February 14th, 2018
Daily Market Commentary
- Canadian stocks were unable to hang onto early gains, losing ground for the 10th of 12 trading days as most sectors fell. The S&P/TSX Composite Index lost 25 points or 0.2 percent to 15,216.47. Rate-sensitive telecom and utility shares lost 0.8 percent ahead of Wednesday’s January U.S. inflation report.
- The Trump administration is signaling progress on Nafta talks, particularly with Mexico, as Republican lawmakers voice support for a trade deal President Donald Trump has threatened repeatedly to abandon. The U.S. is making “headway” in its efforts to renegotiate the North American Free Trade agreement, Trade Representative Robert Lighthizer said on Tuesday at a meeting with the president and a bipartisan group of lawmakers at the White House. He also downplayed the likelihood of a U.S. withdrawal. Talks are going well, “particularly with the Mexicans,” he said.
- European stocks advance as investors assess earnings figures from companies including Natixis and Credit Suisse ahead of U.S. inflation data that will be scrutinized for clues on future central bank policy. The Stoxx Europe 600 Index rises 0.6% in a broad rally. Banks are the best-performing industry group as Natixis and Credit Suisse lead gains.
- U.S. stock-index futures extended gains, hitting a session high in early London trading as investors await a key inflation report Wednesday. March contracts on the S&P 500 rose 0.5 percent at 8:24 a.m. in London after fluctuating during Asian trading hours. Futures on the Dow Jones Industrial Average added 0.6 percent, while the Nasdaq 100 Index was up 0.6 percent.
- Japanese stock benchmarks dropped to a four-month low as the yen extended gains against the dollar before the release of a closely-watched U.S. inflation report later Wednesday. Technology and auto stocks weighed most heavily on the Topix index as Japan’s currency gained past a key resistance level to reach a 15-month high against the dollar.
- Oil traded near its lowest closing level in seven weeks in New York as signs of rising U.S. crude stockpiles fanned concern of a new surge in shale-oil production. U.S. crude futures dropped 0.7 percent after settling on Tuesday at the lowest since Dec. 22. The American Petroleum Institute was said to have reported nationwide crude stockpiles rose by 3.95 million barrels last week, which would be a third straight increase if confirmed by government data on Wednesday.
- Gold held gains as the dollar slipped, with investors counting down the hours before key U.S. inflation data that may offer fresh clues on monetary tightening.
- The euro-area economy maintained its robust growth pace at the end of last year, setting the stage for another solid performance in 2018 that may sway European Central Bank policy makers into winding down unprecedented stimulus. Gross domestic product increased 0.6 percent from the previous three months, Eurostat reported Wednesday, confirming a Jan. 30 estimate. Growth slowed in Germany and Italy, while the pace of expansion accelerated in the Netherlands and Portugal, according to separate reports.
- Warren Buffett is trimming one of his largest investments to avoid a regulatory headache. On Tuesday, he announced that he would sell back 35 million shares of Phillips 66 to the oil refiner, so that his firm, Berkshire Hathaway Inc., could get below a 10 percent stake in the company.
- AT&T Inc. is asking to add the head of the Justice Department’s Antitrust Division to its witness list as it prepares for a trial due next month over the government’s decision to block its $85 billion deal to buy Time Warner Inc., the New York Times reported. The phone giant is seeking to have Makan Delrahim, who took over the antitrust division in September, as a witness in a trial set to start March 19, the newspaper said, citing two people with knowledge of pretrial actions. AT&T has also asked for internal communications between Delrahim’s office and Attorney General Jeff Sessions, the Times reported, citing two unidentified people.
- Credit Suisse Group AG’s trading revenue rebounded at the start of the year along with market volatility, in what Chief Executive Officer Tidjane Thiam said was evidence that the investment bank was alive and well after two years of cost reductions. The first six weeks of 2018 showed a “strong start” in the market-dependent businesses, with revenue gains of 10 percent in its global markets unit and 15 percent in Asia-Pacific markets, Credit Suisse said Wednesday, sending the shares up by the most in more than two months. Thiam said he “couldn’t be more pleased” with that performance because it showed the last piece of his turnaround plan is in place.
- Bristol-Myers Squibb Co. agreed to pay biotechnology firm Nektar Therapeutics as much as $2.8 billion to gain rights to a promising experimental cancer medicine that appears to work well in combination with its own bestseller Opdivo. Nektar will get $1 billion upfront and stands to get another $1.78 billion in milestones for the drug, called NKTR-214. Bristol-Myers also said in astatement Wednesday it will buy $850 million worth of shares in the San Francisco-based company. Bloomberg News reported on Feb. 2 that Nektar was exploring options including a potential sale or licensing agreement.
- Uber Technologies Inc. had a painful 2017, but the business managed to grow. Adjusted net revenue last quarter increased 61 percent to $2.22 billion from the same period in 2016. Meanwhile, the total value of fares grew to $11 billion that quarter. It was the first full quarter under Dara Khosrowshahi, who took over the troubled business in September. Despite a turbulent year for the ride-hailing company, sales were $7.5 billion. But the company also posted a substantial loss of $4.5 billion. There are few historical precedents for the scale of its loss.
- Sky Plc is snagging more rights than ever — and paying less to boot — to broadcast Britain’s top soccer championship through 2022, a bonus for suitors 21st Century Fox Inc., Walt Disney Co. and Comcast Corp. The European broadcaster won the bulk of the Premier League rights in an auction result announced late Tuesday but will pay 16 percent less per game, offering buyers comfort about the profit outlook of its pay-TV business. Sky, the subject of a takeover bid from Fox, rose for the first time above the offer price on speculation its minority shareholders will push for a richer deal.
