November 21st, 2019
Daily Market Commentary
- Canadian stocks dropped for a third straight session, following a broad decline in global markets as investors weighed the prospects that the U.S. and China won’t reach the first phase of a trade deal this year. The S&P/TSX Composite declined less than 0.1% to 17,005.82 in Toronto. Stock performance was mixed Wednesday, though marijuana shares rallied again. The Horizons Marijuana Life Sciences Index ETF advanced 6%. Meanwhile, Canadian National Railway slid for a third session, a day after 3,200 workers walked off the job.
- Charles Schwab Corp. is buying TD Ameritrade Holding Corp, according to reports, reshaping a beleaguered online brokerage sector that’s seen fierce competition from new entrants amid price pressure and alternative ways to invest for clients. A deal, which has yet to be confirmed, would create a $5 trillion titan that would be better positioned to weather the challenges facing today’s brokerages, which include price conscious customers and a low interest rate environment.
- Pressure is mounting on Canadian Prime Minister Justin Trudeau to take action to end a railway strike that’s curtailing shipments of one the world’s biggest exporters of raw materials. More than 3,200 conductors and yard operators walked off the job at Canadian National Railway Co. on Tuesday, disrupting cargo in a country that relies heavily on two main rail companies to transport oil, grain and consumer goods from its inland Prairies for export to the U.S. and the world. Parliament is on hiatus until Dec. 5 after Trudeau swore in a new cabinet on Wednesday, but industry groups and the Alberta government, home to the country’s oil sands, are pushing the government to move more swiftly to end the first strike in a decade at Canada’s largest railway. Trudeau is already facing rising tensions in Alberta as the province struggles with a pipeline bottleneck that has seen investments nearly ground to a halt.
- The Stoxx Europe 600 Index dropped, with Thyssenkrupp AG shares tumbling after the steelmaker said it was suspending dividend payments and warned of deepening losses.
- U.S. equity futures fluctuated as investors weighed the latest trade developments, including a bill from Congress supporting Hong Kong protesters that could complicate a deal with China. Contracts on the S&P 500 Index pared losses on a news report that China’s chief trade negotiator invited his American counterparts for a new round of face-to-face talks. They had declined earlier as President Donald Trump was expected to sign legislation backing Hong Kong protesters, potentially setting up further confrontation with China. TD Ameritrade leaped in pre-market trading on reports that Charles Schwab Corp. is in talks to buy the online brokerage.
- The MSCI Asia Pacific Index at one point fell the most in almost three months, though the moves eased and the yen trimmed gains as Beijing’s chief negotiator said he was “cautiously optimistic” about reaching a phase-one trade deal with the U.S. Crucial to the trade talks is Hong Kong’s deteriorating situation, with the latest developments helping end a streak of record highs for U.S. stocks. China has threatened to retaliate for the passage of an American bill and said supporting the protesters was a “gross” interference in Hong Kong affairs. Traders will be watching closely for signs of progress ahead of a Dec. 15 deadline for further tariffs.
- Oil steadied after Wednesday’s rally amid concern that political tensions between the U.S. and China pose another hurdle to a trade deal that could lift the global demand outlook. Futures for January delivery traded near $57 a barrel in New York. While China’s Vice Premier Liu He said he was “cautiously optimistic” about reaching an initial trade agreement, President Donald Trump is expected to sign a billsupporting protesters in Hong Kong, potentially complicating negotiations. Crude rose 3.4% on Wednesday as U.S. crude inventories at Cushing fell 2.3 million barrels last week, the most since August.
- Gold erased gains to trade little changed after China’s chief negotiator Liu He said he was “cautiously optimistic” about reaching a phase one trade deal with the U.S. This comes amid expectations that President Donald Trump will likely sign legislation passed by Congress supporting Hong Kong protesters, setting up a potential confrontation with China, which has threatened to retaliate.
- China’s chief trade negotiator indicated he was “cautiously optimistic” about reaching a phase one deal with the U.S., as two titans of American diplomacy in Asia warned of the dangers of escalating the tariff war. Vice Premier Liu He made the comments in a speech in Beijing on Wednesday ahead of the Bloomberg New Economy Forum, according to people who attended the dinner and asked not to be identified. He has also reportedly asked the top U.S. trade negotiator to travel to China to continue talks this month, an invitation that so far hasn’t been accepted.
- In five days, New York Governor Andrew Cuomo may decide to expel one of the world’s biggest utilities from the state’s most populous region. That threat is the culmination of an extraordinary showdown between Cuomo and British energy giant National Grid Plc over the future of natural gas. The clash, hinging on the utility’s refusal to connect new gas customers, has already delayed thousands of construction projects across Brooklyn, Queens and Long Island. The fight lays bare just how fraught America’s relationship with gas has grown. As hydraulic fracturing, or fracking, has made the fuel cheap and plentiful, cities and states are pushing residents to switch to gas heating because it burns cleaner than oil. At the same time, left-leaning politicians argue pipelines will only prolong dependence on fossil fuel. While that debate is nationwide, nowhere has it become as explosive as in New York.
- Uber Technologies Inc. faces a new legal attack on its refusal to treat drivers as employees that depicts the company as mistreating not just them but the public at large. A lawyer who’s been fighting the ride-hailing giant in court for six years wants a judge to now take into account the extra costs saddled on California taxpayers by Uber’s business model. Drivers being cheated out of wages and not being reimbursed for expenses causes California to lose out on payroll taxes, attorney Shannon Liss-Riordan said in an interview. Uber also avoids paying premiums for workers compensation, social security, unemployment and disability insurance, and public assistance for drivers can’t support themselves, she said.
