July 26th, 2019
Daily Market Commentary
- Canadian Headlines
- Cenovus Energy Inc. can finally begin rewarding its “patient investors” with share buybacks and rising dividends after two years of paying down acquisition debt, Chief Executive Officer Alex Pourbaix said. The oil-sands producer ended last quarter with about C$7.1 billion ($5.4 billion) in net debt, the company said Thursday. That’s down from about C$11.5 billion in September 2017, just before Pourbaix took over as CEO. Cenovus had borrowed heavily to fund its $13.2 billion purchase of ConocoPhillips’ oil-sands and Canadian natural gas assets.
- The board of CannTrust Holdings Inc. has fired Chief Executive Officer Peter Aceto following an internal probe into the marijuana producer’s violations of growing rules. Company chair Eric Paul has also resigned at the request of the board, CannTrust said in a statement Thursday. The shakeup comes after a Globe and Mail report cited internal emails showing that the executives were aware pot was being grown in unlicensed rooms about seven months before federal regulators unearthed the breach.
- World Headlines
- European equities opened little changed Friday as investors continued to analyze earnings. The Stoxx Europe 600 Index was down less than 0.1%. Vivendi SA surged 3.1% after first-half adjusted net income beat estimates. Kering SA slumped 8% after second-quarter Gucci growth disappointed. Anglo American Plc retreated 4.2% after news Indian billionaire Anil Agarwal, the biggest shareholder in the mining company, plans to exit his stake.
- U.S. equity futures rose with European stocks on Friday as investors weighed the latest batch of corporate earnings and looked ahead to next week’s Federal Reserve interest-rate decision. Treasuries edged higher. Contracts on the S&P 500 and Nasdaq 100 indexes climbed as Twitter and Alphabet rallied in pre-market trading after their sales beat estimates, though Amazon slid on lower-than-forecast earnings.
- Most Asian benchmarks fell, but stocks in Shanghai bucked the trend. The dollar was steady ahead of U.S. economic growth data due later on Friday, while the euro drifted lower a day after fluctuating in the wake of the European Central Bank meeting.
- Oil is set for a weekly increase as U.S. crude stockpiles tighten and lingering tensions surrounding Iran stoke concerns that energy flows from the Middle East may be disrupted. Futures gained slightly in New York on Friday and are up 1.2% this week. American crude inventories have declined for the past six weeks, the longest run since January 2018. Iran tested a medium-range ballistic missile on Wednesday, according to a CNN report. European governments are seeking to assemble a naval mission to provide safe passage for ships through the Persian Gulf after a British tanker was seized by Iranian forces last week.
- Gold is poised for the first weekly drop in three as investors weigh solid U.S. economic data and expectations of easing ahead of a key Federal Reserve policy-setting meeting next week. Orders placed with U.S. factories for business equipment posted the biggest gain in more than a year and shipments unexpectedly increased, according to Commerce Department figures Thursday. A separate Labor Department report showed filings for unemployment benefits fell last week to a three-month low.
- Vodafone Group Plc plans to carve out its phone towers into a new business and consider an initial public offering or minority stake sale to lower debt. The shares rose as much as 8.5% in early London trading after the carrier announced plans to separate Europe’s largest towers portfolio by May 2020. The business will consist of 61,700 masts in 10 countries, Vodafone said in a statement alongside financial results that beat expectations.
- Amazon.com Inc.’s results were marred by a surge in costs tied to its one-day delivery push, worrying investors who had grown accustomed to almost two straight years of fattening profits. Moving millions of products closer to customers to enable one-day delivery proved more costly and complicated than expected, driving up expenses and reducing efficiency in the second quarter, Chief Financial Officer Brian Olsavsky said Thursday on a conference call. The investment will put a strain on earnings for the rest of the year, but has already spurred consumers to buy more on Amazon’s website and helped revenue growth rebound, he said.
- Twitter Inc. reported sales that beat Wall Street expectations as the social media company attracted millions of new users with better ways of sorting users’ feeds and more relevant notifications. The shares rose about 4% in early trading in New York. Second-quarter revenue came in at $841 million, up 18% from the same quarter last year and higher than the $829 million analysts estimated. The company added 5 million daily users in the period, bringing the total to 139 million. That was the biggest year-over-year increase since the summer of 2017.
- Wanda Sports Group Co. is planning to raise about $190 million in its U.S. initial public offering, below its reduced price range, according to people with knowledge of the matter. The owner of the Ironman triathlon brand will sell 23.8 million American depository shares at $8 apiece, said the people, asking not to be identified because the information is private. The unit of Chinese billionaire Wang Jianlin’s conglomerate Dalian Wanda Group Co. earlier slashed the price range to $9 to $11 per American depository shares from $12 to $15 each, an amended filing showed.
