July 25th, 2017
Daily Market Commentary
- The Canadian dollar strengthened to 80 U.S. cents for the first time in more than a year amid mounting evidence the economy is gathering speed and expectations the central bank will continue tightening monetary policy. The loonie has advanced almost 10 percent from a 16-month low on May 4, making it the best-performing major currency tracked by Bloomberg over that period.
- The Trudeau government is prepared to walk away from NAFTA negotiations if the Trump administration insists that dispute-settlement panels be removed from the accord, a senior official says. Canada, the United States and Mexico will sit down on Aug. 16 for the first round of talks aimed at rewriting the North American free-trade agreement – the only reopening of the accord in the past 23 years. (Globe and Mail)
- European stocks advanced, rebounding after three days of declines amid a series of market reversals. Gold headed for the first drop in four days, while the dollar swung before climbing as investors await Wednesday’s U.S. interest rate decision. Most industry sectors rose as the Stoxx Europe 600 Index increased, with banks leading the way.
- Technology and industrial stocks dragged Asian shares lower for a second day as investors await the Federal Reserve’s statement after its Wednesday meeting. The MSCI Asia Pacific Index slipped 0.2 percent to 159.20 as of 4:48 p.m. in Hong Kong, with major gauges in the region trading in narrow ranges.
- Oil extended gains toward $47 a barrel as Saudi Arabia promised deep cuts to crude exports next month while the U.S. shale boom showed signs of slowing. Futures in New York added as much as 1.2 percent after rising 1.3 percent Monday. Saudi Arabia will cap shipments at 6.6 million barrels a day in August, 1 million lower than a year earlier.
- Gold trades near one-month high as investors await outcome of Federal Reserve’s rate meeting this week, and track implications of political turmoil on U.S. President Donald Trump’s policy agenda. Futures in China head for longest rising streak since 2014.
- BNP Paribas SA says that it’s found a way to divine iron ore’s likely path by tracking economic activity in China as well as the yuan, and right now the bank’s number-crunching suggests that the commodity is undervalued and should advance into the year-end. Prices rallied.
- The U.S. House is poised to vote on a bill to strengthen sanctions against Russia and prevent President Donald Trump from unilaterally lifting penalties, after the measure was delayed by procedural concerns and objections from energy companies. The measure, which was altered to ensure that oil companies can work on certain joint projects overseas, would also impose new sanctions on Iran and North Korea. House leaders expect bipartisan support for the bill in the vote Tuesday.
- Indonesia needs about $500 billion over the next five years to build roads, ports and bridges and should remove hurdles to encourage greater private sector investment, World Bank President Jim Yong Kim said. The government should set aside 4.7 percent of the gross domestic product by 2020 to build infrastructure from about 2 percent now, Kim said at a conference in Jakarta on Tuesday.
- The Federal Reserve has been painstaking in laying out how the upcoming reduction in its $4.5 trillion balance sheet will work but left one key detail out: What will it do with the money it will continue to reinvest? With the drawdown slated to start off slowly, the Fed initially will be reinvesting a bigger proportion of its maturing bond holdings than it will be allowing to run off. So its decision on how to redeploy that cash will have important ramifications for investors, with the risk that liquidity problems known as squeezes arise in longer-dated Treasury securities depending on what the Fed opts for.
- BHP Billiton Ltd., the world’s biggest miner, has opened an office and is seeking to add staff in Ecuador as it advances a search for copper in a nation that’s becoming the sector’s exploration hot-spot. Melbourne-based BHP’s local unit, Cerro Quebrado, will spend about $82 million on exploration, having established a base in the capital, Quito, and advertised for workers including a senior geologist. The value of Ecuador’s mining sector could rise to $7.9 billion by 2021 from $1.1 billion this year as major players arrive, according to Fitch Group’s BMI Research.
- India may become a significant importer of iron ore unless the country is able to accelerate domestic mining, according Tata Steel Ltd., which flagged the potential for a tremendous increase in nationwide steel production underpinned by buoyant economic growth.
- Greece has fired the starting gun on its first issue of new bonds since 2014, testing whether investors will back its recovery from a debt crisis that forced it to seek multiple international bailouts.
