July 26th, 2018

Daily Market Commentary

Canadian Headlines

• Suncor Energy Inc., Canada’s largest oil producer by market value, dropped the top end of its production target for the year as it works to bring its key Syncrude facility back online after a power outage brought the plant down last month. Output this year will be 740,000 to 750,000 barrels of oil equivalent a day, the Calgary-based company said Wednesday. Suncor was forecasting production of 740,000 to 780,000 barrels as of May 1.
• Teck Resources Ltd. will seek a partner for its huge Chilean copper project ahead of a final decision on moving forward with construction. Chief Executive Officer Don Lindsay has called the Quebrada Blanca Phase 2 expansion project in northern Chile Teck’s most significant growth opportunity, saying it has the potential to double the company’s copper business. The Canadian miner may announce a deal in the fourth quarter for a minority interest in the project and would probably make a development decision around the same time, Teck said in its second-quarter earnings statement Thursday.
• Canada’s Cameco Corp. extended the shutdown of one of the world’s biggest uranium mines indefinitely and announced it will fire most workers at the operation until a global supply glut eases. The decision comes amid growing uncertainty in Cameco’s biggest market as U.S. President Donald Trump threatens to extend metal tariffs to uranium imports.

 

 

World Headlines

• European stocks gained and U.S. futures slipped following a mixed session in Asia as investors grappled with a slew of catalysts, including an apparent easing of global trade tensions and a flood of corporate earnings. The Stoxx Europe 600 Index climbed, led by industrials, after President Donald Trump agreed with European Commission chief Jean-Claude Juncker to suspend new tariffs while continuing to negotiate over trade.
• Stock-index futures for the S&P 500 and Nasdaq slipped as Facebook Inc.’s anticipated slide outweighed optimism arising from an easing of trade tension between the U.S. and Europe. Facebook, which has the fourth-largest weighting on the S&P 500, tumbled in pre-market trading after reporting sales and user growth numbers that were below projections.
• Asia’s main equity benchmark extended its gain for a third day after the U.S. and European Union agreed to suspend new tariffs, lifting investor sentiment. The MSCI Asia Pacific Index rose 0.3 percent to 168.42 as of 5:18 p.m. in Hong Kong, the highest level in a month. Philippine shares index rallied the most in Asia amid signs of renewed foreign interest in the country.
• Oil extended gains in London after an attack on Saudi Arabian tankers heightened concern over disruption to supplies. Brent futures rose as much as 1.2 percent after adding 0.7 percent Wednesday. Two vessels were attacked by Yemeni Houthi militia, leading Saudi Arabia to suspend oil shipments via the Bab el-Mandeb Strait. Meanwhile, U.S. crude inventories dropped to the lowest since 2015 and gasoline supplies slid for a fourth week.
• Gold declines before European Central Bank meeting, U.S. GDP numbers this week amid easing of trade tensions.
• Comcast Corp. made clear why it has pursued multibillion-dollar mergers on two continents: While second-quarter profit beat analysts’ estimates, revenue came up a bit short. Profit rose to 65 cents a share, the Philadelphia-based company said Thursday, topping analysts’ estimate of 60 cents. While sales grew 2.1 percent to $21.7 billion, they missed Wall Street’s expectations of $21.8 billion.
• Facebook Inc. has racked up plenty of milestones in its pioneering journey. Now the social-media giant is poised to add one it would doubtless rather avoid: the biggest stock-market wipeout in American history. That could happen Thursday if the 24 percent tumble in Facebook’s stock in after-hours trading is replicated in the regular New York session. Its market capitalization plummeted late Wednesday, at one point by about $151 billion, as sales and user growth disappointed investors. A move of that magnitude on Thursday would likely be the largest ever loss of value in one day for a U.S.-traded company.
• Investors dumped shares of the South Korean builder of a Laos dam after the levy’s collapse left at least 19 dead and hundreds missing. SK Engineering & Construction Co. bore the brunt of Wednesday’s selloff, plunging 30 percent and losing about $340 million in market capitalization. Its major shareholders SK Discovery Co. and SK Holdings Co. saw their combined market value shrink by $884 million.
• Eisai Co.’s market value plunged by $2.7 billion Thursday as investors were disappointed with test results for an experimental Alzheimer’s disease drug from the Japanese company and Biogen Inc. Results showing the treatment slowed progression of the disease by 30 percent fell short of expectations that had sent Eisai soaring earlier this month after it announced initial test results showing promise for the drug. After the data was released Wednesday, doctors and patient advocates said more information was needed from larger, longer studies.
• Qualcomm Inc. scrapped its $44 billion bid for rival chipmaker NXP Semiconductors NV after Chinese regulators failed to approve the largest-ever deal in the chip industry. The aborted takeover may be the highest-profile victim yet of the trade spat between China and the U.S., with every other relevant jurisdiction in the world clearing the bid months ago. While China denied its decision had anything to do with trade tensions, Qualcomm Chief Executive Officer Steve Mollenkopf said “there were probably bigger forces at play here than just us.”
