February 22nd, 2018
Daily Market Commentary
- Canadian stocks closed at the highest level since Feb. 2 as financials gained the most since April ahead of bank reporting season, which kicks off Thursday morning. The S&P/TSX Composite Index added 85 points or 0.6 percent to 15,524.01 after earlier rising as much as 1.2 percent. Financials gained 1.3 percent as Royal Bank of Canada added 2 percent and Bank of Montreal rose 1.7 percent.
- Canadian Imperial Bank of Commerce’s push to be less domestically focused is showing signs of success, thanks to its June takeover of Chicago-based PrivateBank. The country’s fifth-largest lender by assets posted profit of C$134 million ($106 million) from U.S. commercial banking and wealth management in the fiscal first quarter, only its second full reporting period since the $5 billion PrivateBank acquisition. A year ago the Toronto-based lender earned C$29 million from that U.S. business.
- Cobalt 27 Capital acquires 1.75% net smelter return royalty on metals production from Dumont Nickel-Cobalt Project in Abitibi region in Canada and sees its Electric Metals Streaming Corp. subsidiary adding additional royalty pacts over next year.
- European stocks fall, tracking a drop in U.S. and Asian shares, after minutes from the Federal Reserve’s latest meeting signaled potential for additional rate hikes this year, fueling investor worries over the outlook for inflation and bond yields. The Stoxx 600 drops 0.8%. The Euro Stoxx 50 falls 0.7%, with its 50-DMA crossing below its 200-DMA for the first time since September 2016, triggering a bearish technical signal known as a “death cross”.
- U.S. stocks reversed gains on Wednesday after minutes of the Fed’s January meeting showed increased confidence economic growth will accelerate while indicating concerns over inflation. Global stocks took another leg down on Thursday in the wake of Federal Reserve minutes that painted a healthy picture of the world’s biggest economy, raising the prospect of tighter monetary policy. The dollar was steady and Treasuries rose.
- Asian equities fell as U.S. Federal Reserve’s latest take on the economy strengthened the prospects of higher interest rates in the world’s largest economy, dampening the appeal of riskier assets. Japanese shares fell for a third day, while stocks in mainland China rose as trading resumed after the Lunar New Year holiday. The MSCI Asia Pacific Index fell 0.9 percent to 175.61 as of 4:48 p.m. in Hong Kong, with energy and utilities shares leading the decline.
- Oil fell on concern U.S. stockpiles expanded again. Futures lost as much as 1.5 percent in New York. Inventories probably rose 2.9 million barrels last week, according to a Bloomberg survey before a government report later Thursday. Global equities and industrial metals also dropped after an upbeat U.S. growth outlook fueled the possibility of interest-rate hikes.
- Gold declines for fifth day, longest stretch since June, after minutes of Federal Reserve’s January meeting show policymakers’ increasing confidence economic growth will pick up despite concerns around inflation, paving way for additional increases in interest rates this year.
- Industrial metals tumbled as traders took a dim view of the short-term outlook for prices with the dollar rallying and Chinese factories restarting slowly following the Lunar New Year holiday. Zinc fell as much as 2.9 percent to $3,437 a metric ton in Asian trading hours, the biggest drop in four months, as all metals slumped on the London Metal Exchange. Copper dropped for the third day this week to hover near $7,000 a ton, as traders eyed sluggish demand in top user China and the dollar headed for a fifth day of gains.
- Even Saudi Arabia wants in on the U.S. oil boom. The kingdom’s state oil firm considered the possibility of sending American crude to Asia in February via a U.S. unit before determining it wasn’t economically viable, according to a person with knowledge of the matter. It also asked potential buyers in Asia if they would be interested in U.S. supply, according to officials at two regional refiners. The people asked not to be identified because the information is confidential.
- Repsol SA sold a 20 percent stake in Spain’s Gas Natural SDG SA for 3.8 billion euros ($4.7 billion), marking its definitive departure from the company. Private-equity firm CVC Capital Partners offered 19 euros a share for the holding, a 3.9 percent premium to Wednesday’s closing price. Repsol will book a capital gain of about 400 million euros from the sale, which is pending approvals, the oil producer said Thursday.
- Centrica Plc stepped up its cost cutting drive, vowing to cut 4,000 more jobs and sell its nuclear assets after its profit plunged. Iain Conn, chief executive officer of Britain’s biggest energy supplier, apologized for “very poor” results last year and said he’d focus on widening margins and investments needed to compete with smaller and more nimble providers. The company lost about 1.35 million customer accounts in its consumer division, about 5 percent of the total.
- France’s top markets regulator is getting tough on cryptocurrency trading. The Autorite des Marches Financiers said on Thursday that online trading platforms for cryptocurrency derivatives fall under the European Union’s MiFID II regulations and face tough new reporting and business conduct standards. The platforms should also be barred from advertising the products electronically, a common practice in the industry.
- Activist investor Elliott Management Corp., having acquired a stake in Fidessa Group Plc, believes that a $2 billion bid from Temenos Group AG undervalues the U.K. computer-software provider, according to people familiar with the matter. The hedge fund run by billionaire Paul Singer is taking the stance that Fidessa could fetch a higher price from other software makers and private equity firms, said the people, asking not to be identified because the matter is private. It doesn’t currently plan to oppose the deal, but believes there are other potential buyers and wants the company to be open to rival offers, the people said.
