July 31st, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks fell for a second day as a mixed bag of earnings offset strong gains in the energy sector. The S&P/TSX Composite Index lost 0.2% to 16,466.05, the lowest in three weeks. Waste Connections Inc. was the biggest drag on the benchmark after lowering its full-year Ebitda outlook because of commodity-price headwinds. Energy stocks rose 0.7% as crude prices jumped 2.1%, their fourth straight daily gain amid expectations for a U.S. interest-rate cut. MEG Energy Corp. added 5.2% ahead of its quarterly earnings report.
- Sun Life Financial Inc. is looking to add fire power in private credit. The Canadian insurer is willing to spend $500 million to $1 billion on firms with more than $10 billion in managed assets in mid-market lending, mezzanine financing or other areas of the private credit space. Ideal targets would have operations in North America and Europe. It’s also studying launching its first U.S. private debt fund as soon as this year.
- TC Energy Corp., the Canadian pipeline giant best known for its Keystone XL project, agreed to sell its holdings in three natural gas-fired power plants to Ontario Power Generation Inc. as part of a drive to fund more than $20 billion of investments. Ontario’s province-owned utility will pay about C$2.87 billion ($2.2 billion) for the 683-megawatt Halton Hills power plant, the 900-megawatt Napanee generating station and 50% of the 550-megawatt Portlands Energy Centre, Calgary-based TC Energy said in a statement Tuesday.
- The owners of the National Hockey League’s Calgary Flames struck a deal with the city to build a new C$550 million ($418 million) event center for the team to play in, replacing the more than 30-year-old Saddledome. The city will own 100% of the building and fund half of the construction cost under the deal approved by a 11-4 vote of the city council on Tuesday. The team owners, the Calgary Sports & Entertainment Complex, will bear all of the operating, maintenance and repair costs for the life of the 35-year agreement.
- World Headlines
- European shares eased further after Tuesday’s tumble as another round of U.S.-China trade talks ended with no sign of progress and investors awaited an expected rate cut by the Federal Reserve. The Stoxx Europe 600 slipped 0.1% as of 8:13 a.m., with the personal and household-goods sector leading losses amid a slide in L’Oreal SA, whose North American sales disappointed. On a big day for bank earnings, Credit Suisse Group AG and BNP Paribas SA led gains in the sector after reporting results, while Lloyds Banking Group Plc dropped on worse-than-expected profits.
- American equity futures gained, stocks in Europe drifted and Asian shares retreated as the U.S. and China concluded the latest round of trade talks with no obvious breakthrough and investors grappled with a flood of corporate earnings. Treasuries edged up and the dollar was steady before the Federal Reserve’s rate decision. Futures on the S&P 500, Dow Jones Industrial Average and Nasdaq 100 all advanced as General Electric delivered strong results.
- Hong Kong shares were the hardest-hit in Asia before the city’s markets closed early due to a storm. Samsung slid after it reported a sharp decline in profit. American delegates wrapped up negotiations with their Chinese counterparts in Shanghai on Wednesday with little evidence of progress toward ending the year-long trade dispute. And with a Fed rate cut already baked into market pricing, Chairman Jerome Powell’s post-meeting press conference later Wednesday will be parsed for clues on the policy path.
- Oil traded near a two-week high in New York amid signs of a further drop in U.S. crude stockpiles and ongoing concerns that political friction in the Persian Gulf could disrupt exports. Futures rose as much as 0.9% in New York after gaining 3.9% in the past four sessions. American crude inventories dropped by 6.02 million barrels last week, according to an industry report. If confirmed by government data on Wednesday, it will be a seventh weekly decline. BP is avoiding sending ships through the Strait of Hormuz, Chief Executive Officer Bob Dudley said Tuesday.
- Gold is poised for a third monthly advance as investors count down the final hours before a widely expected interest rate cut by the Federal Reserve, with Chairman Jerome Powell’s post-meeting remarks set to be dissected for clues on the policy path amid signs of slowing global growth. Traders also weighed the bleak backdrop to renewed U.S.-China trade talks. President Donald Trump hit out at China for what he said is its unwillingness to buy American farm products just as officials resumed negotiations. Data from China showed manufacturing in Asia’s top economy shrank again in July.
- General Electric Co. raised its 2019 outlook for earnings and cash flow, buoying Chief Executive Officer Larry Culp’s plan to stabilize the ailing manufacturer and overcome a tough market for power equipment.Adjusted earnings this year will be 55 cents to 65 cents a share, up a nickel from the prior range, the company said Wednesday in a statement. GE also boosted its outlook for cash flow from its industrial businesses by $1 billion.
