July 26th, 2017

 

Daily Market Commentary

 

 

Canadian Headlines

• Home Capital Group Inc. said it repaid the balance on a C$2 billion ($1.6 billion) credit line from Warren Buffett’s Berkshire Hathaway Inc. after the Canadian mortgage lender sold assets. Home Capital received C$662 million from its previously announced agreement to sell some commercial mortgages, the Toronto-based firm said. The company has received about C$1.13 billion in total on the sale and discharges of commercial mortgages tied to its initiatives to increase liquidity.
• Petroliam Nasional Bhd.’s decision to back out of a giant gas-export project on Canada’s Pacific Coast is the latest hit to the country’s energy sector — and to Prime Minister Justin Trudeau’s plan of balancing energy exports and climate action. The Malaysian state-run oil and natural gas producer cited an “extremely challenging environment” of low prices and other changes in declining to proceed with the liquefied natural gas project, which Trudeau approved last year after sweeping to power on pro-environment pledges.

 

 

World Headlines

• Positive corporate results and energy producers tracking gains in oil helped European stocks extend gains. The Stoxx Europe 600 Index was up 0.4 percent at 8:24 a.m. in London, with the earnings season entering its busiest period. The benchmark index is still down about 3.5 percent from a peak in May, hurt by worries that a recent rally in the euro could derail Europe’s earnings recovery.
• U.S. stocks hit a record high, and option prices suggest traders have little fear that the rally is near an end. More than 80 percent of S&P 500 companies have delivered earnings that have beaten forecasts so far this reporting period, helping to support optimism in the global economy and pushing volatility to record lows. Investors are looking for guidance from the Fed on how it plans to unwind its bond portfolio, with policy makers seen keeping interest rates on hold as the U.S. central bank meeting concludes on Wednesday.
• Hong Kong stocks rose, building on a two-year high, with oil companies leading the advance. China Evergrande Group surged to a record after saying it expects first-half profit to triple from a year earlier.
• Traders are piling into an exchange-traded fund tracking developing shares amid bets the Federal Reserve will signal a gradual increase in interest rates, maintaining the allure of riskier assets. The iShares MSCI Emerging-Markets ETF is poised for its longest streak of monthly inflows in almost three years, gathering almost $2.4 billion since March.
• Oil extended gains from the highest close in seven weeks as industry data showed U.S. crude stockpiles plunged, easing a glut. Futures climbed as much as 1.5 percent in New York after rising 4.6 percent in the previous two sessions.
• As political leaders find ways to shock like never before, the world’s favorite haven investment hasn’t been calmer in years. In the past four months, gold prices moved in a 7.6 percent range, the least in 10 years, while 120-day volatility is at the lowest since 2005. That’s amid unprecedented uncertainty over U.S. President Donald Trump’s legislative program and divisions in the U.K. over plans to leave the European Union.
• Copper surged to the highest level in more than two years, lifting shares of producers including Glencore Plc, on expectations that demand in China will fuel a global shortage, with plans in the country to curb metal-rich waste imports reinforcing a bullish outlook.
• The U.K.’s lackluster growth is doing little to support the Bank of England’s hawks. The economy picked up only modestly to 0.3 percent last quarter, compounding what the Office for National Statistics called a “notable slowdown in the first half.” It leaves the BOE’s divided policy makers with scant further evidence to justify a interest-rate increase when they vote next week.
• Ford Motor Co.’s new chief executive officer surprised Wall Street with better than expected earnings despite familiar challenges of a slow U.S. auto market and an aging model lineup. In its first results since Jim Hackett became CEO in May, Ford delivered second quarter adjusted earnings per share of 56 cents, beating analyst estimates, and boosted its profit forecast for the year. Hackett inherited a carmaker in the midst of its fifth straight quarter of year-on-year profit declines.
• Coca-Cola Co.’s operations are on a diet — and its bottom line is showing the results. The soda giant posted second-quarter profit that beat analysts’ estimates by a penny a share. A combination of cost cutting and higher drink prices helped the company weather sales declines, brought on in part by efforts to spin off its bottling operations around the world.
• The People’s Bank of China and the Ministry of Finance plan to roll over $89 billion worth of government bonds coming due in August that were used to help set up the nation’s sovereign wealth fund, according to people familiar with the matter. China’s Finance Ministry issued about 1.55 trillion yuan of notes in 2007 and used the proceeds to buy an equivalent amount of foreign-exchange reserves from the central bank to set up China Investment Corp.
