January 28th, 2019
Daily Market Commentary
- Canadian Prime Minister Justin Trudeau has ousted his ambassador to China in the middle of a diplomatic feud with Beijing after a string of public remarks drew criticism. Trudeau asked for, and got, the resignation of John McCallum on Friday, according to a statement from his office issued Saturday. The move comes amid the fallout of Canada’s arrest in December of Huawei Technologies Co.Chief Financial Officer Meng Wanzhou, at the request of the U.S., which has angered China.
- BlackBerry Ltd. said Bryan Palma would take over as the company’s president and chief operating officer, reporting to chief executive officer and chairman John Chen. Palma would be responsible for the BlackBerry’s core product and services, including its Internet of Things business that incorporates connecting devices such as cars and smart speakers, the company said in a statement Monday.
- Ontario Premier Doug Ford is pushing to eliminate housing shortages in Canada’s largest province, as policy makers seek to deflate pricey markets in places like Toronto without triggering a correction. Ford’s housing minister, Steve Clark, began consultations this month on proposed reformsthat would give local governments more control over their own housing mix to unlock supply and attract investment. In a background document released in November, the ministry touted the economic benefits of adding 10,000 housing starts a year, an amount builders estimate would bring supply closer to demand.
- European shares fell at the open as investors await a crucial Brexit vote, another Federal Reserve meeting and a new round of trade talks this week. With only four trading days to go, January is set to be the best month for European shares since December 2016. The Stoxx Europe 600 index dropped 0.4 percent, with almost all the sub groups in the red and basic resources shares jumping the most. MorphoSys AG fell 8 percent as a U.S. court declared some patents invalid.
- S&P 500 futures fall as much as 0.5%, hitting a session low as European shares fall at the open ahead of a new round of trade talks this week. Dow Jones and Nasdaq 100 futures also down 0.4% and 0.5% respectively
- Earlier in Asia, Japanese shares retreated with Chinese peers, while stocks in Hong Kong pared gains to close little changed. The yuan appreciated to its strongest against the dollar since July before Vice Premier Liu He’s trip to Washington for trade talks, and as the People’s Bank of China freed up a potential $37 billion for bank lending and a new chief was named to lead the country’s main securities regulator.
- Oil fell below $53 a barrel as America’s rig count rose for the first time this year, signaling further increases in the nation’s burgeoning crude production. Futures in New York dropped as much as 2.2 percent after climbing 2.1 percent over the previous three sessions. The number of rigs targeting oil rose by 10 to 862 last week, Baker Hughes data showed, as rising crude prices buoyed optimism. In OPEC member Venezuela, President Nicolas Maduro abandoned his decision to sever diplomatic ties with the U.S., as he and National Assembly leader Juan Guaido both sought the backing of the country’s armed forces.
- Gold traded around $1,300 an ounce, holding most of Friday’s advance, at the start of a potentially important week for global trade and U.S. monetary policy. After trading in a narrow range since the start of the year, the metal jumped to a seven-month high Friday as the dollar weakened. This week, Chinese President Xi Jinping’s top economic aide will meet with the U.S. trade representative and Treasury Secretary Steven Mnuchin, while Federal Reserve Chairman Jerome Powell will host a briefing after a policy decision.
- The committee of lawmakers crafting a plan for the southern U.S. border is expected to start meeting this week, even as a defiant President Donald Trump made clear he won’t take no for an answer in his effort to construct a border wall. “Does anybody really think I won’t build the WALL?” Trump said late Sunday in a tweet that ran through what he termed more success in two years than any other president. Trump’s acting chief of staff said earlier that Trump was prepared to shutter the government again or declare an emergency if needed to get the wall money.
- Federal Reserve Chairman Jerome Powell has some further explaining to do after the central bank’s monetary messages whipsawed financial markets over the last month. Powell holds a press conference at 2:30 p.m. on Wednesday in Washington following a two-day meeting of the Federal Open Market Committee. Investors expect the FOMC to keep interest rates on hold. Its policy statement will be scrutinized for hints that officials still expect to raise rates twice this year, as they forecast in December.
- Entegris Inc. is acquiring Versum Materials Inc. in a move that will combine two key semiconductor components producers. Versum investors will receive 1.12 shares of Entegris in the all-stock transaction, according to a statement Monday. The combined company will have a market value of about $9 billion — more than $1 billion above the worth of the two firms at Friday’s closing price — and annual revenue of about $3 billion.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 15th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $2.02 billion in the week ended Jan. 25, compared with gains of $1.98 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $8.15 billion.
- Saudi Arabian Oil Co. is taking a nearly 20 percent stake in South Korean oil refiner Hyundai Oilbank Co. for $1.6 billion, tightening the grip of the world’s top crude exporter on the biggest oil consuming region. The Saudi state-owned giant, known as Aramco, is seeking to firm up its customer base and market share in Asia as it moves toward a partial listing in what could be the biggest-ever initial public offering.
