November 19th, 2019

Daily Market Commentary

Canadian Headlines

• The Canadian stock benchmark snapped an 11-day streak of gains on Monday as oil fell from an eight-week high amid dimming signals for a resolution to the long-running U.S.-China trade war. The S&P/TSX Composite declined slightly to 17,025.11 in Toronto. Health care and energy led the index lower. Cannabis stocks tumbled as U.S. presidential candidate Joe Biden said that marijuana may be a “gateway drug,” a sign one of the leading challengers to President Trump may be at odds with much of his party when it comes to pot. Also, Canadian National Railway Co. faces disruption as more than 3,000 workers at the country’s largest railroad threaten to strike just after midnight over safety issues and health benefits.
• Canadian National Railway Co. faces disruption as more than 3,000 workers at the country’s largest railroad are set to strike after a midnight deadline passed without a settlement being reached. A walkout would potentially crimp shipments of oil, potash, grains and consumer goods even if managers trained to operate trains would blunt the impact at Canadian National. Teamsters Canada Rail Conference said a strike would begin Tuesday if a deal can’t be reached on working conditions and prescription drug benefits. Although a strike would crimp Canadian National’s cargo volume, the labor action likely wouldn’t last long and the impact on the company’s earnings wouldn’t be meaningful, Allison Landry, an analyst with Credit Suisse Group AG, said in a note to clients before the deadline passed.
• Molson Coors Brewing Co. is pivoting from beer to aloe vera water and turmeric seltzer in a bid to capture younger drinkers who aren’t interested in alcohol. The brewer has bought a large stake in a nonalcoholic beverage incubator called L.A. Libations to expand Molson Coors’ portfolio with high-end, better-for-you drinks. Financial terms weren’t disclosed, but Molson Coors is taking a 49% stake, according to people familiar with the matter. The investment is the first move by the maker of Coors Light and Miller Lite since the company said in November that it was laying off hundreds of staff, pushing to diversify its drinks and changing its name, replacing the word “Brewing” with “Beverage.” L.A. Libations is “on the leading and bleeding edge of where beverages are going,” Pete Marino, president of emerging growth for Molson Coors, said in an interview.
• Barrick Gold selling its 50% stake in Kalgoorlie mine in Western Australia to Saracen Mineral brings the gold miner halfway toward its $1.5 billion asset sale target. The valuation of the mine is also in-line with most analysts estimates.

