February 23rd, 2018
Daily Market Commentary
- Canadian stocks were unable to hold onto earlier gains, closing lower as consumer staples and financials weighed on the benchmark and bond yields tumbled. The S&P/TSX Composite Index lost 16 points or 0.1 percent to 15,508.17 after earlier gaining as much as 0.7 percent. Consumer staples fell 0.5 percent as Loblaw Cos. fell 1.8 percent after reporting fourth-quarter results.
- Royal Bank of Canada, the nation’s largest mortgage lender, isn’t hurting from a slowing housing market — yet. The bank reported 6.4 percent growth in Canadian residential mortgages in the fiscal first quarter, with average balances climbing to C$238.5 billion ($187.6 billion). That’s down from the 6.6 percent growth rate in the fourth quarter, though it’s still the second-best pace in seven quarters. Canadian banks have been anticipating a slowdown in mortgage lending amid elevated housing prices, overextended borrowers, and tougher mortgage eligibility rules that kicked in this year. Still, the nation’s housing market remains robust. Canadian home sales last year were second only to a record 2016, and were helped by price gains despite government efforts to cool the market.
- STEP Energy Services Ltd., a Canadian oilfield-services company, is looking toward Oklahoma’s Scoop and Stack regions for growth as drilling activity at home remains sluggish. The Calgary-based company on Thursday announced plans to buy closely held Tucker Energy Services Holdings Inc. for $275 million in cash, adding fracking capacity in the U.S. to its coiled-tubing operations in Canada.
- European stocks are steady in early trade amid investors’ cautiousness after Wall Street failed to hold onto gains for a fourth session in a row on Thursday. The Stoxx 600 is little changed, failing to cross above a key resistance level representing the 38.2% Fibonacci retracement of the selloff started in late January.
- Over in the U.S., traders seem unconvinced by the Federal Reserve’s hawkish tilt, with the market still pricing in less than the three quarter-point rate hikes that officials have signaled as likely this year. Minutes of the Fed’s January meeting indicated confidence the economy is strengthening amid signs inflation is rising.
- Asian equities rose, set for a second week of gains, as Japanese shares halted a three-day losing streak and South Korean stocks advanced the most in more than four months. Shares in Hong Kong rebounded from the worst loss in almost two weeks. The MSCI Asia Pacific Index added 1 percent to 177.76 as of 4:18 p.m. in Hong Kong, erasing a weekly decline as energy stocks led the advance.
- Oil headed for a second weekly increase as a surprise pullback in U.S. crude inventories compounded signs that a global glut is easing. Futures in New York are up 1.5 percent this week after closing at the highest level in two weeks on Thursday. While the U.S. is pumping near record volumes, exports also jumped to a four-month high last week, helping drain the nation’s stockpiles.
- Gold heads for third weekly decline in four as Federal Reserve’s upbeat assessment of U.S. economy raises possibility of tighter monetary policy, supporting dollar.
- India is planning to ask state-owned lender Punjab National Bank to compensate other lenders for losses arising out of the $1.8 billion fraud allegedly perpetrated by jewelers Nirav Modi and Mehul Choksi, a person familiar with the matter said. Banks including Allahabad Bank, Axis Bank and UCO Bank were hit after the jewelers allegedly colluded with a rogue PNB employee to obtain fraudulent guarantees for loans from their overseas branches. The quantum of loss isn’t known as the lenders are still in the process of investigating the fraudulent transactions, the person said, asking not to be identified as the discussions are private.
- Standard Life Aberdeen Plc is getting out of the insurance industry after almost 200 years. The Edinburgh-based company agreed to sell the unit to Phoenix Group Holdings for 3.2 billion pounds ($4.5 billion). The transaction will free up cash for Standard Life Aberdeen to pursue M&A deals as part of its ambition to become a $1 trillion money manager at a time when that part of the businesses is struggling to stem outflows.
- General Mills Inc. agreed to buy Blue Buffalo Pet Products Inc. for about $8 billion, adding the maker of natural dog and cat food to a portfolio that includes Haagen-Dazs ice cream and Cheerios cereal. The Minneapolis-based company plans to pay $40 a share for Blue Buffalo, which sells “antioxidant-rich” dog nutrition and walnut-based kitty litter, the companies said in a statement Friday. The deal comes as global food giants snap up makers of natural and organic products, which are outpacing mainstream brands in growth.
