November 28th, 2019
Daily Market Commentary
- OPEC and its allies sent more signals that they’ll stick with their existing output cuts at their meeting next week. As a key advisory committee in Vienna heard that the oil market will be balanced in 2020 if the Organization of Petroleum Exporting Countries maintains current production levels, industry executives in Moscow gave no indication they want to change the output agreement. Just one out of 35 analysts and traders surveyed by Bloomberg predicted deeper cuts. Data presented in Vienna this week to the group’s Economic Commission Board, which analyzes the oil market in advance of ministerial meetings and sometimes makes policy recommendations, show that an oil-supply surplus in the first half of 2020 is mostly offset by a deficit in the last six months of the year, according to delegates.
- The White House pushed Wednesday to wrap final negotiations with Democrats on President Donald Trump’s top legislative priority, the U.S.-Mexico-Canada Agreement, in meetings with top Mexican and Canadian officials. The administration and House Democrats have been locked in tense negotiations for months to secure a potential vote before the end of the year on USMCA and this week managed to narrow their differences. Wednesdays meeting broke up without a USMCA deal announcement but with Mexico and Canada citing progress.
- European equities dipped as China threatened to retaliate after U.S. President Donald Trump signed a bill supporting Hong Kong protesters, casting doubt on a resolution to the trade dispute between the two powers. The Stoxx 600 Index was down 0.2% by 8:03 a.m. London time, ending a four-session winning streak as autos and tech stocks declined. The U.K.’s FTSE 100 Index fell 0.5% after a key poll predicting a majority for the Conservative Party at the general election lifted the pound. Telefonica SA climbed 1.3% after the Spanish carrier announced a reorganization of its telecom empire.
- Stocks slipped along with U.S. equity futures after President Donald Trump signed a bill backing Hong Kong protesters, raising concerns about the prospects for an interim trade deal between the world’s two largest economies. Contracts on the main U.S. benchmarks all traded lower as China threatened retaliation to Trump’s move, though Beijing stopped short of any immediate action.
- Japan’s Topix index dropped as investors weighed the potential fallout from President Donald Trump’s signing of legislation that expresses U.S. support for Hong Kong protesters. Railways and machinery makers were the biggest drags on the benchmark gauge. The yen strengthened against the dollar for the first time in seven sessions. China warned that ties with the U.S. could be strained and “cooperation in important areas” may be at risk, according to a foreign ministry statement.
- Oil fell for a second day after U.S. crude supplies rose and President Donald Trump signed a law supporting Hong Kong protesters, potentially complicating trade talks with China. Futures declined as much as 0.8% in New York. American stockpiles defied analyst expectations to expand for a fifth week and output reached a record high of 12.9 million barrels a day, according to the Energy Information Administration. The legislation signed by Trump requires annual reviews of Hong Kong’s special trade status under American law. China said the action would strain ties.
- Palladium reached a fresh record, while gold edged higher in thin trading as the U.S. celebrates Thanksgiving. Palladium, used in autocatalysts, touched a fresh high of $1,842.46 an ounce, extending this year’s rally to 46%. Yet faltering global car sales and a gloomy prognosis for the sector pose questions about whether the current price levels are sustainable, said Oleg Petropavlovskiy, a BCS Global Market analyst. Gold saw some haven buying after China confirmed its threat to retaliate after President Donald Trump signed a bill supporting Hong Kong protesters.
- Boris Johnson is heading for a 68-seat majority in the House of Commons, a mandate not seen since the height of the Margaret Thatcher years, according to the most hotly-anticipated poll of the election campaign. A margin that size would allow him to ratify his Brexit deal ahead of the Jan. 31 deadline, and potentially give him some breathing space to compromise in subsequent trade negotiations with the European Union.
