March 4, 2019
Daily Market Commentary
- Canada’s already beaten-down oil industry is facing a fresh setback as regulatory issues bog down another key pipeline project. The roughly one-year delay to Enbridge Inc.’s expansion of its Line 3 conduit, announced last week, threatens to prolong a shortage of pipeline space that has made it difficult for Canada’s drillers to ship their crude to refineries. That pinch caused a crisis in the industry last year, sending local oil prices to record lows and prompting the government of Alberta to embark on an unprecedented intervention in the market. Enbridge’s Line 3, which would help move 370,000 more barrels of crude out of Alberta, is particularly important because the province’s government was counting on it to help end mandated production cuts. The delay may scramble plans for drillers who were counting on the line and shift investors’ focus to efforts by producers and Alberta’s government to move more crude by rail.
- The Huawei Technologies Co. chief financial officer whose detention in Canada has sparked a diplomatic standoff has filed a civil lawsuit against Canadian authorities, alleging she was wrongfully detained and searched. Meng Wanzhou claims that her constitutional rights were breached and is seeking damages for an ordeal she says amounted to “false imprisonment.” The suit was filed March 1 in the Supreme Court of British Columbia against the Canadian Border Services Agency, a Royal Canadian Mounted Police officer and the Canadian government.
- In the latest legal blow against tobacco companies, the Canadian units of British American Tobacco Plc, Philip Morris International Inc. and Japan Tobacco Inc. were ordered to pay damages of about C$17 billion ($12.8 billion) after losing an appeal of class actions filed by Quebec smokers. The Quebec Court of Appeal upheld a lower-court decision with minor changes, according to a ruling released Friday. The lawsuits were in favor of smokers seeking damages for addiction and smoking-related diseases, who argued they were never warned of the risks.
- European equities started the week on a positive note as miners and tech led the advance on optimism over a trade deal. The Stoxx Europe 600 Index added 0.5 percent. Germany’s SAP SE climbed 0.9 percent and Rio Tinto Plc advanced 1.3 percent. Ted Baker Plc shares slumped 5 percent after the fashion company’s Chief Executive Officer Ray Kelvin resigned amid an investigation of his conduct.
- Stocks advanced globally alongside U.S. equity futures after the U.S. and China were said to close in on a trade deal that may end American tariffs in return for Chinese concessions. The dollar edged higher with Treasuries, while commodities were mixed.
- Chinese stocks rose to their highest level since June as signs of progress in trade talks and the breaking of a key resistance level added to confidence. Shares pared gains in afternoon trading as investors took profit. The Shanghai Composite Index climbed 1.1 percent at the close, paring a gain of as much as 3.2 percent after smashing through the 3,000 level that had capped gains all last week. About seven stocks rose for each that fell on the gauge. The index has now climbed 23 percent since its Jan. 3 low, helping add some $1.5 trillion in value to China’s stock market.
- Oil climbed as the U.S. and China were said to near a deal on trade that would underpin the outlook for crude demand, while supplies around the world showed signs of tightening. Futures in New York rose as much as 1 percent after a drop of 2.6 percent last week. The world’s two biggest economies are approaching an accord that could lift most or all U.S. tariffs, according to people familiar with the discussions. Working oil rigs in America fell to the least since May, according to data from Baker Hughes. OPEC’s output dropped last month, aided by unplanned supply losses in Iran and Venezuela.
- Gold sank to the lowest since late January as investors weighed the prospects of a trade deal that could lift most or all U.S. tariffs, boosting risk appetite and dimming the appeal of havens. In another sign of gold’s fall from favor, bullion continues to flow out of exchange-traded funds backed by the metal after holdings peaked at the end of January. Bank of America Merrill Lynch sees palladium likely to rally further, with $2,000/oz possible. This year’s best-performing commodity will remain the metal of choice for gasoline catalysts for at least another year, it said in an emailed note.
- Theresa May is promising a 1.6 billion-pound ($2.1 billion) boost for poorer areas of the U.K. as she steps up efforts to get her Brexit deal over the line. The Stronger Towns Fund launched Monday was immediately attacked as an attempt by the prime minister to “buy” the support of opposition politicians ahead of crunch House of Commons votes on her unpopular withdrawal agreement. “For too long in our country prosperity has been unfairly spread,” May said in a statement released by her office. “Communities across the country voted for Brexit as an expression of their desire to see change — that must be a change for the better, with more opportunity and greater control.”
