June 10th, 2019
Daily Market Commentary
- Canadian Headlines
- When the lease on an Alberta Health Services office in Calgary came due for renegotiation two years ago, the rental market was so bad that trying to keep the tenants wasn’t worth it. Instead, landlord Strategic Group took the unconventional step of letting the government agency leave and spent C$24.5 million ($18 million) to convert the seven-story building into an apartment complex. Aside from the renovation cost, the building sat vacant for almost a year. But those were risks the company had to take to cope with a market that’s been gutted by an exodus of oil-industry jobs.
- World Headlines
- Stock markets rose in most of Europe, though several exchanges including Germany’s were closed for a holiday. Shares rallied across Asia. Mexico’s peso jumped the most in almost a year after the country’s accord with the U.S. was unveiled late Friday.
- U.S. stock-index futures rose along with stocks in Europe and Asia after President Donald Trump announced late Friday that he would drop plans for tariffs on Mexico. S&P 500 Index contracts gained 0.4% as of 9:37 a.m. in London, paring an earlier jump of as much as 0.8%, after Trump said that plans for a 5% tariff on Mexican goods had been “indefinitely suspended.” Dow Jones Industrial Average contracts also advanced 0.3%, while those on the Nasdaq 100 added 0.4%. A retreat from haven assets weighed on the Japanese yen and the Swiss franc. Mexico’s peso rebounded.
- Japanese stocks advanced, with the Topix index closing at the highest level in three weeks, after President Donald Trump said late Friday that he would drop plans for tariffs on Mexico, boosting market sentiment. All of the 33 industry groups on the Topix rose, with electronics, chemicals and automakers contributing the most to the gauge, after the yen weakened against the dollar on improved risk sentiment from the U.S.-Mexico agreement unveiled late Friday. U.S. stocks rallied on Friday after weak jobs data added to bets the Federal Reserve will cut interest rates. U.S. Treasury Secretary Steven Mnuchin tweeted that he had a “candid” and “constructive” talk on trade issues with People’s Bank of China Governor Yi Gang.
- Oil steadied near $54 a barrel after Saudi Arabia said it could agree on plans for production with Russia at the G-20 summit this month. Futures traded 0.1% higher, after earlier adding as much as 1.6%. There’s almost unanimous agreement in OPEC to extend production cuts, and holdout Russia could come on board before the deal’s expiry at the end of June, Saudi Arabia’s Energy Minister Khalid Al-Falih said in an interview with Russian news service Tass.
- Gold retreated after President Donald Trump suspended his plans for tariffs on Mexico, boosting equities and curbing demand for a haven. Monday’s drop snaps an 8-day winning streak for gold and follows the biggest weekly gain since 2016. The metal has benefited this month from growing expectations for easier monetary policy after an unexpectedly weak reading on the U.S. jobs market in May. Hedge funds boosted their long position in bullion by the most in almost 12 years, while China extended its gold-buying spree, adding to reserves for a sixth straight month.
- Salesforce.com Inc. agreed to buy Tableau Software Inc. in an all-stock deal valued at $15.3 billion in a major bid to build its analytics offering. The takeover of Tableau will be Salesforce’s largest deal to date, according to data compiled by Bloomberg. Co-Chief Executive Officers Marc Benioff and Keith Block have been chasing new markets to reach an annual revenue goal of $26 billion to $28 billion by fiscal year 2023. Tableau will remain headquartered in Seattle and will continue to be led by CEO Adam Selipsky, a former Amazon.com Inc. executive who has been transitioning Tableau’s software tools to cloud-based subscriptions. Each share of Tableau Class A and Class B common stock will be exchanged for 1.103 shares of Salesforce common stock, the companies said in a statement Monday. The deal price represents premium of 42% to Tableau’s closing price on Friday.
- Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week. This was the sixth straight week of outflows. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $565.1 million in the week ended June 7, compared with losses of $390.1 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $11.7 billion.
- United Technologies Corp. agreed to buy Raytheon Co. in an all-stock deal, forming an aerospace and defense giant with $74 billion in sales in one of the industry’s biggest transactions ever. The new entity will be called Raytheon Technologies Corp. when the deal closes in the first half of 2020, after United Technologies completes the separation of its Otis elevator and Carrier air-conditioner businesses, the companies said in a statement Sunday. While billed as a merger of equals, current United Technologies shareholders will own most of the company after the transaction, which has an equity value of $86 billion, according to data compiled by Bloomberg.
- .China’s Anxin Trust Co. tumbled almost by the daily limit on Monday after disclosing that it has missed payment on 11.8 billion yuan ($1.7 billion) of trust plans. The company said in a filing on Thursday that repayment on 25 trust products it managed were overdue as of May 20 as some borrowers faced short-term liquidity difficulty. Anxin was actively working with creditors to extend the deadline and was also in talks with borrowers to sell assets to repay the debts, the company said.
