January 29th, 2018
Daily Market Commentary
- Canadian companies are increasingly keen to tap the growing demand for floating-rate notes amid expectations the Bank of Canada will continue tightening monetary policy. Most of the new corporate bonds sold since the central bank raised rates this month, its third hike since July, were variable-rate securities. Laurentian Bank paved the way, opening books on the sale of 21-month floating-rate deposit notes just after Governor Stephen Poloz pulled the trigger on January 17.
- Canadians trading bitcoin shouldn’t hold their breath waiting for specific rules on how they’ll be taxed. Finance Minister Bill Morneau, speaking on the sidelines of the World Economic Forum in Davos, said Canada isn’t planning changes to existing tax code to deal with crypto-currencies. But some observers say the rules leave too much room for uncertainty about Bitcoin, which in Canada can essentially be treated as money, a commodity or even income.
- Delta Air Lines Inc. is finally cleared to receive its Bombardier Inc. C Series jets, after the International Trade Commission on Friday ruled that American industry isn’t being harmed by sales of 100- to 150-seat aircraft from Canada. The U.S. carrier threw a lifeline to the slow-selling C Series in 2016 by ordering at least 75 CS100 jets — a deal with a list value of $5.6 billion at the time. The decision also opens the door for Bombardier, which Boeing Co. accused of unfair competition, to woo new customers in the U.S.
- European stocks are steady in early trade, with AMS’s bullish outlook boosting the tech sector while Sanofi’s counter-bid for Ablynx added to positive sentiment about brisk M&A activity. The Stoxx 600 is up 0.1%, adding to Friday’s gains, with the tech sector up 0.7% and AMS up 24%. Defensive sectors including real estate, food and utilities lose ground.
- U.S. stock-index futures drop, following European equities lower, as investors await Janet Yellen’s last policy meeting as Federal Reserve chair and the first State of the Union address from President Donald Trump later this week.
- Asia’s regional stock benchmark held close to a record as investors wagered the global growth outlook will further bolster corporate earnings. A slide in Chinese large-cap stocks weighed on the index. The MSCI Asia Pacific Index slipped 0.1 percent to 187.00 as of 4:55 p.m. in Hong Kong.
- U.S. oil strengthened against the global Brent benchmark, reducing the gap to the lowest in five months, amid declining stockpiles. West Texas Intermediate futures in New York were little changed while Brent in London slipped 0.5 percent. The convergence is emerging amid concern that WTI’s recent jump — spurred by a record 10 weekly declines in American stockpiles — will encourage higher production. Rigs drilling for crude in the U.S. have risen to the most since September.
- Gold holds below highest since August 2016 as the dollar rises and investors await Janet Yellen’s final policy meeting as Federal Reserve chair for clues on future monetary policy.
- Zinc soared to a fresh 10-year high on Monday, pacing gains in base metal markets, as investors in China boosted bullish bets and inventories on the London Metal Exchange fell to the lowest level in nearly a decade. LME zinc rose as much as 3.1 percent to $3,584 a metric ton, its highest since July 2007, while Shanghai Futures Exchange contracts also hit a decade high as a jump in open interest on the bourse signaled investors are adding to bullish bets.
- The European Central Bank still has a way to go before inflation is on track toward its goal, so policy will need to remain patient and persistent, Executive Board member Peter Praet said on Monday. Praet, who presents policy proposals at Governing Council meetings in his role as chief economist, said the ECB is monitoring three criteria as it gauges when it can start withdrawing stimulus. Euro-area inflation must be converging toward the goal of just-under 2 percent, policy makers must have strong confidence in the accuracy of their outlook, and the convergence must be able to withstand a withdrawal of monetary support.
- Donald Trump’s State of the Union address on Tuesday will be one of the president’s last, best chances to win over more of the American public to his nationalist agenda ahead of midterm elections that will be a referendum on his tumultuous administration. White House officials say the president will dial back his signature combative posture and instead frame his policy proposals — from immigration to infrastructure — as areas where Democrats and Republicans can work together. Trump will still take ample time to argue that the U.S. economy has been revitalized by policies that have had little to no bipartisan appeal, including the tax overhaul and efforts to curb regulations.
- All eyes are on the U.S. as the latest round of Nafta talks wrap up amid promising signs of flexibility among the trading partners on the thorniest issues. The sixth round of negotiations ends Monday after a week marked by cautious optimism, with negotiators concluding their first chapter since October and broad discussion about the biggest sticking points. President Donald Trump himself has toned down his rhetoric over the North American Free Trade Agreement, and he isn’t expected to use his State of the Union speech on Tuesday to give a notice of withdrawal as some had privately feare
- Sanofi agreed to buy Belgium’s Ablynx NV for 3.9 billion euros ($4.8 billion), outbidding rival Novo Nordisk A/S to gain a potential blockbuster for a rare blood clotting disease. Paris-based Sanofi will pay 45 euros a share in cash for all outstanding shares of Ablynx, it said in a statement Monday. The price is 48 percent above Novo’s unsolicited offer of as much as 30.50 euros a share. Bagsvaerd, Denmark-based Novo conceded that it had lost, saying in a statement that it won’t try to outbid Sanofi.
