July 7th, 2017
Daily Market Commentary
- Canadian stocks fell as financials and materials led a general decline across the market. The S&P/TSX Composite Index slipped 0.5 percent to 15,073.22 at 10:38 a.m. in Toronto on Thursday. Financials fell 0.2 percent as Toronto-Dominion Bank lost 1.2 percent and the Bank of Nova Scotia dropped 0.5 percent.
- Canada’s first interest-rate increase in seven years poses little risk to the market backed by a record binge in consumer debt. Securities that bundle credit cards, mortgages, and home equity lines of credit, as well as unsecured bonds issued by auto companies, have seen the least erosion of their value compared with other debt since the Bank of Canada signaled tightening may come as early as next week.
- Oats are trading near the highest levels in more than two years, catching the wave of rising grain prices as drought threatens North American crop yields. Futures prices for the crop used in everything from cereal to dog food touched $3.0525 a bushel Wednesday on the Chicago Board of Trade, the highest since January 2015.
- Apache Corp. joined oil majors in pulling out of Canada with a sale of assets in the Montney and Duvernay shale plays, underscoring concerns about costs, regulations and pipeline constraints. The C$459.5 million ($354 million) sale to Paramount Resources Ltd. follows last month’s $254 million divestiture of holdings in Alberta and Saskatchewan to Cardinal Energy Ltd., as well as the sale of its Provost assets in Alberta to an undisclosed, privately owned buyer, Houston-based Apache said Thursday in a statement.
- European stocks fell with oil as traders awaited U.S. jobs data for clues on the health of the world’s biggest economy. The Stoxx Europe 600 Index slipped 0.3 percent at 8:32 a.m. in London, with energy shares sliding to their lowest since November. Europe’s equity gauge is near an 11-week low and is heading for a fifth week without gains.
- U.S. index futures held steady as investors look ahead to Friday’s report on the labor market and the first official meeting between Donald Trump and Vladimir Putin. S&P contracts expiring in September were little-changed as of 6:10 a.m. in New York, after the underlying index closed at a six-week low on Thursday, when real estate stocks had their biggest daily drop in 2017.
- Asian equities fell, led by financial and technology stocks, ahead of the release of U.S. jobs data later Friday. The MSCI AC Asia Pacific Index lost 0.7 percent to 152.81 as of 4:20 p.m. in Hong Kong, heading toward its steepest weekly loss since March. Australia’s megabanks were among the biggest drags on the gauge and the S&P/ASX 200 Index declined most among Asian markets.
- Oil fell in New York, heading for a weekly loss, as a decline in U.S. crude stockpiles failed to convince investors that global markets are re-balancing. Futures dropped as much as 2.8 percent even after U.S. data on Thursday showed the nation’s crude stockpiles dropped by 6.3 million barrels, three times as much as expected. Investors remain doubtful that OPEC-led production cuts will clear a global glut, after Russia ruled out deepening the measures and Saudi Arabia showed less commitment than earlier in the year.
- Gold is set for a fourth weekly loss in five and silver sagged to the lowest level in 15 months on heavy trading as an increase in Treasury bond yields, coupled with concern further gains may be in store, pressures non-interest bearing assets.
- Iron ore will sink back below $50 a metric ton next year as global supply expands and demand moderates in China, according to Australia, the biggest exporter, which released its revised outlook just hours before the country’s largest port reported record shipments for June.
- A sharp drop in the yen and sterling sent the Bloomberg Dollar Spot Index slightly higher on Friday, with traders looking to the U.S. payroll report to provide direction for the greenback. The Japanese currency hit its lowest level since mid-May at 113.85 per dollar after the Bank of Japan announced an unlimited debt-purchase operation to keep 10-year yields at about zero percent.
- U.K. factories and construction firms unexpectedly cut output in May, casting doubt over the performance of the economy in the second quarter. Manufacturing fell 0.2 percent from April as vehicle production posted the biggest drop in more than a year, the Office for National Statistics said Friday. Total industrial production declined 0.1 percent. Building output shrank by 1.2 percent.
- European companies are turning to their backyards for growth via mergers and acquisitions. The volume of deals in Europe in the first half of the year reached about $250 billion, more than 70 percent higher than spending in the first two quarters of 2016, according to data compiled by Bloomberg.
- Hong Kong stocks fell to the lowest level since May 19 as as China Unicom Hong Kong Ltd. dropped amid skepticism about its transition to 5G technology. Industrial & Commercial Bank of China Ltd. led a slump by lenders this week.
