March 27th, 2018
Daily Market Commentary
- Canadian stocks rose the most in three weeks but came nowhere close to matching the gains posted by their U.S. counterparts as trade tensions showed signs of easing. The S&P/TSX Composite Index added 75 points or 0.5 percent to 15,298.56, while the S&P 500 Index gained 2.7 percent. Consumer discretionary stocks led the Canadian gains, rising 1.4 percent as auto parts supplier Magna International Inc. added 3.9 percent.
- Brookfield Property Partners LP reached a deal to buy the rest of GGP Inc. it doesn’t own, gaining full control of the second-largest U.S. mall owner amid tumult in the retail industry. GGP shareholders will receive $23.50 a share in cash, or either one Brookfield unit or one share of a new real estate investment trust for each share they own, the companies said Monday in a statement. The deal, increased from a November proposal, is valued at almost $15 billion, according to data compiled by Bloomberg.
- European shares headed for their first gain in five sessions on signs a trade conflict between the world’s two largest economies is easing. The Stoxx 600 Index followed Asian and U.S. benchmarks higher after the Trump administration was said to be urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve trade tensions.
- U.S. equity futures built on a Monday rally that saw the S&P 500 Index post its biggest one-day jump since August 2015. The resurgence in risk appetite developed as the Trump administration was said to be urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve trade tensions.
- Asian shares rose for a second day, with industrial firms leading gains, after U.S. equities jumped the most in more than two years. The MSCI Asia Pacific Index advanced 1.4 percent to 175.31 as of 4:04 p.m. in Hong Kong, following a 2.7 percent rally by the S&P 500 Index. Rallies were seen in almost every Asian country. Japan’s Topix climbed 2.7 percent, while Hong Kong’s Hang Seng Index added 0.8 percent.
- Oil traded above $65 a barrel as global trade tensions showed signs of easing, countering concerns that U.S. crude stockpiles may have resumed their expansion last week. Futures in New York rose 0.3 percent, remaining near the year’s highest close set in January at $66.14. A resurgence in risk appetite has helped lift markets from equities to commodities after a report that the Trump administration is urging China to lower tariffs on cars during talks to calm trade tensions. Yet a small estimated increase in U.S. inventories is keeping a lid on oil-price gains.
- Gold rises to a two-month high as investors weigh outlook for dollar, with concerns of a trade war between the U.S. and China subsiding.
- Euro-area economic confidence continued its slide in March as the region showed signs of more moderate growth. Optimism slipped in the region’s five biggest economies, taking the overall index to its lowest in six months. It’s a third straight drop from a 17-year high reached in December, and comes as a separate survey by UBS Group AG shows more companies expect to pare back investment as a result of Brexit.
- Auto workers in the U.S. hoping President Donald Trump’s tougher approach to China will help create jobs at home and cut the trade deficit by $100 billion may be in for a huge disappointment. Companies such as General Motors Co. and Ford Motor Co. are among companies that already make cars in China with domestic partners for the local buyer, not only to avoid the 25 percent import duty but also to take advantage of lower costs. GM’s partners in China include SAIC Motor Corp., while Ford has tied up with Changan Automobile Group and holds a stake in Jiangling Motors Corp.
- China’s currency touched its highest level in almost three years amid signs that a trade war may be averted, before erasing gains as the greenback rebounded. The yuan surged as much as 0.6 percent to 6.2418 per dollar on Tuesday to its strongest level since a devaluation in August 2015. The currency closed down 0.1 percent, while the offshore rate dropped 0.35 percent at 6:35 p.m. in Hong Kong.
- U.K. pharmaceutical giant GlaxoSmithKline Plc will examine selling the stake it holds in its Indian consumer health subsidiary, worth about $3.1 billion, as it looks for ways to finance a buyout of the joint venture partner in its global consumer healthcare business. The strategic review of its 72.5 percent stake in a publicly-traded Indian unit, GlaxoSmithKline Consumer Healthcare Ltd., is expected to be completed around the end of 2018 and may not result in a transaction, the company said in a statement. Malted milk drink brand Horlicks — which gets most of its sales through the Indian consumer health unit — will also be part of the process, the company said.
- CEFC China Energy Co., the sprawling conglomerate that’s come under increasing government scrutiny, plans to sell its entire global property portfolio with a combined book value of over 20 billion yuan ($3.2 billion), according to people familiar with the matter. Almost 100 projects are up for sale, including office buildings, hotels, residential apartments and industrial facilities, said the people, asking not to be identified because the deliberations haven’t been publicly disclosed. The properties, mostly located in big Chinese cities, include a smattering of developments in Europe and the U.S., such as a condominium at the Trump World Tower in Manhattan, the people said.
