June 30th, 2017

 

Daily Market Commentary

 

 

Canadian Headlines

• Canadian stocks tumbled in a broad-based decline as investors weighed the implications of hawkish comments from central banks around the world. The S&P/TSX Composite Index lost 142 points , or 0.9 percent, to 15,213.42, its lowest close in six trading days. The benchmark fell below its 200-day moving average (15,271) on slower than usual volume ahead of holidays in Canada and the U.S.
• The world’s fastest-growing developed economy has the worst-performing stock market, creating buying opportunities especially for investors in Canada’s financial sector. The S&P/TSX Composite Index is down 2.2 percent from April to June, set for its first quarterly drop since 2015 and the steepest decline among 24 advanced markets tracked by Bloomberg. Year-to-date, its 0.5 percent dip compares with returns of 8.1 percent for the S&P 500, 8.1 percent for Germany’s DAX and 18 percent for Hong Kong’s Hang Seng.
• A former pulp mill worker is set to become the next premier of British Columbia amid deepening political turmoil in Canada’s fastest-growing province. Lieutenant-Governor Judith Guichon asked John Horgan, who leads the New Democratic Party, to form a government after the resignation of Christy Clark, leader of the Liberals. Clark was ousted in a confidence vote in the legislature earlier Thursday, ending the party’s 16-year rule in the province.
• The door to higher interest rates in Canada is suddenly wide open. Bank of Canada Governor Stephen Poloz reiterated this week he’s considering raising rates as the economy heats up and spare capacity disappears. It was the latest in a barrage of statements from Poloz and his deputies that suggest the central bank is firmly in the tightening camp, even with oil prices below $50 a barrel and inflation falling further below its 2 percent target.

 

 