- Campbell Soup Co., struggling through a sales slump as consumers seek out more natural products, has agreed to buy a company that makes organic soup and broth for $700 million. The deal to acquire Pacific Foods of Oregon will be financed with debt, Campbell said on Thursday. The Tualatin, Oregon-based maker of organic foods generated revenue of $218 million over the last year.
- The Bank of Japan asserted control over the nation’s bond yields, sending borrowing costs lower with its first fixed-rate purchase operation since February after a global debt selloff. No bids were tendered after the central bank offered to buy benchmark 10-year notes at 0.11 percent, it said Friday. Yields dropped to 0.085 percent from as high as 0.105 percent before the operation was announced, while the yen swung to a loss.
- IndiGo, the only carrier that has made a pitch to purchase Air India Ltd., sought to allay investor concerns about the budget operator buying the unprofitable national carrier, saying a deal would help speed up its plans for low-cost, long-distance flights.
- Warren Buffett’s Berkshire Hathaway Inc. is trying for a utility takeover in Texas where energy giant NextEra Energy Inc. and the Hunt family have failed. Berkshire Hathaway’s energy unit agreed to buy a reorganized Energy Future Holdings Corp., the parent company of Oncor Electric Delivery Co., Texas’s largest electricity-transmission operator, according to a statement issued Friday. The all-cash offer for Energy Future is $9 billion, implying an equity value of about $11.25 billion for 100 percent of Oncor.
- Investors couldn’t sell Chinese banking giants fast enough this week. Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and Bank of China Ltd. posted their worst weeks since at least June 2016, while China Construction Bank Corp. fell for a fifth consecutive week. The lenders were among the biggest decliners on a gauge of Chinese shares traded in Hong Kong, losing a combined $15 billion in value.
- Wal-Mart Stores Inc. sold yen bonds for the first time in seven years, taking advantage of falling fundraising costs and Japanese demand for securities issued by well-known U.S. firms. The U.S. retailer offered 170 billion yen ($1.5 billion) in total of five-year, seven-year and 10-year notes, in its first yen issuance since selling 100 billion yen of debt in July 2010. Five-year cross-currency basis swaps show that overseas borrowers in yen wishing to swap back funds into dollars had to pay a premium of 61 basis points on Friday.
- NetLink NBN Trust, the Singapore fiber broadband network provider, is poised to raise S$2.3 billion ($1.7 billion) after pricing the city-state’s largest initial public offering in more than six years near the bottom of a marketed range, according to people with knowledge of the matter.
- Allianz SE, Europe’s biggest insurer, is partnering with Columbia Property Trust Inc. to create a $1.26 billion joint venture for U.S. real estate. The Munich-based insurer contributed an office tower at 114 Fifth Ave. in Manhattan that’s valued at $220 million to the partnership, Allianz’s real estate unit said in a statement Thursday.
- UniCredit SpA Chief Executive Officer Jean Pierre Mustier said the bank will close a deal to sell half of a 17.7 billion-euro ($20 billion) non-performing loan portfolio to Pimco and Fortress Investment Group LLC in coming weeks, and is moving ahead with plans to divest the rest.
- Cyber crime insurers largely avoided costly claims from the recent attacks that hit businesses around the globe. The next global virus could change that. “It’s exceptionally likely that we will see an event over the next months that will seriously affect insurers,” Graeme Newman, chief innovation officer at CFC Underwriting, said in an interview. “It would only need a combination of WannaCry’s wide reach and Petya’s destructive force to cost cyber insurers something like $2.5 billion, or a full year of gross premium income in the market.”
- Elon Musk’s Tesla Inc. has won a tender to supply what the billionaire says is the world’s largest lithium-ion battery to back up the state of South Australia’s blackout-plagued power grid, making good on a promise first made over Twitter four months ago to help solve the state’s energy woes.
- Samsung Electronics Co. heads into the latter half of 2017 with record quarterly earnings under its belt, hoping to sustain that momentum as Apple Inc. prepares to debut the 10th-anniversary iPhone. Samsung intends to use its well-received Galaxy S8 to extend its lead against its American rival. But it will also lean heavily on its position as the world’s largest maker of memory chips to grow its bottom line.
- Axa SA is exploring the sale of its Hong Kong wealth management unit, according to people familiar with the matter, becoming the latest insurer to attempt to cash in on a surge of Chinese interest.
*All sources from Bloomberg unless otherwise specified