- Apple Inc., seeking to bolster its wearables business, is working on upgrades to its wireless AirPods headphones, according to people familiar with the matter. Like with its mobile devices — the iPhone, iPad, and Apple Watch — Apple intends to frequently update the AirPods with new hardware features. The Cupertino, California-based technology giant is working on a new version for release as soon as this year with an upgraded wireless chip, the people said. A subsequent model for as early as next year is planned to be water resistant, they added, asking not to be identified discussing private product plans.
- China stopped updating its homegrown version of the VIX Index, taking another step to discourage speculation in equity-linked options after authorities tightened trading restrictions last week. State-run China Securities Index Co. didn’t publish a value for the SSE 50 ETF Volatility Index on its website Thursday. An employee who answered CSI’s inquiry line said the company stopped updating the measure to work on an upgrade. The move was designed to curb activity in the options market, said people familiar with the matter, who asked not to be identified discussing private information. It’s unclear when the index will resume.
- The U.K. economy expanded less than previously estimated in the fourth quarter as consumers and businesses absorbed faster inflation, keeping the country in the slow lane of global growth. The 0.4 percent expansion — revised down from 0.5 percent — also left full-year growth below the initial estimate. On an annualized basis, the rate was 1.6 percent in the quarter, compared with a 2.6 percent pace in the U.S.
- Bank of America Corp. is the latest overseas bank to commit its long-term future to the U.K. even as the country prepares for Brexit. The U.S. lender has extended the lease on its London headquarters by 10 years to 2032, according to a spokesman. That’s well beyond the U.K.’s planned departure from the European Union. The Bank of America Merrill Lynch Financial Centre at 2 King Edward Street in the City of London, which has about 585,000 square feet (54,300 square meters) of office space, is owned by Norway’s sovereign wealth fund. A spokeswoman for the wealth fund declined to comment.
- The battle to build one of the world’s biggest coal mines has suffered a fresh setback after Adani Enterprises Ltd. conceded it would fail to meet a March deadline to arrange A$3 billion ($2.3 billion) in financing for the project. The December decision by the Queensland government to veto Adani’s A$900 million funding bid for a rail line meant financing would require more time to be secured, an Adani Australia spokeswoman said by phone Thursday. The Indian conglomerate said it will also consider selling a minority stake in its Carmichael project without providing further details.
- President Donald Trump’s pledge to fix America’s ailing roads, bridges and airports may get an unlikely boost from retirement savers some 10,000 miles away in Australia. In face-to-face talks at the White House this week, Prime Minister Malcolm Turnbull will propose using a chunk of Australia’s A$2.53 trillion ($1.99 trillion) pension savings pool to help unlock funding for Trump’s infrastructure push. He’s being joined on the trip by local money managers who help control the world’s fourth-largest pot of retirement savings.
- Broadcom Ltd. lowered its hostile bid for Qualcomm Inc. after the target forged ahead with its own acquisition, further complicating shareholders’ decision on which management team should operate the world’s biggest maker of mobile phone chips. Broadcom said it’s now offering $79 in cash and stock per Qualcomm share, down from the “best and final” bid of $82 submitted earlier this month, in response to Qualcomm boosting its bid for NXP Semiconductors NV. Broadcom’s new bid reduces the cash part of the offer by $3 per share.
- While Barclays Plc’s messy 2017 ended on a mixed note, Jes Staley sees better things to come. Income from trading fell 18 percent, according to the bank’s fourth-quarter earnings report Thursday. That beat both the 26 percent decline estimated by UBS Group AG and the average 25 percent drop in markets revenue posted by Wall Street firms. The lender also said it will return its dividend to previous levels, while considering stock buybacks for the first time in more than 20 years, as its capital buffer rose in excess of its target.
- Ford Motor Co. ousted the head of its most important business unit because of unspecified “inappropriate behavior,” the latest in a litany of setbacks to hit the U.S. automaker. An internal probe found that Raj Nair, president of Ford’s North America operations, engaged in behavior “inconsistent with the company’s code of conduct,” according to a statement. Ford began the investigation after a recent anonymous complaint from within the company.
- Luye Medical Group, the health-care services provider backed by acquisitive Chinese entrepreneur Liu Dianbo, picked banks to manage a Singapore initial public offering that could raise about $500 million, people with knowledge of the matter said. Bank of America Corp., Credit Suisse Group AG and UBS Group AG were chosen after submitting proposals earlier this month, according to the people, who asked not to be identified because the information is private. The company, which is a unit of Luye Life Sciences Group Ltd., aims to sell shares this year, one of the people said.
- Nakheel PJSC is seeking to raise at least 4 billion dirhams ($1.1 billion) in loans to fund the development of new malls in Dubai, according to two people with knowledge of the plan. The developer of palm-shaped islands off Dubai’s coast is holding talks with banks for the fundraising, said the people, asking not to be identified because the information is private. Nakheel will use the loans, which are expected to run over seven to 10 years, to build new malls in Deira and Nad Al Sheba, they said. A spokeswoman for Nakheel declined to comment.
- Congress should investigate new allegations that Volkswagen AG diesel cars were sold overseas with rigged software after the company’s $14.7 billion settlement of a cheating scandal in the U.S., a Republican lawmaker said Wednesday. A new probe is “almost inevitable,” Representative Darrell Issa of California, the former chairman of the House Oversight and Government Reform Committee, said in a phone interview.
*All sources from Bloomberg unless otherwise specified