March 15th, 2018
Daily Market Commentary
- Canadian Prime Minister Justin Trudeau said he’s willing to accelerate Nafta talks to get ahead of U.S. and Mexico election pressures if needed, striking an upbeat tone on the fate of the trade pact. Trudeau, speaking in an interview with Bloomberg Television’s Michael McKee, said he was “very optimistic we’re going to be able to get to a win-win-win” deal on Nafta, while downplaying the impact of talks on business investment.
- Canadian oil producers found a way to access the growing Asian energy market without the controversial Trans Mountain pipeline. A cargo of heavy crude was sent to China after being railed to a terminal in Portland, Oregon, according to U.S. Census data and people with knowledge of the situation. The crude came from Alberta’s oil sands, the people said.
- MGA Entertainment Inc. and a group of investors made a bid for the Canadian assets of bankrupt retailer Toys R Us, a spokesperson for MGA said in an emailed statement. The bid came hours after Isaac Larian, MGA’s founder and chief executive officer, said he was considering buying the Canadian operations and some U.S. assets as we
- Stocks and bonds fluctuated in Europe and Asia as traders assessed the first statements of President Donald Trump’s new economic adviser. U.S. equity futures pared gains and Treasuries drifted higher. The Stoxx Europe 600 Index was steady, with gains in insurance shares offsetting drops in retail and household goods.
- S&P futures reversed overnight losses and are now flat on little news. The tape didn’t cooperate yesterday as stocks went out near session lows for the third day in a row, with some citing the disappointing U.S. retail sales and European industrial production figures. Others are nervously awaiting the next headlines related to China tariffs and/or further personnel shakeups in Trump’s Cabinet.
- Chinese shares wiped out early losses with an afternoon turnaround that may have been due to purchases by state-backed funds, according to an analyst. Hong Kong stocks also rebounded mid-morning and closed higher.
- Oil held gains near $61 a barrel on signs of robust fuel consumption in the U.S. and as OPEC’s compliance with its pledged output cuts soared to a new record. Futures added 0.2 percent in New York, after rebounding from two days of declines on Wednesday. American gasoline inventories sank the most since September last week and product demand reached the highest since January, government data showed. The adherence to supply curbs by the Organization of Petroleum Exporting Countries climbed to 147 percent in February, a fourth consecutive month of record compliance.
- Gold steady as investors weigh comments by incoming White House economic adviser Larry Kudlow, who signaled that President Donald Trump would support a strong dollar, against some risk-off sentiment in markets amid growth concerns.
- Since President Donald Trump signed an executive order last year seeking ways to ease banking rules prompted by the global financial crisis, much has happened — but not much has been completed. On Wednesday, the U.S. Senate took the most concrete step so far, passing a bill that provides considerable regulatory relief to smaller lenders such as regional and community banks. Yet, it’s probably the least worrisome for defenders of the 2010 Dodd-Frank Act, the bedrock law enacted to prevent a future financial meltdown.
- Japanese Finance Minister Taro Aso won’t attend a gathering of global economic leaders in Argentina next week, according to people familiar with the matter, costing him the chance to push back against U.S. tariffs and voice his views on currencies. Aso, who faces calls to resign after his ministry doctored files at the center of a cronyism scandal, will be represented by a deputy at the March 19-20 meeting of Group of 20 finance ministers and central bankers in Buenos Aires, said two ruling coalition lawmakers with knowledge of plans. Bank of Japan Governor Haruhiko Kuroda is expected to attend the G-20 gathering.
- The European Central Bank told banks they’ll need to be tougher in dealing with bad loans as euro-zone lenders continue to grapple with soured debts amounting to almost $1 trillion. For the first time, the banking supervisor laid down time limits for how quickly lenders should set aside capital for loans that turn bad. The guidelines, published Thursday, are the latest attempt by authorities to deal with a problem that still limits banks’ ability to lend and turn a profit a decade on from the financial crisis.
- Toys “R” Us Inc., the ultimate toyland for baby boomers and their kids, is going out of business after a failed rescue effort, unable to recover from intense competition and crushing debts. The collapse, disclosed in a statement Thursday, could shut down hundreds of stores around the world and jeopardize tens of thousands of jobs. Toys “R” Us filed for bankruptcy in September with a plan to turn around the unprofitable retailer. But sales sputtered during the crucial holiday season, and Bloomberg reported that the company began missing payments to some suppliers in recent days, all but sealing its fate.
- Troubled Chinese conglomerate HNA Group Co. has sold out of two Hilton-related companies so far this month. Now, investors are wondering whether Hilton Worldwide Holdings Inc. is next. To help reduce one of the biggest debt loads in China, HNA purged its ownership in Park Hotels & Resorts Inc. earlier this month, and sold its 25 percent interest in timeshare business Hilton Grand Vacations Inc. on Wednesday for $1.1. billion. In both cases, the Chinese firm found a way to amend restrictions that kept the stock tied up until next year, leading to speculation that a similar allowance could be made for HNA’s 26 percent stake in Hilton Worldwide.
- Amazon Japan said on Thursday that it’s cooperating fully with an investigation by authorities, after the Asahi newspaper reported that the country’s Fair Trade Commission conducted on-site inspection of its offices for possible breaches of antitrust rules. The Japanese unit of Amazon.com Inc. is said to have been charging its vendors “cooperation fees” for the products it sells directly through its online retail site, the newspaper reported, citing an unidentified person familiar with the matter. Natsuki Kawase, a spokeswoman for Amazon Japan, declined further comment.
