November 11th, 2019

Daily Market Commentary

Canadian Headlines

  • Canadian equities gained Friday despite President Donald Trump saying that the U.S. hasn’t agreed to roll back all tariffs on China, diluting hopes the U.S. would make such a concession to secure a trade deal. The S&P/TSX Composite gained for sixth straight session, up 0.2% to 16,846.32. Information technology and health care stocks rose as seven of 11 sectors advanced. Meanwhile, Alberta loosened crude-oil production limits for the second time in two weeks, exempting new conventional wells from output caps in a bid to spur drilling and boost employment.
  • There’s something going on in a corner of Canada’s market that suggests investors are looking for shelter. More than $1.1 billion has flowed into high-interest savings exchange-traded funds this year, placing them among the hottest investments in that category, according to data compiled by Bloomberg. The rush for so-called cash ETFs is happening even as Canadian stocks trade near record highs. Muddied indications on whether the U.S. and China are heading toward a trade deal, lower rates across the globe and concerns surrounding economic growth are pushing investors toward haven assets.
  • Investors searching for a bandage to stanch the bleeding in pot stocks aren’t going to find it in third-quarter earnings. The four largest Canadian pot companies by market value will report results for the quarter ended Sept. 30 this week and the expectations are low. This doesn’t bode well for stock prices, which are already down nearly 60% for the sector from recent highs in March.
  • Canada’s labor market slipped after two straight months of strength, sending the currency lower and providing the Bank of Canada with more ammunition if it decides to cut interest rates at its next meeting. The country lost 1,800 jobs in October, Statistics Canada said Friday in Ottawa, versus economist expectations for a 15,000 uptick in employment. It was the first month of job losses since July and comes on the heels of a 135,000 job gain over the prior two months. The unemployment rate held steady at 5.5%.

World Headlines

  • Hong Kong stocks fell the most since early August as protests escalated after police shot and wounded a protester on Monday morning. The Hang Seng Index dropped 2.6%, with local landlords plummeting. Police fired tear gas in the center of the business district to disperse chanting office workers who were blocking roads. Signs that optimism over a potential U.S.-China trade deal has been overdone added to the bearish sentiment. The MSCI Hong Kong Index slumped 2.9% and the local dollar weakened. The abrupt drop in the city’s stocks — the worst in Asia — follows a half trillion dollar rally that drove a measure of buying momentum to its highest level in almost nine months and pushed the Hang Seng Index above its 200-day moving average.
  • Stock markets are mixed in the EU’s eastern part with Poland closed for Independence Day and Romanian shares little changed after the first round of presidential elections. Shares in Hungarian car dealer Autowallis rise after 3Q results and a deal between WizzAir and Sixt, as Autowallis is a member of Sixt’s international network. Czech drinks maker Kofola is set to report 3Q earnings after markets close.
  • U.S. equity-index futures slid on Monday along with European stocks as traders awaited further developments on the trade front, while turmoil in Hong Kong added to the risk-off mood. Gold and the yen climbed. Contracts on the S&P 500 gauge fell after President Donald Trump said over the weekend that America hasn’t yet reached an agreement with China and emphasized that he wouldn’t eliminate all tariffs. In Europe, banks and miners led the Stoxx 600 Index lower. Hong Kong’s Hang Seng Index lost almost 3% on a day of violent demonstrations after one protester was shot by police during the morning commute. Shares in Shanghai retreated, while Japanese stocks were little changed.
  • Oil retreated from a six-week high as ambiguous progress in U.S.-China trade talks and worsening violence in Hong Kong damped sentiment across financial markets. Futures fell as much as 1.7% in New York after President Donald Trump said over the weekend that, while discussions with Beijing are moving along “very nicely,” an agreement hasn’t been reached and that he wouldn’t eliminate all tariffs. Oman’s Oil Minister Mohammed Al Rumhy said OPEC and its partners are unlikely to announce deeper production cuts when they meet next month, adding to concerns of a surplus in early 2020.
  • Gold advanced after its biggest weekly drop in three years as investors parsed the latest developments in the U.S.-China trade conflict. President Donald Trump said Saturday talks with China are moving along “very nicely” and Beijing wants a deal “much more than I do.” His comments came after markets were whipsawed by contradictory headlines about progress toward an interim deal.
  • Nigel Farage said his Brexit Party will not contest the 317 seats won by the Conservatives in 2017, to avoid damaging Prime Minister Boris Johnson’s efforts to secure a parliamentary majority to end the impasse over leaving the European Union. The pound extended gains.
  • Hong Kong saw one of its most violent days since protests began in June, with clashes involving police and protesters leaving downtown paralyzed, transportation networks hobbled and two men clinging to life. The chaos started early on Monday when demonstrators, still angry after the first protest-related death on Friday, moved to disrupt the morning commute. A scuffle ensued outside a subway station in which a police officer shot a protester at point blank, all of which was caught on a video that went viral within moments. He’s currently in intensive care.
  • Credit Suisse Group AG’s investment bank chief stepped down, adding to months of turmoil at the top that started with the departure of its wealth management head and culminated in a spying scandal. Jim Amine decided to resign as chief executive officer of the investment banking and capital markets division and leave the executive board, taking the role as head of private credit opportunities based in New York. The bank appointed David Miller, a 22-year Credit Suisse veteran, to succeed Amine and join the executive board.
  • Global oil demand may peak within the next 20 years, according to an assessment included in the prospectus for Saudi Aramco’s initial public offering, suggesting views are slowly changing in the kingdom where officials long dismissed the notion as overblown. Rather than providing its own assessment, Aramco used a forecast from industry consultant IHS Markit Ltd. that forecasts oil demand to peak around 2035. Under that scenario, demand growth for crude and other oil liquids will be “leveling off” at that time. In an accompanying chart, the Saudi oil giant showed global oil demand lower in 2045 than in 2040.
  • Xerox Holdings Corp. is prepared to offer HP Inc. almost a month for the companies to examine each other’s books as it seeks to win over the computer and printer maker for a takeover offer, according to people familiar with the matter. Xerox, one of the biggest sellers of photocopiers, is willing to give HP four weeks of mutual due diligence so the companies can weigh the merits of the $22-a-share cash-and-stock deal as well as the envisioned cost savings of such a combination, said the people, who asked not to be identified because discussions are private.

*All sources from Bloomberg unless otherwise specified