- The U.S government has approved the sale of naval guns worth $1 billion to India in the biggest defense deal between the two countries in four years. Putting the U.S. among the top three global arms suppliers to India, the State Department notified the Congress on Nov. 19 of the possible foreign military sale of as many as 13 naval guns made by the Minneapolis-based BAE Systems Land and Armaments. Prime Minister Narendra Modi’s government had made a request to buy the MK 45 naval guns and 3,500 D349 ammunition from the U.S. government, a Defense Security Cooperation Agency notice said.
- A unit of Gazprom PJSC plans to sell the remaining 3.59% of so-called quasi-treasury shares in the Russian gas producer on Thursday in a deal that could be valued at $3.3 billion. The gas distribution unit will offer 850.6 million common Gazprom shares on the Moscow Exchange in an all-or-nothing sale that ends at 5 p.m. Moscow time, according to a regulatory filing. At Wednesday’s closing price of 248 rubles a share, the stock is worth $3.3 billion.
- Sony Corp. is in talks to acquire a stake in the Indian television network controlled by billionaire Mukesh Ambani, as the Japanese giant seeks to tap booming demand for content in the South Asian nation, according to people familiar with the matter. The Tokyo-based company is currently conducting due diligence on Ambani’s Network18 Media & Investments Ltd. before any possible offer, the people said, asking not to be named as the information is not public. Sony is considering several potential deal structures, including a bid for the company or a merger of its own Indian business with Network18’s entertainment channels, one of the people said.
- Indonesia’s central bank left its key interest rate unchanged while pumping more liquidity into the financial system to stimulate Southeast Asia’s largest economy. Bank Indonesia kept the seven-day reverse repurchase rate unchanged at 5% on Thursday following four rate cuts this year, in line with the prediction of 21 of 31 economists surveyed by Bloomberg. Banks’ reserve requirement ratio was cut by 50 basis points, the first such decision since June.
- Asia’s food and agricultural industry will need additional investments of $800 billion over the next decade to grow to a sustainable size and reach a point where it can feed itself, according to a report Wednesday. Population growth, changing consumer needs and climate change are among the challenges. The region is urbanizing rapidly, and by 2030 will be home to 250 million more people, equivalent to another Indonesia, with a growing appetite for healthy food sustainably and ethically sourced, according to PwC, Rabobank and Temasek Holdings Pte, Singapore’s state investment company.
- Volkswagen AG and its Chinese joint-venture partners will invest more than 4 billion euros ($4.4 billion) next year to rev up electric-car production and add more SUVs to its lineup, defying broader industry woes. “Of course, we closely watch the up- and down-turns of the new energy vehicle market,” VW China chief Stephan Woellenstein said in prepared remarks at the Guangzhou auto show. “Still, its ongoing long-term growth excites us, as our electrification accelerates.” Sales of electric cars have slumped for months in China after the government reduced incentives and the economy continued to slow. The world’s biggest vehicle market is poised to experience its second consecutive annual decline this year after decades of growth, adding pressure on domestic and foreign manufacturers alike.
- Gordon Sondland testified that “everyone was in the loop” about his months-long push for a quid pro quo from Ukraine. Democrats must now decide if they’ve gathered enough evidence to justify impeaching President Donald Trump quickly or press for more. In more than six hours of testimony on Wednesday, the hotelier-turned-envoy to the European Union said he informed Vice President Mike Pence, Secretary of State Michael Pompeo and other top officials that he was relaying a demand that he believed came directly from the president: Ukrainian aid and an Oval Office meeting required a corruption probe tied to former Vice President Joe Biden’s family.
- Louis Bacon, the founder of Moore Capital Management, is planning to shut his firm and return capital to investors, according to the Financial Times. The decision comes after years of declining performance at Moore’s hedge funds, the newspaper reported, citing two people familiar with the matter it didn’t identify. Before deciding to return capital, Bacon had pitched investors on a fund managed by one of his top-performing traders, Joeri Jacobs, the FT reported. The shuttering will be one of the highest-profile closures in the hedge fund industry that’s been struggling with declining performance and a backlash from investors on the high fees typically charged. Bacon’s firm has been struggling to with returns compared with their historical record.
- Macy’s Inc. shares dropped after the retailer cut its annual per-share profit outlook for the second time this year, adding to worries that retailers could suffer a weak holiday season. Same-store sales, a key metric for retailers, fell 3.5% in the third quarter for owned plus licensed, compared with the flat to 1% average estimate compiled by Consensus Metrix.
- Sanofi is holding discussions over options for its consumer-health business that could be worth $30 billion as new Chief Executive Officer Paul Hudson seeks to rejuvenate the French drugmaker, people familiar with the matter said. While the pharma giant has made no decisions, it has been talking to financial advisers to gauge shareholder feedback, according to the people, who asked not to be identified because the deliberations are private. Hudson, who has said he will take a critical look at all of Sanofi’s operations, will give a strategy update on Dec. 10.
- LVMH and Tiffany & Co. entered talks after the French owner of Louis Vuitton boosted its offer for the U.S. jeweler in an effort to clinch the biggest acquisition ever in the luxury-goods industry, according to people familiar with the matter. The revised proposal is about $130 per share, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made and the talks could fall through. LVMH is trying to bring Tiffany on board with an offer worth about $15.7 billion, up from the $120 a share, or about $14.5 billion, that it offered last month. The shares have traded above the original bid for more than three weeks as investors consider it undervalues Tiffany. Some analysts see even further potential, with price targets of $140 at Credit Suisse and even $160 at Cowen.
*All sources from Bloomberg unless otherwise specified