July 11th, 2017
Daily Market Commentary
- Currency traders who have driven the loonie to a 10-month high are buying protection against the risk of a letdown from the Bank of Canada. With the central bank looking poised to raise rates Wednesday, investors are betting a hike might not be enough to sustain the currency’s strength. They’re piling into options contracts protecting against declines, just in case the central bank decides not to pull the trigger.
- Alimentation Couche-Tard Inc. says it has signed an agreement to buy Upper Midwest U.S. convenience store player Holiday. The transaction will see Quebec-headquartered Couche-Tard acquire 374 stores operated by Holiday and 148 franchisees. Minnesota- based Holiday has stores in 10 states, including six new to Couche- Tard (Globe and Mail)
- Investors appear to be fleeing Canadian shares before the first potential interest-rate increase in seven years. Traders withdrew C$358.1 million ($278 million) last week from the iShares S&P/TSX 60 Index ETF, the biggest exchange traded fund tracking Canada’s benchmark index. The outflow was the largest since early December, when investors were pouring into U.S. stocks following the election of President Donald Trump.
- European stocks were little changed as gains in shares deemed more sensitive to economic growth offset losses in those seen as relatively immune. The Stoxx Europe 600 Index lost 0.1 percent at 8:54 a.m. in London. Carmakers and miners advanced the most, while defensive sectors such as food stocks and real estate companies trailed.
- Asian stocks rose as technology shares led the advance for a second day ahead of comments later this week by U.S. Federal Reserve ChairJanet Yellen and earnings from some of the biggest companies in the world’s largest economy. The MSCI Asia Pacific Index added 0.7 percent to 154.40 as of 4:37 p.m. in Hong Kong, extending its year-to-date advance to 14 percent, as all industry groups gained.
- Oil erased earlier gains to trade near $44 a barrel in New York as Goldman Sachs Group Inc. warned OPEC that it’s not doing enough to clear a surplus. Futures slid 0.5 percent after advancing 1.2 percent earlier. Oil may slip below $40 unless there are sustained inventory declines and a drop in the rig count, according to Goldman Sachs. U.S. crude stockpiles probably fell by 2.85 million barrels last week.
- Gold trades little changed after touching lowest in almost 4 months as unexpectedly strong U.S. hiring data boosts confidence over global economic growth. Silver falls to lowest in more than a year.
- Google will find out this week if it owes 1.12 billion euros ($1.3 billion) in back taxes to France, just days after it was slapped with a record antitrust fine by the European Union.
- PepsiCo Inc. got a lift last quarter from its Frito-Lay snacks unit and initiatives to cut costs, even as consumers continue to turn away from carbonated soft drinks. The seller of Doritos, Sabra hummus and Mountain Dew posted second-quarter earnings Tuesday of $1.50 a share, excluding some items. That exceeded the $1.40 average of analysts’ estimates.
- Pearson Plc agreed to sell a 22 percent stake in Penguin Random House to its partner in the publishing unit, majority owner Bertelsmann SE, for about $1 billion, in a deal that strengthens its balance sheet while retaining some earnings from the profitable business.
- Sanofi agreed to buy closely held Protein Sciences Corp. for as much as $750 million in a deal that will bolster the flu vaccines portfolio at France’s biggest drugmaker. The pharmaceuticals firm will initially pay $650 million upfront, with another $100 million to be given if Protein Sciences reaches certain undisclosed development milestones, Paris-based Sanofi said in a statement Tuesday. The deal is poised to close in the third quarter.
- Affinity Equity Partners Ltd. made a A$2.2 billion ($1.7 billion) indicative offer for Vocus Group Ltd., matching an earlier bid for the Australian telecommunications company from rival buyout firm KKR & Co. Affinity offered A$3.50 a share for the company via a scheme of arrangement on Monday, Sydney-based Vocus said Tuesday in a statement.
- The outlook for Europe’s single currency is diverging from that of its biggest companies. The change can be seen in the market for three-month options, with traders taking positions on the euro against the U.S. dollar — the world’s most-traded currency pair — and on the 2.4 trillion-euro ($2.7 trillion) Euro Stoxx 50 Index.
- Thyssenkrupp AG will cut as many as 2,500 office workers as Germany’s biggest steelmaker expands efforts to reduce costs and boost profit. Administrative costs of 2.4 billion euros ($2.7 billion) are “clearly too high” and will be lowered by 400 million euros by September 2020, the company said in a statement on Tuesday. That will result in the loss of 2,000 to 2,500 of the business’s 18,000 office workers over the next three years, with about half going from Germany.
- Snap Inc. shares fell below their initial public offering price for the first time amid questions about the company’s ability to grow as fast as initially expected and after recent declines in technology stocks worldwide. The stock closed down 1.1 percent at $16.99 in New York Monday, below the $17 IPO price set on March 1 and having earlier slipped as low as $16.95.
- President Donald Trump plans to nominate Randal Quarles, who served as a senior Treasury official in the George W. Bush administration, to be the Federal Reserve’s chief banking regulator, the White House said in statement Monday.
- Liberty House Group, fresh off a deal for Australian steel mill Arrium Ltd., is among bidders for a Glencore Plc coal mine that could fetch as much as A$500 million ($380 million), people with knowledge of the matter said.
- Noble Group Ltd.’s newest major shareholder, Goldilocks Investment Co., has raised its holding in the embattled commodity trader and now controls almost as much equity in the company as China’s sovereign wealth fund.
- An onslaught of maturing funds may see China’s central bank reaching for the fire hose. Liquidity has been flush in Asia’s largest economy — the result of a combination of curbs on loan issuance, a stronger yuan and seasonality factors. That’s seen the People’s Bank of China hold off on conducting open-market operations, until now. Policy makers added liquidity via OMOs for the first time in 13 days on Tuesday, and while the net effect was neutral, it could be a sign they’re ready to start pumping cash into the system again.
- Farms in the northern U.S. have been plagued by drought this year, and the impact on grain production may become clearer when the U.S. Department of Agriculture releases its monthly World Agricultural Supply and Demand report on Wednesday.
- The U.K.’s communications regulator plans to limit the amount of wireless spectrum BT Group Plc and Vodafone Group Plc can buy at a coming auction, in a long-awaited decision that risks being appealed.
- Among the sneakers, diapers and pet food for sale on Taobao, China’s biggest e-commerce platform, is a listing that may take up a little more space in the online shopping basket. For 4.15 million yuan ($610,000), customers on the site owned by e-retailing giant Alibaba Group Holding Ltd. can bid for the debt of a steelmaker from Zhejiang, a coastal province in eastern China.
- The Bank of Japan was kept at bay after an auction for five-year debt saw the strongest demand in almost three years, helping to cap borrowing costs. The bid-to-cover ratio at the Tuesday auction rose to 4.85, the highest since Aug. 2014, from 4.71 at the previous sale. The Ministry of Finance sold 2.2 trillion yen ($19.2 billion) of the notes at an average yield of -0.035 percent, matching what the market traded at.
*All sources from Bloomberg unless otherwise specified