June 27th, 2017
Daily Market Commentary
- Canadian stocks were little changed as falling gold prices weighed on miners, offsetting gains in the health-care and consumer sectors. The S&P/TSX Composite Index fell 4 points or less than 0.1 percent to 15,316.02. Materials stocks lost 0.6 percent as gold prices fell following what appeared to be a fat-finger trade.
- The U.S. will impose further punitive tariffs on imports of softwood lumber from Canada, escalating a longstanding trade dispute that’s already led to higher timber prices. Preliminary anti-dumping duties of as much as 7.7 percent will be levied on Canadian producers, the U.S. Department of Commerce said Monday in a statement. The move follows the government’s decision in April to slap countervailing tariffs of up to 24.1 percent on shipments from Canadian companies including West Fraser Timber Co. and Canfor Corp.
- Mergers and acquisitions in Canada are set for the strongest start in a decade as foreigners sell their oil sands investments. There have been about $132 billion of transactions recorded this year, the highest since $156.5 billion in the first half of 2007, according to data compiled by Bloomberg. Local companies snapped up these energy assets, boosting domestic M&A to a record.
- European stocks deepened losses as the euro jumped after Mario Draghi said the factors weighing on euro-area inflation are temporary. The Stoxx Europe 600 Index retreated 0.6 percent at 10:01 a.m. in London. Banks bucked the trend, following bond yields higher after comments by the European Central Bank President, while shares of automakers held losses.
- Futures on the Nasdaq 100 Index signaled more losses for its stocks, while investors awaited data on consumer confidence and watched the Republican debate over their party’s health-care bill. Nasdaq 100 futures expiring in September fell 0.4 percent at 6:04 a.m. in New York, with Google-parent Alphabet Inc. declining in early trading. The underlying gauge declined 0.4 percent on Monday amid losses in technology shares. S&P 500 contracts were little changed on Tuesday, as were those on the Dow Jones Industrial Average.
- Asian stocks were mixed as gains by Japanese exporters and South Korean retailers were offset by declines in health-care stocks. The MSCI Asia Pacific Index rose 0.1 percent as of 4:20 p.m. in Hong Kong with the number of stocks that gained roughly matching those that fell. Materials and technology companies were the best performers, while utilities and health-care companies were the biggest decliners. With little fresh economic data in the region.
- Oil advanced for a fourth day in New York, its longest run of gains in a month, on estimates that U.S. crude inventories continued their decline from record levels seen earlier this year. Futures added as much as 1.2 percent after rising 2 percent in the previous three sessions.
- Gold holds decline after a sudden plunge on Monday shook the market, as investors turn their attention to U.S. data and speeches from Federal Reserve officials this week for clues on the central bank’s monetary policy tightening path.
- Iron ore forecasts at Morgan Stanley have been chopped back for the remainder of the year, with the bank flagging prospects for rising low-cost production and the likelihood that the worldwide surplus will increase every year through to 2021. The commodity will average $50 a ton in the third quarter, 23 percent down from an earlier estimate, and $55 in the final three months, a 15 percent reduction, according to a report.
- China’s yuan surged both onshore and overseas amid speculation of central bank intervention and a decline in the dollar. The offshore currency jumped as much as 0.7 percent in a sudden afternoon spike, after spending much of the day little changed.
- The Bank of England plans to increase capital requirements for U.K. lenders by 11.4 billion pounds ($14.5 billion) to tackle risks posed by consumer credit growth and prepare for the uncertain outcome of Brexit talks. Each increase of 0.5 percent will swell banks’ cushion of common equity Tier 1, the highest-quality capital, by 5.7 billion pounds, according to the BOE’s Financial Stability Report published on Tuesday.
- If you’re suing Google, European Union enforcers have just saved you a lot of legwork. For dozens of companies that have brought lawsuits claiming Google effectively crushed them by abusing its dominance in internet searches, Tuesday’s announcement will likely ease their attempts to show their much larger rival improperly boosted its business at their expense. The 2.42 billion-euro ($2.7 billion) fine topped the current $1.2 billion record and caps a seven-year probe into Google fueled by complaints from News Corp. and Microsoft Corp. In the U.K., Kelkoo and Foundem are among companies that stand to gain from a formal ruling from the EU.
- China may finally be ready to cut the cord when it comes to the country’s troubled local government financing vehicles. Beijing’s deleveraging drive has seen rules impacting LGFV debt refinancing tightened, spurring a slump in issuance by the vehicles, which owe about 5.6 trillion yuan ($818 billion) to bondholders and are seen by some as the poster children for China’s post-financial crisis debt woes.
