July 5th, 2018
Daily Market Commentary
- Toronto home sales jumped the most in more than a decade last month, a sign that Canada’s biggest housing market is rebounding from the chill brought on by tighter lending regulations and higher borrowing costs in the past few months. Sales in June rose 2.4 percent from the same period a year ago, according to data released Thursday from the Toronto Real Estate Board. Seasonally adjusted sales climbed 18 percent from May, the biggest monthly gain since 2004.
- Hudson’s Bay Co. has agreed to sell half of its European business to Austrian real-estate company Signa Holding GmbH, Wall Street Journal reported on Wednesday, citing unidentified people familiar with the matter.
- European automakers rebounded on hopes of a cross-Atlantic tariff deal, helping spur the Stoxx Europe 600 Index after gauges in Tokyo, China and Hong Kong all fell. The common currency strengthened and European sovereign bonds fell as investors repriced the trajectory of ECB rate increases and after data showed German factory orders surged in May. The pound climbed as U.K. Prime Minster Theresa May continues to seek backing for her vision of Brexit.
- The trade conflict is poised to enter a new phase on Friday, with the imposition of fresh tariffs between the world’s two biggest economies. China said that it won’t be the first to act, and will hold off on enforcement until the U.S. does. Investors are also preparing for more end-of-week action in the shape of the latest Federal Reserve minutes and American jobs data.
- Asian shares fell ahead of the U.S.’s planned implementation of trade tariffs on $34 billion worth of Chinese goods. China pledged not to implement duties before the U.S. is scheduled to do so on Friday. The MSCI Asia Pacific Index dropped 0.5 percent to 162.56 as of 4:24 p.m. in Hong Kong, after swinging between gains and losses. Technology and financial stocks were among the biggest drags on the region’s benchmark gauge.
- Oil held near $74 a barrel amid estimates that U.S crude inventories declined for a fourth week, compounding concerns that global markets are growing increasingly tight. Futures in New York were 0.3 percent higher following the U.S. Independence Day holiday, remaining near the highest since 2014. President Donald Trump criticized OPEC on Twitter again for failing to lower prices for consumers. Although Saudi Arabia has pledged the organization will boost supplies, Goldman Sachs Group Inc. said that losses in some members — notably Venezuela and Iran — will lead to a new rally.
- Gold trades little changed for a 2nd day ahead of U.S. jobs data and tariffs on Chinese goods scheduled to take effect Friday.
- Shares in European carmakers are having their best trading day in two years after a U.S. official floated a proposal to eliminate vehicle-import tariffs on both sides of the Atlantic. German auto-industry executives met with U.S. Ambassador to Germany Richard Grenell Wednesday, where he was said to have told participants Washington was seeking talks with the European Union and Berlin on lowering car duties to zero, according to two people briefed about the meeting. The news was first reported by Handelsblatt newspaper.
- Chinese President Xi Jinping has an ambitious master plan for his country’s transformation into a wealthy, technology-driven global economic power. And U.S. companies need not apply. That’s why the current trade rumble between the U.S. and China, in which the Trump administration is threatening to slap tariffs on $34 billion of Chinese imports and Beijing promises to respond in kind, is far more than just a spat over market restrictions, intellectual property rights and the epic U.S. deficit.
- Boeing Co. is forming a $4.75 billion venture with long-time industrial partner Embraer SA, a move that will expand the U.S. planemaker’s manufacturing base abroad while extending its reach into the market for small jetliners. Under a preliminary deal, Boeing will own 80 percent of a partnership controlling Embraer’s commercial airplane and services business while the Brazilian manufacturer holds 20 percent, the companies said in a statementThursday. The tie-up caps years of talks between the two, while extending the duopoly held by Boeing and Airbus SE as competitive threats emerge from rivals in Russia, Japan and China.
- Seven & i Holdings Co.’s U.S. expansion strategy, anchored by its $3.3 billion Sunoco purchase of Sunoco gas stations and convenience stores, is finally starting to kick in. The Japanese convenience store giant, which operates more than 30,000 locations around the world, reported first-quarter earnings that beat estimates on Thursday. Its performance was boosted by its overseas business, which included U.S. profits from Sunoco for the first time since the deal closed in January.