- Units of Gazprom PJSC are set to raise about 139.1 billion rubles ($2.2 billion) through the sale of a 2.9% stake in the Russian natural gas producer. Gerosgaz Holdings BV and Rosingaz Ltd., both 100%-owned subsidiaries, priced 693.6 million common shares in Gazprom at 200.5 rubles apiece. That’s a 5.4% discount to the closing price on Wednesday, the day before the sale announcement. Gazprom surged as much as 8% in trading Thursday as Gazprombank was collecting bids before paring those gains to close 3.3% higher at 219 rubles in Moscow.
- Following a crucial court victory in mid-July, Amazon.com Inc. seemed poised to clinch a lucrative Pentagon cloud-services contract, having beaten out several rivals and steered past the animus of a powerful foe, President Donald Trump. Just one week later, Trump stunned tech companies, the Defense Department and lawmakers when he openly questioned whether the $10 billion contract had been competitively bid. He said he had heard complaints from companies such as Microsoft Corp., the No. 2 contender, and Oracle Corp., which was eliminated from the competition earlier this year. Both have argued that the terms favored Amazon, whose founder, Jeff Bezos, is one of the president’s longtime nemeses.
- China rebuffed FedEx Corp.’s claims that it mistakenly rerouted some Huawei Technologies Co. packages to the U.S. and warned that authorities found other violations by the American delivery firm, raising concern the company could face repercussions from Beijing. “It is not true that its wrong transfer of Huawei parcels were operational errors,” Chinese Foreign Ministry spokeswoman Hua Chunying said at a briefing in Beijing on Friday. “During our investigation we also found out other FedEx activities in violation of the law so we will continue to have in-depth investigations on it.”
- Turkey’s president said his government may have to “rethink” existing orders for Boeing Co. airplanes worth about $10 billion, in comments that reflect the country’s straining ties with the U.S. Turkey’s hesitation on the Boeing order adds to tension created when the country ordered a missile defense system from Russia, spurning an offer for Ankara to buy U.S. air-defense missiles. Erdogan spoke with U.S. President Donald Trump at the G-20 summit, during which he reminded him of existing orders for 100 Boeing jets by Turkish Airlines, the nation’s flagship carrier where the government holds a 49% stake. Turkey has since begun receiving the S-400 missile defense systems from Russia, which the U.S. has long said is incompatible with the its role as a NATO member and purchases of U.S. F-35 fighter jets.
- Bayer AG persuaded a judge to reduce a jury verdict to $86.7 million from more than $2 billion in the most recent trial over its Roundup weedkiller. Now, it’s up to the elderly couple who won the award to decide whether to accept the reduced amount or pursue a new trial. There was no question the $2.055 billion award would be slashed. Jurors in state court in Oakland, California, arrived at the figure in May after concluding the herbicide caused Alva and Alberta Pilliod’s cancer. The jury found that punishment damages were warranted because Monsanto, the maker of Roundup that was acquired by Bayer last year, had covered up the chemical’s health risks.
- T-Mobile US Inc. is set to win U.S. antitrust approval for its takeover of Sprint Corp. on Friday, according to a person familiar with the matter, moving the wireless carriers a step closer to completing a deal that has been more than a year in the making. The Justice Department’s antitrust division is scheduled to announce a settlement that will require the companies to sell assets to Dish Network Corp.to preserve competition in the industry, said the person, who asked not to be named because the review is confidential. Under the settlement, Dish would pay about $5 billion for wireless assets, including prepaid mobile businesses and spectrum. The arrangement is intended to resolve competition problems stemming from uniting the No. 3 and No. 4 wireless carriers.
- Chinese investors are taking a different approach to trading the yuan, a change strategists say is helping curtail sharp moves in the currency. From late 2015 through 2018, China’s firms and households mostly added to the yuan’s momentum in either direction, buying foreign currencies when the yuan was weak and vice versa, data compiled by Bloomberg show. Lately, they’re doing the opposite. They sold foreign-exchange when the yuan was low on bets that Beijing will halt depreciation to avoid capital outflows.
- Charles Schwab Corp. agreed to pay $1.8 billion to acquire the investment management arm of USAA, the insurance company that mainly serves military veterans and service members, according to a statement Thursday. The transaction will add more than 1 million new accounts with about $90 billion in assets to Schwab’s $1.9 trillion in investor services. The transaction is expected to close next year, subject to regulatory approval.
- China plans to start regulating large conglomerates that may pose systemic risks to the nation’s financial sector. Certain non-financial firms or individuals with businesses that straddle at least two financial industries will be classified as “financial holding companies” and will need licenses from the People’s Bank of China to operate, the regulator said in proposals Friday. If adopted, the rules would require the companies to hold specified levels of capital and regulators would scrutinize their ownership structure, related transactions, and source of funding.
*All sources from Bloomberg unless otherwise specified