July 10th, 2018

 

Daily Market Commentary

Canadian Headlines

• Canadian stocks closed at a fresh record, tracking global indexes higher, as investors shrugged off trade fears, with industrials leading the gains. The S&P/TSX Composite Index added 81 points or 0.5 percent to 16,452.34, just ahead of its previous high of 16,450 hit on June 22. Industrials rose 1.9 percent as trade-sensitive stocks rallied, with Air Canada gaining 3.8 percent and Canadian Pacific Railway Ltd. adding 3.4 percent.
• Canada set out to cool a hot housing market, and did it ever. Luxury-property sales in the nation’s priciest markets fell sharply in the first half of the year amid a slew of government regulations, according to a report released Tuesday by Sotheby’s International Realty Canada. Sales of homes above C$1 million ($760,000) fell 46 percent in Toronto and 19 percent in Vancouver from a year earlier, while the number of homes sold above C$4 million dropped 51 percent in Toronto and 47 percent in Vancouver.
• Prime Minister Justin Trudeau pledged to extend Canada’s military mission in the Baltic region and said he sees this week’s NATO summit reaffirming member states’ commitment to the alliance. Speaking before the North Atlantic Treaty Organization’s two-day meeting in Brussels, Trudeau said Canada plans to boost troop numbers in Latvia to 540 from 455 and maintain its presence there until 2023. The summit, which begins Wednesday, is set to be dominated by defense spending, an issue U.S. PresidentDonald Trump has repeatedly complained about.

 

 

