January 16th, 2018

 

Daily Market Commentary

 

Canadian Headlines

• Canadian stocks posted their biggest gain in two weeks as marijuana companies resumed a rally that stalled in the latter half of last week. The S&P/TSX Composite Index added 64 points or 0.4 percent to 16,371.81. Volume was 33 percent below the 100-day average as U.S. markets were shut for a holiday. The health-care index jumped 6.2 percent, the most in five weeks, as pot stocks soared. Canopy Growth Corp. added 13 percent and Aphria Inc. jumped 20 percent, the most since November 2016.
• Canada Mortgage & Housing Corp. replaced Chief Financial Officer Wojo Zielonka and shuffled its leadership ranks to “better address current and emerging business needs.” The government-backed mortgage insurer made changes to its leadership team to ensure it continues to meet its business objectives and the housing needs of Canadians, Audrey-Anne Coulombe, spokeswoman for CMHC, said in an email to Bloomberg on Monday. “Many of our leaders have been asked to take on redefined roles.”
• Amid the bogs and forests of northern Alberta, in the heart of the Canadian oil patch, lie some of the largest waste dumps of the global energy business. In the shadow of the pipes and smokestacks that turn oil sands into flowing crude, earthen dams as long as 11 miles encircle lakes of toxic sludge, the byproduct of decades of extraction. These waste pools — known as tailings ponds — represent perhaps the most serious environmental challenge facing the oil-sands industry. Now, the battle over how quickly to clean them up — and fears about who will pay — are escalating anew.
• Cenovus Energy Inc., which has been selling assets to pay down debt from the acquisition of ConocoPhillips operations in Canada, is putting a natural gas-rich block along the eastern slopes of the Rocky Mountains for sale. Production from the Clearwater block in the Deep Basin of western Alberta is about 16,500 barrels of oil equivalent a day, the Calgary-based company said Monday in a presentation on its website.
• Canada and the U.K. are continuing to press Boeing Co. to drop its trade challenge of Bombardier Inc., with one Canadian minister saying any resolution must also include the cancellation of U.S. punitive tariffs.

 

 

