June 21st, 2019

Daily Market Commentary

• Canadian Headlines
  • Desjardins Group, the largest financial co-operative in North America, said an “ill-intentioned” employee illegally exposed the personal information of some 2.9 million credit union members in one of Canada’s largest data leaks. Laval police alerted the Quebec-based institution on June 14 with information confirming that personal details from 2.7 million individual clients and 173,000 business members had been shared outside the firm, Desjardins said Thursday in a statement. The company described the situation as the outcome of “unauthorized and illegal use” of internal data by an employee who has since been fired.
  • China National Gold Group Corp., the nation’s second-biggest miner of the metal, is studying a bid for a stake in Canada’s Iamgold Corp., people familiar with the matter said. Iamgold shares jumped the most in more than four years. The state-owned gold miner is working with financial advisers on the potential offer, the people said, asking not to be identified as the information is private. Iamgold is exploring a possible sale of all or part of the company and has spoken to several potential buyers, Bloomberg News reported last month.

   

• World Headlines
  • European shares were steady, poised for their longest streak of weekly gains since March, amid optimism looser monetary policy will support economic growth. The Stoxx Europe 600 Index added less than 0.1% as of 8:10 a.m. in London, taking its five-day rally to 2%. The travel-and-leisure sector led gains as cruise ship operator Carnival Plc rebounded, while insurers also outperformed on Friday. Stocks have rallied this week after Federal Reserve Chairman Jerome Powell opened the door to cutting rates and its European counterpart signaled further easing was also possible.
  • U.S. futures drifted lower alongside European stocks on Friday at the end of a bullish week for equities spurred by the decisive shift from central banks back to stimulus mode. Treasuries fluctuated. After closing at a record on Thursday, the S&P 500 was poised to edge down at the New York open as the Stoxx Europe 600 Index was weighed down by media firms.
  • Japanese shares fell as brewing tension between Iran and the U.S. pushed the yen to a fifth day of gains against the dollar, to around its highest in 14 months. The Topix index fell about 0.1% this week. Pharmaceuticals weighed most on the benchmark Topix. The yen added to gains following a four-day climb toward 107 versus the greenback. The U.S. called off military strikes against Iran on Thursday night that were approved by President Donald Trump, according to an administration official, abandoning a move that would have dramatically escalated tensions that are already running high between the two countries.
  • Oil in London headed for its biggest weekly gain since February as escalating tensions between the U.S. and Iran fanned fears of conflict that would disrupt energy supplies from the Middle East. Brent crude rose 0.5% on Friday, bringing its increase for the week to 4.5%. President Donald Trump initially ordered military strikes against Iran on Thursday in response to the downing of a U.S. spy drone, but then called them off, according to an administration official. Hostility in the oil-rich region has escalated recently with a missile strike by Yemeni rebels on Saudi Arabia and an attack on tankers near the Strait of Hormuz, which the U.S. blamed on Iran.
  • Gold is back in favor. Prices have galloped this month, passing $1,400 an ounce for the first time since 2013. It’s become easy to find reasons to be bullish. Everything from dovish central banks, technical indicators, negative-yielding bonds and fears of a military strike between the U.S. and Iran are all working in favor of higher bullion prices. Gold for immediate delivery climbed 0.6% to $1,396.97 on Friday after rallying 4.2% during the week, the biggest gain since 2016. Prices briefly topped $1,400, but couldn’t hold the level for long.
  • Europe’s economy showed signs of stabilizing at the end of the second quarter, but weak sentiment will keep policy makers on edge about the outlook for the rest of the year. Days after European Central Bank President Mario Draghi made it clear the ECB is poised to cut interest rates or re-launch asset purchases if the region’s economic outlook doesn’t improve, the monthly Purchasing Managers Indexshowed a pickup in activity, rising to a seven-month high. German bonds declined and the euro rose.
  • Stewart Butterfield loved the game, but not enough people agreed with him. He spent two years and raised roughly $11 million to build an online adventure game called Glitch that featured garrulous, blue-headed creatures and milk-drunk butterflies. Once people had a chance to play it and Butterfield could track the numbers, the verdict was clear: Glitch was a flop. “There was this night where I just lost faith,” Butterfield said in a podcast interview. He decided in 2012 that it was game over. Butterfield made plans to shut down the company and give the remaining money back to his investors.
  • The U.S. called off military strikes against Iran on Thursday night that were approved by President Donald Trump, according to an administration official, abandoning a move that would have dramatically escalated tensions that are already running high. The attack, ordered after Iranian forces shot down a U.S. Navy drone over the Strait of Hormuz, would have involved airstrikes and was close to being carried out when it was stopped, said the official, who was granted anonymity to discuss a national security matter. The official would not discuss whether the plan might be revived.
  • The union for American Airlines Group Inc. pilots is redoubling its push for time in a Boeing Co. 737 Max simulator, saying aviators should be given access before the grounded plane returns to service. Dan Carey, a veteran American pilot and head of the Allied Pilots Association, appealed to Boeing Chief Executive Officer Dennis Muilenburg a day after testifying before a Congressional subcommittee looking into two deadly crashes of the model. The APA has said that an earlier request for simulator time, which union officials made to Boeing through American, was rejected.