- The second nerve-agent poisoning in southern England in four months comes at a particularly difficult time for Theresa May. In the next 10 days, the U.K. prime minister faces a tough NATO summit and will host U.S. President Donald Trump, and before that she’ll try to unite her squabbling cabinet behind a vision for Britain’s post-Brexit relationship with the European Union. Now she must contain the fallout from the poisoning of two Britons in southern England that police say were exposed to the same nerve agent that contaminated a former Russian spy in March.
- Glencore Plc will buy back as much as $1 billion of its shares, a move that may soothe investor concerns after the world’s top commodity trader was hit by a U.S. Department of Justice probe earlier this week. The buyback program will start Thursday and last through year-end, the Swiss miner and trader said in a statement. Glencore shares rose as much as 4.7 percent, the most since April. The announcement comes two days after U.S. authorities demanded documents relating to possible corruption and money laundering regarding Glencore’s business in Nigeria, the Democratic Republic of Congo and Venezuela over the past decade. That wiped about $5 billion off Glencore’s market value on Tuesday, marking the latest twist in a tumultuous year for the company.
- Some of the world’s largest technology companies might be breaking the European Union’s new data privacy law, according to an analysis of their policies conducted by artificial intelligence software. Researchers from the European Union Institute in Florence worked with an EU consumer organization to create the software. They then used the program to examine the privacy policies of 14 major technology businesses, including by Alphabet Inc., Amazon.com Inc., and Facebook Inc.
- Praxair Inc. and Linde AG took a major step toward overcoming antitrust hurdles blocking their planned $45 billion merger by agreeing to sell a raft of industrial-gas plants in Europe to Taiyo Nippon Sanso Corp. The Japanese supplier of oxygen and argon to the steel industry will pay 5 billion euros ($5.9 billion) to expand its reach from Germany to Portugal and over to the U.K., the companies said in statements on Thursday. The deal, first reported Wednesday by Bloomberg News, gives Taiyo Nippon a foothold in the region to compete head on with dominant suppliers Linde and Air Liquide SA of France.
- Special Counsel Robert Mueller is tapping additional Justice Department resources for help with new legal battles as his year-old investigation of Russian interference with the 2016 election continues to expand. As Mueller pursues his probe, he’s making more use of career prosecutors from the offices of U.S. attorneys and from Justice Department headquarters, as well as FBI agents — a sign that he may be laying the groundwork to hand off parts of his investigation eventually, several current and former U.S. officials said.
- Temasek Holdings Pte and RRJ Capital will together invest about $1 billion in a Swiss airline caterer owned by China’s HNA Group Co., said people with knowledge of the matter. The two firms subscribed to a five-year, mandatory exchangeable bond that will convert into a 49 percent stake in Gategroup Holding AG, according to a statement earlier this week that didn’t mention the purchase price. They will split the investment equally, the people said, asking not to be identified because the details are confidential.
- Renault SA and Nissan Motor Co. have given themselves two years to decide on a possible merger between the two automakers or find an alternative mechanism to enhance their partnership, people familiar with the matter said. A solution to cement ties would be found before Carlos Ghosn, the chairman of both the automakers, is due to step down as the chief executive officer of Renault in 2022, according to the people, who asked not to be named because the talks are private. Ghosn, currently serving a four-year CEO term at Renault, had previously said he may step down before his tenure ends. Renault shares closed 1.3 percent higher in Paris, after rising as much as 3.1 percent. Nissan added 0.3 percent as of 9:25 a.m. in Tokyo.
- Assicurazioni Generali SpA agreed to sell almost 90 percent of its German Generali Leben unit to a company owned by Cinven Ltd. And Hannover Re in a deal that values the business at about 1 billion euros ($1.2 billion.) The deal’s total value could be as much as 1.9 billion euros including debt, the Trieste, Italy-based insurer said in a statement on Thursday. The sale, to Viridium Group GmbH & Co KG, is part of the insurer’s strategy to re-balance its portfolio and cut exposure to interest-rate risk, it said. Bloomberg reported in March what Viridium had submitted a binding bid for the unit.
- Creditors that provided a $4.75 billion loan to the majority owner of Turkey’s largest phone operator are in the final stages of setting up a special purpose vehicle to take over the company as they seek to resolve the country’s biggest default, people with knowledge of the matter said. About 90 percent of banks have formally approved the formation of an SPV that would assume control of Ojer Telekomunikasyon AS, or Otas, said the people, asking not to be identified because the talks are private. The remaining 10 percent have informally agreed and have until Thursday to officially approve, they said.
*All sources from Bloomberg unless otherwise specified