- British Airways owner IAG SA is following European rivals in a capacity splurge led by an expansion of its low-cost Level and Aer Lingus long-haul divisions, while going on the offensive in Europe. The shares fell as much as 3.9 percent in London, mirroring the reaction when rival Air France similarly said this month that it would charge ahead in the face of rising competition. IAG will increase capacity 6.7 percent in 2018, the company said in a statement Friday, as Level adds two planes and flights to North America from Paris, and Dublin-based Aer Lingus is rapidly expanding across the Atlantic.
- BMW AG is firming up plans to start making Mini city cars outside Europe for the first time, signing an initial agreement with Chinese manufacturer Great Wall Motor Co. Under the pact, which would add a second partner for BMW in China, the two companies will produce electric Minis in the world’s biggest market for battery-powered autos, the Munich-based luxury-car maker said Friday in a statement. Talks will now focus on a plant site in the country and final investment plans. BMW sold about 35,000 Mini vehicles in China last year, dwarfed by 560,000 deliveries there of the company’s namesake marque. Six BMW models are built locally with existing joint-venture partner Brilliance China Automotive Holdings Ltd.
- China’s government seized temporary control of Anbang Insurance Group Co. and will prosecute founder Wu Xiaohui for alleged fraud, cementing the downfall of a politically-connected dealmaker whose aggressive global expansion came to symbolize the financial overreach of China’s debt-laden conglomerates. The surprise move furthers President Xi Jinping’s anti-corruption and de-leveraging campaigns while providing a government backstop for the high-yield investment products that Anbang sold to hordes of Chinese citizens. It suggests that after months of clamping down on acquisitive tycoons, China is increasingly focused on insulating the economy from their shaky finances.
- U.S. regulators are scrutinizing this month’s implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse Group AG and other firms, several people familiar with the matter said. The Securities and Exchange Commission and the Commodity Futures Trading Commission have been conducting a broad review of trading since Feb. 5, when volatility spiked and investors lost billions of dollars, the people said.
- Momo Inc. has agreed to buy Tinder-like competitor Tantan for about $735 million to solidify its lead in Chinese online dating, according to two people familiar with the matter. Nasdaq-listed Momo will fund the acquisition with mostly cash and some of its own shares, the people said, asking not to be identified talking about a private deal. Tantan counts live-streaming giant YY Inc., Russia’s DST and Genesis Capital as backers but all three will unload their stock via the deal, according to the people. The agreement could be announced as soon as Friday, they added.
- Swedish buyout firm EQT Partners AB, which said it’s raised its largest fund ever, will begin investing the pool of money as soon as the second quarter. Private equity firms have been on a fundraising spree as yield-hungry investors seek returns outside of stocks and bonds. Last year, Apollo sealed$24.7 billion for its latest global buyout fund, the largest pool ever by a leveraged buyout firm. CVC Capital Partners raised more than 16 billion euros for its flagship European and North American fund, the most ever by a European buyout firm.
- Pakistan will be placed back onto an international terrorism-financing watch list from June, according to a person with direct knowledge of the matter, a move that may hinder the country’s access to financial markets. Following a push from the U.S., U.K., France and Germany, the Financial Action Task Force during a review meeting in Paris this week will announce that Pakistan is to be placed on its “grey” monitoring list. China, which is financing more than $50 billion of infrastructure projects across Pakistan, removed its earlier objections to the move, said the person, who asked not to be identified as the decision hasn’t been announced yet. Pakistan’s benchmark stock index reversed earlier gains and fell 0.8 percent in Karachi.
- Royal Bank of Scotland Group Plc swung to its first full-year profit in a decade, but the delay in settling with the U.S. Department of Justice over a mortgage-securities probe and rising restructuring costs are casting a shadow on any celebrations. The shares fell. Executives at the government-owned bank warned restructuring costs will be about 2.5 billion pounds ($3.5 billion) over the next two years, and that it may take further charges for litigation as discussions with the U.S. regulators remain beyond the company’s control. The restructuring costs are partially linked to the increased use of artificial intelligence and technology, as the lender aims to catch up with its competitors.
*All sources from Bloomberg unless otherwise specified