- Credit Suisse Group AG and BNP Paribas SA broke some of the gloom surrounding Europe’s banks with trading results that mostly beat their Wall Street peers. The French bank saw debt trading rise almost 9% in the second quarter after a surge in the first three months of the year, while Zurich-based Credit Suisse posted a 6% gain in fixed income and equity revenue that only slightly declined. The biggest Wall Street firms recorded 8% lower equities revenue and a 7% drop in fixed income, capping what’s shaping up to be the worst first half for securities trading in a decade.
- Economic growth in the euro area slowed dramatically in the second quarter, the latest in a string of reports flagging deteriorating economic prospects that increase the chance of more European Central Bank stimulus. Cooling momentum risks extending a phase of too-low inflation that’s worrying policy makers. At their last meeting, ECB officials ordered staff to study everything from interest-rate cuts to asset purchases as they look at ways to prop up the economy.
- Apple’s guidance for the all-important September quarter cheered Wall Street amid concerns about the impact on sales from the U.S.-China trade war and increasing competition from smartphone rivals. The tech giant’s results were “good enough for now,” Raymond James said in a note, while Goldman Sachs and Piper Jaffray raised their price targets. However, some analysts aren’t getting excited just yet, waiting instead for the release of Apple’s 5G-enabled phones, which aren’t likely to arrive before 2020. The shares jumped 4.3% in pre-market trading on Wednesday. The gain could push the company’s market value back above $1 trillion, depending on the number of shares Apple had outstanding at the end of the quarter. Apple is approaching a year-to-date high reached in May and has made back the losses incurred that same month, when the company was faced with an antitrust suit and as rising trade tensions weighed on shares.
- EssilorLuxottica SA agreed to buy GrandVision NV in a deal that values the smaller Dutch eyecare retailer at as much as 7.3 billion euros ($8.1 billion) and brings the Ray-Ban sunglasses brand and Vision Express prescription centers under the same roof. The Franco-Italian company said it will pay at least 28 euros a share for investment firm HAL’s roughly 77% stake. HAL is controlled by the Dutch billionaire Van der Vorm family. Following the completion of the deal, EssilorLuxottica will be obliged to make an offer for the rest of GrandVision’s shares.
- China and the U.S. plan to meet again in September to extend trade talks, as the latest round of negotiations in Shanghai ended with signs the sides discussed Chinese purchases of American farm products — a key demand of President Donald Trump. U.S. delegates including Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer wrapped up talks with their Chinese counterparts including Vice Premier Liu He Wednesday afternoon at the Xijiao State Guest Hotel, according to a pool report. The U.S. delegation, which arrived Tuesday afternoon, was heading to the airport about 24 hours later.
- North Korea greeted U.S. Secretary of State Michael Pompeo’slatest trip to Asia with twin signals of frustration: test-firing missiles and withholding top diplomats from a chance at nuclear talks. Kim Jong Un’s regime fired two short-range ballistic missiles into the sea early Wednesday, the South Korean military said, the second such test in less than a week. The launches came just hours ahead of Pompeo’s arrival in Bangkok for a regional summit, a stop that the top U.S. diplomat acknowledged wouldn’t include an anticipated meeting with the North Koreans.
- Gold investors are positioning for further gains in the lead up to the Federal Reserve’s first expected cut to interest rates in more than a decade. Holdings in bullion-backed ETFs rose 4.8 tons to 2,350.1 tons, the highest since April 2013, according to data compiled by Bloomberg on Tuesday. In silver, the combined volume of calls and puts has surged above 220,000 contracts this month, on course for the highest since November 2010, a sign of greater speculative interest in the metal.
- Carlyle Group LP, in a move to one-up rivals, became the first private equity giant to create one class of shares, making it eligible for the S&P 500. The private equity firm dropped its dual-class shares as part of its switch to a corporation, the company said Wednesday. Carlyle is seeking to accelerate its inclusion in stock indexes to boost its share price, which has lagged some rivals. Its new one-share, one-vote structure increases the chances of getting into top indexes ahead of competitors KKR & Co. and Blackstone Group Inc. These firms have dual class shares which prevent them from getting into some indexes.
- Aston Martin Lagonda faces questions about its future after it swung to a loss in the first half, adding to a torrid week when the British luxury-car maker’s slashed its sales forecast and its shares tumbled by more than half. Since listing in October, the manufacturer has struggled to find its footing as a publicly traded company. The challenges, and a share price in free-fall, have prompted speculation about the carmaker raising more funds and becoming a takeover target.
*All sources from Bloomberg unless otherwise specified