March 20th, 2018
Daily Market Commentary
- Canadian stocks fell the most this month amid a global selloff that also hit crude prices, sending energy shares tumbling. The S&P/TSX Composite Index lost 122 points or 0.8 percent to 15,589.39, the biggest drop since Feb. 28 and the first retreat in eight trading days. Energy stocks were the biggest decliners, losing 2 percent as oil prices closed lower for the first time in four sessions.
- Novartis AG is partnering with a Canadian cannabis company backed by billionaire Peter Thiel to get in on the medical marijuana business. The health-care giant’s Sandoz Canada Inc. division is forming a strategic alliance with Tilray, which makes cannabis medicines in capsules and other forms. Together, the companies will develop new pot-based medications and Sandoz would distribute them to hospitals and pharmacies.
- European shares eke out a small gain as investors await Jerome Powell’s first meeting as the Federal Reserve’s new chairman and mull a selloff in U.S. technology stocks. The Stoxx 600 Index gains 0.2 percent, after dropping the most in two weeks on Monday. The Fed is widely expected to raise interest rates on Wednesday, with the focus on whether officials will project faster tightening for the rest of the year, whereas the Bank of England is seen keeping monetary policy unchanged on Thursday.
- In the wake of the tech setbacks and with a Federal Reserve rate decision a day away, bullish sentiment appears in short supply. Compounding the reasons for caution were reports late Monday in Washington saying that the White Houseplans to impose tariffs worth as much as $60 billion on Chinese products as part of a battle over safeguarding intellectual property. It would be the latest phase of President Donald Trump’s protectionist agenda, and threatens to increase market fears of a trade war.
- Japanese stocks declined, pushing the Topix index down a third day, as a tumble in U.S. technology companies damped sentiment before a Federal Reserve policy decision. A gauge of electronics companies was the biggest drag on the benchmark after U.S. technology stocks dropped following reports of a Facebook Inc. data breach. The Topix fell the most in two weeks Monday after polls showed approval ratings for Prime Minister Shinzo Abe’s cabinet fell, a possible sign that revelations in a land-sale scandal could threaten his leadership.
- Oil climbed to a two-week high as output curbs by OPEC and its allies continued to deplete the remnants of a global supply surplus. Futures in New York rose as much as 1.2 percent after dropping on Monday. While U.S. inventories are forecast to have added 3.4 million barrels last week, that would mark slower growth than the prior week. OPEC and its partners, which are cutting output to ease the global glut, still expect markets to balance by about the third quarter, according to people familiar with the matter.
- Gold declines before Jerome Powell’s first Federal Reserve policy meeting as chairman, with investors looking for clues on how policy might change under his tenure.
- The U.K. inflation rate fell more than expected in February as the impact of the pound’s post-Brexit referendum slide abated. Consumer prices rose 2.7 percent from a year earlier, down from 3 percent in January, the Office for National Statistics said on Tuesday. Economists expected an increase of 2.8 percent. The core inflation rate gained 2.4 percent.
- Glencore Plc agreed to buy two of Rio Tinto Group’s last remaining coal assets for $1.7 billion, underscoring the differing views of the mining giants toward the world’s dirtiest fuel. Glencore will purchase Rio’s 82 percent stake in the Hail Creek coal mine and its majority interest in the Valeria resource in Australia for $1.7 billion in cash, the companies said Tuesday. The deal will leave London-based Rio owning just one operating coal mine, while Glencore, already the top supplier of coal to global markets, will expand its footprint in a commodity where some investors are calling for miners to cut their exposure. Glencore said in July that it agreed to acquire 49 percent of the Hunter Valley Operations, assets that were previously held by Rio.
- China made further promises to protect the intellectual property of foreigners investing in its economy, addressing a long-standing grievance as U.S. President Donald Trump plans new tariffs aimed at Beijing. Speaking Tuesday at the end of the annual National People’s Congress, PremierLi Keqiang said that China wants to avoid a trade war and that the government plans to further open the manufacturing sector — and that it won’t force foreign companies to transfer technology to domestic ones while doing so.
- Republican attempts to cobble together a comprehensive $1.2 trillion spending bill stalled late Monday, pushing House and Senate votes on the package closer to a deadline at the end of the work week to keep the government operating. Lawmakers, who’ve had a month to work out the details of a budget agreement aimed at ending a cycle of stopgap measures, blew past another target to finish their work as disagreements persisted over immigration, border security, tax breaks and a tunnel under the Hudson River between New York and New Jersey.
- Weinstein Co., the troubled movie company that failed in the wake of sexual harassment claims against co-founder Harvey Weinstein, filed for bankruptcy with plans to sell its entertainment assets. Under a deal the company announced in a statement Monday, Weinstein will sell itself to an affiliate of Dallas-based Lantern Capital Partners.
- The Trump administration plans to impose tariffs worth as much as $60 billion on Chinese products as early as this week to punish Beijing for what the U.S. perceives as intellectual property theft from American businesses, according to two people familiar with the matter. U.S. Trade Representative Robert Lighthizer is leading an investigation into China’s treatment of intellectual property, and policies that the U.S. believes force American companies to turn over their technological know-how as the price of doing business there. The administration is said to be considering wide-ranging tariffs on everything from consumer electronics to shoes and clothing made in China, as well as restrictions on Chinese investments in the U.S., according to people briefed on the matter.
