May 10th, 2019
Daily Market Commentary
- Canadian Headlines
- President Donald Trump discussed trade and legal disputes with China in a telephone conversation Thursday with Canadian Prime Minister Justin Trudeau. The two leaders talked about the negotiations with China as the U.S. readied a tariff increase from 10% to 25% on some $200 billion in Chinese goods, according to a statement from the White House. They also discussed tensions in the Chinese-Canadian relationship, with Trump saying the U.S. was committed to assisting efforts to secure the release of Canadians detained in China.
- Vancouver penthouses, ski chalets at Whistler, and holiday retreats in the Gulf Islands are among the thousands of properties identified in a dirty money probe that estimates more than C$7 billion ($5 billion) was laundered through the western Canadian province of British Columbia last year. The startling findings from two reports released by the provincial government Thursday illustrate how a torrent of suspicious cash has fueled casinos, luxury car sales and real estate in the Pacific Coast region.
- World Headlines
- European stocks followed most Asian markets higher on Friday, trimming some of the week’s sharp losses even as U.S. hiked tariffs on more than $200 billion in goods from China. The Stoxx 600 benchmark was still set to post its biggest weekly drop so far this year. The Stoxx 600 Index was up 0.8%. Technology and basic resources bounced back from the previous session’s steep losses, while defensive sectors such as real estate underperformed. Danske Bank gained ground after naming ABN Amro veteran Chris Vogelzang as its chief executive officer.
- U.S. equity futures slipped on Friday while stocks from Europe to Asia rebounded after fresh American tariffs kicked in on Chinese goods and traders prepared for countermeasures promised by Beijing. Contracts on the S&P 500, Dow Jones Industrial Average and Nasdaq 100 all dipped as investors digested the latest headlines on the U.S.-China trade war, with President Donald Trump tweeting there is “no need to rush” for a deal. Tech shares led the Stoxx Europe 600 index higher.
- In Asia, the Shanghai benchmark jumped 3.1% as Chinese state-backed funds bought domestic shares. That helped an Asia-Pacific equities gauge toward its first gain of the week. With China yet to specify how it will retaliate against U.S. duties, investors are stumbling to the end of a bruising few days as the S&P 500 index is poised to post its worst week this year. Sino-U.S. talks were scheduled to resume on Friday, as both sides try to salvage more than a year of work toward a trade deal.
- Oil pushed higher even after the U.S. went ahead with a planned tariff increase on Chinese goods, as rising tensions in Iran and elsewhere kept the supply outlook tight. Futures in New York erased a gain shortly after the increase in levies but then climbed again. China said it would be forced to retaliate after U.S. tariffs on $200 billion of its imports were lifted from 10% to 25%. Iran’s oil shipments have tumbled this month with not a single ship seen leaving the nation’s oil terminals for foreign ports, according to tanker tracking data compiled by Bloomberg. Timespreads on global crude benchmark Brent are soaring, another sign of scarce supply.
- Gold is set for the second weekly advance in three as the U.S. hiked tariffs on more than $200 billion of goods from China on Friday, before a second day of trade deal talks between the two nations. China immediately said it would be forced to retaliate, but didn’t specify how, adding it hoped to resolve issues with the U.S. through cooperation and negotiation. The move came after discussions between Chinese President Xi Jinping’s top trade envoy and his U.S. counterparts in Washington made little progress on Thursday, with the mood around them downbeat, according to people familiar with the talks.
- Industrial metals including copper and nickel climbed as traders hoped that leaders Donald Trump and Xi Jinping will strike a deal, even as the trade war between the U.S. and China escalated with an expansion of import tariffs on mainland goods. While Donald Trump had said a deal is still possible after he received a “beautiful letter” from Xi Jinping, the U.S. government boosted tariffs on $200 billion of goods just after midnight. Trade talks will continue on Friday, the White House said in a statement, before the tariff increase kicked in.
- Uber Technologies Inc. took a conservative approach to its initial public offering Thursday, picking a share price toward the bottom of the marketed range and at a valuation below its last private funding round. On Friday, public market investors will get to decide whether that was a good idea. The No. 1 ride-hailing company’s shares will start trading on the New York Stock Exchange after it raised $8.1 billion in the biggest U.S. IPO since 2014, pricing shares at $45 each. It had marketed them for $44 to $50 apiece. In distributing the stock, Uber prioritized shareholders — particularly institutional investors — that it thinks will hold on to the shares for a long time, according to a person familiar with the matter. The company is hoping to avoid the tumultuous first weeks of trading in rival Lyft Inc., whose shares fell below its $72 IPO price within days of listing and closed 23 percent below that price Thursday.
- President Donald Trump boosted tariffs Friday on $200 billion in goods from China and was preparing more in his most dramatic steps yet to extract trade concessions, saying there’s “no need to rush” a deal even though the uncertainty is roiling markets and clouding the global economy. China said it will be forced to retaliate, though the government hadn’t specified how as of 6:45 p.m. in Beijing. The move came after discussions between President Xi Jinping’s top trade envoy and his U.S. counterparts in Washington made little progress on Thursday, with the mood around them downbeat, according to people familiar with the talks. The negotiations were due to resume on Friday morning Washington time.
