March 25, 2019
Daily Market Commentary
- Canadian Headlines
- TransAlta Corp. is nearing an agreement that would see Brookfield Asset Management Inc. invest about C$750 million ($559 million) in the power producer and nominate two directors to its board, according to people familiar with the matter. Brookfield could also use the investment to increase its stake in the Calgary-based utility to about 9 percent under certain conditions, said the people, who asked not to be identified because the discussions are private. The deal would allow Brookfield to convert its investment into an equity interest in TransAlta’s Alberta hydro assets at a later date, the people said.
- Canada has joined the U.S. in the inverted yield curve club, signaling a growing risk of recession that may keep Stephen Poloz on hold for his final 14 months as head of Canada’s central bank. The yield on Canada’s 10-year bond dipped to 1.6 percent Friday, or six basis points lower than the rate on the three-month Treasury bill. That hasn’t happened since 2007, at the start of the financial crisis sparked by a housing crash in the U.S.
- Canada’s canola sales to China, the world’s biggest buyer of oilseeds, slumped 33 percent in February from a month earlier amid a diplomatic dispute over the detention of a Huawei Technologies Co. executive in the North American country. Shipments dropped to 402,887 tons last month from 601,496 tons in January, according to China custom’s data published on Monday. In dollar terms, trade value slumped to $188 million from $277 million.
- Onex Corp., Canada’s biggest private-equity firm, agreed to buy Gluskin Sheff & Associates Inc. for about C$445 million ($331 million) in cash, adding a money manager with C$8.2 billion in assets. Onex, run by billionaire founder Gerry Schwartz, will pay C$14.25 a share for Toronto-based Gluskin, a 28 percent premium to the company’s current share price. Gluskin shareholders will vote on the offer in May, with the deal requiring two-thirds support, according to a statement Friday.
- European stocks opened lower as almost all the sectors slumped amid concerns about global and regional economic growth and as investors continued to book profit on gains at the end of the quarter. The Stoxx Europe 600 Index declined 0.7 percent. The FTSE 100 Index retreated 0.5 percent as Prime Minister Theresa May is hoping for one more chance to put the divorce agreement she’s negotiated with the European Union to a vote in the House of Commons this week. Oil stocks, including BP, fell, as Brent retreated.
- U.S. stock-index futures fell amid a sell-off in Asian and European equity markets as investor pessimism grew on global growth concerns. U.S. negotiators head to Beijing for more talks later this week. Apple is set to unveil streaming video and news subscriptions. Futures contracts on the S&P 500 Index were down 0.3 percent at 04:40 a.m. in New York, after the underlying gauge slumped 1.9 percent on Friday, a casualty of a flattening yield curve and concerns that the global economy was slowing down. Contracts on the Dow Jones Industrial Average and Nasdaq 100 were down 0.2 percent and 0.4 percent respectively.
- Volatility returned with a vengeance to Asia, home to some of the best stock-market returns in the world this year before Monday. The MSCI Asia Pacific Index slumped 2.1 percent on Monday, heading for its biggest decline since October and erasing monthly gains. Shares in China, Hong Kong and Japan lost 2 percent or more, with S&P 500 Index futures dropping as much as 0.7 percent.
- Oil steadied in New York after its biggest loss in three weeks, yet concerns lingered that a slowdown in global economic growth will erode fuel consumption. West Texas Intermediate futures were little changed near $59 a barrel, after losing 1.6 percent on Friday. A closely watched gauge of U.S. Treasuries inverted for the first time since 2007, a signal a recession may be coming in the world’s largest economy. Some concerns over a new crude glut abated however as drilling rigs in America fell to the lowest in almost a year.
- Gold gained amid a gloomier outlook for global growth that has seen stock markets continue falling after Friday’s selloff. Platinum also rose and has formed a so-called golden cross, which may point to further gains. Gold’s attraction as a haven asset has increased after the yield curve of U.S. Treasuries turned negative for the first time since 2007 on Friday, stoking recession fears. Silver rose, while palladium fell.
- Confidence among German companies unexpectedly improved in March, providing a glimmer of hope for the European economy. Ifo’s closely-watched index rose to 99.6, beating forecasts for a reading of 98.5, and a gauge of executives’ expectations also rose. The improvement helps to dispel some of the gloom after a survey on Friday showed German manufacturing in its deepest slump in more than six years.
- The Federal Reserve may have to put interest-rate increases on hold or even ease monetary policy if economic forecasts for 2019 disappoint, Chicago Fed President Charles Evans said. “At the moment, the risks from the downside scenarios loom larger than those from the upside ones,” Evans said in remarks prepared for a speech Monday in Hong Kong. “If activity softens more than expected or if inflation and inflation expectations run too low, then policy may have to be left on hold — or perhaps even loosened — to provide the appropriate accommodation to obtain our objectives.”
