June 12th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian equities advanced as metals and mining companies rose on China trade optimism and lumber producers gained after additional production curtailments. The S&P/TSX Composite Index increased 0.2%. Materials stocks were the best performers among 11 industry groups, rallying 1.4%. New Gold Inc. rallied 11%. Health care stocks fell the most, dropping 0.7%. Meanwhile, Quebec is ready to take more risks to support its companies. Investissement Quebec, the financing arm of the provincial government, will increasingly buy subordinated debt or take outright stakes in local businesses under a revamped mandate, according to Economy Minister Pierre Fitzgibbon.
- Beyond Meat breakfast sandwiches are now available at almost 4,000 Tim Hortons restaurants across Canada after testing at select stores last month.
- World Headlines
- European stocks fell on Wednesday as traders assessed recent gains that sent shares to a three-week high. The Stoxx Europe 600 Index dropped 0.4%, with all 19 industry groups declining. Construction and material shares declined the most, with LafargeHolcim retreating 2.9% after its largest shareholder cut his stake in the cement maker by about a third. Banks, which have the biggest weighting on the regional benchmark, were the second-worst performers. Axel Springer jumped 13% after KKR offered to buy out minority shareholders of the company.
- Stocks slipped globally on Wednesday alongside U.S. index futures amid signs the June revival in risk appetite may have overshot, with trade concerns still lingering. An escalating protest in Hong Kong compounded the negative sentiment, and Treasuries gained. U.S. President Donald Trump, meanwhile, said he’s personally delaying a trade deal with China and won’t complete the accord unless Beijing returns to terms negotiated earlier this year. Futures on the S&P 500 and Nasdaq 100 indexes all edged lower. The dollar drifted, while Treasuries advanced across the yield curve. Gold and the yen rose as appetite grew for havens.
- As Asian markets struggled for traction Wednesday, bulls were clinging to some positive technical signs amid the trade-inspired gloom. Though the MSCI Asia Pacific Index retreated, thanks to a pull back in Hong Kong shares, it remained above the 200-day moving average it broke through on Monday — a key technical first step in the benchmark’s bid to climb out of its recent downtrend. Still, trading in Asia’s major markets remained relatively subdued with volumes in Japan and Hong Kong below their 30-day average, as sentiment remained fragile toward the ongoing trade spat between the U.S. and China.
- Oil slumped below $52 a barrel in New York after an industry report signaled that American crude inventories rose from the highest level in almost two years, while the U.S. and China remained at loggerheads over trade. Futures lost as much as 3.4%. U.S. stockpiles increased by 4.85 million barrels last week, the American Petroleum Institute was said to report. That’s a contrast to a decline forecast by analysts in a Bloomberg survey before official government data due later on Wednesday. President Donald Trump said he won’t complete a trade deal with China unless Beijing returns to terms negotiated earlier in the year.
- Gold climbed after President Donald Trump said he’s personally holding up a trade deal with China, boosting demand for havens. Stocks in Asia slipped amid flagging risk appetite as Trump said he won’t complete the agreement with China unless Beijing returns to terms negotiated earlier in the year. Separately, the president renewed his attack on the Federal Reserve for high interest rates. Gold was also supported as the dollar traded near an eight-week low.
- Britain is to become the first major economy to adopt laws that require a cut in fossil-fuel emissions to zero by 2050 to fight climate change. Prime Minister Theresa May said legislation to wipe out the U.K.’s net contribution to rising global temperatures will be put to members of Parliament, endorsing a report from advisers that laid out what a carbon neutral future would have to look like. The radical move recommended by the government’s climate-change adviser has won backing from across the political spectrum even as debate about leaving the European Union roiled U.K. lawmakers.
- The U.S. and its allies accused North Korea of importing more petroleum so far this year than allowed under United Nations sanctions, according to a report sent to a Security Council committee. While Pyongyang is permitted to import as much as 500,000 barrels of oil, the U.S. said Tuesday in a letter seen by Bloomberg News that the country has exceeded that amount through illicit ship-to-ship transfers. The letter, signed by several allies including Australia, France, Japan and Germany, was sent alongside a detailed report documenting the suspected illegal oil transfers.
- President Donald Trump plans to make an announcement Wednesday on U.S. troop commitments in Poland after discussions about establishing a military base that the country’s president has dubbed “Fort Trump.” The announcement will come as Polish President Andrzej Duda meets with Trump at the White House, according to administration officials. The officials, who briefed reporters on Tuesday on condition of anonymity, wouldn’t say whether there would be an announcement about the base or preview any details about the troop commitment. But they said it would enhance the U.S. commitment to NATO.
- Boeing Co.’s 737 Max aircraft, grounded since March after two fatal crashes in five months, will be back in the air by December, according to a top Federal Aviation Administration safety official. It’s not possible to give an exact date as work progresses on safety fixes to the aircraft, Ali Bahrami, the U.S. regulator’s associate administrator for aviation safety, said Wednesday in interview at an aviation safety conference in Cologne, Germany. While the FAA is “under a lot of pressure,” he said the Max will be returned to service “when we believe it will be safe.”