- The Trump administration is urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve a rise in trade tensions that has shaken global markets, according to a person familiar with the matter. Treasury Secretary Steven Mnuchin called China’s Liu He to congratulate him on his appointment this month as vice premier in charge of economic policy, said the person, who spoke on condition of anonymity because the discussions aren’t public. The two discussed the trade deficit between the two countries and committed to finding a mutually agreeable way to reduce the gap, the person said, adding they have exchanged correspondence.
- Germany is willing to offer the U.S. concessions in order to stop President Donald Trump from imposing tariffs on European steel and aluminum, exposing a divide with France on how to avert a trade war. Germany is pressing within the European Union to lower tariffs on goods including cars to try and reach a deal with the U.S., a government official said. That approach to protecting Germany’s export-led industry risks alienating other EU countries including France, which according to a French government official doesn’t want the bloc to make any concessions.
- Akzo Nobel NV’s sale of its specialty chemicals unit to U.S. private equity firm Carlyle Group for 10.1 billion euros ($12.5 billion) is set to transform the Dutch company into a more focused supplier of paints and coatings. The decision unveiled Tuesday comes a year after the manufacturer first rebuffed a hostile $29 billion takeover attempt by rival PPG Industries Inc., a move that helped pave the way for Chief Executive Officer Thierry Vanlancker to break up the company. With investors poised to get an estimated 6 billion-euro payout from the proceeds, Akzo Nobel shares rose as much as 5.7 percent, the most in almost a year.
- Swedish fashion retailer Hennes & Mauritz AB said it’s increasing markdowns this quarter after accumulating a record pile of unsold garments worth more than $4 billion. Operating profit fell 62 percent to the lowest level in more than a decade as clearance sales failed to reduce quantities of T-shirts and jeans that customers had passed over. The stock slumped to the lowest level since 2005.
- Deutsche Bank AG is considering candidates to potentially replace Chief Executive Officer John Cryan amid heightened tensions between him and Supervisory Board Chairman Paul Achleitner, the Times of London reported without saying where it got the information. The bank approached Richard Gnodde, the head of Goldman Sachs Group Inc.’s international operations, but he’s thought to have spurned the overture, the newspaper said. Deutsche Bank also considered UniCredit SpA CEO Jean Pierre Mustier and Standard Chartered Plc CEO Bill Winters, according to the report.
- Indonesia ordered the nation’s biggest lenders to set aside additional capital to bolster their ability to absorb losses and protect against any bank failures. The Financial Services Authority, known as OJK, told the country’s systemically important banks to create a tier-1 capital surcharge of between 1 percent and 3.5 percent of risk-weighted assets, depending on the size and perceived riskiness of the lender, the regulator said in a statement on its website Tuesday. Banks have until Jan. 1 to meet the additional requirement, it said.
- FIT Hon Teng Ltd., part of the contract manufacturing giant Foxconn Technology Group, agreed to buy Belkin International Inc. in the latest move by billionaire Terry Gou to expand in branded goods. FIT will pay $866 million in cash for Belkin, a maker of Wi-Fi routers, mobile device chargers and keyboards, the company said in a filing to the Hong Kong stock exchange on Tuesday. The deal will give it access to strong research and development capacity with Belkin owning more than 700 patents, it said.
- Southeastern Grocers LLC, owner of the Winn-Dixie and Bi-Lo supermarket chains, filed for bankruptcy after debt linked to a 2005 buyout dragged on the company as it grappled with the industry’s razor-thin profit margins. The chapter 11 filing in Delaware bankruptcy court Tuesday come with a plan to turn around the business and pay creditors. The chain, controlled by Lone Star Funds, listed estimated liabilities of $1 billion to $10 billion, and estimated assets in the same range.
- Billionaire Mikhail Fridman’s Veon Ltd. named former Xerox Corp. Chief Executive Officer Ursula Burns as its executive chairman after Jean-Yves Charlier unexpectedly resigned as CEO of the carrier with roots in Russia. Burns, a board member of Uber Technologies Inc., Exxon Mobil Corp. and Nestle SA, has been chairman of Veon, the former VimpelCom, since July 2017. She’ll continue to lead the board and assume direct supervision of executive management, Veon said in an emailed statement Tuesday. A search for a new CEO has started and Burns will revert to her role as chairman once a replacement is named and installed.
*All sources from Bloomberg unless otherwise specified