- Just as Prime Minister Theresa May was spelling out the U.K.’s response Wednesday to the poisoning of a former spy on British soil, European investors were helping a state-owned Russian company do brisk business in the bond market. Demand was so high for a 750 million-euro ($927 million) bond sale from Moscow-based Gazprom PJSC that the energy giant was able to cut its borrowing costs by knocking about 38 basis points off its yield. Most of the demand for the oversubscribed bond came from continental Europe, but there were also some buyers from the U.K., according to VTB Capital, which helped organize the sale.
- The chief executive officer of Black Hills Corp. has a message for two electric cooperatives offering to buy its Colorado electric utility in a $1.1 billion deal: We’re not interested. Selling the utility assets would be “inconsistent with our corporate strategy,” CEO David R. Emery wrote in a letter to the chiefs of San Isabel Electric Association and Southeast Colorado Power Association. The two cooperatives had proposed a deal that would value the company at $1.1 billion, which Emery called “low” in his letter.
- Munich Re, the world’s largest reinsurer, is in talks to acquire a plot that has approval for one of the tallest towers in the City of London financial district, people with knowledge of the plan said. The insurer is negotiating to buy the One Leadenhall project from Brookfield Property Partners LP, and could use it as its new U.K. headquarters, the people said, asking not to be identified because the plan is private. Cushman & Wakefield is brokering the possible deal, the people said. The company has looked at multiple developments and no final deal with Brookfield has been agreed, the people said. Spokesmen for Brookfield, Munich Re and Cushman & Wakefield Inc. declined to comment.
- Unilever is consolidating its headquarters in the Netherlands, abandoning a separate London base in a blow to Prime Minister Theresa May’s effort to maintain investment in the U.K. after it leaves the European Union. The maker of quintessentially British brands like Marmite spread and Lipton tea is streamlining the dual nationality it has maintained for nearly a century. Unilever said the move will ease mergers and acquisitions, which have become a priority for slow-growing consumer-goods giants as predators take aim.
- IHeartMedia Inc., the biggest U.S. radio broadcaster, filed for bankruptcy with a plan to ease its debt load of more than $20 billion after almost a year of fractious negotiations with creditors. The company, with about 850 radio stations and 17,000 employees worldwide, filed for Chapter 11 protection on Wednesday in Houston to keep operating as it tries to work out a way to turn the business around and pay its debts.
- Russian President Vladimir Putin is preparing to retaliate against the U.K. after Prime Minister Theresa May threw out 23 diplomats over the poisoning of a former spy and his daughter on British soil. Russia will “certainly” expel British diplomats soon in response, Foreign Minister Sergei Lavrov said in Moscow, the state-run RIA Novosti news service reported. Foreign Ministry and other government officials are preparing measures against the U.K.’s “absolutely irresponsible” behavior and Putin will decide how best to act, Kremlin spokesman Dmitry Peskov told reporters on a conference call Thursday.
- Czech energy magnate Pavel Tykac is ready to spend 1 billion euros ($1.2 billion) of his own cash on aging coal and gas-fired power plants across Europe. He’s betting the dirty generators will be needed for decades to supplement the green power that’s taking a bigger role at utilities from Germany to Britain. “The media bubble around clean energy doesn’t reflect reality,” said Alan Svoboda, an executive director of Seven Energy, the utility and lignite miner owned by Tykac. “Our fundamental assumption is that these conventional assets will be needed in the near future to balance the grids.”
- When the head of health care at Siemens AG went before investors in January with a sales pitch for the division’s initial public offering, he raced through a description of products like scanners and X-ray machines. The executive was on a mission to promote a new line of equipment to analyze medical samples, and his strategy to speak mostly about that business hammered home an important truth about Healthineers. The future success of the $35 billion company slated to make its trading debut on Friday rests partly on a bet it can gain heft in diagnostics, a market in which it has long struggled.
- Aboitiz Equity Ventures Inc., a Philippine conglomerate mainly invested in power, is ready to spend about 200 billion pesos ($3.8 billion) in upgrading the Southeast Asian country’s rickety and overcrowded airports. “Airports is a play on consumer growth, on their increasing financial capability and on tourism,” President and CEO Erramon Aboitiz said in an interview on March 13. “The nation’s infrastructure requirements are tremendous all over. We’re behind in everything except power.”
- Hennes & Mauritz AB shares fell to their lowest in nine years after the Swedish clothing retailer’s attempt to clear inventory ate into revenue. H&M slashed prices to get rid of unsold winter garments after unseasonably warm European weather in December and January. That’s weighed on profitability and complicated the clothing chain’s turnaround efforts. The shares fell as much as 5.2 percent Thursday after the second straight quarterly sales decline. The downbeat report indicates further weakness among apparel retailers hit by the shift to online shopping, after Zara parent Inditex SA reported its weakest annual sales growth in three years Wednesday.
- Ford Motor Co. is about to face an unfortunate reality as it shifts to SUVs from cars: Its share of a lucrative and fast-growing market it helped pioneer has been steadily shrinking. As America’s demand for mainstream sport utility vehicles has soared more than 50 percent over the last five years, Ford hasn’t kept pace with some of its rivals. The company’s share of this market may fall to about 12.7 percent this year, from 16.2 percent in 2013, according to researcher LMC Automotive.
- Helios Towers Plc abandoned plans for an initial public offering following a report that it could merge with another telecommunications tower operator in Africa, Eaton Towers Ltd. A merger between the two could take place, given the scope for regional sector consolidation, Mergermarket reported on Wednesday, citing a person familiar with the situation and two industry advisers. Earlier talks to combine failed due to disagreement on valuation, yet could take place instead of a listing of either business, according to the report, with both firms declining to comment.
*All sources from Bloomberg unless otherwise specified