May 8th, 2019
Daily Market Commentary
- Canadian Headlines
- Canadian stocks fell for the sixth day in seven Tuesday as investors remained on edge over President Trump’s threat to increase tariffs on billions of dollars of imports from China. Oil also tumbled toward $60 a barrel. The S&P/TSX Composite Index slid 0.8 percent to 16,358, the most since March 22, led lower by health care, tech and industrials. Consumer staples, communications services and utilites advanced. SNC-Lavalin Group Inc. is weighing a breakup amid the stock’s slide, the Globe & Mail reported. Additionally, Enbridge Inc. is asking oil shippers to sign at least eight-year contracts to move crude on its Mainline pipeline network, people with knowledge of the matter told Reuters.
- Barrick Gold Corp. has identified the assets it intends to sell, once they are optimized enough to create sufficient value for shareholders, Chief Executive Officer Mark Bristow said in interview. “Our focus is realizing $1.5 billion through next year,” Bristow said.
- Huawei Technologies Co.’s chief financial officer is set to return to a Vancouver courtroom Wednesday ahead of planned extradition hearings as deteriorating relations with China over her arrest exact a growing toll on Canada. Meng Wanzhou is scheduled to appear for another preliminary hearing at the Supreme Court of British Columbia as her defense lawyers seek to discredit the U.S. handover request and argue Canada improperly arrested her in December at Vancouver’s airport. Those matters must be dealt with first before extradition hearings can begin, her defense has said.
- World Headlines
- European equities opened little changed as investors continued watching trade headlines and earnings to gauge the prospects of global growth. The Stoxx Europe 600 Index was down less than 0.1 percent. Germany’s Commerzbank added 1.1 percent as revenue proved resilient in the first quarter. Siemens jumped 4.6 percent after posting second-quarter profit that exceeded expectations. Meanwhile, Wirecard gained 3.1 percent as it raised its earnings forecast, after posting a 41 percent jump in profit.
- U.S. equity-index futures and European stocks dropped on Wednesday following steep declines in Asia as markets struggled to stem this week’s selloff. The pound slipped as hopes for a Brexit breakthrough faded. Contracts for the S&P 500, Nasdaq 100 and Dow Jones Industrial Average had been stable for much of the European morning, but they gradually extended losses as the session wore on.
- Equities fell earlier across Asia, with big declines seen in Japan and Hong Kong. The yen and gold climbed as demand continued for haven assets. The euro edged higher on upbeat German factory data. The unexpected escalation of President Donald Trump’s rhetoric on trade in the past few days appears to have caught global equity markets off-guard. Many had been testing record highs, seemingly priced to perfection on the assumption a deal between the U.S. and China would get done.
- Oil traded near a five-week low as concern over supply losses from Iran to Russia were offset by high American stockpiles and fears that if U.S.-China trade talks fail it could dent global demand. Futures erased earlier gains to fall as much as 0.5 percent in New York after a 1.4 percent plunge on Tuesday. Russian tankers continue to hold Urals crude exported from the country’s Baltic Sea port of Ust-Luga, a sign that contamination issues remain unresolved. Meanwhile, U.S. crude stockpiles climbed by 2.81 million barrels last week, though gasoline inventories fell by a similar amount, the American Petroleum Institute was said to report on Tuesday.
- Gold rose for a fourth day as the U.S. threat of higher tariffs on imports from China, as well as the possibility of a response from Beijing, buoyed demand for havens. Vice Premier Liu He will visit the U.S. for talks on May 9 and 10 as President Donald Trump ratchets up pressure to clinch a deal. At the same time, the Asian nation is said to be preparing retaliatory tariffs should Trump carry out his threat. Elsewhere, the U.S. is sending B-52 bombers, in addition to an aircraft carrier group, to the Middle East over rising strains with Iran.
- President Donald Trump defended his real estate business tax strategy following a New York Times investigation that showed he reported losses of $1.17 billion between 1985 and 1994. The president was responding to a New York Times report indicating that his businesses generated $1.17 billion losses between 1985 and 1994. His hotel and casino properties were eligible for large depreciation write-offs that meant he paid taxes for only two years during that period, the Time reported, citing tax records it had obtained.
- An unexpected fall in China’s exports and an equally unforeseen rise in imports show that the world’s second-largest economy continues a tentative recovery while global demand weakens and trade tensions re-escalate. Exports dropped 2.7 percent in April versus a forecast 3 percent increase, while imports expanded by 4 percent compared to a projected slip, the customs administration said Wednesday. Those misses highlight that the global slowdown is weighing down on China’s growth, instead of the other way around, at least for now. Months of policy stimulus has fueled a pickup in the Asian economy, although the re-escalating trade threats may throttle those green shoots.