• Southwest Airlines Co. says it expects bookings and fares to rebound this quarter following a fatal engine accident in April. Revenue for each seat flown a mile, a closely watched gauge of demand and fares, is poised to rise as much as 1 percent in the three months ending Sept. 30, the Dallas-based airline said in a statement Thursday. The measure declined 3 percent in the second quarter, after Southwest suspended marketing for about a month following the engine explosion. Total passenger revenue declined $100 million last quarter due to the accident.
• First, General Motors Co. and Fiat Chrysler Automobiles NV reported weak earnings, with both reining in profit forecasts for the year. That sparked sharp sell-offs of their stocks. Then it really got ugly. Ford Motor Co. took the stage and projected $11 billion in charges linked to a restructuring plan that will take as long as five years to play out. The already-struggling company that had touted plans to cut $25.5 billion in costs in the coming years left analysts wanting more detail and subjecting Chief Executive Officer Jim Hackett to harsh questioning.
• President Donald Trump’s vision of Europe becoming a “massive buyer” of U.S. liquefied natural gas is likely to crash into the reality that Russia is a cheaper supplier for now. Europe is consuming record volumes the fuel delivered by pipelines from its traditional and geographically closer partners, Russia and Norway. Production has been increasing in both of those countries, and the government in Moscow has been promoting vast fields in Siberia that can ship to Europe at a lower cost than the U.S.
• A radical option for breaking the deadlock in Brexit negotiations is still in play, even though it’s likely to enrage the Northern Irish party propping up Theresa May’s fragile Conservative government. British officials are considering allowing the EU to impose its market regulations on Northern Ireland, while the rest of the U.K. breaks away after Brexit, according to a person familiar with the matter who declined to be named outlining proposals that aren’t public.
• British American Tobacco Plc’s shares broke out of their recent malaise as investors welcomed solid profits and the prospect of the company’s heated-tobacco product being the first on the U.S. market. BAT’s first-half profit of 4.82 billion pounds ($6.4 billion) was slightly ahead of analysts’ estimates. The London-based company said it received approval from the U.S. Food and Drug Administration to begin selling its Neocore heated-tobacco device, which was formerly known as Eclipse.
• The U.S. Securities and Exchange Commission has sought details from India’s ICICI Bank Ltd. on its accounting and corporate governance practices, people familiar with the matter said. The SEC’s queries center on ICICI’s dealings with certain borrowers under Chief Executive Officer Chanda Kochhar and whether there had been misrepresentations in the bank’s accounting, the people said, asking not to be named. The regulator is taking an interest because ICICI has American Depositary Receipts traded in the U.S., the people added.
• Royal Dutch Shell Plc finally gave investors the share buybacks they’ve been demanding, even as profit fell short of expectations despite resurgent crude prices. The Anglo-Dutch energy producer said Thursday that it is starting a $25 billion share-repurchase program, initially buying up $2 billion of stock over three months. That should soothe investors who have grown increasingly anxious about when they’ll see the reward for sticking with Shell through the biggest oil-industry downturn in a generation.
• Nissan Motor Co. and Hyundai Motor Co. warned of more consequences from the ongoing tit-for-tat tariff war between the U.S. and its trade partners including China, joining a chorus of negative voices from the Detroit automakers. Car prices would rise with additional tariffs by the U.S., Nissan Corporate Vice President Joji Tagawa told reporters in Yokohama Thursday. He also said the risks of a conflict between the U.S. and the European Union haven’t been completely eliminated. An extended dispute would have the potential to weaken car demand, Hyundai Vice President Koo Zayong said in Seoul.
• Novelis signs pact to acquire Aleris, a global supplier of rolled aluminum products, for about $2.6 billion including the assumption of debt.
• KBS Realty Advisors, a U.S.-based commercial property owner, is considering its second real estate investment trust listing in Singapore, people with knowledge of the matter said. The company aims to raise at least $1 billion from a potential sale of trust units backed by at least 15 prime commercial properties, the people said. A possible initial public offering could take place in the fourth quarter, said the people, who asked not to be identified because the details are private.
• Chinese e-commerce company Pinduoduo Inc. has raised $1.6 billion after pricing its U.S. initial public offering at the top end of a marketed range, according to a person with knowledge of the matter. The Shanghai-based shopping platform backed by Tencent Holdings Ltd. has priced 85.6 million American depositary shares at $19 each, said the person, who asked not to be identified because the details are private. The shares were marketed at $16 to $19 each, according to a regulatory filing.

 

*All sources from Bloomberg unless otherwise specified