March 14, 2019
Daily Market Commentary
- Canadian Headlines
- Bruce Flatt put Wall Street’s biggest private equity players on notice that the Canadian juggernaut was coming for them three years ago. The head of Brookfield Asset Management Inc. told Bloomberg Television then that his firm — pushing into private equity — should be mentioned in the same breath as Blackstone Group LP, Carlyle Group LP and KKR & Co. It was an unusually brash statement from the understated Winnipeg native. On Wednesday, Brookfield Asset Management agreed to buy a majority stake in Oaktree Capital, a move that will create a $475 billion alternative-investing behemoth. That’s more assets under management than any of the other blue-chip buyout firms reported at year-end.
- Goldcorp Inc.’s Chairman Ian Telfer, under fire from investors over a planned $12 million retirement allowance, said he won’t join the board of Newmont Mining Corp. as had been planned after completion of a deal to merge the two gold producers. Telfer, who’s held his position since 2006 and previously served as chief executive officer, had been scheduled to serve as deputy chairman of the combined company under a plan set out in January. At present, he’s focusing on encouraging Goldcorp shareholders to approve the transaction, a move that will create the sector’s biggest company, according to a statement.
- European stocks trimmed an advance on the news, but remained higher while the pound fell as the Brexit saga rumbled on. The Stoxx Europe 600 Index climbed as most sectors advanced, with shares in the U.K. also rising after a night of voting that saw the British government once again defeated in Parliament. European sovereign debt was mixed as Germany said the economy likely to grow moderately in first quarter.
- U.S. equity futures fluctuated on Thursday as America and China were said to push back a key meeting on trade. S&P 500 futures swung from a loss to a gain and back amid news a meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war is now likely to happen in April at the earliest. Treasuries pared a drop, the dollar gained and the yuan dropped.
- Japan’s Topix index fell, erasing earlier gains, after China’s industrial production data indicated the world’s second-biggest economy is slowing, overshadowing resilient U.S. economic data. Chemicals and electronics makers contributed most to the decline in Japan’s benchmark equity gauge. The Topix is still up 6.3 percent so far this year after the 18 percent slide in 2018. Chinese data showed higher unemployment and slowing retail sales growth as well as the lower-than-expected output figures.
- Oil erased gains after a U.S.-China meeting to end the nations’ trade war was said to have been pushed back. Futures fell in New York, erasing an earlier gain of 0.7 percent. A meeting between President Donald Trump and his Chinese counterpart Xi Jinping to sign an agreement to end their trade war is more likely to happen in April at the earliest, three people familiar with the matter said. Crude had closed at a four-month high on Wednesday after an unexpected drop in U.S. inventories.
- Gold dropped to snap two days of gains as the dollar recovered and equities rose, reducing the yellow metal’s appeal as a haven. Silver, platinum and palladium also all declined. Investors are watching the latest economic data from China, progress in ending the trade war and Brexit developments for gold’s future direction, after the price has oscillated either side of $1,300 an ounce so far this month.
- China’s economic slowdown deepened in the first two months of the year, pushing unemployment sharply higher and intensifying pressure on the government’s calibrated stimulus strategy. With industrial output having its worst start to a year since 2009 and retail sales expanding at the slowest pace since 2012, the unemployment rate jumped to 5.3 percent in February from 4.9 percent in December, the highest level in two years. On the upside, fixed-asset investment accelerated and property investment jumped.
- With the U.K. in limbo and Parliament deadlocked, politicians vote Thursday on whether to delay Brexit after they rejected a no-deal split from the European Union. European Council President Donald Tusk said he will push for a long extension.
- Boeing Co.’s $600 billion-plus order book for its 737 Max began shaking after several big customers threatened to reconsider their purchases in the wake of the Ethiopian Airlines crash, the second deadly accident involving the plane since October. VietJet Aviation JSC, which doubled its order to about $25 billion only last month, said it will decide on its future plans once the cause of the tragedy has been found. Kenya Airways Plc is reviewing proposals to buy the Max and could switch to Airbus SE’s rival A320. Russia’s Utair Aviation PJSC is seeking guarantees before taking delivery of the first of 30 planes.
- A meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war won’t occur this month and is more likely to happen in April at the earliest, three people familiar with the matter said. Despite claims of progress in talks by both sides, a hoped-for summit at Trump’s Mar-a-Lago resort will now take place at the end of April if it happens at all, according to one of the people. China is pressing for a formal state visit rather than a lower-key appearance just to sign a trade deal, the person said.