- Iran set a 60-day deadline for its nuclear deal counterparts to abide by their commitments on oil and banking, saying it will stop observing restrictions on uranium enrichment if they don’t. The move threatens the landmark 2015 accord meant to prevent Iran from developing a nuclear weapon, and will further ratchet up tensions with President Donald Trump’s administration, which walked away from the agreement a year ago. The U.S. has since imposed sanctions that squeezed Iran’s economy, triggered a currency collapse and ushered in shortages of consumer goods.
- A planned $7.7 billion merger of Vodafone Group Plc’s struggling Australian business with TPG Telecom Ltd. was blocked by the regulator in a bungled announcement published early that sent stocks tumbling. The proposal would “substantially lessen competition” for mobile-phone services in an already concentrated market, the Australian Competition and Consumer Commission said in a statement Wednesday. TPG is Australia’s best — and probably the last — chance to gain a new cellular network operator, ACCC Chairman Rod Sims said in the statement.
- Simmering tensions between drivers and ride-hailing companies are flaring again, as drivers in major cities across the U.S. and the U.K. threatened strikes on Wednesday over low wages and unstable working conditions. Billed as an international protest in advance of Uber Technologies Inc.’s planned initial public offering this week, drivers in London and nearby cities said they would turn off their apps at 7 a.m. on Wednesday. In the U.S., driver groups in Boston, Los Angeles, New York, San Francisco and other large cities said they would participate in the strike and encouraged users to boycott the apps as well.
- Carrefour SA is weighing options including a sale of its Chinese business, mirroring other international consumer firms that have decided to exit the country in recent years, people familiar with the matter said. The French retail giant is working with an adviser and has begun reaching out to potential suitors, the people said, asking not to be identified because the deliberations are private. Carrefour could seek about $1 billion for the Chinese business, though it may also opt to divest just a stake or decide against a sale, the people said. No final decisions have been made, they said.
- UniCredit SpA raised more than 1 billion euros ($1.1 billion) by selling a 17 percent stake in FinecoBank SpA, as the Italian lender clears out non-essential assets ahead of its new strategic plan. UniCredit placed about 103.5 million shares of the digital banking business at 9.80 euros apiece, the Milan-based bank said in a statement on Wednesday, confirming an earlier report by Bloomberg News. The former unit will be decoupled from UniCredit’s income statements and the bank’s remaining 18 percent stake will be classified as a financial asset.
- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon repeated his warning about the need to prepare for higher Treasury yields, despite their retreat since he said last August they could surpass 5 percent. “People tend to forecast a little bit of a change, and sometimes it’s a huge inflection point which people almost never capture,” Dimon said Wednesday in an interview with Bloomberg Television in Beijing. “When I talk to my board, we’ve got to be able to handle 5 percent, 7 percent, 8 percent, 10 percent because you don’t know.”
- This year is shaping up to be the biggest by far for defaults in China’s $13 trillion bond market, highlighting the widening fallout from the government’s campaign to rein in leverage. Companies defaulted on 39.2 billion yuan ($5.8 billion) of domestic bonds in the first four months of the year, some 3.4 times the total for the same period of 2018, according to data compiled by Bloomberg. The pace is also more than triple that of 2016, when defaults were more concentrated in the first half of the year, unlike 2018. The trend is clear: unless something changes, 2019 will be the new high.
- MPLX LP, a U.S. company controlled by Marathon Petroleum Corp., agreed to buy Andeavor Logistics LP in a $9 billion all-share deal that consolidates two large oil and gas pipeline businesses. The deal announced Wednesday is the latest example of U.S. energy-related businesses structured as master limited partnerships being simplified or merged in an attempt to improves financial performance.
- Toyota Motor Corp. and Honda Motor Co. forecast profit and sales short of analysts’ estimates as a trade spat between the U.S. and China threatens global car sales already sputtering from weaker demand. Both reported results on Wednesday that underscore the challenges faced by automakers across the globe, from having to invest in electrification and self-driving cars, to struggles with tariffs on both sides of the Pacific Ocean and changing consumer tastes.
- Wealthy investors around the world are holding a relatively high level of cash, and perhaps they’ve become too cautious, according to UBS Group AG. The world’s largest wealth manager said 32 percent of high-net-worth portfolios are in cash, in a survey released May 7. In Asia and Latin America, the portion was 36 percent, compared with 31 percent in Switzerland and 35 percent in the rest of Europe. The outlier: the U.S., at just 23 percent.
- The global equity slump in the past two days has pushed Japan to the bottom of the ranks among developed markets amid ongoing concern over President Donald Trump’s threat to increase tariffs on Chinese imports. The Topix index slid 1.7 percent at the close in Tokyo, while the Nikkei 225 Stock Average lost 1.5 percent. Electronics makers were the biggest drag as all industry groups declined. About $156 billion of value was wiped off the Topix in the two days since Japan returned from a 10-day holiday.
*All sources from Bloomberg unless otherwise specified