- DuPont Co.’s agriculture business gave a boost to second-quarter earnings, buoying prospects for the company’s largest business ahead of the planned completion next month of the historic $75 billion merger with Dow Chemical Co. Seed sales climbed 6 percent in the second quarter as farmers planted more soybeans in North America, DuPont said in a statement Tuesday. Pesticide revenue climbed 10 percent.
- China’s central bank said it will take an increased role in financial regulation. The People’s Bank of China said in a statement Tuesday that it will “step up coordinated supervision” on systemic financial institutions, which Basel III defines according to banks’ size, global activity, complexity and degree to which they are irreplaceable for an economy.
- China Investment Corp., the sovereign wealth fund that controls $814 billion in assets, is betting on U.S. real estate by investing in a commercial real estate lender formed by the money management firm TPG. In conjunction with last week’s initial public offering of TPG RE Finance Trust Inc., CIC disclosed in a U.S. regulatory filing that it holds about a 15.5 percent stake in the lender through affiliate Flourish Investment Corp.
- Biogen Inc.’s new pricey therapy for a rare deadly muscle disease sold far more than expected in the second quarter, helping the drugmaker beat analysts’ estimates and raise its forecast. Chief Executive Officer Michel Vounatsos, who took over this year, also announced a plan save up to $400 million a year by 2019 after making cuts to the organization, without providing details.
- Sunac China Holdings Ltd. is raising $516 million in a share placement after agreeing to buy theme parks from Dalian Wanda Group Co. as part of China’s largest property transaction. The firm is selling 220 million shares at HK$18.33 each, about an 8.8 percent discount to the last closing price, to raise HK$4.03 billion, according to a statement Tuesday to Hong Kong’s stock exchange.
- Democrats will press the president’s son-in-law, Jared Kushner, about his meeting with a Russian banker and his attempt to establish a back-channel with the Russian government during a closed-door interview before the House Intelligence Committee on Tuesday.
- Senate Republican leaders and President Donald Trump appear determined to begin a floor debate Tuesday on repealing Obamacare in a highly unorthodox way — without lawmakers knowing what they’ll be voting on or where it might end up. It’s unclear whether they have the 50 votes needed to begin considering a version of Majority Leader Mitch McConnell’s replacement bill or a stripped-down bill that would repeal much of Obamacare with a two-year delay.
- China’s central planner, the National Development and Reform Commission, has set the stage for what could become the biggest theme in China over the next six to 12 months: a surge in domestic mergers and acquisitions that benefits the economy and stock market. That can be concluded from the NDRC’s confirmation last week that the government is curbing “irrational” outbound acquisitions in some sectors, likely due to growing concern of systemic risks related to overseas deals, as well as pressure those investments have placed on the yuan.
- Michael Kors Holdings Ltd. agreed to buy Jimmy Choo Plc for about 896 million pounds ($1.2 billion), as the maker of handbags popular with the commuter set seeks to restore lost luster by adding “Sex and the City” stilettos.
- Refresco Group NV agreed to buy the soda business of Canada’s Cott Corp. for $1.25 billion in a deal that may help the Dutch soft-drink bottler fend off an unsolicited takeover offer from a private-equity firm.
- Stada Arzneimittel AG’s top managers and board backed Bain Capital and Cinven’s 5.4 billion-euro ($6.2 billion) bid, bringing their second offer a step closer to success. The German drugmaker reviewed the private equity firms’ offer document and “reached the conclusion that the renewed takeover offer is in the best interest of the company and all of its stakeholders,” it said in a statement on Tuesday
- Chinese e-commerce giant Alibaba Group Holding Ltd. and its Indian associate Paytm E-commerce Pvt are in talks to invest about $200 million for a stake of roughly 20 percent in India’s leading online grocer, Bigbasket, according to a person with direct knowledge of the negotiations.
- Lyft Inc.’s business has been booming as its primary competitor, Uber Technologies Inc., has faced an executive exodus and a string of self-inflicted scandals. Total revenue generated by Lyft drivers, or the company’s gross bookings, grew about 25 percent to more than $1 billion in the second quarter from more than $800 million in the previous period.
*All sources from Bloomberg unless otherwise specified