February 8th, 2018
Daily Market Commentary
- Canadian stocks were unable to hold onto early gains, closing down for the 7th time in 8 days as U.S. oil stockpiles grew the most since September, weighing on energy stocks. The S&P/TSX Composite Index fell 33 points or 0.2 percent to 15,330.58, the lowest since mid-September. Energy shares lost 1% as crude prices tumbled 2.5% to the lowest since early January.
- MEG Energy Corp. is pleased to announce that it has entered into an agreement with Wolf Midstream Inc. for the sale of the Company’s 50% interest in Access Pipeline and 100% interest in Stonefell Terminal for cash and other consideration of $1.61 billion, representing 13.4x 2018 annualized EBITDA.
- Canada will introduce new review rules for major projects such as pipelines, after pledging it wanted to give investors firm, predictable timelines. Prime Minister Justin Trudeau’s government will unveil its overhaul of “environmental and regulatory reviews related to major projects” on Thursday — as a provincial trade war brews over a Kinder Morgan Inc. pipeline project that has already been approved. The announcement is scheduled for noon Ottawa time, with ministers set to fan out across the country to sell the new regime.
- Aftershocks from the global stock selloff continued to reverberate around markets on Thursday, with European shares falling. The Stoxx Europe 600 Index declined, with miners leading the retreat as most country benchmarks in the region fell.
- S&P 500 Index futures swung between gains and losses after falling in Asia trading. U.S. 10-year Treasuries were steady after weak demand at a bond sale Wednesday pushed the yield back toward the recent four-year high. Traders remain on edge after the resurgent threat of inflation and higher bond yields helped trigger a burst of volatility and a pullback across the overheated global equity market.
- Asian stocks rose, halting a four-day slide that wiped out this year’s advance, with investors still cautious that volatility will return. Indian equities gained a day after the central bank kept borrowing costs unchanged, while Japanese stocks climbed on speculation losses were excessive. The MSCI Asia Pacific Index advanced 0.3 percent at 173.60 as of 4:44 p.m. in Hong Kong, after fluctuating between a 0.7 percent gain and a 0.2 percent loss.
- WTI fell for a fifth day as surging U.S. output and a rising dollar sent crude to its biggest drop in two months. Futures fell as much as 0.9 percent in New York after Department of Energy data showed U.S. crude production jumped to a record 10.25 million barrels a day last week. Investors were also left disappointed after American crude stockpiles rose, countering an earlier industry report that had pointed to a decrease. The Bloomberg Dollar Spot index traded higher on Thursday.
- Gold drops for third day, its longest losing streak since early December, to lowest in almost a month as dollar strengthens and bond yields hold around four-year highs as investors mull outlook for inflation, interest rates.
- China’s just imported a gargantuan volume of iron ore. Shipments topped 100 million metric tons in January, the second-highest volume ever and a record for the month, as mills bought more cargoes amid expectations steel output will rebound when winter curbs are lifted. Purchases swelled to 100.3 million tons, 9.3 percent higher than a year ago, and well above the 84.1 million tons seen in December, according to customs data on Thursday. The record monthly figure in the world’s largest buyer stands at 102.8 million tons, which was set in September.
- Twitter Inc. posted a surprise gain in revenue, the first growth in four quarters, driven by improvements to its app and added video content that are persuading advertisers to boost spending on the social network. The shares surged. The company topped analysts’ average sales estimates in the fourth quarter and for the first time posted a real profit, a milestone in Chief Executive Officer Jack Dorsey’s turnaround effort. Monthly active users were little changed from the prior quarter at 330 million, a lower-than-projected total that the company attributed in part to stepped-up efforts to reduce spam, malicious activity and fake accounts.
- The Bank of England lifted its forecasts for economic growth and suggested it may need to raise interest rates faster than previously indicated. The Monetary Policy Committee, led by Governor Mark Carney, sees the U.K. growing quicker than its sustainable pace through 2020, meaning there’s a greater risk of overheating. Inflation is projected to remain above the 2 percent target under the current yield curve, which prices in about three quarter-point hikes over the next three years.