World Headlines

• Europeans haven’t felt this good about spending in 16 years. That bodes well for companies focused on shoppers. The MSCI Europe Consumer Discretionary Index, which has typically tracked improvements in sentiment, has so far lagged gains in the broader regional measure this year. That may change, with the euro-area consumer confidence in June surging to its highest level since early 2001.
• Volatility is picking up again in markets after a prolonged period in the doldrums. The S&P 500 Index tumbled the most in six weeks on Thursday and Treasuries are heading for their worst four-day slump since March.
• Asian stocks fell, paring their best start to the year since 2009, with technology shares leading declines amid heightened volatility. The MSCI Asia Pacific Index dropped 0.6 percent to 4:08 p.m. in Hong Kong, paring its advance so far this year to 15 percent. Technology shares, which slipped 0.9 percent Friday, have been the biggest boost to the gauge this year, surging 31 percent since December. Australian stocks dropped the most since November.
• Oil headed for the longest run of gains in six months as a drop in U.S. crude production and gasoline stockpiles eased concern that OPEC-led supply curbs were proving ineffective. Futures added as much as 1 percent in New York, advancing for a seventh session. U.S crude output last week fell by the most in almost a year amid field maintenance in Alaska and tropical storm Cindy.
• Gold is set to post its first monthly decline since December, ending the longest winning streak since 2010. Prices are down 1.9 percent in June as central banks around the world take a more hawkish stance on monetary policy, curbing the appeal of assets that don’t pay interest. The metal is still up 8.5 percent this year, partly on demand for a haven.
• Sentiment among U.K. households fell to its lowest level since just after the Brexit vote as the rising cost of living and inconclusive general election deterred Britons from spending on big-ticket items. GfK’s consumer-confidence index dropped to minus 10 this month, the weakest since the minus 12 recorded July 2016, the first full survey after the European Union referendum, the market-research firm said Friday.
• China threw a lot at the yuan in June, tussling with traders to drag the currency higher. Starting the month at a 2017 high, the yuan lost 0.6 percent to the dollar over the next two weeks as bearish bets returned on concern China’s economic growth may have peaked. That seemed to trigger a reaction from the People’s Bank of China, with the authorities speculated to have intervened on at least three occasions over the past two weeks, driving the yuan to its strongest level since November.
• HSBC Holdings Plc became the first foreign bank to win permission for a majority-owned securities joint venture in China, a structure some of its competitors have unsuccessfully lobbied to secure for several years. The London-based firm received approval to invest 918 million yuan ($135 million) for 51 percent of a venture with Qianhai Financial Holdings Co., the China Securities Regulatory Commission said in a statement on Friday.
• The U.K. and U.S. will open negotiations over a post-Brexit trade agreement next month, posing an early test of Britain’s ability to strike such deals and of its relationship with President Donald Trump. Britain cannot formally sign trade deals with other countries until it leaves the European Union in March 2019, but can prepare the groundwork for them to be ratified soon after. Such accords are key to Prime Minister Theresa May’s ability to deliver what she calls the “promise of Brexit.”
• The Trump administration’s revised travel ban faced a new court challenge as soon as it took effect Thursday after the president’s signature immigration policy already weathered months of protests, legal wrangling and delays. A new set of restrictions on refugees and immigrants from six predominantly Muslim countries took effect at 8 p.m. EDT. The administration said the rules should help prevent the chaotic airport scenes witnessed when PresidentDonald Trump’s initial order was abruptly imposed in January.
• Lotte Chemical Titan Holding Bhd. plans to cut the price range for its Malaysian initial public offering, which was previously seeking to raise as much as 5.9 billion ringgit ($1.4 billion), according to people with knowledge of the matter.
• Gold producer Polyus PJSC raised about $800 million in a stock offering in Moscow and London, making it the biggest sale by a Russian company in a year. The nation’s top miner of the precious metal, controlled by the family of billionaire Suleiman Kerimov, sold a 9 percent stake at $66.50 per ordinary share, according to a statement on Friday.
• Deutsche Bank AG is targeting a 25 percent increase in revenue from advising companies in the U.S. on acquisitions over the next one to two years, amid a hiring drive to replenish the division’s ranks.
• Goldman Sachs Group Inc. is among bidders for about 1 billion pounds ($1.3 billion) of U.K. mortgages being sold by UniCredit SpA, according to people with knowledge of the matter. The Italian lender is offloading a portfolio of home loans that were previously packaged into bonds, said the people, who asked not to be identified because they aren’t authorized to discuss the matter publicly.
• Nestle SA Chief Executive Officer Mark Schneiderpreviously transformed a sleepy German hospital operator into a stock-market darling via more than 30 acquisitions. Now he wants to return to dealmaking at his new employer — where the challenges are bigger.
• Waberer’s International Nyrt. reduced the price and scale of its initial public offering as eastern Europe’s largest hauler moved to list its shares on the Budapest Stock Exchange in its second attempt in as many years. Waberer’s determined the final price for both institutional and retail investors at 5,100 forint, compared with an initial guidance of as much as 6,300 forint, the company said in a statement after the book-building ended. Private-equity fund Mid Europa Partners will retain a 70 percent stake after selling 1.8 million shares, while 3.04 million new shares will also be issued, less than half of the total of up to 11.7 million securities originally announced.
• IndiGo, India’s biggest airline, expressed interest to buy a stake in national carrier Air India Ltd., giving a boost to the government’s plan to sell the unprofitable company saddled with almost $8 billion of debt.
• Asahi Group Holdings Ltd. is selling its remaining stake in a Chinese beverage joint venture for $612 million to partly pay for its purchases of beer brands in Europe. The company is selling its remaining 20.4 percent holding in Tingyi-Asahi Beverages Holding Co. in two equal tranches in 2018 and 2019, according to exchange statements by the companies Friday. The company is a joint venture Asahi formed with Tianjin-based Tingyi Cayman Islands Holding Corp. Tingyi will buy back the entire stake from Asahi, according to the companies.
• A TPG-led group will invest 500 billion won ($437 million) in a ride-hailing startup to be spun out of South Korean social media giant Kakao Corp., throwing its weight behind a competitor to Uber Technologies Inc.
• Bayer AG plans to cut its sales and profit forecasts for this year because of unexpectedly high stockpiling in Brazil of its crop-protection products. Full-year earnings before interest, taxes, depreciation and amortization and other special costs will be reduced by 300 million euros ($342 million) to 400 million euros, the Leverkusen, Germany-based company said in a statement on Friday. Second-quarter results will also be eroded. The stock dropped by the most in almost eight months.
• Workers at U.S. auto factories are finding that their summer schedules may be determined by the height of the model they assemble. General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV are all shortening summer shutdowns or forgoing them altogether at some plants that make popular SUVs and pickups as demand for the bigger vehicles continues to chug along. At the same time, several U.S. car plants are bracing for a cut in summertime shifts and output as manufactures try to align supply with still-slumping passenger-car demand.

 

*All sources from Bloomberg unless otherwise specified