- The U.S. and China are close to a trade deal that could lift most or all U.S. tariffs as long as Beijing follows through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, two people familiar with the discussions said. Chinese officials made clear in a series of negotiations with the U.S. in recent weeks that removing levies on $200 billion of Chinese goods quickly was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. That’s the amount the Trump administration imposed after China retaliated against the U.S.’s first salvo of $50 billion in tariffs that kicked off the eight-month trade war.
- Qualcomm Inc. is putting the value of its patent portfolio on the line in a California courtroom in its hometown to try to make Apple Inc. pay for using technology the chipmaker credits for the iPhone’s commercial success. It’s the first time a U.S. jury will have a say in the two-year, sprawling global battle between the tech giants. Qualcomm alleges that Apple infringed patents related to technology for graphics processing and battery power conservation, which the San Diego-based company says improve the efficiency and reduce the cost of smartphones.
- Novolipetsk Steel PJSC, Russia’s largest steelmaker, plans to invest in more production of advanced products amid demand for electric cars and wind turbines. The company will increase steel output by 1 million tons at its main site in Lipetsk by 2021 and will use the supply to produce more high value added products used in everything from electric vehicles to wind turbine towers. NLMK plans to step up output of the specialty products at its other sites in Russia, Europe and the U.S., Chief Executive Officer Grigory Fedorishin said.
- China is planning to cut the value-added tax rate that covers the manufacturing sector by 3 percentage points as part of measures to support the slowing economy, a person familiar with the matter said. The reduction in the highest of the nation’s three VAT brackets could be announced as soon as this week, when political leaders are gathering in Beijing for the annual National People’s Congress, the person said, who declined to be named as the matter isn’t public.
- Indonesia is going all out to strike trade pacts with about a dozen countries and blocs as the U.S.-China trade war hurts its shipments and threatens to worsen a current-account deficit. The country on Monday signed a free trade pact with Australia that has been in the works for years, and is close to clinching deals with Iran, Turkey and the European Union, according to officials. It’s also pushing for a China-backed 16-nation Regional Comprehensive Economic Partnership, or RCEP, to ensure greater access for its goods and services, they said.
- Singapore will allocate a further S$300 million ($222 million) to spur research in digital innovation as the government transforms the economy through technology. The amount, almost double the current budget, is part of the next phase of the National Research Foundation’s five-year plan ending 2020, Minister for Communications and Information S. Iswaran said during a parliamentary session Monday. It will be used for research in the services and digital economy.
- House Judiciary Chairman Jerrold Nadler said he’s aggressively investigating whether there’s evidence of wrongdoing by President Donald Trump, thrusting the veteran New York City lawmaker into center of a politically risky probe. Nadler said he plans to demand documents Monday from more than 60 people and entities, including the White House, the Trump Organization and Donald Trump Jr., the president’s son — following other committee chairmen who’ve made sweeping document requests since Democrats took control of the chamber in January.
- Unibail-Rodamco-Westfield, Europe’s biggest commercial landlord, is in exclusive talks to sell a Paris office tower to a venture led by Mirae Asset Daewoo Co. South Korea’s biggest brokerage by assets, together with Amundi Immobilier SA and another investor, have been selected as preferred bidders and will pay about 1.08 trillion won ($962 million) for the Majunga tower, Mirae said in a statement.
- Nordea Bank Abp sank as much as 6.5 percent on Monday ahead of report due to be broadcast this afternoon that will focus on the biggest Nordic lender’s alleged involvement in money laundering. The news appeared to drag down a number of other Nordic bank shares with DNB ASA, Norway’s largest lender, falling as much as 4.6 percent. SEB AB fell as much as 2.1 percent.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 20th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $383.9 million in the week ended March 1, compared with gains of $1.1 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $17.8 billion.
- A coalition of billionaires led by Bill Gates has thrown its financial weight behind a startup hoping to build a “Google Maps for the earth’s crust” to hunt for new sources of cobalt. The startup, Kobold Metals, is using data-crunching algorithms to scour the globe for cobalt, in a bet that there may still be significant undiscovered sources of the metal that has become one of the world’s hot commodities thanks to its use in electric vehicle batteries. The company has raised money from Silicon Valley venture capital firm Andreessen Horowitz and Breakthrough Energy Ventures, a fund backed by Gates and a dozen other tycoons including Jeff Bezos, Ray Dalio and Michael Bloomberg, owner of Bloomberg LP, the parent company of Bloomberg News.
*All sources from Bloomberg unless otherwise specified