- France’s Loxam SAS agreed to buy Ramirent Oyj for 970 million euros ($1.1 billion) to create Europe’s largest network of construction-equipment rental agencies. Loxam will begin a tender offer for all of Ramirent’s shares at 9 euros each, 65% above Ramirent’s closing price on Friday, the companies said in a statement on Monday. Ramirent’s conflict-free board members unanimously recommended that shareholders accept the offer, according to the statement.
- Singapore’s second-largest property developer is offering to buy out shareholders of Millennium & Copthorne Hotels Plc in a deal that would value the company at $2.84 billion. City Developments Ltd. said in a statement on Friday that it has made a final offer for the London-traded hotel chain at 685 pence per share, representing a 37% premium to the June 6 closing price of 500 pence. That’s up from a previous offer of 620 pence per share.
- U.K. manufacturing output fell the most in almost 17 years in April as the boost from Brexit stockpiling evaporated and car producers went ahead with planned shutdowns. The 3.9% decline, the most since June 2002, saw the economy as a whole shrink for a second straight month, Office for National Statistics figures published Monday show. Vehicle production plunged by a quarter.
- The decades-old alliance of Renault SA and Nissan Motor Co. descended into open enmity as the two sides sparred over governance changes at the Japanese automaker, an apparent tit-for-tat following Nissan’s refusal to endorse a deal with Fiat Chrysler Automobiles NV. Nissan Chief Executive Officer Hiroto Saikawa said it was “most regrettable” that Renault planned to stymie board reforms, after receiving a letter from the French company’s chairman, Jean-Dominique Senard. Renault’s salvo contrasts with more reassuring remarks from French Finance Minister Bruno Le Maire.
- Thomas Cook Group Plc shares and bonds surged after the troubled British tourism group confirmed it received an offer for its tour-operator business from Chinese investor Fosun International Ltd. Hong Kong-listed Fosun, already Thomas Cook’s biggest shareholder with a stake of about 18%, has submitted a preliminary approach and talks are underway, the U.K. company said in a statement on Monday. Sky News reported on June 8 that negotiations were being held.
- China’s imports tumbled in May and a surprise rise in exports wasn’t enough to dispel concerns that the economic dispute with the U.S. will intensify and damage the global economy. Imports declined by 8.5% in May from a year earlier, according to the customs administration, more than double the forecast drop. While exports rose 1.1% compared to an expected decline, shipments to the U.S. fell for a second month.
- Gold is finally gaining the traction needed to boost prices to a level not seen since 2013 as concern mounts over increased trade war tensions and the global growth outlook. Bullion may touch $1,400 an ounce this year as investors hedge risk, according to Rhona O’Connell, head of market analysis for EMEA and Asia regions at INTL FCStone Inc. Spot gold was at about $1,326 an ounce on Monday after jumping to a 13-month high of $1,348.31 on Friday on the back of a weaker-than-expected U.S. jobs report for May.
- Renault SA’s alliance with Nissan Motor Co., already stressed by the Carlos Ghosn affair and a failed merger proposal by Fiat Chrysler Automobiles NV, lurched toward a new crisis after developments over the weekend highlighted the deep divide between the two-decade partners. The government of France — Renault’s most powerful shareholder — extended an apparent olive branch on Saturday when Finance Minister Bruno Le Mairesaid during his G-20 trip to Fukuoka, Japan, that the state is willing to reduceits 15% stake in the French automaker if such a move would strengthen the alliance.
- Comstock Resources Inc., the energy company controlled by billionaire Dallas Cowboys owner Jerry Jones, agreed to acquire closely held natural-gas producer Covey Park Energy LLC in a cash-and-stock deal valued at $2.2 billion including debt.
- Chinese internet giant Alibaba Group Holding Ltd. has picked China International Capital Corp. and Credit Suisse Group AG to lead a planned Hong Kong share sale, people familiar with the matter said. The online retailer is in discussions with other investment banks seeking a role on the offering, according to the people, who asked not to be identified because the information is private. Alibaba plans to file a formal listing application with the Hong Kong stock exchange as soon as the next few weeks, the people said.
- Tilray Inc.’s largest shareholder has agreed not to sell its stake over the next two years except to big institutions or strategic partners in a deal that will also see it become a subsidiary of the cannabis company. Privateer Holdings Inc., which owns about 77% of Tilray’s outstanding shares, has signed a non-binding letter of intent that will allow it to sell its holdings only under certain circumstances over a two-year period after it merges with Tilray. During the first year after the merger closes, Privateer can only sell blocks of shares to big institutions or large companies looking to make a strategic investment in the pot industry, and then only at the discretion of Tilray. In the second year, the remaining shares will be subject to a staggered release.
- Drugmaker Insys Therapeutics Inc., whose former executives were convicted of bribing doctors to prescribe its highly addictive opioid, filed for bankruptcy protection after agreeing to pay hundreds of millions of dollars to settle a probe by U.S. prosecutors. The Chapter 11 filing in Delaware Monday allows the company to keep operating while it devises a plan to pay its obligations, including to the Justice Department, and try to turn around the business to salvage a pipeline of cannabis-derived drugs.
*All sources from Bloomberg unless otherwise specified