June 28th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian equities made a late push to gain Thursday, though closed down for their fifth straight session. The S&P/TSX Composite Index fell less than 0.1% to 16,307. Information technology, consumer staples, and health care rose while energy lagged. Alberta raised its mandatory production limit by 25k b/d in August from July levels to 3.74m b/d, while Ontario Teachers’ Pension Plan has invested an undisclosed amount in Elon Musk’s Space Exploration Technology Corp. Also, Acreage Holdings Inc. has some “head-turner” acquisitions in the works now that its planned sale to pot giant Canopy Growth Corp. has been sealed, according to the New York-based company’s chief executive officer.
- Mirko Bibic will become president and chief executive officer of BCE Inc. when George Cope retires after 14 years with the Canadian telecommunications company. “Mirko is a seasoned Bell executive who has played a critical leadership role in the company’s strategic transformation over the last decade.” Gordon Nixon, chairman of BCE and Bell Canada, said in a statement Friday. “With deep experience across Bell’s business segments, outstanding financial and operational acumen, and an unmatched understanding of the issues transforming the Canadian communications landscape, Mirko is the ideal choice to lead Bell’s management team forward in the execution of our growth strategy.”
- Canada is hoping to resume meat exports to China even before finishing an official investigation into forged documents that triggered a ban by the Asian nation. “I’m hopeful that we’ll be able to reassure our Chinese trading partner with additional safety measures to our export system so they can reopen the market even if the investigation still needs a bit more time,” Marie-Claude Bibeau, minister of agriculture and agri-food, said in a phone interview. The forgery was discovered by the Canadian Food Inspection Agency after the Asian country informed Canada on June 14 that a pork shipment was found to contain ractopamine. Canada told China about the fake document as it was a potential public health issue, Bibeau said. Beijing then decided to temporarily halt meat shipments.
- World Headlines
- European shares traded little changed to cap its first weekly decline in a month as investors awaited a meeting between the U.S. and Chinese presidents for updates on the two countries’ trade talks. The Stoxx Europe 600 held steady, taking its drop this week to 0.7%. Merlin Entertainments Plc, the operator of Legoland resorts and Madame Tussauds wax museums, gained 14% after an agreed takeover offer. Deutsche Bank AG rose after the lender passed the Federal Reserve’s annual stress test. Travel and leisure shares outperformed, while utility stocks were the biggest decliners.
- American equity futures climbed alongside European stocks on Friday ahead of the highly anticipated U.S.-China presidential meeting that could determine the next chapter in the trade war. Futures on the S&P 500 and Dow Jones Industrial Average climbed, while the Stoxx Europe 600 Index also gained. Stocks edged lower in Asia, with losses steepest in Shanghai, and moderate declines in benchmarks in Tokyo, Hong Kong and Sydney. Ten-year Treasury yields lingered just above 2%, and the dollar edged down. Gold advanced and oil was steady.
- Japanese shares slipped ahead of a highly-anticipated summit between the U.S. and China taking place during the G-20 meeting this weekend. Telecommunication giants and machinery makers weighed most heavily on the Topix index. President Donald Trump shook hands with Chinese leader Xi Jinping ahead of their scheduled sit-down on Saturday in Osaka. Xi condemnedprotectionism and “bullying practices” in a meeting with African leaders ahead of the summit, according to Dai Bing, the foreign ministry’s Director General for African Affairs.
- The U.S.-Iran standoff and falling American stockpiles have propelled oil toward its biggest monthly gain since January but crucial meetings in the next few days will determine whether the rally continues. Futures in New York declined Friday, paring their advance in June to about 11%. Investors are focused on the meeting Saturday in Osaka between the U.S. and Chinese leaders for any progress on defusing the trade war. OPEC and its allies will then gather in Vienna on Monday and Tuesday to decide on the group’s production levels. Russia’s energy minister said his country is still in talks on the future of the group’s supply cuts deal.
- The tide has turned for gold as the Federal Reserve charts a path toward lower interest rates and the prolonged U.S.-China trade war threatens global growth. Bullion rocketed to a six-year high and prices are holding above $1,400 an ounce. Markets are expecting a U.S. interest rate cut in July, which may fuel further gains, and Fed Chairman Jerome Powell has warned that downside risks to the U.S. economy have increased recently.
- Kamala Harris staked her claim to top-tier status in the Democratic primary with a searing indictment of Joe Biden on race, putting the front-runner on defense and puncturing the aura of inevitability that he had carefully sought to cultivate. The deeply personal confrontation at a Democratic debate on Thursday pitted the 54-year-old daughter of Jamaican and Indian immigrants against a 76-year-old white man for fondly recalling his civil relationships with segregationist senators in the 1970s and 1980s. Both are aggressively courting the black community, a vital constituency that has decided the last five Democratic presidential nominees in every contested primary since 1992.
