February 7th, 2019
Daily Market Commentary
- Canadian stocks were little changed, snapping a 2-day rally. U.S. stocks were lower as investors weighed positive corporate earnings against persistent concerns over trade and another government shutdown. The Canadian benchmark fell less than 0.1 percent. Consumer discretionary and materials outperformed. Marijuana stocks cooled after a strong rally, weighing on the benchmark.
- TransCanada Corp.’s Keystone pipeline and Enbridge Inc.’s Platte pipeline were shut Wednesday to investigate a possible oil spill in Missouri. Both lines carry Canadian crude to the U.S. The shutdowns come as Canada’s heavy oil is in greater demand among U.S. refiners, following supply cuts by OPEC and U.S. sanctions against Venezuelan state oil company Petroleos de Venezuela SA. If prolonged, the closures also could exacerbate a pipeline bottleneck in Alberta, Canada, where a supply glut sent the price of crude to record lows in October.
- Lightspeed POS Inc., which filed for an initial public offering Wednesday, is seeking to raise about C$200 million ($151.4 million), according to people familiar with the matter. The Montreal-based maker of payments software has filed a preliminary prospectus with Canadian regulators and plans to list its shares on the Toronto Stock Exchange under the ticker LSPD, it said in the filing. Bank of Montreal, National Bank Financial and JPMorgan Chase & Co. are running the share sale.
- Suncor Energy Inc. Chief Executive Officer Steve Williamssaid he expects Alberta’s mandated oil-production cuts to end earlier than planned after the program boosted heavy crude prices so much that it made purchases unprofitable for U.S. refiners. Alberta’s curtailment program — intended to clear space on the province’s limited pipelines and draw down a glut of oil that had built up in storage — has meant it’s now uneconomic for U.S. refiners to buy crude from Alberta and foot the bill to move it via rail, he said.
- Stocks in Europe fell alongside U.S. index futures after a mixed session in Asia as signs emerged that the global rally in equities is stalling. Italian bond yields rose after the European Commission slashed growth forecasts for the euro region’s major economies. The Stoxx Europe 600 Index extended declines, dragged down by automakers and banks as sharply lower trading revenue from Societe Generale SA countered positive results from UniCredit SpA and DNB ASA. Futures on the S&P 500, Dow and Nasdaq indexes all slipped. In Japan, shares fell amid a raft of corporate earnings, although SoftBank surged 18 percent on plans for its biggest-ever buyback. China and Hong Kong markets are shut.
- Japanese shares fell as chemical companies and automakers slid, weighed down by disappointing earnings figures. Chemical companies contributed most to the benchmark Topix index’s drop. Asahi Kasei Corp. was the biggest drag among industry peers after cutting its full-year profit forecasts, citing price dips in petrochemicals and the impact of China’s economic slowdown. Automakers extended declines from earlier this week, with Toyota Motor Corp. sliding almost 2 percent following a net income forecast cut on Wednesday.
- Sovereign bonds in India rallied after the central bank unexpectedly cut its key rate and dropped its hawkish stance citing easing inflation, providing relief to traders concerned about a record government borrowing program. The yield on the most-traded 2028 sovereign bond fell seven basis points to 7.50 percent, cooling from 7.57 percent just before the Reserve Bank of India reduced the policy rate for the first time since August 2017. The drop marked a shift in sentiment that had pushed up yields by the most since May last week on concerns about widening in the deficit targets.
- U.S. stock futures were signaling a second day of losses for the S&P 500, following declines in equity markets in Europe and Asia. The retreat in stock volatility in Europe, though, could be a sign this year’s rally may return, Ben Dow noted. The dollar gained and Treasuries were little changed before data on jobless claims and Treasury’s sale of a 30-year bond.
- Oil steadied near $54 a barrel as a decline in American fuel inventories signaled that demand remains healthy despite ongoing concerns about the global economy. Inventories of winter fuel in the U.S. fell more than expected last week as cold polar air blasted the nation, though crude stockpiles rose amid record output, according to the Energy Information Administration. Elsewhere, supplies from OPEC face heightened uncertainty after Libya’s eastern leader Khalifa Haftarsaid his forces have taken control of the country’s largest oil field.