- Slack Technologies Inc. is expected to be valued by investors at $16 billion to $17 billion when it lists its shares publicly next week, according to people familiar with the matter. That valuation is roughly based on the workplace chat and collaboration software company’s projected revenue and current growth rate, said the people, who asked not to be identified discussing private talks. The expected value is up from the $7.1 billion in its last private funding round in August. It’s similar to the company’s share sales on the private market, where in April investors were snapping up stock at prices that would give the company a valuation of about $16 billion.
- President Donald Trump’s net worth rose to $3 billion, a 5% gain over the past year, thanks to a jump in the value of an office-building deal he once sued to prevent. The increase in Trump’s wealth reverses two years of declines and brings his net worth back to 2016 levels, according to figures compiled by the Bloomberg Billionaires Index from lenders, property records, securities filings, market data and a May 16 financial disclosure. It comes despite setbacks at his family company, including the cancellation of two new hotel chains and reduced business at his Mar-a-Lago resort in Florida and seven golf courses.
- Alphabet Inc.’s Google is moving some production of Nest thermostats and server hardware out of China, avoiding punitive U.S. tariffs and an increasingly hostile government in Beijing, according to people familiar with the matter. Google has already shifted much of its production of U.S.-bound motherboards to Taiwan, averting a 25% tariff, said the people, asking not to be identified discussing internal matters. While U.S. officials have pinpointed Chinese-made motherboards as a security risk, Google didn’t bring that up during discussions with its suppliers, they said. Tariffs have also pushed American-bound production of its Nest devices to Taiwan and Malaysia, the people said.
- President Donald Trump’s patience for his deal averting tariffs on Mexico depends on a quick drop in migration across the U.S. border — something his own administration and political allies see as an unrealistic expectation. This raises the prospect that Trump’s frustration over immigration will soon reignite, possibly prompting renewed tariff threats against Mexico. Under the deal, announced late Friday after Trump threatened to impose tariffs on imports from its southern neighbor, Mexico agreed to deploy troops to interdict migrants headed for the U.S. and also keep more of them on its side of the border while their asylum cases are adjudicated. Mexican Foreign Minister Marcelo Ebrard said his country has 45 days to show the U.S. that additional measures aren’t needed.
- Protesters flooding downtown Hong Kong to stop the government’s proposed extradition law effectively presented the city’s leaders with an ultimatum: back down, or risk violent clashes that could be worse than the Occupy movement in 2014. Thousands of demonstrators gathered in the heart of the financial hub Wednesday, and some battled with riot police throughout the afternoon to prevent lawmakers from debating the bill. Overwhelmingly young, many protesters wore surgical masks to hide their identities and plastic goggles to ward off pepper spray, which police fired sporadically throughout the day, along with tear gas, rubber bullets and bean-bag rounds.
- French technology company Dassault Systemes SE agreed to buy Medidata Solutions Inc., a software firm that analyzes clinical trials, for $5.7 billion to bolster its offerings to the pharmaceutical industry. The record deal will allow Dassault to offer drugmakers a complete set of services and ride a shift toward personalized medicine, in which research and tools are tailored to individual patient profiles, generating the need to analyze vast amounts of data.
- For decades, Axel Springer’s widow has been the keeper of his legacy, grooming executives to enforce his vision at the publisher of Germany’s Bild tabloid while solidifying her grip with a controlling stake. But as the company advances its costly transformation into a digital media powerhouse, Friede Springer is finding that she needs a partner to help shoulder the burden. Enter KKR & Co., which is seeking to buy out minority shareholders with an offer that values Axel Springer SE at 6.8 billion euros ($7.7 billion). Friede Springer and CEO Mathias Doepfner, who together hold more than 45% of the company, are betting that the private-equity company’s clout and deep pockets will help them with the transition online.
- Bain Capital LP has raised $900 million for its second fund dedicated to life sciences, a sign that volatile market conditions haven’t diminished investors’ eagerness to back innovative medical companies. The new fund will make between 15 and 20 investments in companies developing new drugs, medical devices, diagnostics and tools, according to Bain Capital Life Sciences’ managing directors, Adam Koppel and Jeffrey Schwartz. The unit previously raised $600 million in 2017 for its first fund, which has made 15 investments, including in biotechnology companies Solid Biosciences Inc. and neuroscience-focused Cerevel Therapeutics.
- Oil demand is shriveling as the trade war between the U.S. and China trips up the global economy. Estimates for March and April are pointing to year-on-year declines in regions that account for almost half of global oil demand, according to Morgan Stanley. Indicators including the profit from making plastics have been sinking while refining margins in Europe recently hit multiyear lows. Even support from one of the tightest physical markets in years is starting to weaken — premiums refineries pay to procure immediate supplies are slumping. That’s despite output being hit by a combination of OPEC+ production cuts, U.S. sanctions on major producers Iran and Venezuela, and an unprecedented halt to Russia’s giant Druzhba crude pipeline. Analysts are now taking increasingly bearish views on consumption for this year.
*All sources from Bloomberg unless otherwise specified