- Uber Technologies Inc. is set to announce a $3.1 billion cash-and-share deal to acquire its Dubai-based rival Careem Networks FZ as early as this week, according to people with knowledge of the matter. The U.S. ride-hailing giant will pay $1.4 billion in cash and $1.7 billion in convertible notes for Careem, the people said, asking not to identified because the talks are private. The notes will be convertible into Uber shares at a price equal to $55 per share, according to the term-sheet seen by Bloomberg.
- A group of private equity firms and pension funds agreed to buy Inmarsat Plc for $3.4 billion in a bet on the U.K.-based satellite operator’s growing inflight broadband business. Inmarsat shares rose more than 8 percent. Talks began in late January as the London-based company faces growing competition from traditional rivals such as ViaSat Inc. and new challengers including Richard Branson-backed OneWeb and Elon Musk’s SpaceX offering smaller, cheaper satellites.
- Russia urged U.S. President Donald Trump to seize the opportunity to reset relations after Special Counsel Robert Mueller’s report found no evidence of collusion between his campaign and the Kremlin. “There’s a chance to renew much in our relations, but the question is whether Trump will take the risk,” Konstantin Kosachyov, chairman of the international relations committee in the upper house of parliament, wrote Monday on Facebook. “We, of course, are ready. And I suggest starting with the most acute issues: the START and INF agreements” limiting nuclear weapons, he said.
- Boeing Co. plans to meet this week with customers and regulators to explain plans for getting its 737 Max back into service, after the aircraft was grounded following two deadly crashes in less than five months. The planemaker invited more than 200 pilots, technical leaders and regulators for an informational session Wednesday in Renton, Washington, Boeing said in an emailed statement Monday. The company said it met Saturday with some U.S. and overseas customers. Boeing and the U.S. Federal Aviation Administration have come under scrutiny over the certification of the 737 Max aircraft after crashes of an Ethiopian Airlines flight this month and a Lion Air flight in October raised concern about an automated safety system on the plane. U.S. air-safety regulators are leaning towards approving Boeing’s changes to software and pilot training for the Max, the Wall Street Journal reported earlier, citing people familiar with the matter.
- Apple Inc. and Qualcomm Inc. finally agree on something: the importance of 5G mobile phone technology for the U.S. The protagonists in a wide-ranging and bitter legal battle before the U.S. International Trade Commission argue that the other’s actions are damaging the nation’s lead in fifth-generation wireless technology. The agency is scheduled to release key decisions on Tuesday in the long-running fight over patent royalties — including one that could lead to an import ban on one of the U.S. economy’s most iconic products.
- Thermo Fisher Scientific Inc., a maker of diagnostic and testing equipment, agreed to buy Brammer Bio for about $1.7 billion in cash, expanding its reach in the fast-growing gene and cell therapy business. Waltham, Massachusetts-based Thermo is buying closely held Brammer from Ampersand Capital Partners, according to a statement late Sunday. Thermo Fisher expects the acquisition to add 10 cents a share to adjusted earnings in the first full year of ownership.
- Volkswagen AG was dealt another setback in a 9 billion-euro ($10.2 billion) investor lawsuit over the diesel emissions scandal when a judge said the court will allow shareholders to be reimbursed even if they can’t prove top manager knew about the scam. It will likely be enough to show that top engineers, like the heads of engine development, knew about the software rigging, Presiding Judge Christian Jaede said in a preliminary assessment of the case at a hearing in Braunschweig Monday. One of the most contested issues of the diesel saga has been how much VW’s leadership knew about the widespread cheating.
- The technocrats who run Vladimir Putin’s Finance Ministry know well that the next geopolitical crisis could be just around the corner. This year they’re preparing early for potential turbulence, stockpiling cash while times are good. The ministry borrowed more than $7.2 billion so far in March through local-currency and Eurobond sales, almost four times the monthly average in 2018, capitalizing on a recovery in demand among foreign investors. Finance Minister Anton Siluanov said on Friday that the huge amount raised gives the country room to start trimming sales in the local market.
- JPMorgan Chase & Co is pushing around 300 employees in London to sign up to fresh contracts confirming they will leave the U.K. in the event of a no-deal Brexit scenario, people familiar with the matter said. The investment bank staff, who work in areas such as sales and risk, have in the last week been presented with contracts that mean they must relocate to a European Union country, such as Germany or France, the people said, declining to be identified as the details are private. A spokesman for JPMorgan in London declined to comment.
- When Apple Inc. boss Tim Cook takes the stage at the Steve Jobs Theater in Silicon Valley on Monday, he will usher in a new era for the world’s largest technology company. The chief executive officer is expected to unveil streaming video and news subscriptions, key parts of Apple’s push to transform itself into a leading digital services provider. The company may even discuss a monthly video games subscription. Likely absent from the event: Any new versions of the gadgets that have helped Apple generate hundreds of billions of dollars in profit since 1976.
*All sources from Bloomberg unless otherwise specified