December 7th, 2018
Daily Market Commentary
- Canada’s eight big banks extended their record earnings streak this year, posting a 7.5 percent jump in annual profit fueled by operations outside their home turf. Net income for the companies totaled C$45.9 billion ($34.3 billion) in the fiscal year ended Oct. 31. Toronto-Dominion Bank and Bank of Montreal profited from their U.S. consumer-lending divisions, while Bank of Nova Scotia’s Latin America focus helped in a year when Canadian companies saw more muted results in domestic banking. Royal Bank of Canada’s wealth management was boosted by its Los Angeles-based City National Bank, and Canadian Imperial Bank of Commerce benefited from its takeover of PrivateBank in Chicago last year.
- Canadian oil prices strengthened Thursday amid forecasts that mandated cuts risk draining inventories too quickly. Light Edmonton Mixed Sweet crude rose $8 relative to West Texas Intermediate futures to a $9 discount, the smallest since Aug. 10, data compiled by Bloomberg show. Heavy Western Canadian Select’s discount to futures shrank to the smallest since July 17.
- Tobacco company Altria agrees to buy 45% equity stake in Canadian pot company Cronos at a price of C$16.25 per share, for a deal total of about $1.8 billion.
- European equities climbed after sinking to the lowest level in two years on Thursday, as technology and mining shares led the gains. The Stoxx Europe 600 Index added 0.8 percent, set for a drop of 3.2 percent this week. SAP SE climbed 1.6 percent, while Nokia Oyj surged 5.4 percent after analysts said that Huawei Technologies Co.’s recent difficulties were positive for the company. Fresenius SE slumped 11 percent after saying it won’t meet financial goals through 2020.
- U.S. stock-index futures traded lower as equities continue to gyrate following a Thursday session marked by an initial sell-off and a subsequent rally. Investor sentiment remains in limbo, caught between worries that the trade truce between China and the U.S. won’t last and the prospect of a pause in Federal Reserve tightening. December contracts on the S&P 500 Index fell as much as 0.8 percent. Futures on the Nasdaq 100 Index and Dow Jones Industrial Average dropped a maximum of 0.9 percent and 0.8 percent, respectively.
- Asian stock markets have had some volatile days, to say the least. And while Friday provided a bit of a respite, all pointed to a down week as optimism over a 90-day truce in the trade war was overshadowed by the arrest of a Huawei Technologies Co. official. The MSCI Asia Pacific Index was in plus territory as of 4:50 p.m. in Singapore, taking cues from U.S. counterparts that pared losses on a late Thursday rally led by large tech names. Japan’s Topix index rebounded after an earlier drop, while stock benchmarks in China and Hong Kong swung between gains and losses. After those markets closed, data showed Chinese foreign currency holdings rose last month, countering concerns about capital outflows.
- Oil extended losses near $51 a barrel after OPEC entered a second day of talks in an attempt to draw up a deal to cut output. New York futures slipped as much as 1.7 percent, falling for a third session. Saudi Energy Minister Khalid Al-Falih said Thursday in Vienna that he isn’t confident of an agreement when the Organization of Petroleum Exporting Countries meets again with its allies on Friday. OPEC is discussing a proposalthat would see the group reduce output by 650,000 barrels a day, with a further 350,000 barrel a day contribution from its allies, including Russia, delegates said.
- Gold held steady as Federal Reserve Chairman Jerome Powell delivered a bullish assessment of the U.S. economy and the job market ahead of November employment data due Friday. Powell’s comments are his final scheduled public remarks before the Fed goes into a blackout period ahead of its Dec. 18-19 policy meeting, at which officials are expected to raise interest rates by a quarter percentage point for the fourth time this year. Investors, though, have reduced their bets on 2019 rate increases amid stock-market losses and heightened fears of a trade war between the U.S. and China.
- Federal Reserve Chairman Jerome Powell delivered a bullish assessment of the U.S. economy and the job market on the eve of the scheduled release of November employment data. “Our economy is currently performing very well overall, with strong job creation and gradually rising wages,’’ Powell said in the text of a speech to be delivered to a housing conference in Washington on Thursday. “In fact, by many national-level measures, our labor market is very strong.’’
- OPEC crunch talks were deadlocked on Friday as Iran was said to reject a symbolic oil-output cut as part of a wider deal with the cartel and its allies. An agreement remained elusive as the Persian Gulf state insisted on an exemption from production curbs, one delegate said. It stuck in its heels despite attempts by non-OPEC producer Russia to broker a deal, with Energy Minister Alexander Novak shuttling between meetings with the Iranian and Saudi delegations at the organization’s secretariat in Vienna.
- Theresa May is said to be weighing a plan to postpone the crunch vote on her Brexit deal in an attempt to avoid a landslide defeat that would risk a major U.K. political crisis. The prime minister was urged by allies in her Conservative Party to delay the parliamentary vote on the U.K.’s divorce agreement with the European Union amid predictions she would lose it badly. Defeat would put the U.K. on course to crash out of the EU in March without a deal, and could trigger a fresh attempt to topple May and even a general election.