- The U.S. is in talks with private companies to build a secure 5G network amid concerns about China and cybersecurity, said two administration officials familiar with the plans. Talks are preliminary, and key decisions over funding and control haven’t been reached, said the people, who discussed the deliberations on condition of anonymity. The government aims to decide on a plan by the end of September and build it out over the next few years, said one of the officials. If the U.S. opts for one secure network rather than multiple systems, the main unresolved questions would be what portion of the project would be taxpayer funded, and whether it would be owned by the government, a private consortium or some combination of public and private entities, one of the officials said.
- Amazon.com Inc. is expanding a service launched to make more groceries, cleaning supplies and other products available for quick delivery directly from merchants without overwhelming the e-commerce giant’s warehouses with additional inventory, according to documents reviewed by Bloomberg. The trial pushes Amazon’s logistical reach beyond its own facilities and into those of its merchants, encroaching on services of long-time delivery partners United Parcel Service Inc. and FedEx Corp. Amazon is enticing the sellers who use the company’s online marketplace with lower delivery costs, logistics software, warehouse inspections and recommendations.
- German carmakers condemned experiments that exposed humans to diesel fumes, promising to investigate the tests whose disclosure threatens to open a new phase in an emissions controversy that’s dogged the industry since 2015. The study was supported by a little-known group founded by Volkswagen AG, Daimler AG and BMW AG, and carried out by Aachen University in Germany. Reports of the tests, following a New York Times account of similar experiments on monkeys in the U.S., triggered political recriminations and had automakers scrambling to distance themselves.
- Several thousand Russians braved sub-zero temperatures to protest against President Vladimir Putin, who’s seeking to prolong his almost two-decade-long rule in March elections. Russian opposition leader Alexey Navalny, who’s been barred from taking part in the March 18 vote, was dragged roughly by police into a bus shortly after he arrived at the demonstration on Moscow’s central thoroughfare, Tverskaya Street, according to a live video feed from the scene. Navalny later said on Twitter that he had been released pending trial, and thanked his supporters.
- At 2:57 a.m. on Friday morning in Tokyo, someone hacked into the digital wallet of Japanese cryptocurrency exchange Coincheck Inc. and pulled off one of the biggest heists in history. Three days later, the theft of nearly $500 million in digital tokens is still reverberating through virtual currency markets and policy circles around the world. The episode, disclosed by Coincheck executives at a hastily arranged press conference on Friday night, has heightened calls for stricter oversight at a time when many governments are struggling to formulate a response to the digital-asset boom. Japanese finance ministry officials said on Monday that the country will conduct on-site inspections of exchanges and that cryptocurrencies would likely become an issue at the next G-20 meeting.
- WestRock Co., one of the largest U.S. producers of containerboard, agreed to acquire Kapstone Paper & Packaging Corp. for about $3.4 billion. KapStone investors will get $35 a share in cash, or can elect to take 0.4981 of a WestRock share, with the stock consideration of the deal capped at 25 percent of KapStone’s outstanding shares, the companies said Monday in a statement.
- Chinese e-commerce giant Alibaba Group Holding Ltd. and Foxconn Technology Group led a new fundraising round by electric carmaker Xiaopeng Motors, investing 2.2 billion yuan ($350 million) in the startup as a push toward battery-powered vehicles intensifies. The latest funding puts the total investment in Xiaopeng at 5 billion yuan, according to a statement sent by the carmaker. Other investors also include IDG Capital, the company said.
- Some investors are preparing for a drop in the VIX after recent gains sent the index above its six-month average. The largest exchange-traded note that rises with declines in Cboe Volatility Index futures posted its biggest weekly inflows since August 2015 as the number of shares outstanding on the security rebounded from a low. The trend was similar for another product that benefits from easing swings, while a note that gains with growing turmoil had its largest withdrawals since last August.
- Noble Group Ltd. reached an in-principle deal to restructure $3.5 billion in debt, saving the troubled commodity trader from bankruptcy at the cost of handing control to creditors and all but wiping out current shareholders. After a three-year crisis marked by massive losses, writedowns and controversial accounting, Noble management, bank creditors, and bondholders reached an agreement that will convert half of the debt — roughly $1.7 billion — into new equity, the company said on Monday.
- Top Democrats are questioning President Donald Trump’s infrastructure plan even before it’s released, raising doubts about whether the administration’s approach can win bipartisan support. Trump has long touted his plan to upgrade U.S. public works as something that can win Democratic backing, and he will appeal to Democrats on infrastructure in his State of the Union address on Tuesday. He’s offering at least $200 billion in federal money over 10 years to spur states, localities and the private sector to spend as much as $1.6 trillion.
*All sources from Bloomberg unless otherwise specified