- Bunge Ltd.’s chief executive officer left open the possibility of a merger while acknowledging shareholder demands to consider all options for the company, including a potential sale, as talk of consolidation in the grain-trading world continues to swirl. The U.S. crop merchant and processor has been at the center of industry deal speculation for at least the past 10 months, during which time the 200-year-old trading house has been in deal talks with Archer-Daniels-Midland Co. and rebuffed a merger proposal from Swiss commodities giant Glencore Plc.
- The message from the massive government shakeup completed Tuesday in Beijing is clear: Chinese President Xi Jinping is just getting started. China’s national parliament gave its rubber stamp of approval to a dizzying overhaul that will reverberate through the world’s second-largest economy for years. They restructured almost every cabinet-level ministry, created a powerful new anti-graft agency, repealed presidential term limits and appointed Xi’s closest advisers to key positions.
- Singapore Telecommunications Ltd. plans to create a platform that connects mobile wallets across Asia, enabling users to pay digitally in the countries its partners operate. The initiative will begin commercially in mid-2018 between Singapore and Thailand, where Singtel and partner Advanced Info Service Pcl have obtained regulatory approval, the company said in a statement. The service is targeted at travelers and small-to-medium sized enterprises, according to Singtel, which is Southeast Asia’s biggest phone company.
- Goldman Sachs Group Inc. cut its estimate for India’s economic growth, saying an alleged $2 billion bank fraud will render the government’s record recapitalization plan less effective than it earlier thought it would be. Ever since Punjab National Bank — India’s second-biggest state-run lender — disclosed the scam about a month ago, “markets and investors are questioning whether the problem is more systemic,” Goldman analysts led by Nupur Gupta wrote in a note on Tuesday. Goldman is now factoring in “slightly higher” bank provisions and predicts the recapitalization announced last year will only add 0.7 percentage point to gross domestic product rather than the 1.1 percentage point previously projected. That pushes Goldman’s GDP forecast for the year starting April 1 down to 7.6 percent from 8 percent.
- McDonald’s Corp., on a quest to boost sales by improving its image, is vowing to cut its greenhouse-gas emissions. The world’s largest restaurant chain is adding LED lights and more efficient kitchen equipment, such as grills and fryers, in a bid to reduce emissions at its restaurants and offices by 36 percent by the year 2030 from 2015 levels. Changes to beef production, meanwhile, will lower greenhouse gases from the company’s supply chain by 31 percent, McDonald’s said. Suppliers are experimenting with new paddock-style grazing practices, in which herds are rotated across sections of pasture. That allows the land to recover and reduces gases from cattle.
- Warren Buffett said his Berkshire Hathaway Inc. made only one “sensible” stand-alone acquisition last year, and it didn’t do much for his growing pile of cash. Berkshire paid $2.76 billion for its 38.6 percent stake in Pilot Travel Centers LLC, the owner of the Pilot Flying J truck stop chain, according to an insurance filing. Berkshire didn’t disclose the purchase price when it announced the deal in October, and hasn’t revealed the figure in subsequent reports to the U.S. Securities and Exchange Commission.
- Ryanair Holdings Plc agreed to buy an Austrian airline from former Formula One motor-racing champion Niki Lauda, only the second acquisition in the Irish carrier’s history. The low-cost giant will pay Lauda less than 50 million euros ($61.7 million) for a majority stake in LaudaMotion, which retook control of carrier Niki just two months ago following the insolvency of Air Berlin. The aviation entrepreneur paid about the same for the whole airline as Ryanair plans to spend on a 75 percent stake in the holding company. The deal is Ryanair’s first since it bought the U.K.’s Buzz from KLM in 2003, only to close the carrier down a year later. Since then it’s tried and failed to take over fellow Irish airline Aer Lingus and last year was a potential bidder for Air Berlin, before pulling out of an auction it claimed was rigged in favor of Deutsche Lufthansa AG.
- Alibaba Group Holding Ltd. is considering acquiring Rocket Internet’s online retail unit in Pakistan to help China’s biggest e-commerce company expand its reach in the South Asian nation, a person with knowledge of the matter said. The companies are negotiating a price for Rocket’s retail unit Daraz, according to the person, who asked not to be identified since the discussions are private. The deliberations are an early state and no decisions have been made, the person said. Alibaba’s spokesman declined to comment, while Daraz didn’t immediately respond to requests for comment.
- A Hyundai Motor Co. executive called for caution in the development of autonomous cars after an Uber Technologies Inc. self-driving vehicle struck and killed a woman in Arizona. “We don’t know other carmakers’ standards on autonomous cars, but ours are not lax,” Yoon Sung-hoon, head of Hyundai’s mid-large vehicle project, said at the sidelines of a Seoul event Tuesday. Hyundai doesn’t look into tech companies’ standards “because they are not mass-producing companies.” Hyundai, a latecomer to autonomous driving, has been speeding up its development and expanding cooperation with tech companies and startups. The South Korean automaker, which is working on vehicles and software systems for a planned robo-taxi service with a startup called Aurora, has said it is talking to Uber and Alphabet Inc.’s Waymo for potential cooperation.
*All sources from Bloomberg unless otherwise specified