- A Chinese investor group led by Anta Sports Products Ltd.reached a $5.2 billion deal to acquire the maker of Wilson tennis rackets and Louisville Slugger baseball bats, as it seeks to bring high-end athletic equipment to China’s wealthy consumers. The consortium, which includes Chinese buyout firm FountainVest Partners, will offer shareholders of Finland’s Amer Sports Oyj 40 euros a share in cash, or about 4.6 billion euros. The deal is the largest struck by a Chinese acquirer for a European asset since China Investment Corp. agreed to buy Logicor Europe for almost $14 billion in June 2017, according to data compiled by Bloomberg.
- Taiwan’s benchmark stock gauge will rebound next year as investors look ahead to 2020 for roll out of 5G and expected boost to equities from presidential election, Taishin Securities Investment Trust Co. Vice President Roger Shen says at a press conference on Thursday.
- A top House Democrat plans to propose that the federal government sell 40-year bonds to capitalize a U.S. infrastructure bank, indicating that the party may seek common ground with President Donald Trump on an issue that stalled in the Republican-led Congress. U.S. Representative John Yarmuth of Kentucky, who is set to lead the House Budget Committee, said he plans to introduce legislation in January that would authorize the bond sales and create the infrastructure bank. He expects it could get rolled into a broader public-works package that Democrats want to passafter taking control of the House in January.
- JPMorgan Chase & Co.’s global co-head for mergers and acquisitions Hernan Cristerna sees a slowdown in takeovers that are at least $10 billion in size next year amid a “very active market” for dealmaking. “What CEOs and companies are cautious of is engaging in a very large transaction that might take a very long time to get approved, if it’s approved at all,” Cristerna said in an interview with Bloomberg Television’s Francine Lacqua and Tom Keene. “I know what I’m buying today, but I just don’t know what I’m buying two years from now.”
- Renault SA is aiming to reach in about a week the first conclusions of an internal probe into whether the pay packages of Carlos Ghosnand other top managers of the French carmaker were properly disclosed, according to people familiar with the matter. The ongoing investigation focuses on their salaries and other benefits at Renault, where Ghosn remains chief executive officer and chairman, said the people, who asked not to be named because the information isn’t public. The probe is being led by Eric Le Grand, a former head of security who was recently appointed as an ethics and compliance officer, and another Renault insider, Claude Baland, a 68-year-old former top civil servant, they said.
- Airbus SE firmed up an order for 100 single-aisle aircraft from Avolon, the aircraft-leasing company owned by China’s HNA Group Co. The deal, worth $11.5 billion before discounts, seals an outline accord unveiled at the Farnborough Air Show in July, the Irish lessor said in a statement Friday. Aircraft orders typically come in stages, and aren’t counted against order totals until finally signed off. The announcement provides a late boost for Airbus’s 2018 tally after it had struggled to finalize deals following the exit of long-time sales chief John Leahy. It’s a win for new marketing boss Christian Scherer, though the original accord was secured by Eric Schulz, who left the post after only nine months.
- Noble Group Ltd. said it intends to push through its mammoth debt-for-equity restructuring by an “alternative process,” signaling it’s likely to file for insolvency in a move that could wipe out existing shareholders and may put its remaining business at risk. The company may implement the restructuring through a court-appointed officer, the trader said on Friday after Singaporean regulators halted a key element of the first-choice plan — allowing shares in the new corporate entity to be listed in the city-state. The statement didn’t give further details.
- The Trump administration arranged the arrest of Huawei Technologies Co.’s chief financial officer aware of potential blow-back in trade talks with Beijing but intent on showing resolve to crack down on Chinese companies accused of violating U.S. law. The arrest happened about the same time that President Donald Trump dined with Chinese President Xi Jinping in Buenos Aires to discuss the trade war between the countries. White House National Security Adviser John Bolton, who sat at the table with Trump and Xi, knew in advance of the U.S. request that Canadian authorities arrest Huawei CFO Wanzhou Meng, he told National Public Radio Thursday. After Bolton’s interview, a White House official said that Trump was not aware of the arrest in advance, distancing the president from the provocative move.
- WuXi AppTec Co., the Shanghai-listed contract medical researcher, has raised $1.01 billion after pricing its Hong Kong first-time share sale above the midpoint of a marketed range, according to people with knowledge of the matter. The Chinese company sold 116.5 million shares at HK$68 apiece, the people said, asking not to be identified because the information is private. The shares were offered at HK$64.10 to HK$71.50 each. The final pricing is lower than the guidance WuXi AppTec’s deal arrangers gave Thursday, when they told investors that orders below HK$70 per share would likely miss out.
- Cryptocurrencies continued their slide with a fresh bout of losses Friday after the SEC dashed hopes that a Bitcoin exchange-traded fund would appear before the end of this year. Bitcoin, the largest cryptocurrency, slumped as much as 8.2 percent, taking it down past $3,400 to the lowest level since September 2017, according to consolidated pricing compiled by Bloomberg. The wider Bloomberg Galaxy Crypto Index sank 8.4 percent as rival tokens including Ether, Litecoin and XRP also
*All sources from Bloomberg unless otherwise specified