June 26th, 2017
Daily Market Commentary
- Slumping crude prices appear set to cut short the loonie’s best run this year. That’s music to the ears of hedge funds that are still near the most bearish on the Canadian dollar in over two decades. The currency’s rally, fueled in part by surprisingly hawkish comments from central bank officials this month, is on the cusp of stalling as crude prices plunge.
- Gains in Italian lenders and Swiss food giant Nestle SA helped European stocks rebound from three weeks of losses. The Stoxx Europe 600 Index added 0.6 percent at 8:29 a.m. in London, following its longest weekly losing streak since the U.K.’s vote to leave the European Union. The benchmark is still on track for a fourth quarterly advance, the best showing since 2014.
- U.S. stock-index futures inched higher ahead of data on durable goods orders, with shares in food companies in the spotlight following news that activist fund Third Point has taken a $3.5 billion stake in Nestle SA, Europe’s largest company.
- China’s large-cap shares extended their outperformance amid investor optimism about MSCI Inc. inclusion and speculation state-backed funds were keeping markets buoyant before President Xi Jinping’s trip to Hong Kong this week. The SSE 50 Index of some of the nation’s biggest companies climbed 0.6 percent to 2,543.32, closing at the highest since August 2015.
- Oil rose, trimming its biggest monthly decline in almost a year, on speculation that its recent sell-off may have been excessive. Prices rose as much as 1.5 percent in New York on Monday. Still, summer demand for driving fuels should whittle away excessive inventories, according to Swedish bank SEB AB. Crude’s 14-day relative strength index dipped below 30 last week, a sign that prices had collapsed very quickly.
- Gold pares three days of gains as dollar steadies after head of San Francisco Fed John Williams makes case for further gradual increases in interest rates.
- President Donald Trump has promised the largest tax cut in history, but for scores of the biggest U.S. corporations, it might be just a tax nick. Constrained by congressional rules, political concerns and simple arithmetic, Republican leaders in Washington have yet to announce any consensus on how to finance the deep corporate tax cut they want, beyond vague plans to close off business-related loopholes.
- Italy will commit as much as 17 billion euros ($19 billion) to clean up two failed banks in one of its wealthiest regions, the nation’s biggest rescue on record. The intervention at Banca Popolare di Vicenza SpA and Veneto Banca SpAincludes state support for Intesa Sanpaolo SpA to acquire their good assets for a token amount, Finance Minister Pier Carlo Padoan said Sunday after an emergency cabinet meeting in Rome.
- China’s stepping in to control the coal market again by urging miners to cap prices as summer demand intensifies. At a meeting with major thermal coal and power companies over the weekend, the National Development and Reform Commission requested suppliers of the power-station fuel prevent prices from rising above 570 yuan a metric ton, according to people with knowledge of the discussions.
- Toshiba Corp.’s announcement of a final agreement to sell its memory chip business may be delayed beyond the electronics maker’s self-imposed deadline this week, as Bain Capital and Japanese investors work out the structure of the deal, people with knowledge of the matter said Monday.
- Russian billionaire Mikhail Fridman’s investment vehicle agreed to buy Holland & Barrett for about 1.8 billion pounds ($2.3 billion), gaining one of Europe’s largest health-food retail chains in its first retailing acquisition.
- Takata Corp. filed for bankruptcy protection in the biggest postwar Japanese corporate failure in the manufacturing industry, as the 84-year-old company buckled under liabilities from millions of recalled air bags that have been linked to more than a dozen deaths.
- Dan Loeb has amassed a $3.5 billion stake in Nestle SA, targeting Europe’s largest company in the biggest bet of his two-decade career as an activist investor. Third Point, Loeb’s hedge fund, owns about 40 million shares in the Vevey, Switzerland-based company, according to an investor letter released Sunday after Bloomberg first reported the position. The fund encouraged Nestle to sell its stake in cosmetics maker L’Oreal SA, increase leverage for share buybacks and adopt a formal profitability target, among other suggestions. The shares rose as much as 4.8 percent in Zurich.
- Senate Majority Leader Mitch McConnell faces the risk of an embarrassing defeat in his campaign to pressure enough fellow Republicans to pass sweeping cutbacks in Obamacare. The wily tactician, seeking to deliver this week on a seven-year promise to gut the Affordable Care Act, already faces opposition from at least five GOP senators who demand big changes in the bill they saw for the first time Thursday.
- Volkswagen AG agreed with its Slovak workers on a compromise wage increase after a six-day strike, the first at the German carmaker’s luxury sport-utility producing east European unit. Slovakia’s largest private employer with more than 12,000 workers will increase wages by 14.1 percent in three installments starting this month and ending in November 2018.
- China-controlled Yancoal Australia Ltd. added new incentives to its offer for Rio Tinto Group’s Australian coal assets to fend off a last-minute challenge by rival Glencore Plc, according to a person with knowledge of the situation. Yancoal submitted a revised offer and will release details of the proposal Monday morning in London, said the person, who asked not to be identified as the information isn’t public. The value of the offer will remain at $2.45 billion but will include new incentives that may make it more attractive to Rio, said the person.
- Thai Airways International Pcl said it plans to modernize its fleet by replacing almost 30 older aircraft over the next five years, adding to the climbing demand for planes in Asia. The state-run airline is seeking new generation aircraft offering greater comfort and fuel efficiency, and is talking with both Airbus SE and Boeing Co., Chairman Areepong Bhoocha-Oom said in an interview with Bloomberg .
- China’s regulatory moves can appear secretive and scattershot to outside observers. When it comes to the country’s deleveraging drive, that’s presenting challenges for parts of the booming Asian dollar-bond market. Chinese regulators have tightened restrictions on offshore corporate debt as they try to rein in record leverage built up after the global financial crisis. The sometimes opaque way the curbs are being implemented is making it difficult for cash-strapped firms to plan and undertake bond sales. Given needs to roll over maturing debt, the uncertainty could even boost the risk of defaults, according to S&P Global Ratings.
- Deutsche Bank AG’s asset management arm purchased two office buildings from M&G Real Estate for 310 million pounds ($395 million) in a bet that Brexit won’t hurt the market in the long run. The properties, built in 2007, have 38,500 square meters of office space on nine floors and are located behind the Tate Modern art museum in the Southbank district of London, Deutsche Bank said Monday in a statement.
- Carmakers may end up shouldering the bulk of the costs of replacing the estimated 100 million defective air bags made by Takata Corp. after the company filed for the biggest postwar bankruptcy by a Japanese manufacturer. Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. on Monday issued separate statements saying they may not be reimbursed for the majority of their recall-related claims by Takata, which earlier filed for bankruptcy protection in the U.S. and Japan.
*All sources from Bloomberg unless otherwise specified