- Exxon Mobil Corp. plans to reduce the cost of pumping oil in the Permian to about $15 a barrel, a level only seen in the giant oil fields of the Middle East. The scale of Exxon’s drilling means that it can spread its costs over such a big operation that the basin will become competitive with almost anywhere in the world, Staale Gjervik, president of XTO Energy, the supermajor’s shale division, said in an interview.
- Ethiopia has sent black boxes from a crashed Boeing Co. 737 jet to France for decoding after refusing to hand them to U.S. authorities that had kept the Max model flying after most other regulators grounded it. The flight-data and cockpit-voice recorders have arrived in Paris where they’ll be processed by the Bureau d’Enquetes et d’Analyses, France’s air-accident investigator, according to a spokesman for the agency. The BEA will download data for the Ethiopian authorities but hasn’t been asked to analyze it, he said.
- The ripple effects of the Reserve Bank of India’s unusual move to use foreign-exchange swaps to ease a liquidity deficit at banks ahead of national elections were felt across local currency, stocks and bond markets on Thursday. Sovereign bonds fell as traders speculated that the measure would reduce the need for the central bank to buy debt via open-market operations, removing a key support for the market. The rupee weakened as some analysts saw the decision as a signal that the RBI isn’t comfortable with the currency’s recent gains, while some financial stocks cheered the planned liquidity infusion. The RBI will hold a $5 billion foreign-exchange swap auction for a three-year tenor on March 26, it said late Wednesday. The plan comes as India is estimated to spend an unprecedented 500 billion rupees ($7.2 billion) to conduct a six-week-long vote starting next month. That, along with a seasonal shortage before the fiscal year-end, is putting a strain on banking liquidity.
- Palm oil emerged as a flashpoint in a potential trade war between the European Union and some of the world’s largest developing nations after the bloc imposed stricter limits on how the crop can be used in green fuels. The European Commission on Wednesday restricted the types of biofuels from palm oil that may be counted toward the EU’s renewable-energy goals and introduced a certification system. Indonesia and Malaysia, which supply 85 percent of the crop, have warned that they are ready to retaliate against what they see as “discriminatory” rules.
- General Electric Co. will burn as much as $2 billion of cash this year as the manufacturer tries to repair its balance sheet and put its reeling power business back on stable ground. Free cash flow from the company’s industrial businesses and profit will decline in 2019, GE said Thursday in a statement detailing its forecast for the first time. Investors have been bracing for a tough year, particularly after Chief Executive Officer Larry Culp said last week that cash flow from the industrial operations would be sharply lower.
- Homeplus Co., backed by private-equity firm MBK Partners Ltd., has withdrawn a planned real estate investment trust listing, dashing hopes that the retailer would transform South Korea’s nascent REIT market with the country’s biggest-ever deal. Korea Retail Home Plus REIT 1 decided to cancel the planned initial public offering of as much as 1.7 trillion won ($1.5 billion) after gauging investor demand, the company said in an emailed statement Thursday. Investors are not used to large REIT offerings in South Korea and overseas demand fell below expectations, according to the statement.
- Uber Technologies Inc. is in advanced discussions to sell a $1 billion stake in its costly self-driving car unit to a consortium of investors led by SoftBank Group Corp., people familiar with the plans said. The deal would value the autonomous-vehicle business at $5 billion to $10 billion, and Uber would retain a majority stake, said the people, who asked not to be identified because the discussions are private. The plans aren’t finalized and could fall apart.
- Naspers Ltd. wants to spend about $1 billion in India this year as it scours the globe for investments that can replicate its blockbuster bet on China’s Tencent Holdings Ltd., a person familiar with the matter said. Africa’s largest company by market value is in talks to inject about $200 million into business loan provider Capital Float and payments security firm Wimbo as a first step, according to two people with knowledge of the discussions, who asked not to be identified as the talks are private.
- AT&T Inc. is hiking prices on its pay TV services for the second time since January, even after telling a judge during the U.S. antitrust trial last year that prices would go down if it was allowed to buy Time Warner Inc. Next month, most of the 1.6 million subscribers of DirecTV Now, a live TV streaming service, will be charged $10 a month more as AT&T changes its programming packages. That follows a price increase in January for its traditional satellite service.
*All sources from Bloomberg unless otherwise specified