  • The Japanese government played a role in the breakdown of merger talks between Renault SA and Fiat Chrysler Automobiles NV earlier this month, weighing in with concerns the combination could harm Nissan Motor Co., people familiar with the matter said. Japan signaled its misgivings over the deal to the French government, said the people, asking not to be identified speaking about the negotiations. France — Renault’s most powerful shareholder — then sought a pause in the talks for more time to win Nissan’s support, provoking Fiat to withdraw its offer. Details on Japan’s role, only emerging now, highlight the obstacles to a quick resumption in merger negotiations between Renault and its Italo-American rival. They also show that France and Japan can find common ground to protect their carmakers and the two-decade Renault-Nissan alliance.
  • Patron Capital Advisers LLP pulled in about 500 million euros ($565 million) for a new European real-estate fund, surpassing its target for the first fundraising phase, according to people with knowledge of the matter. The London-headquartered private equity firm also secured about 100 million euros of co-investment commitments for the Patron Capital LP VI fund, said the people, who asked not to be identified because the figures are private. The take-up in the so-called first-close phase means Patron is more than halfway to reaching its 1 billion-euro target.
  • China is the one place with a dovish central bank that’s yet to see a spectacular rally in government debt. Including interest payments, the country’s bonds have dropped 0.02% since April, the worst performance among the world’s biggest debt markets. That’s even as the People’s Bank of China signaled its readiness to support the economy, with Governor Yi Gang saying he sees “tremendous” room to adjust policy. Authorities have also repeatedly injected cash into the financial system, boosted liquidity to support smaller banks and ramped up aid to small firms.
  • The yen hit a five-month high early Friday prompting an emergency meeting of officials from the Bank of Japan, the finance ministry and the financial regulator, in the first clear sign that Japan is back on alert over its currency. “If there are excessive moves or wild movements we will act. Our stance in principle hasn’t changed at all,” said Masatsugu Asakawa, the finance ministry’s top currency official, after Friday’s talks. Earlier in the day the yen hit its highest level since the beginning of January when a flash crash caused a spike in the Japanese currency. Asakawa said he would collaborate with his G-20 counterparts who shared the understanding that excessive moves in foreign exchange levels weren’t good for financial markets or the economy. “When that’s not enough, we will act appropriately in line with G-7 and G-20 agreements,” he added.
  • The argument in favor of cutting interest rates has strengthened recently as cross currents buffet the U.S. economy, amid heightened uncertainty, Federal Reserve Vice Chairman Richard Clarida said. “The case for providing accommodation has increased,” he said Friday in an interview on Bloomberg Television with Tom Keene. “Especially in the last six or eight weeks, there has been elevated uncertainty about the outlook.”
  • Bitmain Technologies Ltd., the world’s biggest producer of cryptocurrency mining chips, is reviving plans for an initial public offering as Bitcoin climbs to a one-year high, people with knowledge of the matter said. The company is working with advisers on preparations for a U.S. share sale that could take place as soon as the second half of this year, the people said. Bitmain aims to file listing documents with the U.S. Securities and Exchange Commission as soon as next month, the people said, asking not to be identified because the information is private. Bitmain, which was valued at about $15 billion in a private funding round last year, is considering reducing its earlier fundraising target due to the increased volatility in cryptocurrency prices, according to one of the people. It could raise about $300 million to $500 million from the U.S. share sale, though it hasn’t finalized the amount it wants to seek, the people said.
  • Telecom Italia SpA is in talks with the shareholders of smaller rival Open Fiber SpA over a possible combination of the two fixed-line networks. Telecom Italia said it signed a non-disclosure agreement with Italy’s state lender Cassa Depositi e Prestiti and the country’s largest utility Enel SpA. The talks will center on evaluating “possible forms of integration between Telecom Italia’s and Open Fiber’s fibre optic networks, including corporate operations,” the phone company said in a statement.
  • UnitedHealth Group Inc. has agreed to buy the health-care payments company Equian LLC for about $3.2 billion, said a person familiar with the matter who asked not to be identified because it was private. Equian’s private equity owner, New Mountain Capital, had been considering a sale valuing the business at about $3.5 billion, people familiar with the matter said in April. New Mountain bought Equian for $225 million in 2015 from Great Point Partners, according to a statement at the time. In conjunction with that deal, New Mountain merged Equian with Trover Solutions Inc., a software and services company that had been owned by Abry Partners.
  • China’s Xi Jinping told Kim Jong Un that the world wanted him to make progress in nuclear talks with the U.S., underscoring Beijing’s key role in negotiations ahead of his own summit with President Donald Trump. The Chinese president said during a landmark visit to Pyongyang on Thursday that he was willing to play a “positive and constructive role” toward achieving the denuclearization of the Korean Peninsula, the official Xinhua News Agency said. “The international community hopes that talks between the DPRK and the United States will move forward and bear fruit,” Xi said, referring to North Korea’s formal name.
  • Magellan Health may have lost another potential bidder after UnitedHealth Group was said to reach an agreement to buy Equian, SVB Leerink analyst Ana Gupte wrote in a note to clients. UnitedHealth’s roughly $3.2 billion deal for the health-care payments company “reduces the likelihood that UNH bids for MGLN as its appetite for a large acquisition may be diminished in the near term,” Gupte said; rates Magellan market perform

*All sources from Bloomberg unless otherwise specified