January 24th, 2020

Daily Market Commentary

Canadian Headlines

  • Canada Tries to Bring ‘Little More Light’ to Climate-and-Oil Clash. Canada’s fraught debate on decreasing greenhouse gas emissions while growing its economy will have a helping hand from a new government-funded research body, its leadership and observers say. The Canadian Institute for Climate Choices opened its doors this week to praise from academics, business leaders, and environmental groups, despite obstacles that include those opposed to shrinking the country’s large oil sector.
  • Lundin Gold CEO Looking for Acquisitions, Open to a Takeover. With its first commercial production around the corner, Lundin Gold Inc. is looking at options to grow — including acquisitions. The company’s largest shareholder, Melbourne-based Newcrest Mining Ltd., is supportive of a potential acquisition, as is the Lundin family, also a major owner, Hochstein said. “The challenge for us is going to be finding something that’s accretive for our shareholders.” Lundin Gold has marked out a “concentric circle” of geographic targets in which a “bulls-eye” would be a pure-play gold asset in Latin America, outside Ecuador. Beyond that, the Vancouver-based miner would look at the rest of the Americas and then the world, excluding Russia, China and the “Stans.” Meanwhile, it will focus on organic growth through additional land.
  • Cincinnati Bell Inc. says it received a non-binding proposal from an infrastructure fund to acquire all outstanding shares for $12/share cash. Brookfield Infrastructure announced plans on Dec. 23 to buy Cincinnati Bell for $10.50/share. Cincinnati Bell says it has commenced discussions with the fund regarding the proposal, but says Brookfield deal “remains in effect” and board reaffirms its existing support of deal with Brookfield
  • Uber Says It Has Permission to Operate in Vancouver – Finally. After eight years of lobbying, backed by complaints from frustrated tourists and local techies, it looks like Uber will finally begin operating in Canada’s third-biggest city. Vancouver was one of Uber’s first targeted destinations outside the U.S., but provincial authorities quickly kicked them out. Unlike dozens of other places where Uber outmaneuvered local authorities, operating outside of the law until public pressure forced regulators to accommodate them, Vancouver was never swayed.



World Headlines

  • Wall Street Caves on MiFID, Allows Separate Payment for Research. Banks are increasingly embracing a change that could trigger upheaval for Wall Street’s vaunted stock analysts. They’ve started allowing U.S. clients to buy research without paying a steep tab for trading services. The shift, which banks’ brokerage businesses have privately shared with customers, is arguably the biggest U.S. fallout yet from sweeping European rules that force firms to charge separately for analysis. Those regulations, which took effect in 2018, sparked a revolt among some money managers, who began asking why they still had to trade with a brokerage just to get access to its research in the U.S. when that was no longer the case across the Atlantic
  • Stocks Jump, Futures Rise as Virus Fears on Hold. Stocks jumped in Europe while U.S. index futures edged higher as investors digested the latest corporate news and economic data, setting  aside for now fears over a deadly virus spreading from China. Oil fell for a fourth day.
  • Joe Biden and Bernie Sanders lead the Democratic field while Elizabeth Warren is a distant third in a national 7 News/Emerson College poll. The gender gap in Trump’s approval rating is a massive 19 percentage points in that same survey.
  • Intel jumped in early trading after delivering more signs of strength in the chip industry. Its sales forecast for 2020 and the current quarter were well above estimates, driven by a surge in demand from cloud-computing centers. The guidance may even be conservative, BI said. Intel will boost spending on new plants and equipment to $17 billion to fulfill orders and build inventory.
  • House Democrats will wrap up their impeachment case today. Three Republicans may back the call for more evidence, but Lisa Murkowski — whom Democrats are counting on to support subpoenas for witnesses and documents — questioned whether that makes sense if it leads to a long court fight with the White House. Trump’s legal team starts its defense tomorrow.
  • China Locks Down 40 Million People as Anger Grows Over Virus. China is struggling to contain rising public anger over its response to a spreading coronavirus even as it took unprecedented steps to slow the outbreak, restricting travel for 40 million people on the eve of Lunar New Year. LATEST: China orders travel agencies to suspend sales of tour packages. Death toll jumps to 25 from 18; one victim age 36. Over 10 Chinese cities curb travel. Cases emerge in 32 of China’s 34 provinces. WHO opts not to declare global emergency yet
  • Europe Stocks Back at Record High With PMIs Eclipsing Virus Fear. European stocks climbed to a fresh record, rebounding from four days of losses, after strong economic data from Germany and the U.K. overshadowed worries about a China virus outbreak. The Stoxx 600 Index rose 1.2% higher as of 9:30 a.m. in London, with all of the industry groups in the green. Retailers were in the lead as Carrefour SA jumped the most in a year after the French supermarket chain issued higher-than-expected profit guidance.
  • EU, China, 15 Others Form Alliance to Settle Trade Disputes. The European Union and a group of 16 nations that includes China and Brazil are forming an alliance to settle their trade disputes using an appeals and arbitration system at the World Trade Organization to replace temporarily a process stymied by the U.S. “We will work towards putting in place contingency measures that would allow for appeals of WTO panel reports in disputes among ourselves,” according to the joint declaration posted by the European Commission.
  • Small Caps’ S&P 500 Lag Deepens as Record Remains Elusive. While stock markets around the world have continued to hit records this year, that milestone has remained elusive for U.S. small-cap stocks. Though the Russell 2000 Index last week came within 2% of its all-time high set in 2018, it trails the S&P 500 Index on a monthly basis by the most since August.
  • UBS Says Buy the Dip in China as Virus Impact Set to Fade Away. While airline, tourism and some consumption-related companies may suffer, “we view the knee-jerk reaction as a tactical buying opportunity,” analysts and strategists including Hong Kong-based Eva Lee wrote in a report, saying they remain positive on Asian equities and China in particular.
  • Japan’s inflation pickup in December was led by prices of volatile components — gasoline and accommodation. Prices of durable goods remained weak, probably reflecting the hit to real spending by consumers after the sales-tax hike
  • Vale’s iron ore output in 2020 is set to return to the record level reached before last year’s dam disaster, Brazil’s mines minister said. That will raise supplies at weakening prices. Vale produced 385 million tons of the raw material in 2018.
  • OPEC Discussing Output Cuts Extension to End-2020. OPEC is discussing the possibility of extending its oil output-cuts deal to the end of the year with talks at preliminary stage, Tass reports, citing an unidentified person within the producer group, speaking Friday on the sidelines of the World Economic Forum in Davos, Switzerland.

*All sources from Bloomberg unless otherwise specified