- Apple Inc. is providing a $100 million lifeline to Japan Display Inc., a person familiar with the matter said, shoring up a key smartphone display supplier that’s trying to salvage a bailout package after multiple investor departures. The U.S. company is stepping in after Taiwan’s TPK Holding Co. withdrew from a $1.1 billion rescue plan for the Japanese firm, the person said, asking not to be identified discussing a private deal. Cosgrove Global Ltd. and Topnotch Corporate Ltd. pulled out shortly after, leaving the bailout in limbo. Harvest Tech Investment Management Co. and Oasis Management Co. remain in discussions, the Japanese company said in a statement on Thursday. It’s received commitment letters from Chinese fund Harvest for investments of $300 million — including Apple’s outlay — and a conditional agreement from Oasis to stump up as much as $180 million. Japan Display said it’s continuing talks and seeks to close a bailout deal by Dec. 30.
- Volkswagen AG’s trucks unit fell on its first day of trading as investors were unconvinced of ambitious plans to enter the U.S. truck market and go head-to-head with market leaders Daimler AG and Volvo Group. Traton SE declined as much as 2.4% to 26.36 euros, after pricing at 27 euros, the bottom of its range of as much as 33 euros. VW raised 1.55 billion euros ($1.8 billion) from the transaction, which values the business at 13.5 billion euros. Other recent industrial stock offerings have fared better. German commercial vehicles brakes maker Knorr-Bremse AG has gained 21% since its IPO in October, tracked by Swiss train maker Stadler Rail AG’s performance after listing in April.
- An investor group including the family behind the Legoempire agreed to buy Merlin Entertainments Plc, the operator of Madame Tussauds wax museums, for about 4.8 billion pounds ($6.1 billion). Merlin investors would receive 455 pence per share, a premium of 15% over the closing price Thursday. The deal, which continues a run of major private equity investments in Europe, is also backed by Blackstone Group LP and Canadian pension fund CPPIB.
- As Chinese President Xi Jinping prepares for one of the most important meetings of his seven-year rule, he appears to have Donald Trumpon the brain — even if he won’t say so directly. In conversations with other leaders ahead of his sit down tomorrow with the U.S. president on the sidelines of the Group of 20 summit in Japan, Xi spared no opportunity to paint the U.S. as the bad guy in China’s spiraling trade conflict, while avoiding the provocative step of naming Trump personally. In remarks to African leaders this morning, Xi took a not-so-subtle swipe at Trump’s policy slogan, “America first.” Warning against “bullying practices,” Xi said that “any attempt to put one’s own interests first and undermine others’ will not win any popularity.”
- Japan’s technology stocks are having a surprisingly good 2019 even as trade tensions have escalated between the world’s largest economies. Well-known internet and telecom giants Rakuten Inc. and SoftBank Group Corp. are doing especially well, closing the first half with gains of 74% and 41% respectively. The pair are riding expectations for their global investments as well as hopes for their domestic operations. Lesser known nut-and-bolt tech manufacturers also feature in the top gainers on the Nikkei 225 Stock Average, which is up 6.3% year to date. On the flipside, stocks that benefit from domestic demand, including drugmakers, retailers and utilities, have been among the biggest losers on the blue-chip gauge.
- For an OPEC+ meeting in which the key decision over an output-cut extension is supposedly “in the bag,” according to Saudi Arabia’s Energy Minister Khalid Al-Falih, Monday’s gathering in Vienna could be as closely watched as any during the three-year coalition. The Organization of Petroleum Exporting Countries and its allies convene next week to discuss extending a 1.2 million barrel-a-day cut into the second half. While the cartel’s three biggest members – Saudi Arabia, Iraq and the United Arab Emirates – are all willing to continue the policy of reduced production, Russia remains circumspect, prompting questions over potential changes to policy.
- FWD Group, an insurer backed by Hong Kong billionaire Richard Li, is nearing a deal to acquire the life insurance operations of Thailand’s Siam Commercial Bank Pcl, according to people familiar with the matter. Talks between FWD and Siam Commercial are advanced after three months of exclusive negotiations, and an announcement could come as early as Monday, the people said, asking not to be identified because the matter is private. Siam Commercial’s life insurance unit could be valued at about $3 billion, they said. At that price tag, it would be the biggest acquisition of an insurer in Southeast Asia, according to data compiled by Bloomberg.
- Nexon Co.’s founder has shelved a sale process for his stake in the $13 billion Asian game developer, people with knowledge of the matter said. South Korean billionaire Kim Jung-ju couldn’t reach an agreement on price with suitors, according to the people, who asked not to be identified because the information is private. Kim owns nearly half of Tokyo-listed Nexon through his holding company NXC Corp. Private equity firms Hillhouse Capital, KKR & Co. and Blackstone Group LP were among parties considering bids for the Nexon stake earlier in the process, Bloomberg News has reported. Chinese internet company Tencent Holdings Ltd. was considering teaming up with other suitors for a joint offer, people with knowledge of the matter said earlier.
*All sources from Bloomberg unless otherwise specified