December 21st, 2017
Daily Market Commentary
- Canadian stocks closed at a record high, rebounding from a decline earlier in the day as strong gains in commodity prices offset drops in most other sectors. The S&P/TSX Composite Index added 26 points or 0.2 percent to 16,159.67. Materials rose 1.2 percent as copper prices jumped 1.4 percent to the highest in nearly two months. Lundin Mining Corp. gained 3.3 percent.
- Hard times for Canadian oil producers may last well into 2018. Western Canadian Select for February delivery fell 85 cents relative to West Texas Intermediate futures to a $26.85 a barrel discount on Wednesday afternoon, a four-year low. Prices collapsed after a nearly-two-week shutdown of TransCanada Corp.’s Keystone pipeline in November caused Western Canadian inventories at four storage sites in Alberta and Saskatchewan to rise to a record 31.8 million barrels the week ended Dec. 8.
- Stocks in Europe steadied after two days of declines, while most of the region’s bonds continued to fall as traders tidied up positions ahead of the Christmas holiday. The euro steadied and sterling drifted as data showed U.K. consumer confidence slipped to a four-year low in December.
- 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.
- The yen declined as the Bank of Japan held rates and Governor Haruhiko Kuroda said there’s no need to reconsider the current policy framework.
- Oil traded near the highest close in more than two weeks after crude stockpiles in the world’s largest economy slid more than forecast to a two-year low. Futures were little changed in New York after settling on Wednesday at the highest since Dec. 1. U.S. inventories fell 6.5 million barrels last week — more than double the average estimate in a Bloomberg survey — to the lowest level since 2015, government data showed.
- Gold rises to two-week high after U.S. stocks weaken following congressional passage of U.S. tax cuts, signaling growth expectations may be priced in. Bank of Japan maintains policy rate.
- The Bank of Japan left policy settings unchanged in the final meeting of 2017, retaining its unprecedented monetary stimulus as it waits for a pickup in stubbornly low inflation. With Japan’s economy continuing to grow at a healthy pace, and inflation at least moving in the right direction, there is little pressure on the BOJ adjust its interest-rate and asset-purchase targets any time soon. This sets it apart from its global counterparts, with the Federal Reserve hiking interest rates and the European Central Bank moving closer toward policy normalization.
- U.K. Prime Minister Theresa May arrived in Poland on Thursday to attempt to get close — but not too close — to its new government, as she sought to move the agenda forward after firing her closest political ally. May was forced to tell First Secretary of State Damian Green to resign Wednesday afternoon after an inquiry into his behavior found he’d made misleading statements over pornography found on his parliamentary computer by police nearly a decade ago. Green is the third Cabinet minister to quit in two months.
- President Donald Trump plans to sign the tax bill on Jan. 3 to ensure automatic spending cuts to Medicare and other programs don’t take effect, according to a House Republican aide familiar with the plans. The White House informed House GOP members of the timetable, following the likely decision by House Republicans to leave the so-called PAYGO provision out of a year-end spending deal to avoid a government shut down before Friday, the person said who asked not to be named because the plan hasn’t been publicly announced.
- Walt Disney Co. is seeking to protect confidential business information that could be disclosed in the U.S. government’s lawsuit against AT&T Inc.’s planned acquisition of Time Warner Inc. Disney made a court filing Wednesday asking the judge overseeing the case to restrict what AT&T and Time Warner can see as they prepare their defense. The request echoes an earlier filing from Disney’s own merger partner, 21st Century Fox Inc.
- A European Union decision to treat Uber Technologies Inc. like a taxi company spotlights a trans-Atlantic divide over how governments cope with disruptive technologies and could embolden U.S. cities to restrict the ride-sharing service. The EU Court of Justice on Wednesday ruled against Uber, which had argued it’s a technology platform connecting passengers with independent drivers, not a transportation company subject to the same rules as taxi services. In the U.S.,states have passed broad-based laws governing ride-sharing businesses, brushing aside traditional taxi-industry regulations for Uber and Lyft Inc.
- A Greek shipowner is predicting new rules for marine fuel will put thousands of the world’s merchant vessels out of business in the next two years, roiling global trade. In fact, he’s wagering $1.1 billion on it. Evangelos Marinakis, chairman of Capital Maritime & Trading Corp., based near Athens, says his company has invested that much in the last 18 months to upgrade its 71 ships spanning from oil tankers to container carriers. The rules, designed to clean up vessel emissions, will benefit more modern vessels and contribute to sending many older ones to the scrapyard, Marinakis said.