- We are hours away from additional tariffs getting slapped on Chinese goods, with the U.S. and China in pivotal trade negotiations. Fear has gripped markets and the level of sensitivity to any trade headline is extremely high. A tweet that Donald Trump, Steven Mnuchin and Robert Lighthizer were in a meeting to discuss progress completely erased early declines in U.S. stock-index futures and contracts are now up on the day. U.S. stocks also pared Thursday morning declines right after Trump said he received a letter from Chinese President Xi Jinping and that the two may speak on the phone. (Though, benchmarks still closed lower.) Still, stock markets across the world have been in thrall to Trump this week and the MSCI AC World Index has lost $2.1 trillion in value. Japan’s Topix index has erased more than half of its 2019 rally. The S&P 500 Index is poised for its worst week since before Christmas after falling for a fourth straight session. Foreigners are dumping Chinese stocks before the tariff deadline — they’ve net sold an average of 4.4 billion yuan ($640 million) of mainland shares a day through trading links with Hong Kong this week.
- Viacom Inc., the owner of MTV and Nickelodeon, reported second-quarter sales that fell short of analysts’ estimates as the company’s international business declined by more than 20%. Revenue for the period ended March 31 declined to $2.96 billion, Viacom said Friday, missing the $3.05 billion average of analysts’ estimates and falling below $3 billion for the first time since early 2010. The company said the U.K.’s uncertain post-Brexit future slowed sales at Channel 5, its British TV company.
- Anheuser-Busch InBev NV is targeting a July listing for its Asia Pacific operations as it moves forward with an initial public offering that could raise at least $5 billion, people with knowledge of the matter said. The Belgian brewer said Friday that it has applied to the Hong Kong stock exchange to sell shares in the unit, with JPMorgan Chase & Co. and Morgan Stanley leading the offering as joint sponsors. Bank of America Corp. and Deutsche Bank AG have also joined the deal as joint global coordinators, the people said, asking not to be identified because the information is private.
- IAG SA eked out a profit in the first quarter even after the impact of a European fare war that pushed its biggest rivals to a loss. Shares of the British Airways owner rose as much 5.1% after it posted an operating profit of 135 million euros ($151 million) Friday, while reiterating its full-year guidance and predicting that pricing will pick up in coming months. The earnings figure was still 60% down from a year earlier as higher fuel costs and the timing of Easter further eroded margins. Deutsche Lufthansa AGreported a 336 million-euro loss and Air France-KLM Group suffered a 303 million-euro shortfall.
- Japanese wages fell for a third straight month in March, marking the worst first quarter in a decade and casting fresh doubt on whether the tight labor market will push up pay significantly. Household spending topped expectations. Labor cash earnings fell 1.9% from a year ago, the ministry said Friday, compared with a 0.5% decline estimated by economists. Economists have treated recent wage data with caution after sampling problems led to a string of revisions. Household spending rose 2.1%, compared with a 1.6% estimate.
- Mukesh Ambani, Asia’s richest man, sealed another deal to expand his retail footprint and add heft in a battle with Amazon.com Inc.and Walmart Inc. in India. Reliance Brands Ltd. agreed to purchase the 259-year-old British toy-store chain Hamleys from C.Banner International Holdings Ltd. for almost 68 million pounds ($88.5 million) in cash. The transaction would transform the unit of Ambani’s Reliance Industries Ltd. into a “dominant player in the global toy retail industry,” it said in a statement late Thursday.
- San Miguel Corp. agreed to acquire an 85.7% stake in Holcim Philippines Inc. in a deal that would help tycoon Ramon Ang expand his cement business just as the southeast Asian country pursues a massive infrastructure upgrade. The conglomerate, through unit First Stronghold Cement Industries, will buy 5.53 billion common shares of Holcim’s local arm from entities controlled by LafargeHolcim Ltd, San Miguel said in a filing to the Philippine Stock Exchange. Holcim Philippines’ total enterprise value is $2.15 billion.
- Boeing Co.’s 737 Max is about to join the list of brands trying to come back from ignominy. Analysts are digging into decades-old safety scares for clues to the future of the jetliner — and Boeing’s finances. There’s the Chevrolet Corvair rollovers that launched Ralph Nader as a consumer advocate in the 1960s, gas-tank explosions that sank Ford Motor Co.’s Pinto in the 1970s, and the Tylenol poisonings of 1982 that spurred tamper-proof packaging.
- Thyssenkrupp AG announced a sweeping overhaul of its corporate strategy, saying it will take its elevator business public and abandon a previous plan to split the company in two. The company, once an icon of German industrial might, announced the U-turn after deciding that regulators were likely to reject its proposed joint venture with Tata Steel Ltd. due to antitrust concerns. The move is a major shift for Thyssenkrupp, which has so far failed to turn around the business despite growing investor dissatisfaction with its falling share price and declining profits.
*All sources from Bloomberg unless otherwise specified