June 15th, 2018
Daily Market Commentary
- Canadian stocks resumed their run at a fresh high, gaining the most in a week and a half on strength in consumer and materials shares. The S&P/TSX Composite Index added 63 points or 0.4 percent to 16,328.96, less than 100 points from its January record. Consumer discretionary stocks rose the most, adding 1.2 percent. Magna International Inc. gained 1.4 percent, shrugging of lingering trade fears.
- Canada’s debt to disposable income ratio declined by the most on record in the first quarter, boosting confidence the country’s households can handle higher borrowing costs.
- A key indicator of Canada’s labor-market health remains depressed, even with the economy producing some of the biggest pay increases in years and the unemployment rate sitting at a four-decade low. Workers are doubtful switching jobs would leave them better off financially, according to a Nanos Research Group poll conducted for Bloomberg News. Only one in 10 respondents said their wages would increase if they lost their jobs or chose to find a new one, while about seven in 10 said they’d probably be paid the same or less.
- Canadian Imperial Bank of Commerce is pushing for more U.S. deposits and business loans and is on pace to exceed an earnings target, building momentum a year after buying Chicago-based PrivateBank in its biggest takeover. CIBC’s U.S. head Larry Richman — the veteran Chicago banking executive who migrated with the $5 billion acquisition completed in June 2017 — said he’s driving a “strong and steady” expansion under the wings of Canada’s fifth-largest lender by assets.
- Japan’s agriculture ministry has suspended Canadian wheat imports due to the discovery of genetically-modified wheat in Alberta, according to Tetsuo Ushikusa, director for grain trade and operation at the ministry.
- Asia stocks fell, with Chinese equities declining as plans for U.S. tariffs on the nation’s imports revived concerns about global trade growth. Japanese shares rose as investors weighed the Bank of Japan’s decision to keep policy unchanged while cutting its assessment of inflation.
- European stocks were little changed in early trade, taking a breather after Thursday’s sharp rally fueled by a drop in the euro following ECB President Mario Draghi’s dovish tone.
- U.S. equity index futures fell while European stocks reversed early gains amid renewed worries over a potential global trade war as President Donald Trump is set to approve new tariffs on Chinese goods.
- Oil headed for a second weekly decline in London as OPEC members were set to clash on raising production at a meeting next week. Brent crude slipped on Friday, on course for a 1.5 percent drop this week. Saudi Oil Minister Khalid Al-Falih said it’s “inevitable” the group will decide to boost output gradually when it meets on June 22, though Iran, Iraq and Venezuela oppose an increase.
- Steel stocks and miners could come under pressure on Friday as base metals head for a weekly decline amid ongoing trade tensions. Copper, iron ore, zinc and aluminum all lower; copper prices coming off four-year highs.
- President Donald Trump has approved tariffs on Chinese goods worth about $50 billion, said a person familiar with the decision, ratcheting up a confrontation on trade with Beijing and triggering losses in the domestic stock market. The Trump administration is preparing to release a refined list of the first batch of Chinese products to be hit with tariffs on Friday that hones in on technologies where China wants to establish itself as a leader, according to people familiar with the matter. In April, the U.S. revealed an initial list targeting about 1,300 products worth $50 billion in Chinese imports.
- The limit on how many television stations one company can own is headed for change at the U.S. Federal Communications Commission and the only question is whether Chairman Ajit Pai will loosen the restrictions by a lot or a little. The limits aim to encourage independent ownership and to help ensure that TV viewers have a diversity of viewpoints available. Critics say such rules handcuff broadcasters as audiences decline in the face of challenges from online news and entertainment, and from cable competitors.
- Walmart Inc. has dialed back its global footprint this year –retreating from Brazil and merging its U.K. business with a rival. But while the world’s largest retailer is stepping away from some high-profile international markets, it’s doubling down in a region that gets less attention — Central America. Walmart’s business in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica is a growing part of the retailer’s publicly traded Mexican and Central American business, Wal-Mart de Mexico SAB, or Walmex. The region now accounts for almost one-fifth of Walmex’s revenue, up from 14 percent in 2014.
- Qualcomm Inc.’s $43 billion acquisition of NXP Semiconductors NV has been approved by Chinese regulators, according to people familiar with the matter who asked not to be identified. The stocks rallied in extended trading, with gains continuing into Friday.
- Billed as the most important week of the year for the global economy, central banks provided insight into the outlook for monetary policy through the rest of 2018 and beyond and putting a clear stamp on financial markets. The Federal Reserve raised interest rates, the European Central Bank said it would stop bond buying in December and the Bank of Japan kept stimulating. It was the People’s Bank of China, however, which perhaps transmitted the most tremors through markets as it chose not to follow the Fed in hiking.
- Paul Manafort could be locked up as soon as Friday if a judge agrees with Special Counsel Robert Mueller’s argument that he tried to tamper with witnesses while under house arrest. Manafort, a former campaign chairman for President Donald Trump, is accused of money laundering and acting as an unregistered foreign agent of Ukraine. But what could land him in jail as he awaits trial are new charges relating to witness tampering.
- The U.S. signaled to banks that risky loans are okay. Lenders are now listening. Goldman Sachs Group Inc. and Citigroup Inc. are among the banks that have doused companies with debt to an extent that would have been almost unthinkable a year ago, at least for a regulated bank. They’re piling loans onto corporations that are being purchased in leveraged buyouts, and when the dust settles, companies like health-care services provider Envision Healthcare Corp.could have total debt around 7.5 times a measure of earnings.
- Ether investors got a reprieve Thursday when a top U.S. regulator said transactions involving the token aren’t subject to federal securities rules, ending months of speculation that had weighed on the second-most valuable digital currency. Ether and other coins surged on the news.
- Apple Inc. has decided on its next Hollywood act: making feature films. A deal is near for the rights to an animated movie as part of its upcoming slate of original video offerings, according to people familiar with the matter. Apple is in talks with Cartoon Saloon, an Ireland-based, Oscar-nominated animation studio, said the people, who asked not to be identified speaking about private negotiations.
*All sources from Bloomberg unless otherwise specified