June 27th, 2018

 

Daily Market Commentary

Canadian Headlines

• Canadian technology stocks are trading near a decade-high as they ride booming U.S. demand for everything from e-commerce to office software and stay far from the global trade fray. The S&P/TSX Composite’s technology index has gained about 23 percent this year, trouncing the 6.1 percent rise of its nearest competitor, industrials. Tech now sports a 4 percent weighting in the benchmark equity index, the highest since 4.2 percent in 2009 when BlackBerry Ltd. ruled the smartphone market.
• Count foreign exchange analysts among those betting global trade ructions will blow over, at least for the loonie. The Canadian dollar is hovering near a one-year low against its U.S. counterpart as President Donald Trump’s tariff adventures and concerns over Nafta’s potential unraveling cut the odds for interest-rate increases in Canada. But forecasts call for a rebound by the end of the year as global growth wins out as the currency’s driving force.
• The brewing trade war between China and U.S. is having a spillover effect on Canada’s farmers. The trade spat has caused a drop in North American grain prices that probably prompted Canada’s growers to abandon some of their plans to plant more wheat and instead shift back to canola. The nation’s farmers likely sowed 21.87 million acres of canola in 2018, up 2.3 percent from the government’s April estimate, according to a Bloomberg News analyst survey. Statistics Canada will release its estimates on Friday at 8:30 a.m. in Ottawa.
• Corus Entertainment Inc. slashed its dividend as part of a plan to reduce its debt as it reported a loss of $935.9 million in its latest quarter and took a $1.01-billion non-cash impairment charge related to broadcast licenses and goodwill. The company says it will pay a quarterly dividend of six cents per class B share starting in September compared with its current dividend which is a monthly payment to shareholders of 9.5 cents per class B share.

 

 

