m. in Hong Kong, with Mitsubishi UFJ Financial Group Inc and Toyota Motor Corp. providing the biggest boost to the main gauge.
- Oil headed toward its highest close in over a week as industry data was said to show a larger-than-expected drop in U.S. crude stockpiles. February futures in New York added 0.4 percent after gaining 0.6 percent Tuesday. Inventories fell 5.2 million barrels last week, the American Petroleum Institute was said to report, suggesting further tightening in a market already facing the shutdown of a key North Sea pipeline. The drop is bigger than estimates for government data due on Wednesday, which is forecast to show supplies shrank by 3.15 million barrels.
- Gold holds steady as the dollar trades little changed after Senate Republicans pass most extensive rewrite of U.S. tax code in more than 30 years, with bill now returning to the House.
- Iron ore will probably weaken in the opening months of next year on prospects for increasing mine supplies, according to Goldman Sachs Group Inc., which says prices above $70 a metric ton won’t last. The raw material will drop to $60 in three months, and average $55 next year, the bank said in a report received on Wednesday. While iron’s been bolstered by low steel inventories in China and expectations for a revival in demand when a clampdown on mills eases, prices at $70 aren’t sustainable, it said.
- Senate Republicans passed the most extensive rewrite of the U.S. tax code in more than 30 years, a bill that delivers a deep, permanent tax cut for corporations and shorter-term relief for individuals. The chamber’s 51-48 party line vote just before 12:45 a.m. Wednesday in Washington brought President Donald Trump to the brink of his first major legislative victory. The bill — which has scored poorly in public opinion polls — promises to become one of the biggest issues in the 2018 elections that will determine whether the GOP retains its majorities in Congress.
- Congressional leaders are trying to jam as many extras as possible into a must-pass spending bill that may end up ricocheting between the House and Senate right up to the deadline three days from now. Republican leaders, poised to finish a sweeping tax-cut bill this week, are eager to avoid an embarrassing shutdown. They also want to resolve other pressing issues without making too many concessions to Democrats or alienating the conservative GOP lawmakers in the House.
- Eni SpA and Royal Dutch Shell Plc and senior executives will face trial over a $1.1 billion bribery scandal in Nigeria, an Italian judge ruled on Wednesday. The trial will start on March 5 in Milan, judge Giusy Barbara told reporters. The long-awaited decision, initially expected several months ago, will not only affect the two companies but 11 individuals including Eni Chief Executive Officer Claudio Descalzi.
- Hennes & Mauritz AB Chairman Stefan Persson bought another 20 million shares in the Swedish clothing retailer after a week during which investors dumped the stock following surprisingly weak sales figures. Persson spent 3.42 billion kronor ($407 million) acquiring the shares on Dec. 15-19, according to a filing with the Swedish financial regulator published on Wednesday. That’s equivalent to 1.2 percent of the company’s total share capital and brings the stake of Persson, his family and related companies to 41.7 percent.
- MiFID II-weary firms have another reason to breathe a sigh of relief. With only a few working days to go until the European overhaul of financial rules kicks in, regulators just announced a six month transition for one part of the law. The European Securities and Markets Authority on Wednesday proposed the grace period for a requirement that companies wanting to trade with any party based in the European Union will need a code, known as a legal entity identifier, or LEI. The identifying code is important as it lets firms continue to trade from MiFID’s Jan. 3 start date. Industry groups have been urging firms for months to register, saying: ‘No LEI, no trade.’
- Coinbase Inc., one of the most popular U.S. cryptocurrency exchanges, is adding the bitcoin splitoff known as bitcoin cash to its offerings, giving momentum to a rival of the most traded digital unit. The move didn’t occur without a hitch. The San Francisco-based company said it’s investigating a price increase in bitcoin cash ahead of the announcement. Bitcoin itself tumbled about 10 percent after the news late Tuesday in the U.S. and registered its biggest one-day drop in about three months. It has since recovered much of the loss.
- Glencore Plc and a group led by Apollo Global Management LLCare among bidders set to be shortlisted for the sale of Rio Tinto Group’s last remaining coal mines, which may fetch more than A$2 billion ($1.5 billion), people familiar with the matter said. Whitehaven Coal Ltd. and South32 Ltd. also made indicative offers for the Hail Creek and Kestrel mines by the deadline this month, the people said, asking not to be identified because the information is private. The parties, which also include EMR Capital Advisors Pty, are preparing to enter the second round of the sale process, which will include management presentations and site visits, before deciding on final bids, the people said.