World Headlines

• Japanese stocks fell on Tuesday as investors’ optimism over the progress of U.S.-China trade negotiations waned. Electric appliance makers weighed on the index the most. Earlier, CNBC reported that the mood in China has soured due to President Donald Trump’s failure to roll back tariffs. The U.S. Department of Commerce extended for another 90 days a limited set of exemptions that allow some American companies to continue business with Huawei Technologies Co. Pharmaceutical shares supported the benchmark Topix gauge the most, as the sector rallied following a takeover deal by Mitsubishi Chemical Holdings of its drug manufacturing unit.
• Asian stocks drifted on Tuesday as investors continued to await signs of progress in U.S.-China trade negotiations, while Treasuries held modest gains. U.S. futures were flat, while shares were lower in Japan and Korea and higher in Australia and Shanghai. Hong Kong equities climbed again despite continuing unrest in the city, further recouping some of last week’s losses. The S&P 500 notched another record high on Monday in a lackluster session. Oil prices added to their Monday decline. Australia’s dollar fell after the minutes of this month’s central bank meeting showed there was a case for cutting interest rates.
• European shares gained in early trading on Tuesday, while the focus remains on any signs of developments in the trade talks between the U.S. and China. The Stoxx Europe 600 rose 0.4% as of 8:15 a.m. in London with all sectors gaining aside from media sector, down 0.1%. Germany’s biggest commercial landlord could be formed, as Aroundtown SA agreed to buy TLG Immobilien AG, which rose as much as 2.1%. Elsewhere, EasyJet Plc climbed after its full-year profit met estimates. “Investors have been worried all year long and have hoarded cash, but now they have run out of patience,” said Lippo Suominen, chief strategist at Finnish asset manager FIM. “Money is put to work despite sluggish news from the economy and continued cuts in earnings expectations.”
• U.S. equity futures advanced with stocks in Europe as investors kept an eye out for fresh signs of progress in America-China trade negotiations. Treasuries were steady. Contracts on the S&P 500 Index rose, signaling the benchmark will head toward a fifth straight record on Tuesday. In earnings news, Kohl’s Corp. tumbled in pre-market trading along with Home Depot after both retailers cut guidance. Mining and automaker shares led the Stoxx Europe 600 Index higher, boosted by data showing the region’s car sales jumped in October. In Asia, equities fell in Tokyo and climbed in Shanghai. Government bonds slipped in Europe, while oil futures declined in New York. The dollar fluctuated against its major peers after President Donald Trump saidhe “protested” U.S. interest rates that he considers too high relative to other developed countries, in a meeting with Federal Reserve Chairman Jerome Powell at the White House. The Fed said Powell’s remarks were “consistent” with his recent public comments.
• Gold drifted lower as investors digest progress in the U.S.-China trade talks. Platinum continued its recovery from a two-month low, testing $900 an ounce. Gold rose Monday, after a report that Chinese sentiment on the talks turned pessimistic, but has now erased those gains. The price probably needs to move sustainably above a resistance level at $1,473.48 to make any gains stick, according to David Cottle, an analyst at DailyFX. Platinum rose for a fifth day, the longest run of advances since April, after data showing European car sales jumped in October. The global platinum market may swing into deficit this year amid strong investor demand, according to Russia’s Norilsk Nickel.
• Oil dropped for a second day on indications American crude stockpiles and shale output will keep expanding, while investors wait for a breakthrough in U.S.-China trade talks. Futures declined as much as 1.2% in New York after falling by a similar amount on Monday when they dropped by most since Nov. 6. U.S. oil inventories probably rose by 1.5 million barrels last week, according to a Bloomberg survey before government data on Wednesday, while shale output at major fields is expected to increase next month. Markets are also being pressured by the impasse in trade discussions between the U.S. and China.
• Hong Kong hospitals were overwhelmed with injured protesters who evacuated from a university campus after a standoff with police that’s transfixed the city, as schools were due to reopen following days of chaos in the financial hub. Leader Carrie Lam said earlier Tuesday that she wanted a peaceful end to the showdown between protesters and police at the Hong Kong Polytechnic University that’s persisted since this weekend, as evacuations began for remaining demonstrators trapped inside. The school has appealed to police to not enter its campus for the time being so that people are given a chance to leave in a peaceful and orderly manner. Police said Tuesday that they fired more than 1,400 tear gas volleys the previous day amid battles with protesters. As the city’s college campuses became focal points for unrest in recent days, its primary and secondary schools have remained closed since Thursday.
• Home Depot Inc.’s shares dropped in early U.S. trading after the retailer giant missed third-quarter sales estimates and trimmed its annual growth outlook for the second time this year. Some online investments didn’t pan out as early as expected, and the benefits will take longer to materialize, Home Depot said in a statement Tuesday. Same-store sales — a key measure of a chain’s performance — gained 3.6% in last quarter, compared with the average projection for 4.6% growth, according to Consensus Metrix. The company now sees same-store sales growth of 3.5% for the full year, down from 4% previously. It was the second time the company cut the guidance this year.
• Julius Baer Group Ltd. announced its first share buyback in eight years as Chief Executive Officer Philipp Rickenbacher rewarded investors for sticking with the bank through two years marked by compliance concerns and sliding returns. The Swiss private bank presented investors with a mixed bag for the first 10 months of the year, announcing the 400 million Swiss franc ($404 million) buyback while also saying it would book a writedown on its Kairos wealth-management unit in Italy. Net new money for the period was slightly less than 3%, dipping further below a medium-term target.

*All sources from Bloomberg unless otherwise specified