- South Korean investigators are looking into North Korea’s possible involvement in the hack of a Seoul-based cryptocurrency exchange that collapsed this week, according to a person familiar with the investigation. Yapian, the owner of bitcoin exchange Youbit, said Tuesday that it would close and enter bankruptcy proceedings after a cyberattack that claimed 17 percent of its total assets. It was also hit by an attack in April that local media have linked to North Korean hackers.
- American universities are the richest they’ve ever been, with more schools than ever sitting on endowments valued at $1 billion. From 2009 to 2016, the number of institutions hitting the 10-figure mark increased from 55 to as many as 90. As the year ends, the bull market promises to deliver additional billion-dollar endowments, given that investment returns averaged 13.2 percent for the year ended June 30.1Ivy League stalwarts such as Dartmouth College and Cornell University are being joined by newcomers including the University of Arkansas and Virginia Tech. Some of these recent arrivals are already focused on bigger numbers in the years to come.
- China is set to become the world’s biggest aviation market in five years thanks in part to hefty subsidies from local governments beseeching airlines to fly mainland tourists overseas. Local governments, especially those outside mega cities like Beijing, Shanghai and Guangzhou, spent at least 8.6 billion yuan ($1.3 billion) subsidizing airlines in 2016, mostly for them to start direct services to far-flung places such as New York and Paris, according to data compiled by Civil Aviation Data Analysis. These payments, to both Chinese and foreign carriers, equate to close to half the 19.49 billion yuan in profits earned by the top four mainland-based airlines last year, according to the consultancy known as Cadas.
- Pedro Pablo Kuczynski will face Peru’s Congress on Thursday in an attempt to save his presidency, less than a week after lawmakers triggered impeachment proceedings amid accusations he lied about dealings with the company at the center of a continent-wide bribery scandal.
- China is temporarily lifting restrictions on coal imports in an effort to ensure sufficient energy supplies this winter, according to people with knowledge of the matter. The National Development & Reform Commission has informed local governments that it’s temporarily removing previously imposed measures to limit overseas purchases, said the people, who asked not to be identified as the information isn’t public. The commission didn’t specify how long the suspension will last, they said.
- AEA Investors, the buyout firm whose earliest backers included the Rockefeller, Mellon and Harriman families, is preparing to sell packaging equipment company Pro Mach Inc., people with knowledge of the matter said. The private equity firm is working with an adviser to sell Pro Mach for more than $1.5 billion, said the people, who asked not to be identified because the information is private. AEA has reached out to other private equity firms and corporate buyers in Asia to gauge interest in the company with an auction process expected in the first quarter of 2018, the people said.
- Moscow is lobbying Saudi Arabia to open its rapidly growing market to Russian wheat, giving it another destination to offload a record harvest and compete with supplies from the European Union. Russian wheat has largely been barred from entering the kingdom for the past decade due to strict bug-damage rules, but the two nations have begun talkson starting up trade. It’s the latest sign of increased collaboration between the two in global commodities markets — the nations are leading a group of 24 nations that have cut oil production to lift energy prices.
- Didi Chuxing has scored another investment from SoftBank Group Corp. in a massive funding round that will bankroll the Chinese ride-hailing leader’s exploration of new markets and technologies. Didi said it’s secured new financing of more than $4 billion. That pushed its valuation to about $56 billion and lifts cash reserves to $12 billion, people familiar with the matter said, asking to not be identified as the details are private. The five-year-old company now intends to expand internationally as well as develop self-driving and electric vehicle systems, it said in a statement.
- One of Japan’s biggest coal buyers has told the country’s antitrust regulator that Glencore Plc’s deal to buy thermal coal assets in Australia’s Hunter Valley may hurt competition by increasing the miner’s market dominance, according to people with knowledge of the situation. Jera Co. expressed its concerns to Japan’s Fair Trade Commission during at least one meeting since the deal was announced in July and in follow-up communications with the agency, including submitting documents, said one of the people, who asked not to be identified because the information isn’t public.
- Americans’ life expectancy at birth declined for the second year in a row in 2016 as the nation grappled with an opioid crisis, the first time that’s happened in more than half a century. The overall decrease in longevity — to an average of 78.6 years — was driven by higher death rates among young and middle-aged Americans, even as older people are living longer. Fatal drug overdoses jumped by 21 percent, and the rate of deaths from synthetic opioids like fentanyl doubled from 2015 to 2016, the National Center for Health Statistics said Thursday.
*All sources from Bloomberg unless otherwise specified