December 31st, 2018

Daily Market Commentary

 

Canadian Headlines

• Canada Goose Holdings Inc. rose 6 percent in early trading before U.S. markets opened after the company opened its flagship store in Beijing over the weekend. The store had been delayed since Dec. 15 amid escalating tensions between Canada and China following the arrest of Huawei Technologies Co.’s chief financial officer in Vancouver. The luxury jacket maker is expanding in China as it bets on the nation’s growing middle class..
• Rio Tinto Group’s Oyu Tolgoi copper-gold operation in Mongolia agreed a pact to build a power plant in Mongolia close to the country’s largest coal mine, the company said in an email on Monday.
• Green Growth Brands Ltd., which owns one cannabis retail store in the U.S., has made a C$2.8 billion ($2.1 billion) unsolicited takeover offer for Aphria Inc., one of Canada’s largest pot producers. Short-seller Hindenburg Research, which has previously targeted Aphria, immediately called the bid “non-credible” and raised questions about connections between the two companies.
• Shui On, Manulife and China Life Form $1b Property Investment JV. The targeted total capital commitment is $1b and currently agreed capital commitment of $750m will be made by units of Shui On Land, Manulife and China Life in proportion, Shui On Land says in filing to Hong Kong stock exchange.

 

 

World Headlines

• U.S. stock-index futures rallied on Monday amid optimism around trade talks between two of the world’s largest economies. March contracts on the S&P 500 Index rose 0.8 percent as of 10:20 a.m. in London after U.S. President Donald Trump said in a tweet that U.S.-China negotiations were “moving along very well” toward a comprehensive deal. Futures on the Nasdaq 100 and the Dow Jones Industrial Average Index both rose 0.9 percent.
• European shares gained on optimism that China and the U.S. may resolve their trade conflict, capping a year that’s set to post the biggest decline in a decade. The Stoxx Europe 600 index climbed 0.2 percent in early trading on Monday, trimming its annual drop to 13 percent. With hopes over trade rising again, much battered cyclical sectors led gains, with resources stocks posting the steepest advance.
• The benchmark Hang Seng Index ended the year down 14 percent, the worst since 2011, with technology shares and trade-war proxy WH Group Ltd. among the most sold. Heavyweight Tencent Holdings Ltd. posted its steepest annual loss on record, while drugmakers also joined the worst-performer list following a recent sell-off.
• Gold is closing out 2018 on a strong note, with haven demand in the ascendant amid volatile trading in global equities, rising concern about the economic outlook and a drawn-out government shutdown in the U.S. Spot bullion is holding near a six-month high after topping $1,280 an ounce, and the metal is set for the best monthly gain in almost two years. December’s rally has pared an annual decline, the first full-year loss since 2015.
• Copper in London heads for the highest close in two weeks as investors weigh prospects for a trade deal between the U.S. and China. Copper is still heading for its biggest annual loss since 2015 on concerns demand is foundering. China’s slowdown continued, with a gauge of its manufacturing industry weakening to the lowest since early 2016 and measures of new orders and new export orders slipping.
• Oil headed for its first annual decline since 2015, slumping more than 20 percent in a turbulent year that saw fears of supply scarcity turn to expectations of a surplus. Crude jumped 2.5 percent in New York on Friday, but prices remain on course for a 37 percent drop this quarter — the worst in four years.
• U.S. natural gas extended its slide toward $3 as forecasts for unseasonably warm weather and a smaller-than-average stockpile drop eased concern about a winter supply crunch. Front-month futures are on track to lose 33 percent this month, which would be the biggest decline in 15 years and the worst December since 1991.
• European corporate bonds are headed for the biggest annual losses since the global financial crisis after a year marked by political upheavals in Italy and the U.K., the winding down of ECB stimulus measures and higher U.S. interest rates.
• China heads into the new year with its factories back in contractionary territory as the threat of a prolonged trade war dampens sentiment and stimulus struggles to gain traction. The manufacturing purchasing managers index dropped to 49.4 in December, the weakest since early 2016 and below the 50 level that denotes contraction. Measures of new orders and new export orders slipped — a bearish signal for future demand — while readings for input and output prices weakened.
• A turbulent year is coming to a close in Washington with the 10th day of a partial federal government shutdown and no signs of progress toward a spending deal that President Donald Trump would be willing to sign. Nancy Pelosi is set to reclaim the speaker’s gavel on Thursday, when Democrats take control of the House of Representatives. Her first order of business is expected to be passing a bill to fund the federal departments that are closed, without providing extra resources for Trump’s border wall.
• Facebook Inc. Chief Executive Officer Mark Zuckerberg, criticized for months by lawmakers, privacy advocates and some investors, said he was “proud of the progress we’ve made,” fighting misinformation and protecting users’ personal data during one of the company’s most tumultuous years.
• Chinese President Xi Jinping stressed self-reliance amid “changes unseen in 100 years,” as the country faced an economic  slowdown and a more confrontational U.S. under President Donald Trump. In his annual New Year’s Eve address, Xi stressed China’s capacity to weather the storm, citing a series of industrial and technological achievements in 2018. He said the government would would keep growth from slowing too quickly and follow through on a tax cut as part of an effort “to ease the burden on enterprises.”
• Italy’s populist government won final parliamentary approval for its 2019 budget, barely meeting a year-end deadline after limiting discussion of the spending plans in the wake of a weeks-long clash with the European Union. Lawmakers in the lower house voted 313 in favor and 70 against the budget, which had already been approved by the Senate. The approval came on the eve of a Dec. 31 deadline, averting a special procedure in which public spending would have had to revert to this year’s budget, with likely turmoil on financial markets.
• German Chancellor Angela Merkel said nationalism remains the key threat to the global order, setting herself up as President Donald Trump’s main adversary in Europe for another year. Signaling she intends to use her clout even as a lame-duck leader, Merkel evoked the horror of Europe’s 20th-century wars in her New Year’s Eve address while calling for Europe to stand together in 2019 as the U.K. heads toward the exit consumed by domestic political battles and populists seek gains in an EU-wide election.
• Russia’s Federal Security Service detained a U.S. citizen in Moscow on suspicion of espionage on Dec. 28, according to a statement on website. The investigation department of the FSB, as the domestic security service is widely known, started a criminal case and investigations are underway, Interfax said, citing the FSB. It didn’t provide any details on where the person was being held.

 

 

*All sources from Bloomberg unless otherwise specified