World Headlines

• European equities climbed at the open as investors turned their attention away from trade concerns to the upcoming earnings season. The Stoxx Europe 600 Index added 0.2 percent, led by technology, energy and mining stocks, marking a sixth straight day of gains for the benchmark. Royal Dutch Shell Plc and Total SA advanced as Brent oil climbed for the second day amid supply risks.
• U.S. equity futures pointed to a firmer opening as a lull in the trade war let investors contemplate the beginning of earnings season. Futures on the S&P 500, Nasdaq and Dow all edged higher. With trade-war headlines lessening since last Friday’s imposition of U.S. and Chinese tariff hikes, U.S. President Donald Trump is focusing on his Supreme Court choice and planned trip to Europe.
• Most Asian equity benchmarks rose on Tuesday, as investors looked past the start of a U.S.-China trade war to focus on the upcoming earnings results. The MSCI Asia Pacific Index gave up its intraday gain of as much as 0.6 percent to little changed at 165.73 as of 4:39 p.m. in Hong Kong. More than three stocks rose for every two that declined on the benchmark. Australia’s S&P/ASX 200 Index ended 0.4 percent lower and Hong Kong closed little changed after earlier rising as much as 1 percent. Singapore’s Straits Times Index rose 1.3 percent while Japan’s Topix index closed 0.3 percent higher.
• Oil advanced above $74 a barrel as U.S. crude stockpiles were seen shrinking at a time when supply disruptions from Libya to Iran and beyond are straining global markets. Futures in New York were up 0.7 percent on Tuesday after a 1.3 percent gain in the previous two sessions. A U.S. government report on Wednesday will show crude inventories fell for the fourth time in five weeks, according to a Bloomberg survey of analysts. Meanwhile, Libya warned its output could keep declining amid port closures, and Iran’s customers in Asia signaled they’re shying away from the nation’s crude because of U.S. political pressure.
• Gold climbs to an almost two-week high as investors sought haven amid mounting uncertainty over British Prime Minister Theresa May’s Brexit plan as she struggles to contain a political crisis.
• Zinc slumped to the lowest in a year in London as investors weigh the risk that the market will start to unravel into oversupply as new mines enter production and steel output drops in China. Prices for the metal used in steel galvanizing and alloy making plunged 2.6 percent to $2,635 a metric ton on the London Metal Exchange. Zinc’s fallen for four straight weeks, slumping 27 percent from a February peak. The latest slide has coincided with a loosening in the forward price curve on the LME, a signal that spot demand is weakening.
• Tom Watson, deputy leader of the U.K. opposition Labour Party, said he thought another Brexit referendum could be necessary if Theresa May’s proposed Brexit deal can’t get support. After months of trying to find a Brexit position that all wings of the Conservative Party could agree on, May seems to have given up, and gone for something that at least 20 — and probably more — of her lawmakers are likely to vote against. Without a majority in Parliament, she needs Labour either to vote with her or abstain, something the party is clear that it won’t do.
• Xiaomi Corp. surged 13 percent a day after its disappointing debut, gaining roughly $6 billion of market value as investors begin to pile into the world’s third-largest listed smartphone maker. The Chinese company finished Tuesday at HK$19, well above its HK$17 initial public offering price. About HK$9.7 billion ($1.2 billion) worth of shares changed hands, more than the value traded during its debut. That rebound more than made up for Monday’s 1.2 percent decline: the worst first-day performance by a $1 billion-plus Hong Kong IPO since 2015.
• PepsiCo Inc., grappling with a slumping soda business, got another boost from its food operations. The maker of Mountain Dew posted second-quarter profit that topped analysts’ estimates, helped by strong sales of Frito-Lay chips and Quaker oatmeal, according to a statement Tuesday. Core earnings per share were $1.61, 9 cents above analysts’ consensus estimate.
• Convene, a New York-based real estate startup that specializes in flexible meeting and working space, has raised $152 million from investors including Revolution Growth, Brookfield Property Partners LP and the Durst Organization, its co-founders said. The Series D round values the company at more than $500 million, according to a person familiar with the matter who asked not to be named. Revolution, RXR Realty, David Rubenstein’s Declaration Capital and QuadReal Property Groupare among the company’s new investors, while existing investor ArrowMark Partners led the round and was joined by other earlier Convene investors including Brookfield, Durst, Conversion Venture Capital LLC and Elysium Management.
• A strike curtailed oil production in Norway for the first time in six years as Royal Dutch Shell Plc shut a North Sea field and workers threatened to escalate labor action at the weekend. A total of 669 drilling workers walked off the job early Tuesday when state-backed mediation failed to produce an agreement on wages and pensions, affecting nine mobile rigs and fixed platforms. The action forced Shell to start closing its Knarr field, which produces about 23,000 barrels of oil a day and 3,500 barrels of natural-gas liquids.
• Theresa May looked likely to survive any attempt to remove her as U.K. prime minister over her Brexit strategy. But furious lawmakers warned that she could split her Conservative Party trying to get her plan through Parliament. Despite the resignations of two of her most senior ministers in one day — an event without parallel in recent decades — most of her Conservatives appeared content on Monday evening with a proposal that would keep Britain close to the European Union on trade and regulations.
• Iranian oil shipments to some U.S. allies are being threatened even before America’s Nov. 4 deadline for buyers to curb imports and comply with renewed sanctions on the OPEC member. September-loading cargoes are set to be the last to head for Japan if the Asian nation doesn’t receive an exemption from the U.S., people with knowledge of the matter said. South Korea, meanwhile, is said to be facing problems with July shipments because of tanker-insurance and chartering issues, with buyers already shunning a form of oil known as condensate from the Persian Gulf state. A Taiwanese refiner is mulling ending purchases.
• Temasek Holdings Pte., the Singaporean state firm that poured $95 billion into everything from startups to asset managers in the past five fiscal years, is turning more cautious as threats to the global economic expansion mount. The investor expects global growth to moderate and sees rising risks in the market, Temasek said in a statement accompanying its annual review on Tuesday. “We may recalibrate and slow our investment pace over the next nine to 18 months,” Alpin Mehta, managing director of investment, said in the statement.
• A unit of Ping An Insurance (Group) Co., China’s largest insurer by market value, plans to purchase a 19.7 percent stake in local developer China Fortune Land Development Co. The insurer’s asset management unit will spend 13.8 billion yuan ($2.1 billion), or 23.66 yuan a share, to buy 582 million shares of the builder from the company’s controlling shareholder, China Fortune Land said in a filing to the Shanghai Stock Exchange on Tuesday. The transaction will boost the stake owned by Ping An’s asset management arm and co-investors to 19.9 percent, according to the filing.
• China Eastern Airlines Corp., one of the nation’s three state-owned carriers, plans to raise as much as $2.2 billion from a stock sale to investors including Juneyao Airlines Co., according to a statement to the Shanghai stock exchange. The Shanghai-based operator proposes to sell up to 1.62 billion mainland shares to raise 11.8 billion yuan ($1.8 billion), and is also seeking HK$3.55 billion ($452 million) from a placement in Hong Kong, it said. Proceeds will be used to fund purchases of planes and engines.
• Bain Capital has raised 4.35 billion euros ($5.1 billion) for its fifth European buyout fund, surpassing its initial target of 3.5 billion euros, according to people with knowledge of the situation. The Boston-based firm’s employees and their partners invested about 700 million euros alongside the fund, said the people, who asked to not be identified because the matter isn’t public.
• Hong Kong billionaire Henry Cheng’s jewelry-to-property business empire will acquire Dublin-based Sky Leasing for about $2.8 billion, including debt, to bolster the group’s aviation business. Though the Cheng family’s Goshawk Aviation Ltd. announced the deal last month, it didn’t disclose the value at the time. Of the total, 70 percent of the purchase will be funded with debt and the rest from Goshawk parents Chow Tai Fook Enterprises Ltd. and NWS Holdings Ltd., Brian Cheng, one of the patriarch’s sons and an executive director at NWS, said in an interview.

 

*All sources from Bloomberg unless otherwise specified