- Kering SA fell after Italy said the French owner of the Gucci luxury brand owes about 1.4 billion euros ($1.6 billion) in back taxes, the equivalent of almost half of 2018’s expected earnings. The stock lost as much as 1.6 percent. Kering said it’s contesting the findings of the audit. The probe scrutinized business activities by a Swiss subsidiary of the Paris-based company from 2011 through 2017.
- The U.S. Treasury Department lifted sanctions on three firms tied to Russian tycoon Oleg Deripaska, including United Co. Rusal, a move that will provide relief to the global aluminum market. The metal fell in London. Deripaska, an ally of Russian leader Vladimir Putin, will remain under U.S. sanctions, and his property will remain blocked. But the Treasury Department is removing restrictions on Rusal, En+ Group Plc and EuroSibEnergo JSC.
- The Securities and Exchange Commission is investigating whether Nissan Motor Co. accurately disclosed its executive pay in the U.S., according to several people familiar with the matter, compounding the carmaker’s woes as it grapples with the aftermath of former chairman Carlos Ghosn’s arrest. The U.S. financial regulator is examining whether Nissan’s executive-pay disclosures were accurate and whether the carmaker had adequate controls to prevent improper payments, the people said, asking not to be identified because the probe hasn’t been disclosed publicly.
- A last-ditch bid by Siemens AG and Alstom SA to win approval from the European Union’s top antitrust regulator for their planned rail merger isn’t good enough to allay concerns about competition, according to a person with knowledge of the situation. The fresh concessions, first reported by Bloomberg Jan. 25, come too late and fall short of the bold steps that European Commissioner Margrethe Vestager would need to grant approval for the deal, said the person, who asked not to be identified because the matter is private. Alstom shares dropped as much as 4.3 percent, while Siemens declined 0.8 percent.
- Platform Specialty Products Corp., the chemical company backed by hedge fund manager Bill Ackman, is preparing for a management shakeup as it looks to expand after selling its Arysta LifeScience agricultural division. Platform, founded by serial deal-maker Martin E. Franklin, is planning to appoint Benjamin Gliklich as chief executive officer, replacing Rakesh Sachdev, who is retiring but will stay on as a non-executive director, according to people familiar with the matter. Franklin, meanwhile, will assume the role of executive chairman, said the people, who asked not to be identified because the move hasn’t been disclosed yet.
- Forecasters are less optimistic about U.S. expansion this year, though they’re nearly unanimous in their expectations that a recession can be kept at bay until at least 2020, a National Association for Business Economics survey showed Monday. Two-thirds of respondents expect growth to exceed 2 percent this year, down from the 90 percent in the prior survey for the 12 months through the third quarter of 2019, according to the Dec. 17-Jan. 9 survey of 106 NABE members.
- The U.S. Treasury Department is set to maintain elevated sales of long-term debt to finance the government’s widening budget deficit, with new issuance projected to top $1 trillion for a second-straight year. Many strategists at primary-dealer firms predict that this Wednesday’s quarterly refunding announcement will see the Treasury maintain note and bond sales at the record high levels they have boosted them to in recent months. The total amount of 3-, 10- and 30-year securities to be offered at next week’s refunding auctions is seen by most at $84 billion. While that’s $1 billion more than the total for these maturities three months ago, that’s only because the size of the three-year sale was already nudged higher in December.
- Carlyle Group LP is seeking to raise $5 billion for its second buyout fund that has a longer time horizon than a typical private-equity vehicle. Carlyle Global Partners II fund, which closed at $1.8 billion on Friday, will make small-to-large buyouts across the U.S. and Western Europe and hold companies for longer than the common five years, according to people familiar with the matter. The fund is expected to have a second close by the second quarter. Money managers are increasingly starting longer-term funds, which appeal to investors who want to lock up their capital for as long as 20 years. The funds tend to be less risky and come with lower fees but also smaller returns.
- Europe’s retail crisis deepened as companies in the U.K. and Germany are poised to cut thousands of jobs as online shopping accelerates the erosion of sales from traditional bricks-and-mortar stores. Tesco Plc, the biggest U.K. grocer, will eliminate about 15,000 positions and close meat, fish and delicatessen counters, the Mail on Sunday reported, citing unidentified industry sources. Galeria Kaufhof, which has department stores in cities including Berlin and Munich, will cut about 2,600 jobs, it said Friday — the same day that German fashion chain Gerry Weber International AG began insolvency proceedings. They join a growing list of European retailers that have collapsed amid ever tougher online competition.
*All sources from Bloomberg unless otherwise specified