May 17th, 2019
Daily Market Commentary
- Canadian Headlines
- Canada’s opposition Conservatives, leading in the polls ahead of October elections, will seek to make the country oil independent within 10 years if they win power, the party’s leader said Thursday. Andrew Scheer, the front-runner to unseat Prime Minister Justin Trudeau, said he’ll work toward that goal by creating a single corridor of energy infrastructure across the country that would simplify the construction of new pipelines.
- World Headlines
- European equities fell on Friday amid renewed trade war concerns, with China’s state media signaling a lack of interest in resuming talks with the U.S. The Stoxx Europe 600 Index dropped 0.5% in early trade, with the auto sector index down 1.4%. Despite the day’s losses, Europe’s benchmark index was still on track to post a gain on the week.
- U.S. equity-index futures tracked declines in European stocks as Chinese state media appeared to signal a tougher line on the trade dispute. The dollar edged higher and Treasury yields were steady. Contracts on the S&P 500, Dow Jones and Nasdaq signaled a lower U.S. open after yesterday’s gains, while the Stoxx Europe 600 Index fell for the first time in four days.
- China’s benchmark equity gauge tumbled 2.5% earlier after local media said the country may have no interest in continuing trade talks with the U.S. for now. The yuan, already trading at five-month lows, dropped further. Japanese shares advanced, and stocks retreated in South Korea and Hong Kong. Yields on Spanish 10-year debt fell to a record as bonds across the euro region firmed.
- Brent oil headed for its biggest weekly gain since mid-February as OPEC and its allies gather this weekend to consider output policy and political tensions in the Persian Gulf escalate. Futures have added 3.5% in London this week. Saudi Arabia, Russia and other major producers in the OPEC+ coalition will assemble in Jeddah over the next few days, while U.S. sanctions squeeze exports from fellow member Iran. Regional friction is growing, as the Saudis said two oil tankers were targeted and accused Iran of ordering a drone attack on their fuel pumping stations, spurring concern of conflict between America and the Islamic Republic.
- Gold held recent declines as improved U.S. economic data boosted the dollar, leaving bullion little changed for the week despite ongoing trade concerns. Other precious metals extended weekly drops. After reaching a one-month high on Tuesday, gold has failed to hold those gains as the greenback climbed to the highest in three weeks. In the continuing trade spat, China signaled a lack of interest in resuming talks with the U.S. under the current threat to escalate tariffs, while the government said stimulus will be stepped up to buttress the domestic economy.
- Iron ore is barreling toward $100 a ton, hitting the highest level in almost five years and supercharging miners’ shares, as investors bet that a global supply crunch may spur a scramble for cargoes just as mills in China push out record volumes of steel. Most-active futures in Singapore gained as much as 3.2% to $97.92 a ton, the highest since mid-2014, following strong gains in the past two days. In Sydney, Fortescue Metals Group Ltd. rallied as much as 7.4% as Rio Tinto Group rose.
- China’s state media signaled a lack of interest in resuming trade talks with the U.S. under the current threat to escalate tariffs, while the government said stimulus will be stepped up to buttress the domestic economy. Without new moves that show the U.S. is sincere, it is meaningless for its officials to come to China and have trade talks, according to a commentary by the blog Taoran Notes, which was carried by state-run Xinhua News Agency and the People’s Daily, the Communist Party’s mouthpiece. The Ministry of Commerce spokesman said Thursday he had no information about any U.S. officials coming to Beijing for further talks.
- Democrats are attempting to turn the Supreme Court into a campaign issue as they confront President Donald Trump’s success at reshaping the federal judiciary with young, conservative judges and the prospect that abortion rights are close to being eliminated. It’s a shift after decades of GOP candidates rallying their voters with promises to reshape the courts in a backlash to Warren Court rulings of the 1960s, and Roe v. Wade in 1973, the landmark abortion-rights ruling. That dynamic lasted through the 2016 election, when Trump won over skeptical evangelicals by vowing to pick conservative justices who would allow states to outlaw abortion.
- Amazon.com Inc. is leading a $575 million investment in Deliveroo, buying a slice of the fast-growing startup and pitting it directly against Uber Technologies Inc. in a fiercely competitive European food delivery industry. The London-based startup, which has raised $1.53 billion to date, will use the cash infusion to expand its technology team and network and compete against the likes of Just Eat Plc and Uber. Consolidation has been heating up in the food delivery sector. Deliveroo rival Takeaway.com NV agreed to acquire the German businesses of Delivery Hero SE for approximately 930 million euros ($1 billion) in December, while Uber was in early talks to buy Deliveroo, Bloomberg reported in September.
- Hewlett Packard Enterprise Co. is in advanced talks to acquire U.S. supercomputer maker Cray Inc., according to people with knowledge of the matter. A deal could be announced as soon as this week, the people said, asking not to be identified as the information is private. Shares of Cray have risen 11% in the past year, giving it a market value of about $1.2 billion. The stock was up as much as 17% in pre-market trading on Friday. Buying Cray would help HP Enterprise strengthen its position in high-end computer systems against International Business Machines Corp. The purchase could become HP Enterprise’s biggest since it started trading in 2015, surpassing its acquisition of Nimble Storage Inc. for about $1 billion more than two years ago, according to data compiled by Bloomberg.
- Eastern Oregon Telecom provides broadband and telephone service to 4,000 customers in a remote corner of the Northwest U.S., keeping costs low in part by using equipment made by Chinese telecom giant Huawei Technologies Co. Now the company, based in Hermiston, Oregon, is trying to figure out how its operations may be affected by President Donald Trump’s decision this week toward banning Huawei equipment.
- Japanese Prime Minister Shinzo Abe sounded out four economists for their views on the economy Thursday night and was warned by one of them that postponing a sales tax increase could trigger a credit downgrade. Nobuyasu Atago, an economist at Okasan Securities Co., told Bloomberg News on Friday that the prime minister asked the four economists invited to dinner to talk openly about Abenomics.
- The U.S.-China trade war is finally taking a visible toll on the world’s biggest maker of tractors. Deere & Co. is no longer “cautiously optimistic” as it has been for so long. The machinery giant reported lower-than-expected earnings and cut its annual guidance as its farmer customers shun major purchases amid uncertainty about demand for their products.
- Huawei Technologies Co. has stockpiled enough chips and other vital components to keep its business running for at least three months as the U.S. curtails its access to American technology, people familiar with the matter said. The Trump administration on Friday blacklisted China’s largest tech company — which it accuses of aiding Beijing in espionage — threatening to cut off the American software and semiconductors it needs to make smartphones and networking gear. But it’s been preparing for such an eventuality since at least the middle of 2018, hoarding components while designing its own chips, the people said.
- Avantor Inc., a chemical maker for the life-sciences industry, raised $2.9 billion in the world’s second-biggest initial public offering of the year, pricing its shares at the bottom of a lowered range. The company, owned by New Mountain Capital, sold 207 million shares on Thursday at $14 each, according to data compiled by Bloomberg. Avantor increased the number of shares for sale earlier Thursday, but dropped the price range to $14 to $15 each from a previous target of $18 to $21. The IPO values the company at about $7.4 billion based on the shares to be outstanding according to its filings.
- The Federal Bureau of Investigation is probing Johnson & Johnson, Siemens AG, General Electric Co. and Royal Philips NV for allegedly paying kickbacks on medical-equipment sales in Brazil, Reuters reported, citing investigators. The U.S. and European manufacturers are suspected by Brazilian prosecutors of passing the payments on to government officials in exchange for winning public health contracts over the past two decades, according to the report.
*All sources from Bloomberg unless otherwise specified