- Wounded retail investors are curbing their optimism after the U.S. equity market lost $1.3 trillion of value over the past week. The percentage saying they are bullish in the American Association of Individual Investors (AAII) weekly survey — a closely followed indicator of market sentiment — has dropped to 37 percent from 45 percent last week, the lowest in two months. And AAII’s bull-bear spread has hit the weakest since mid-November.
- BlackRock Inc., the world’s largest money manager, is seeking to raise more than $10 billion to buy and hold stakes in companies. BlackRock, which oversees about $6 trillion in assets, is seeking capital from sovereign-wealth funds, pensions and other big investors for an effort named BlackRock Long-Term Private Capital, according to a person familiar with the matter.
- The Senate is poised to quickly pass a bipartisan budget deal Thursday that would avert a government shutdown and suspend the federal debt ceiling, but the bill faces less certain prospects in the House, where the chamber’s top Democrat and GOP conservatives are raising objections. Democratic leader Nancy Pelosi, who emphasized her opposition with an unprecedented eight-hour address on the House floor Wednesday, has vowed to reject it without a promise of an open immigration debate. And some conservatives, particularly members of the House Freedom Caucus, oppose the deal because it calls for increased domestic spending.
- President Donald Trump’s fiscal 2019 budget will request 24 Super Hornet jets built by Boeing Co., reversing an Obama administration decision to stop buying the fighter after this year, according to two people familiar with the decision. The Navy has argued that it needs more of the planes designated F/A-18E/F to fill a shortage in its inventory until more of Lockheed Martin Corp.’s newer F-35s are deployed. Before Trump even took office, he’d promoted the Super Hornet as a less costly alternative to the F-35, though the two planes have different capabilities.
- The Chinese sovereign wealth fund is considering joining the bidding for Rio Tinto Group’s last remaining coal mines, which may fetch more than $2 billion, people familiar with the matter said. China Investment Corp. is discussing making a joint offer with Australian private equity firm EMR Capital Advisors Pty, which was among shortlisted bidders for the Hail Creek and Kestrel mines, according to the people. Suitors are scheduled to make site visits to the operations in Australia’s Queensland state this month ahead of the final bid deadline in March, the people said, asking not to be identified because the information is private.
- Societe Generale SA Chief Executive Officer Frederic Oudea weathered the low volatility in late 2017 better than some competitors, returning the bank’s equities-trading business to traditional strength. After declines that were worse than rivals such as BNP Paribas SA earlier in the year, the bank posted fourth-quarter equities income of 501 million euros ($614 million) that beat analysts estimates, though was little changed from a year earlier. The lender also posted higher-than-expected quarterly sales and net income, even as restructuring and other charges hit the bottom line.
- India’s wheat imports are set to surge as lower plantings and poor rain threaten output in the world’s biggest grower after China. Imports may total 3.5 million metric tons in the year from April 1, according to the median estimate of eight traders and analysts surveyed by Bloomberg. That compares with the U.S. Department of Agriculture’s estimate of 2.5 million tons for 2017-18. Output is seen falling to a three-year low of 92 million tons in 2017-18 from 98.4 million tons estimated by the government for 2016-17.
- Nine lenders have been warned by the U.S. that they will be kicked out of a top mortgage program within months unless they find ways to stop costly rapid refinances of veterans’ loans. The warnings stem from a probe by Ginnie Mae, a government-owned corporation that makes mortgages cheaper by protecting bond investors against homeowner defaults. Ginnie Mae guarantees about $2 trillion in bonds containing loans backed by agencies including the Department of Veterans Affairs.