World Headlines

• European equities struggled for direction Wednesday as trade tensions expand with Canada said to be preparing new measures to prevent a potential flood of steel imports from global producers seeking to avoid U.S. tariffs. The Stoxx Europe 600 Index was fluctuating at the open, with energy companies rising as oil gained 0.7 percent. The S&P 500 Index added 0.2 percent in New York Tuesday.
• Trade stress between the world’s biggest economic powers kept the negative atmosphere surrounding stocks in place on Wednesday, while havens including the yen and sovereign bonds capitalized. Oil built on gains after the U.S. stepped up pressure on Iran. U.S. equity-index futures slid as the Stoxx Europe 600 Index struggled for direction.
• Asia equities fell for a third consecutive day as investor concerns on global trade tensions lingered. The MSCI Asia Pacific Index fell 0.7 percent to 165.79 as of 5:02 p.m. in Hong Kong, set for the lowest close since October. The Hang Seng China Enterprises Index entered a bear market as the yuan weakened, reviving fears of a competitive devaluation amid risks of a trade war.
• Oil rose to a one-month high as the risk of a supply crunch continued to buoy markets, with a U.S. demand that Iran’s customers halt their imports overshadowing Saudi Arabia’s promise to boost output. New York futures gained as much as 0.9 percent, after advancing 3.6 percent on Tuesday. Renewed U.S. sanctions that may curb OPEC member Iran’s exports, a Canadian oil-sands outage and turmoil in Libya have lifted prices. While Saudi Arabia is said to plan ramping up production, a move that would strain the kingdom’s spare capacity at a time when the market is already coping with falling Venezuelan output and shrinking American inventories.
• Gold sets new low for the year as dollar holds gain, overshadowing concerns about escalating global trade tensions. Other precious metals decline.
• Conagra Brands Inc. agreed to buy Pinnacle Foods Inc. for about $8.1 billion in cash and stock, gaining freezer-aisle brands such as Birds Eye to capitalize on growing demand for frozen foods. The deal values Pinnacle at $68 a share, the companies said in a statement Wednesday. The price is 23 percent above Pinnacle’s closing level on April 19, when an activist investor disclosed a stake in the Parsippany, New Jersey-based company and began pushing it to sell itself. Bloomberg News reported last week that Conagra had approached Pinnacle about a deal. Including assumed debt, the deal values Pinnacle at about $10.9 billion.
• Chinese search giant Baidu Inc. has approved a plan to buy back as much as $1 billion of its own shares over the next 12 months, a move that may help prop up its stock as global market volatility grows. Its board has green-lit a program to use existing cash to buy shares in the open market at prevailing prices, the Beijing-based company said in a statement Wednesday. It will review that program periodically and may adjust its terms and size.
• Mark Carney warned that time is running out to remove the threat that Brexit poses to trillions of pounds of derivative contracts, stepping up pressure on the European Union to act. Unless the EU follows the U.K. government in putting in place temporary workarounds, there could be havoc in financial markets when Britain leaves the bloc next March, the Bank of England said in its Financial Stability Report, presented in London by the governor. Firms may find themselves unable to service trillions of pounds of contracts from derivatives to insurance policies.
• President Donald Trump signaled he may take a less confrontational path toward curbing Chinese investments in sensitive American technologies, potentially relying on a U.S. committee that scrutinizes foreign acquisitions for national security risks. Trump made remarks Tuesday at the White House that appeared to align with Treasury Secretary Steven Mnuchin’s approach, in an internal administration debate over how to protect U.S. intellectual property from China.
• Qatar Petroleum, the world’s biggest seller of liquefied natural gas, is looking to get even larger, investing $20 billion in America’s oil and gas fields at a time when rival U.S. exporters are expanding. The investments will be made over five years, Chief Executive Officer Saad Sherida al-Kaabi said in an interview with Bloomberg News in Washington. Some of that will likely go toward lining up gas supplies for the Golden Pass LNG export project in Texas, being developed with Exxon Mobil Corp.
• At least some buyers of Iranian supplies in the world’s biggest oil market are considering acquiescing to U.S. President Donald Trump’s demands. As the American administration piles pressure on its allies to entirely halt purchases of Iranian supplies, Japan’s Fuji Oil Co. and Taiwan’s Formosa Petrochemical Corp. are considering ending imports from the OPEC member — though they are yet to make a final decision. South Korea has already put some imports on hold while Emirates National Oil Co. in the U.A.E. is trying alternatives to cargoes from the Islamic Republic.
• OPEC is heeding consumers’ calls to pump more crude, but that’s only making the oil market more nervous. The fleeting reassurance that came from Saudi Arabia’s pledge last week to lead a substantial production increase was swept away on Tuesday as tougher U.S. sanctions on Iran shifted focus back to the world’s dwindling buffer of emergency crude supply.
• T-Mobile US Inc. Chief Executive Officer John Legere will tell lawmakers Wednesday his company’s proposed purchase of Sprint Corp. will bring lower prices, while a former U.S. antitrust official will say the deal poses dangers from less competition. Legere and Sprint Corp. Executive Chairman Marcelo Claure are among witnesses scheduled to appear at a hearing before the Senate’s antitrust panel as Washington begins to turn its attention to the $26.5 billion deal that would reduce the number of nationwide wireless carriers from four to three.
• A federal judge ordered the Trump administration to reunite immigrant children who were separated from their families at U.S. border crossings, and to refrain from detaining parents without their children. U.S. District Judge Dana Sabraw in San Diego said in a ruling late Tuesday there was no dispute that the U.S. government wasn’t prepared to accommodate the consequences of President Donald Trump’s “zero tolerance” policy of prosecuting all adults entering the U.S. illegally from Mexico and separating any children they had with them.
• Capital One Financial Corp. is limiting how account data flows to outside apps for managing finances, prompting a backlash from the bank’s customers who say they have been locked out of their own information. A technology upgrade led to the disruption, people familiar with the situation said. Plaid Technologies, whose software is used to connect banks with third parties, is unable to link with some Capital One accounts, according to the people, who requested anonymity because they weren’t authorized to speak publicly.
• India’s top steelmaker JSW Steel Ltd. says it’s scouting for more deals in the U.S. and Europe to expand its global footprint, betting that vibrant growth will underpin demand in overseas markets and complement a boom at home that’s seen the mill ramp up local output. “What is driving us is that, inherently, we find it is an interesting opportunity because the U.S. economy is doing well” and the investment cycle looks positive, Joint Managing Director Seshagiri Rao said in an interview. After meeting half its target for 10 million tons of capacity overseas, the steelmaker is now looking to buy more facilities, Rao said in Mumbai.
• IHS Towers Ltd. has postponed an initial public offering that would have valued the company at as much as $10 billion, according to people familiar with the matter, because of concern that a sale may take place too close to an election in its home market of Nigeria. Africa’s largest tower company, whose shareholders include Goldman Sachs Group Inc., Wendel SA and South African wireless carrier MTN Group Ltd., was seeking to raise about $1 billion in New York, said the people, asking not to be identified as the details aren’t public. The share sale may now be postponed until next year, they said.
• Orsted A/S stands to pocket as much as $3.7 billion from a potential sale of assets in Denmark as a utility that once relied on fossil fuels consolidates its status as a global giant in renewable energy. The company, which is based in western Denmark, has started a process to sell its Danish power distribution and residential customer businesses, itsaid on Tuesday. It’s being advised by Danske Bank A/S in a process on which management hopes to decide before the end of the first half of next year.

 

*All sources from Bloomberg unless otherwise specified