• PetroChina Co., the nation’s biggest publicly traded oil and gas company, forecast profit rebounded during the first half of this year on higher oil prices. The Beijing-based company said net income may have risen to between 9 billion and 11 billion yuan ($1.6 billion) during the first six months of the year, versus 528 million yuan during the same period last year.
• Freeport-McMoRan’s Inc.’s local unit and the Indonesian government agreed that the producer will operate the giant copper and gold mine at Grasberg under a special mining license through 2021, according to a top official. The company will be allowed to seek two extensions, each valid for 10 years, Teguh Pamudji, secretary-general at the Energy and Mineral Resources Ministry, told reporters.
• HNA Group Co.’s proposed $416 million investment in an in-flight entertainment and Internet-services provider collapsed after the two companies failed to get regulatory approval from the U.S., in the latest setback for the acquisitive Chinese group.
• UniCredit SpA said hackers accessed about 400,000 client bank accounts in Italy, taking biographical and loan data in one of the biggest breaches in Europe to date. The breaches occurred in September and October of 2016 and June to July of this year, the bank said on Wednesday in an emailed statement.
• Noble Group Ltd. warned that it will post a loss for the second straight quarter, casting further doubt on the ability of the embattled commodity trader to avoid default, with the company highlighting challenges in restoring the confidence of its lenders. Its bonds plunged. The company expects a total net loss of $1.7 billion to $1.8 billion for the three months to June.
• Metro Bank Plc, one of the challengers to Britain’s big four lenders, raised 278 million pounds ($362 million) in a “significantly oversubscribed” stock sale to bolster capital levels as it steps up growth.
• Daimler AG is conducting a thorough investigation into allegations of diesel cheating as the German automaker seeks to burnish the technology’s battered reputation amid an onslaught of negative news for an industry reeling from scandals. The maker of Mercedes-Benz cars is keen to shore up diesel, which powers many of its lucrative sport utility vehicles and big sedans as well as its trucks, vans and buses. The Stuttgart, Germany-based manufacturer is counting on diesel while it invests in lowering the price and increasing the range of battery-powered cars to meet increasingly tough environmental regulations.
• The U.K. became the latest European country to mark the end of the line for diesel and gasoline fueled cars as automakers such as Volvo race to build electric vehicles or face the consequences of getting left behind. In London, the government said it will ban sales of the vehicles by 2040, two weeks after France announced a similar plan to reduce air pollution and become a carbon-neutral nation. For the auto industry, the end of an era for fossil-fuel powered cars poses a challenge not everyone is welcoming.
• A senior Italian senator is proposing to merge state-backed ultra-broadband carrier Open Fiber SpA with Telecom Italia SpA as a way to reduce the influence of Vivendi SA at the country’s biggest phone company.
• Abu Dhabi Ports Co. is considering an initial public offering, joining a growing list of state entities in the United Arab Emirates seeking to sell shares, according to people familiar with the matter. The government-run ports operator has met with investment banks in recent weeks and may decide on financial advisers soon, the people said, asking not to be identified as the information is private. The company could raise at least $1 billion in a share sale on the local exchange.
• Indonesia moved a step closer to hunting down tens of billions of dollars it believes its citizens have hidden abroad after passing a law that will give tax officials access to financial data held by other countries. The parliament on Wednesday approved a law in lieu of a presidential decree, fulfilling a requirement to participate under the Organisation for Economic Co-operation and Development’s Automatic Exchange of Information framework.
• Snapdeal’s co-founders are resisting the latest acquisition bid from rival Flipkart Online Services Pvt. and the company’s board plans to let all shareholders vote on the offer to reach a final resolution, according to people familiar with the matter.
• SoftBank Group Corp. has taken a stake in Roomba vacuum-cleaner maker IRobot Corp., people familiar with the matter said, as the Japanese company builds its holdings in robotics firms. SoftBank has built a less than 5 percent stake in IRobot, below the amount that would require a regulatory disclosure in the U.S., the people said, asking not to be identified because the purchase was private. The Bedford, Massachusetts-based technology company has a market value of $2.4 billion.

 

 

*All sources from Bloomberg unless otherwise specified