- Donald Trump signed legislation expressing U.S. support for Hong Kong protesters, prompting China to threaten retaliation just as the two nations get close to signing a phase one trade deal. China summoned U.S. Ambassador Terry Branstad, with Vice Foreign Minister Le Yucheng telling him to stop meddling in Hong Kong affairs. He warned that such actions would strain ties and risk affecting “cooperation in important areas,” according to a foreign ministry statement, which didn’t give more details. Earlier, the foreign ministry reiterated threats of retaliation with no specifics.
- European Central Bank policy makers expect to tweak their inflation target in an upcoming review of their strategy but will struggle to go much further than that, according to officials with knowledge of the matter. The institution’s first fundamental assessment in 16 years might conclude with a goal of 2% — instead of the current “below, but close to, 2%” which some governors worry risks leaving inflation too weak. A more radical change to measuring and achieving price stability is probably too ambitious, said the people, asking not to be identified because the discussions are private.
- The retail tranche of Saudi Aramco’s initial public offering is fully covered with one day to go after 3.7 million investors applied to buy shares in the world’s biggest oil producer. The subscription reached 32.6 billion riyals ($8.7 billion), lead manager Samba Capital said in statement. A third of what’s likely to be the world’s largest share sale has been reserved for retail investors, who’ve been targeted by a country-wide advertising campaign and offered larger-than usual loans to finance purchases. There may be a last-minute surge before today’s final deadline for applications, but so far the share sale hasn’t been as well subscribed as some other IPOs in the counrty. The book for National Commercial Bank’s 2014 Initial public offering was covered 23 times over. In 2006, 10 million Saudis, about half the kingdom’s adult population, applied to buy shares in the local unit of the Middle East’s biggest property develop, Emaar Properties PJSC.
- Billionaire Mukesh Ambani is in talks to sell his news media assets to India’s Times Group, as Asia’s richest man plans to unload a business that’s been losing money, people familiar with the matter said. Bennett Coleman & Co., the publisher of the Times of India, is looking to hire advisers for due diligence on the news properties of Ambani’s Network18 Media & Investments Ltd., the people said, asking not to be named as the discussions are private. Ambani is considering various options, ranging from an outright exit to a stake sale, one of the people said.
- Kilcoy Global Foods, an Australian beef processor owned by Chinese buyout firm Beijing Hosen Investment Management, is preparing a Hong Kong initial public offering that could raise $300 million to $400 million, people with knowledge of the matter said. Kilcoy, which supplies beef products to restaurants including the Tony Roma’s steakhouse chain, is expected to go public in the former British colony in the first half of next year, said the people, who asked not to be identified as the information is private.
- PG&E Corp.’s latest attempt at escaping the California policy that saddled the power giant with billions of dollars in wildfire liabilities, pushed it into bankruptcy and led to the ousting of its chief executive officer has failed. U.S. Bankruptcy Judge Dennis Montali on Wednesday sided with wildfire victims, who said PG&E is subject to a legal doctrine known as inverse condemnation that holds utilities strictly liable for covering the costs of blazes linked to their equipment — regardless of whether they were negligent. PG&E had argued that it shouldn’t be subject to the rule because it’s owned by investors, not taxpayers.
- Norway’s $1.1 trillion sovereign wealth fund plans to expand its work on assessing climate risk, from pushing for better company reporting to expanding flood analysis for its real estate assets. The Norwegian fund, the biggest of its kind, already has a variety of instruments to measure how climate change may affect demand, spur regulation or physically damage assets. It has cut a large part of its exposure to coal production and also follows ethical guidelines for its investments that incorporate climate and environmental standards.
- Electricite de France SA selected companies to build a 1.8 billion-pound ($2.3 billion) wind farm off the east coast of Scotland, and sold half of the project to an Irish utility. Siemens Gamesa Renewable Energy SA, General Electric Co., Saipem SpAand Prysmian SpA will be the main suppliers, EDF said Thursday. The divestment of a 50% stake to Ireland’s Electricity Supply Board will help the French company meet asset-sale targets as it struggles to cover day-to-day maintenance costs and investments in new nuclear and renewable facilities.
*All sources from Bloomberg unless otherwise specified