- Palladium led gains among precious metals, touching the highest level in more than two weeks amid a deficit that’s expected to grow and a likely increase in demand from China. Gold traded flat as investors awaited fresh cues from further meetings between the U.S. and China on trade and as Asian markets remained shut for the Lunar New Year holiday.
- Twitter Inc. gave a lackluster first-quarter sales forecast and reported tepid user growth, suggesting changes to improve the social-media platform haven’t yet attracted a much wider audience. Revenue will be $715 million to $775 million in the period, the San Francisco-based company said Thursday in a statement. Analysts, on average, projected $766.1 million, according to data compiled by Bloomberg. The shares slid about 7 percent in early trading.
- BB&T Corp. plans to acquire SunTrust Banks Inc. in an all-share deal in the biggest global bank merger for more than a decade, which will create the sixth-largest bank in the U.S. SunTrust shareholders will receive 1.295 shares of BB&T for each SunTrust share they own, the companies said in a joint statement on Thursday. Shareholders of Winston-Salem, North Carolina-based BB&T will own approximately 57 percent of the combined company and Atlanta-based SunTrust’s holders will own about 43 percent.
- House Democrats are facing off with Republicans for a battle that could turn intensely personal for Donald Trump and risks a backlash against the chamber’s new majority — how to get their hands on the president’s tax returns. Representative Richard Neal, chairman of the tax-writing House Ways and Means Committee, has said he is all too aware of the political dangers of delving deep into Trump’s personal finances. Neal, of Massachusetts, has delegated the task to his oversight subcommittee, which holds its first hearing Thursday on the matter.
- Societe Generale SA is shrinking its markets business and cutting an additional 500 million euros ($567 million) of costs to combat the market rout that sent trading revenue tumbling. The Paris-based bank is replacing global markets head Frank Drouet and cutting about 8 billion euros ($9.1 billion) of risk-weighted assets. SocGen will review less profitable fixed-income and currencies activities after a 29 percent decline in fourth quarter revenue, while seeking to maintain its position in equity derivatives.
- The Trump administration escalated its dispute with Germany over the transfer of a terror suspect sought by the U.S., with American officials berating their German counterparts in a private meeting and Acting Attorney General Matt Whitaker issuing an unusual rebuke of an ally for sending the man to Turkey. Senior U.S. and German officials had a heated argument over the fate of Adem Yilmaz, a Turkish man convicted of belonging to a terrorist cell, after he was deported to Turkey despite a U.S. extradition request. The dispute is the latest sign of mounting strain between the two allies under Donald Trump’s presidency.
- The Bank of England warned that the impact on the economy from Brexit has increased as it cut its growth forecast and predicted a dramatic slump in investment. As the U.K. approaches the March 29 deadline to leave the European Union without yet having a deal for a new relationship settled, businesses are slashing spending and consumers are growing more worried.
- JPMorgan Chase & Co. suddenly finds itself caught in the middle of the struggle for power in Venezuela. The dilemma surrounds the bank’s bond indexes, long the industry standard for gauging emerging-market performance. After the U.S. slapped sweeping sanctions on Nicolas Maduro’s regime last week, trading in the nation’s defaulted debt grounded to a halt — a development that typically would prompt JPMorgan to yank the notes from its indexes. But bondholders as well as some Venezuelan politicians aligned with Juan Guaido, the U.S.-backed lawmaker trying to oust Maduro, are now actively lobbying to get JPMorgan to keep the debt in the index.
- Fiat Chrysler Automobiles NV plunged as much as 10 percent after reporting a 2019 outlook that missed analysts’ estimates. The Italian-American company forecast 6.7 billion euros ($7.6 billion) in adjusted Ebit for 2019, well below targets that ranged from 7.1 billion to 8.6 billion euros. The forecast excludes the Magneti Marelli unit that’s being sold, but even so it’s far weaker than expected. The guidance “looks weak despite that issue,” Demian Flowers, an analyst with Commerzbank said in an email.
- Howard Schultz is unlikely to land in the White House if he makes an independent bid for the presidency, but he would probably pull enough votes away from a Democratic candidate to strengthen Donald Trump’s prospects for re-election. That’s the conclusion of a survey examining the former Starbucks Corp. chief executive officer’s political ambitions conducted by Optimus, a data-science firm that’s studying the effects of independent candidates on the 2020 race.
*All sources from Bloomberg unless otherwise specified