- Freeport-McMoRan Inc. and Indonesia are still engaged in negotiations over a road-map for the transfer of majority ownership of the giant Grasberg copper and gold mine to a local firm, according to Finance Minister Sri Mulyani Indrawati. The government is determined to increase its stake in PT Freeport Indonesia to 51 percent as instructed by President Joko Widodo, Indrawati told reporters in Jakarta on Wednesday. The two sides are negotiating details of Freeport’s divestment, construction of a smelter, valuation and future governance of the local unit, she said.
- Asahi Group Holdings Ltd. agreed to place its stake in Tsingtao Brewery Co. back into Chinese hands, selling its holding to conglomerate Fosun Group and the local brewer for about $941 million. Asahi is selling its 20 percent holding in China’s third-largest brewer for HK$27.22 a share, the Japanese company said in a statement Wednesday. That’s a 32 percent discount to today’s closing price of HK$40 a share. Fosun will pay about $847 million for an 18 percent stake while Tsingtao will pay approximately $94 million for the rest.
- Uber Technologies Inc. suffered a defeat when the European Union’s top court ruled its ride-hailing service should be regulated as a transport company, a decision that could set a precedent for the burgeoning gig economy. The EU Court of Justice said Wednesday that the world’s most valuable startup should be regulated as a transport service even when drivers aren’t professionals and using their own vehicles. The company says most of its products are already covered by such regulations.
- Ukraine’s state-run gas company, Naftogaz Ukrainy, wants to tap international markets for the first time since restructuring its debt almost a decade ago, according to the company’s chief commercial officer. Naftogaz plans to offer $1 billion in Eurobonds in a sale that may take place in the second quarter of next year, Yuriy Vitrenko said in an interview in his office in Kiev on Monday.
- Yen analysts in Tokyo pretty much agree: the outlook for U.S. economic growth and interest rates will determine where Japan’s currencygoes next year. And that’s where the consensus ends. As with U.S. economists, Japanese currency strategists are divided on whether a strong American job market will propel inflationary pressures that finally send 10-year Treasury yields climbing. If they do, a widening U.S. yield advantage is seen lifting the dollar. Another year of disappointment would bring a stronger yen. A survey of nine forecasters by Bloomberg showed estimates ranging from 105 to 120 yen per dollar for year-end 2018. The exchange rate was at 113.14 on Wednesday.
- Saudi Arabia’s crackdown on alleged corruption showed no signs of letting up, with more people being questioned and banks freezing more accounts, according to people familiar with the situation. Almost seven weeks after the purge started, authorities are detaining new suspects and releasing some of those held, the people said, asking not to be identified because the matter is private. The Saudi Arabian Monetary Authority is also telling banks to freeze the accounts of more individuals who aren’t under arrest and people linked to them, the people said.
- Surging steel prices and a new Indian insolvency law have set the stage for an industry-defining battle between tycoons and producers for more than $26 billion of the sector’s most-coveted assets. Creditors are seeking the approval of India’s new bankruptcy court to sell assets of as many as 40 firms, including steel producers. That’s spurred Lakshmi Mittal, head of the world’s largest maker of the alloy, and fellow billionaire Anil Agarwal to vie for control of Essar Steel India Ltd., according to people with knowledge of the matter.
- Oi SA creditors approved a plan to bring the Brazilian phone company out of bankruptcy protection after a dramatic 15-hour meeting that concluded at 2:30 a.m. in Rio de Janeiro. Final changes to the plan included a proposal to pay for the fines owed to telecommunications regulator Anatel, which is Oi’s largest individual creditor, in five yearly installments after a 20-year grace period. Fines under the attorney general’s jurisdiction would be paid in monthly installments over 20 years. Anatel and the attorney general voted against the plan. Oi also said a 4 billion real ($1.2 billion) capital increase will happen within a year and scaled back conditions for the cash injection, subject to the approval of the bankruptcy court.
*All sources from Bloomberg unless otherwise specified