- Private equity firm CVC Capital Partners is close to selecting banks including Goldman Sachs Group Inc. and Citigroup Inc. to advise on an initial public offering for Sky Betting & Gaming, people familiar with the matter said. Barclays Plc as well as Deutsche Bank AG and Numis Securities Ltd. are likely to have a role on the potential share sale in London this year, the people said, asking not to be named as the details aren’t public. The offering could value the business at about 3 billion pounds ($4.16 billion), they said. No final decisions have been made and the plans may change, according to the people.
- Russian Eurobonds may see more than $2 billion of inflows if the nation wins back an investment-grade credit score this month, according to Societe Generale SA. S&P Global Ratings is due to review Russia’s sovereign rating on Feb. 23 as investors including Amundi Asset Management predict it’s only a matter of time before the world’s biggest energy exporter is lifted out of junk. Russia’s foreign debt is still rated investment grade at Fitch Ratings, meaning an upgrade by just one other agency would make it eligible for inclusion in the global benchmarks that international funds follow, such as Bloomberg Barclays and JPMorgan Chase & Co. indexes.
- Danone is selling about $1.8 billion worth of shares in Japan’s Yakult Honsha Co. as an activist investor pushes the world’s largest yogurt maker to boost its returns. The move pares back an investment the French company has held for more than a decade, reducing its stake in Yakult to about 7 percent from 21 percent. Danone will remain the largest shareholder.
- JD.com Inc. will raise about $2.5 billion by selling a stake in its logistics business to investors including Hillhouse Capital and Tencent Holdings Ltd. The agreement includes backing from China Merchants Group, Sequoia China and China Life, the Beijing-based e-commerce operator said in a statement Wednesday. JD.com will retain an 81 percent stake after the deal is completed this quarter, which suggests a valuation on the business of more than $10 billion.
- GKN Plc sharpened its argument against a hostile takeover attempt by Melrose Industries Plc, outlining plans to divest businesses representing a quarter of its sales, slash costs and return 2.5 billion pounds ($3.5 billion) in cash to shareholders over the next three years. The U.K. company will sell its powder metallurgy business and several smaller operations, and has begun to operate its automotive and aerospace parts businesses independently before considering a formal separation “when it makes sense,” GKN said in a statement Wednesday.
- Russian banks and a joint Russia-China investment fund are eager to participate in Saudi Aramco’s initial public offering, according to the head of a sovereign Russian investment fund. Several banks and other groups in Russia are interested in investing in shares of Aramco, the world’s biggest oil exporter, Kirill Dmitriev, chief executive officer of the Russian Direct Investment Fund, said Wednesday in Riyadh. Saudi Arabia plans this year to sell a stake of about 5 percent of the company in what could be a record IPO.
- Hennes & Mauritz AB executives, addressing a gathering of investors for the first time since reporting an earnings slump, failed to convince shareholders that the apparel retailer’s turnaround plan is on track. The Swedish company said it expected sales in comparable brick-and-mortar stores to recover in 2019 but said they’d continue to slide this year. The shares fell as much as 5 percent Wednesday after H&M said it expects markdowns to remain high as it struggles to clear stockpiles.
- Norway’s $1 trillion sovereign wealth fund could be restricted from investing in gambling stocks should opposition parties secure a parliamentary majority in favor of a ban. The wealth fund, the world’s biggest, has $26 billion invested in gambling stocks at end of last year, according to spokesman Aleksander Lee Olsen, confirming a figure reported earlier by E24. The fund held stakes in bookmakers such as William Hill Plc and Ladbrokes Coral Group Plc, and casino operators including Las Vegas Sands Corp. and MGM Resorts International, according to figures on the fund’s website for 2016.
- India’s second-biggest state-run bank said it has detected a $1.8 billion fraud at a single branch in the nation’s financial hub, the impact of which could extend to other lenders as well. Its shares plunged. Punjab National Bank has detected some fraudulent and unauthorized transactions in one of its branches in Mumbai “for the benefit of a few select account holders with their apparent connivance,” it said in an exchange filing on Wednesday. “Based on these transactions other banks appear to have advanced money to these customers abroad.”
- Noble Group Ltd. is planning to leave its perpetual bondholders as investors in an empty shell if they don’t approve a deal that wipes out more than 96 percent of their face value, according to people familiar with the matter. The fate of $400 million in perpetual bonds is a potential obstacle to the commodity trader’s $3.5 billion debt restructuring that was announced last month, with some holders of the notes aiming to block the deal.
- Thailand’s central bank left its benchmark interest rate unchanged near a record low, while forecasting inflation will pick up and return to the target range next quarter. Monetary policy committee members voted unanimously to hold the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to a Bank of Thailand statement on its website on Wednesday. The decision was predicted by all economists in a Bloomberg survey.
- Hillhouse Capital Management, the Chinese investment firm that last year helped lead Asia’s biggest-ever buyout deal, is targeting to raise about $6 billion in a new private equity fund, people with knowledge of the matter said. Hillhouse has started gauging interest from potential investors, one of the people said, asking not to be identified because the information is private. If successful, it will be the biggest dollar buyout pool raised by the firm, which started in 2005 with $20 million from Yale University’s endowment.
*All sources from Bloomberg unless otherwise specified