June 26th, 2019

Daily Market Commentary

  • Canadian Headlines
    • Canadian equities fell for a third-straight session, following the U.S. market lower. The S&P/TSX Composite Index fell 0.9% to 16,371 led by technology while materials also underperformed. No sector advanced Tuesday. Shopify Inc.’s biggest drop of 2019 shows the e-commerce stock is testing the limits of what investors are willing to pay for rapid revenue growth.
    • China halted imports of Canadian meat after an investigation into traces of a banned feed additive led to the discovery of counterfeit health certificates attached to a pork shipment. The forged documents were sent to Chinese regulatory authorities through Canada’s official certificate notification channel, which reflects “obvious safety loopholes,” the Chinese embassy in Canada said in a statement posted online. Marie-Claude Bibeau, Canada’s minister of agriculture and agri-food, confirmed in an email that “inauthentic export certificates” were used.
    • Oxford Properties Group is planning a C$3.5 billion ($2.7 billion) development in downtown Toronto that would be one of Canada’s biggest real estate projects. The property arm of pension fund OMERS aims to build a 4.3 million-square-foot, mixed-use complex on a 4-acre site that’s just north of Toronto’s Rogers Centre and CN Tower. The development, called Union Park, is the largest ever for Oxford outside of Manhattan’s Hudson Yards, the $25 billion project it’s co-developing with Related Cos.
    • BlackBerry Ltd. beat analysts’ estimates for fiscal first-quarter revenue, which got a boost from the acquisition of cybersecurity firm Cylance, completed in February. The 23% increase in revenue marked the second consecutive quarter of growth at the Canadian phone-maker-turned-software company. Adjusted sales totaled $267 million, the highest since 2017. Analysts had forecast for $264.5 million according to data compiled by Bloomberg.
    • Kuwait plans to boost production from Canadian shale deposits by two thirds and increase output of natural gas in Australia as the OPEC member ramps up efforts to find and develop overseas deposits of the fuel. The international upstream arm of state-owned Kuwait Petroleum Corp. sees output of almost 20,000 barrels of oil equivalent a day at its Canadian shale gas project by year-end, up from 12,000 currently, Sheikh Nawaf Saud Al-Sabah, acting chief executive officer, said in an interview in Kuwait City.


  • World Headlines
    • European stocks extended their decline into a fourth day, poised to match their longest losing streak in three months, as optimism about a U.S.-China trade deal faded and geopolitical tension in Iran lingered. The Stoxx Europe 600 Index fell 0.3% as of 8:08 a.m. in London, as all industry groups except energy shares declined. Carmakers and real estate shares were among the worst performers. Oil and gas stocks bucked the trend as crude jumped to a four-week high on data that showed falling U.S. stockpiles. John Wood Group Plc was the best performer in the index, up 5.3% after keeping its full-year outlook unchanged. European equities are losing momentum after last week’s rally spurred by dovish central-bank comments, trimming their best June advance since 2012.
    • Japanese shares slipped on global growth concerns and as tensions surrounding U.S. and Iran continued. The Topix gauge slid for a second day on volume 21% lower than its 30-day average. Federal Reserve Chairman Jerome Powell said downside risks to the U.S. economy have increased recently, reinforcing the case for lower interest rates. Fed’s Bank of St. Louis President James Bullard, however, said while a preemptive rate cut would protect against a sharper-than-expected slowdown, the situation doesn’t warrant a 50-basis points reduction.
    • U.S. index futures gained while stocks in Europe fluctuated as comments by Treasury Secretary Steven Mnuchin tempered concern over the trade impasse with China. Government bonds retreated. Futures on the S&P 500 index advanced after Mnuchin reiterated he was “hopeful” for an eventual trade deal as leaders of China and U.S. two countries prepare to meet at the G-20 summit. The Stoxx Europe 600 index erased an early decline as gains for banks and carmakers offset declines for real-estate and healthcare stocks. Ten-year Treasury yields climbed above 2%, oil rose to a four-week high on supply concerns, and gold retreated. Shares slid in Japan and Australia, while benchmarks in Hong Kong and India edged higher.
    • Oil rose to a four-week high after an industry report signaled a bigger-than-forecast drop in U.S. crude stockpiles, adding impetus to a rally that’s been driven by a tense standoff between Washington and Tehran. Futures in New York gained as much as 2.3%. The American Petroleum Institute reported that inventories fell by 7.55 million barrels last week, according to people familiar with the data. That would be the biggest decline in more than three months if confirmed by government figures due Wednesday. Gasoline futures jumped in New York after Reuters reported that Philadelphia Energy Solutions is expected to close its refinery, the largest on the U.S. East Coast.
    • Gold has hit pause after surging to a six-year high, as comments from Federal Reserve officials damp expectations over the scale of interest rate cuts. Bullion is retreating for the first day in seven after surging through key technical and psychological resistance levels as the Fed and other central banks adopted a more dovish stance. The rally was further fueled by rising tensions between the U.S. and Iran and trade war uncertainty, which helped boost holdings in gold-backed exchange-traded funds to the highest since 2013. The run up in prices has kept the metal’s 14-day relative strength index above 70 — a level that signals to some investors that an asset may be poised for a correction.
    • Walmart Inc. is re-listing its Japanese supermarket chain Seiyu after struggling to find a buyer for the unit, following a decade-long battle to compete with bigger local rivals. The U.S. retailer will keep its majority stake in Seiyu after the listing, Walmart’s international division head Judith McKenna said in a statement Wednesday. The company also announced a mid-term business plan to offer lower prices, better products and grow e-commerce sales.
    • The stock index that U.S. President Donald Trump singled out in his criticism of European Central Bank policy this month is poised for its biggest June rally in 16 years. Boosted by optimism about looser monetary policy in the euro area and a rebound in carmakers, Germany’s benchmark DAX Index has climbed 5% this month, in what has historically been a weak period for the country’s equities. A close at this level will mark its best June since 2003.
    • The U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese imports while Beijing and Washington prepare to resume trade negotiations, people familiar with the plans said. The decision, which is still under consideration, may be announced after a meeting between Presidents Donald Trump and Xi Jinping set for Saturday at a Group of 20 summit in Japan. A broad outline of the Trump-Xi agenda was discussed in a phone call Monday between U.S. Trade Representative Robert Lighthizer, and his counterpart in Beijing, Vice Premier Liu He. In an interview with CNBC on Wednesday, Treasury Secretary Steven Mnuchinexpressed optimism that a deal could be reached by year end, saying the two sides “were about 90% of the way there and I think there’s a path to complete this,” with a need still for “the right efforts.”
    • American technology companies have resumed selling certain products to Huawei Technologies Co. after concluding there are legal ways to work with the Chinese telecom giant in spite of its inclusion on a Trump Administration blacklist. Micron Technology Inc., the largest U.S. maker of computer memory chips, said on Tuesday that it had started shipping some components to Huawei after its lawyers studied export restrictions. Intel Corp., the largest microprocessor maker, has also begun selling to Huawei again, according to a person familiar with the matter. It’s not clear how many other suppliers have reached the same conclusion.

*All sources from Bloomberg unless otherwise specified