- Swiss Re AG shares rose the most in more than six years after the company said that it’s in talks with SoftBank Group Corp. about the Japanese company taking a stake in the reinsurer. SoftBank could purchase as much as a third of Swiss Re, one of the world’s largest reinsurers, according to people familiar with the discussions, who asked not to be identified because no agreement has been reached. The transaction could be valued at more than $10 billion. Swiss Re confirmed the talks and said they are at a very early stage.
- China’s yuan sank the most since the aftermath of its shock 2015 devaluation, after data showed the country’s trade surplus more than halved last month, and investors speculated controls on outward cash flows will be eased. The yuan weakened as much as 1.2 percent in Shanghai, touching as low as 6.3550 per dollar on Thursday. The slump marks a reversal for the managed currency, which acts as an anchor for the wider Asian region and has beenrallying amid the dollar’s retreat.
- Greece is issuing a new seven-year bond in another step toward exiting a bailout program in August that has kept the nation afloat. The country may price the euro 2025 notes Thursday in the 3.75 percent area, people familiar with the matter said, asking not to be named because they’re not authorized to speak about it. Barclays Plc, BNP Paribas SA, Citigroup Inc and JPMorgan Chase & Co. are the bookrunners for the bond. The government aims to create a cash buffer of about 20 billion euros ($24.5 billion) by the time its bailout program ends in August, of which half will come from markets and the rest from European Stability Mechanism bailout funds.
- Investors got a stark reminder of how fast their bets can turn in China, where the most bullish trades are falling apart. The country’s currency was their latest favorite to succumb to a rout that has roiled financial markets around the world this week, losing as much as 1.2 percent on Thursday for the biggest decline since the aftermath of its 2015 shock devaluation. That follows a selloff in large caps and banks that has wiped out about $660 billion from the value of Chinese equities.
- Japanese investors dumped U.S. sovereign bonds for a third month in December, taking sales last year to the highest in a decade. Investors from the Asian nation sold a net 475.2 billion yen ($4.3 billion) of U.S. debt in December, the Ministry of Finance’s balance of payment data showed Thursday. That took total withdrawals for 2017 to 3.83 trillion yen, the most since 2007, when they offloaded 3.98 trillion yen. They were net buyers between 2014 and 2016.
- Teva Pharmaceutical Industries Ltd. said its profit will slump further this year as new Chief Executive Officer Kare Schultz tightens belts drastically at the world’s largest generic drugmaker and competition to its top medicine escalates. Profit excluding some costs will be between $2.25 a share to $2.50 a share this year, compared with $4.01 a share in 2017, the Israeli company said in a statement on Thursday. That was well below analyst estimates, and the shares fell as much as 5.6 percent in Tel Aviv.
- Bermuda-based insurer XL Group Ltd. is attracting interest from rivals including Allianz SE of Germany, according to people with knowledge of the matter. Interest from insurers in potentially acquiring XL, which had a market value of almost $10 billion at Tuesday’s close, is preliminary and may not lead to a takeover, the people said. Allianz is looking at XL as a potential target to grow its casualty coverage business in the U.S., the people said, asking not to be identified as the talks are confidential.
- Nordic Capital and Sampo Oyj offered to buy Nordax Group AB in a bid valuing the Swedish niche bank at 6.66 billion kronor ($825 million). The private-equity firm’s Fund VIII and the Finnish investment company offered 60 kronor a share in cash for Nordax, a 15 percent premium to the closing price on Wednesday, according to a statement on Thursday. Nordax’ board unanimously recommended shareholders to accept the bid.
- Viacom Inc. reported lower revenue for the first three months of fiscal 2018, reminding investors why the controlling Redstone family wants to merge the company with their other big media investment, CBS Corp. Sales fell about 8 percent to $3.07 billion in the period, New York-based Viacom said Thursday in a statement. That was less than the $3.15 billion average of analysts’ estimates and resulted from slumping ad sales, slower growth in subscriber fees and struggles at the Paramount Pictures film studio.
*All sources from Bloomberg unless otherwise specified