- Two and a half years after SpiceJet Ltd. was forced toground its entire fleet on its inability to pay a mere $2.2 million in fuel bills, the budget airline has become the world’s best-performing airline stock — with $26 billion in plane orders to boot.
- The Trump administration said the U.S. suspects that Syrian forces are planning another chemical-weapons attack on rebel forces and issued a warning that President Bashar al-Assad risks paying “a heavy price” if it proceeds. The U.S. identified “potential preparations” for the use of chemical weapons that appear similar to the April 4 attack that prompted President Donald Trump to order a cruise-missile strike against Syrian military targets on April 6.
- Comcast Corp. and Charter Communications Inc., the two largest U.S. cable companies, met with executives at Sprint Corp. in the past month to discuss reselling wireless services or an acquisition, people familiar with the matter said. The more likely scenario is the cable giants strike a deal that lets them resell services on Sprint’s wireless network, the people said, asking not to be identified as the details are private. Another topic discussed was Comcast and Charter jointly buying Sprint, though that scenario is less likely, one of the people said.
- Cotton output in India, the world’s biggest grower, may increase to a three-year high as some farmers plant more of the fiber on better returns compared to other crops. Production will probably climb to 37.5 million to 38 million bales in the harvesting season starting Oct. 1, from 34.1 million bales a year earlier if the monsoon is normal in main growing areas, said Nayan Mirani, president of the Cotton Association of India.
- Aeroflot PJSC is targeting a deal for 28 Airbus SE A350 jets by the end of this year, double an initial outline agreement, as Russia’s biggest airline pushes expansion plans buoyed by a recovering economy. The board authorized the purchase of a second tranche of 14 A350-900s last month, but final terms including cabin configuration, delivery slots and pricing remain to be negotiated, Deputy Chief Executive Officer Giorgio Callegari said in an interview. The total transaction will be worth $8.7 billion at list prices.
- Stada Arzneimittel AG shares dropped the most in a year after the German generic-drug maker’s planned 5.3 billion-euro ($5.9 billion) sale to two buyout firms fell apart as a small group of investors held out for a better deal.
- NetLink Trust, the fiber broadband network provider backed by the largest Singapore phone company, will seek as much as S$2.7 billion ($1.9 billion) in what could be the city-state’s biggest initial public offering in six years, people with knowledge of the matter said.
- Noble Group Ltd. shares slid Tuesday on the first day of trading after Fitch Ratings cut the embattled commodities trader’s credit rating to a score indicating that a default is possible.
- A string of Hong Kong stocks suddenly plunged Tuesday, with traders pointing to links between some of the companies and a brokerage that’s under regulatory investigation. Seventeen firms tumbled by more than 40 percent at the close, losing a combined HK$47.8 billion ($6.1 billion) in market value. China Jicheng Holdings Ltd., an umbrella maker, and GreaterChina Professional Services Ltd. sank more 90 percent. Lerado Financial Group Co.
- The Navajo generating station, the biggest coal-fired power plant in the U.S. West, may live to see another two years. On Monday, Navajo Nation leaders agreed to a deal with the plant’s utility owners that, as originally proposed, could keep the ailing, 2,250-megawatt complex online through December 2019.
- Bankia SA agreed to acquire Banco Mare Nostrum SA in an all-stock deal, part of a plan by Spain to recoup the costs of bailing out lenders following the country’s property bust. Bankia, the country’s fourth-biggest bank by market capitalization, will issue new stock amounting to 6.7 percent of its post-merger capital to the shareholders of Banco Mare Nostrum, the bank said in a statement Tuesday. The transaction values the unlisted BMN at 825 million euros ($924 million).
- The earliest indicators for China’s economy in June signal that the manufacturing sector may be poised to decelerate, while other challenges loom in the second half of this year. Small- and medium-sized enterprises showed the lowest level of confidence in 16 months, a gauge of manufacturing drawn from satellite imagery slumped, and conditions in the steel business remained lackluster. There’s some good news though: sales-manager sentiment stayed positive, and outlook of financial experts recovered.
- Western Digital Corp. and KKR & Co. submitted a new bid for Toshiba Corp.’s memory chip business, even as the Japanese company is poised to secure a deal with a rival consortium. Western Digital will provide debt financing, it said in a statement on Tuesday. The U.S. chipmaker’s earlier bid for Toshiba’s flash-memory operations, jointly owned by the two companies, was rejected by its partners as insufficient. Western Digital has sought to derail the sale via legal means.
*All sources from Bloomberg unless otherwise specified