World Headlines

• European shares rise, as investors weigh earnings at companies including Hugo Boss, while gains in insurers and financial service shares offset losses in miners. The Stoxx Europe 600 Index adds 0.3%. Hugo Boss rises after reporting an improvement in quarterly same-store sales. Miners are the worst performers, halting an 8-day rally that had pushed them to a 2012 high.
• U.S. stock-index futures climb, signalling extension of gains on the back of synchronized global growth. The dollar steadied on Tuesday after its lowest close in three years.
• Asian stocks extended gains for a third day as Hong Kong equities surged to an all-time high and Japanese shares closed at another record as the yen weakened against the dollar. The MSCI Asia Pacific Index added 0.5 percent to 182.96, set for another record close as of 4:43 p.m. in Hong Kong, where the Hang Seng Index climbed to its highest level since 1964.
• Oil slipped from a three-year high amid speculation that a surge in hedge-fund buying had pushed prices up too quickly. Futures lost 0.7 percent in New York after earlier adding 0.9 percent. Money managers increased their bullish bets on U.S. crude to the highest in more than a decade, according to data from the Commodity Futures Trading Commission on Friday. Futures’ 14-day Relative Strength Index also showed they’ve been in overbought territory since the beginning of last week.
• Gold retreated from a four-month high as the dollar regained its footing and stocks in Europe maintained a bullish tone.
• U.K. inflation eased for the first time in six months in December, which may be the start of a slowdown that will ease pressure on consumers who spent 2017 being squeezed by rising prices. The decline took the rate to 3 percent from 3.1 percent in November, which was the fastest in more than five years.
• Iron ore’s about to collapse right back to $50 a metric ton, according to Barclays Plc, which warns the commodity faces an imminent sell-off as steel mills’ profitability in China recedes, growth in the top importer slows and supplies at ports are at unprecedented levels.
• General Electric Co. will take a charge of $6.2 billion for the fourth quarter as the manufacturing behemoth grapples with lingering problems in a legacy insurance business. The after-tax charge will be $7.5 billion when adjusted to the rate following the recent U.S. tax overhaul, GE said Tuesday in a statement. The Boston-based company’s finance unit, GE Capital, will make statutory reserve contributions of about $15 billion over seven years following a lengthy review of the North American Life & Health portfolio.
• Energizer Holdings Inc. agreed to buy Spectrum Brands Holdings Inc.’s battery and lighting business for $2 billion in cash, gaining brands such as Varta and Rayovac. The maker of Energizer batteries and EverReady portable lights will get a business with a range of rechargeable, alkaline, carbon zinc, hearing aid and nickel metal hydride batteries as well as chargers, the St. Louis-based company said in a statement. The Spectrum business garnered revenue of $866 million last year.
• BP shares fell the most among European energy companies after announcing a charge of about $1.7 billion as part of the Deepwater Horizon disaster’s class-action settlement. Cash payments related to Deepwater Horizon in 2018 are now anticipated to be about $3 billion, higher than the company’s third-quarter estimate of just over $2 billion.
• Republican congressional leaders are struggling to separate the immigration blow-up set off by President Donald Trump from a funding bill to avert a U.S. government shutdown at the end of this week. Democrats say the burden is on Trump to help break the stalemate after he rejected a bipartisan proposal to shield young, undocumented immigrants from deportation and ignited outrage by reportedly disparaging Haiti and African nations as “shithole countries.” Democrats want to attach such an immigration measure to the must-pass spending bill, an idea House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell reject.
• The European Union has stepped up the demands for concessions that the U.K. must make during the transition period that follows Brexit, pushing back the cut-off date for the acquisition of rights for EU citizens, according to revised draft negotiating directives obtained by Bloomberg. The U.K. won’t be able to apply new immigration rules to EU citizens arriving during the transition period, according to the document dated Jan. 15. That means any EU citizen arriving in Britain before the end of 2020 would be able to remain indefinitely.
• January’s cryptocurrency selloff got fresh impetus on Tuesday when bitcoin slumped, plunging as much as 20 percent as the prospect of regulatory crackdowns appeared to spread. The largest digital coin fell 14 percent to $11,940 as of 11:40 a.m. in London, the lowest level since late December, according to composite pricing on Bloomberg. As bitcoin halted a two-day rally, rival cryptocurrencies alsoplunged. Ripple sank as much as 33 percent and ethereum dropped 24 percent, before paring some of those declines.
• Repsol SA is in talks with KKR & Co.’s X-Elio about a possible acquisition as it seeks to take on renewable energy assets, according to a person familiar with the matter. The discussions with X-Elio opened as Repsol is working to come up with a strategy regarding renewables. The Spanish oil company’s options include acquiring a clean-energy producer, forming a partnership with one or other strategies, according to the person familiar with the matter. No decision has been made.
• Ericsson AB, the struggling Swedish network maker, said its earnings were hurt by about 15.2 billion kronor ($1.89 billion) in costs from writedowns and a revaluation of U.S. tax assets. The items will weigh on fourth-quarter net income, though won’t affect cash, Ericsson said Tuesday in a statement. The company said its gross and net cash positions “remain strong” and an impairment isn’t an indication of the quarter’s business performance.
• Toyota Group’s trading unit will take a stake in an Australian lithium miner, the latest move by an Asian automaker to secure battery metals as the industry accelerates its development of electric vehicles. Toyota Tsusho Corp. will take a 15 percent stake in Orocobre Ltd., the Tokyo-based company said in a statement Tuesday. The unit will invest A$292 million ($232 million), primarily for the expansion of Orocobre’s Olaroz facility, which will more than double its capacity to 42,500 metric tons a year.
• McDonald’s Corp. is embracing recycling and will start using more environmentally friendly packaging as consumers gravitate toward brands perceived to be good corporate citizens. The world’s largest restaurant chain, which has moved to using cage-free eggs and antibiotic-free chicken, is setting the goal of recycling customer trash at all of its restaurants across the globe by 2025. Only an estimated 10 percent of the chain’s roughly 37,000 locations offer recycling today.
• BP Plc raised the amount it will pay this year for the Deepwater Horizon accident as thousands of lawsuits related to the biggest oil spill in U.S. history start to wind down. The 2010 explosion at a well in the Gulf of Mexico threatened BP’s existence after 11 people were killed and millions of barrels of oil spilled into the sea. While the latest liabilities will add to the more than $60 billion of penalties the company has already racked up, Chief Executive Officer Bob Dudley will see an end in sight to the largest court battles.
• Bank of America Corp. may not be willing to help customers invest in bitcoin, but that doesn’t mean it isn’t plowing into the technology underlying the cryptocurrency. The Charlotte, North Carolina-based lender has applied for or received at least 43 patents for blockchain, the ledger technology used for verifying and recording transactions that’s at the heart of virtual currencies. It is the largest number among major banks and technology companies, according to a study by EnvisionIP, a New York-based law firm that specializes in analyses of intellectual property.
• UnitedHealth Group Inc. is giving investors the first look at how tax cuts will help boost earnings for the health insurance industry. The insurer raised its forecast for 2018 adjusted profit thanks to the recent tax changes, according to a statement Tuesday. UnitedHealth said it would invest much of the benefit in improving its technology, without giving further financial details. The stock rose as much as 3.7 percent is early U.S. trading.
• Tencent-backed Chinese startup Kuaishou is seeking to raise funds at about a $17 billion valuation, people familiar with the matter said, as it expands its video-streaming service to Southeast Asia. The company is targeting around $1 billion of financing, the people said, asking not to be identified discussing a private deal. The startup’s desired valuation would be almost six times the $3 billion it garnered after its lastfundraising in March, the people said.

 

 

 

*All sources from Bloomberg unless otherwise specified