November 12th, 2018

Daily Market Commentary

 

Canadian Headlines

  • Canadian stocks ended the week on a sour note and U.S. stocks also turned sharply lower Friday amid a fresh round of selling in technology shares sparked by weak earnings. Crude capped its longest losing streak on record. The S&P/TSX Composite Index fell 0.5%, with pot and tech shares pacing losses. Gold miners dropped as spot metal prices headed for the longest slump in 17 months. Utilities, consumer staples and industrials were among the sectors that posted gains.

 

 

World Headlines

  • The Stoxx Europe 600’s earlier gains quickly dissipated, with the benchmark down 0.3 percent at 9:20 a.m. in London. The earnings season is entering its back half, but traders are parsing morning newspapers as European markets’ two biggest political stories returned to dominate sentiment. First, Brexit. Hopes for an imminent deal were dashed amid speculation U.K. Prime Minister Theresa May will have to abandon her divorce proposal amid crumbling parliamentary support. Pro-European Union Transport Minister Jo Johnson’s Friday resignation was another sign of May’s weakness.
  • Stocks turned lower in Europe and U.S. futures pared their early gains on Monday, following a mixed session across most of Asia as investors weighed the outlook for equities after a roller coaster few weeks. The dollar strengthened, oil snapped a 10-day sell-off and the pound slid as the U.K.’s premier fought to keep her Brexit divorce plan alive.
  • The main Asian equities gauge dropped, though shares in Japan and Hong Kong finished in a tight range, while those in China jumped. Futures on the S&P 500 fluctuated while those on the Nasdaq climbed after large-cap tech shares on Friday dragged the gauge down 1.7 percent. Contracts on the Dow were edged lower.
  • Oil climbed after a record run of losses as Saudi Arabia said OPEC and its allies should rein in output, with the kingdom itself reducing shipments by about 500,000 barrels a day. Futures in New York rose as much as 1.8 percent, after slumping into a bear market last week. Saudi Arabia said that oil producers need to cut about 1 million barrels a day from October levels, and that it’ll reduce exports by half that amount next month.
  • Gold traded near a one-month low, hurt by the strength in the dollar. Prices ended last week below the 100-day moving average, often a bearish signal, and the Bloomberg Dollar Spot Index is at a 18-month high. However, there are some bright spots. ETF investors and hedge funds show no signs of abandoning gold, and early estimates suggest that buying during Dhanteras, the most auspicious day in the Hindu calendar to buy gold, was better than expected.
  • SAP SE is making its largest acquisition yet as it battles rivals including Salesforce.com Inc. in selling software to clients that want to better understand their customers. The $8 billion purchase of Qualtrics International Inc., whose software gathers and analyzes data, is meant to strengthen SAP’s offering in the customer relations management sector. That’s a field Europe’s biggest software company wants to gain a stronger foothold in because it’s growing faster than its core enterprise software business.
  • Political risks gathering across Europe are back to haunt investors. The euro slumped to its weakest level in more than 16 months as the European Commission looked ready to escalate its budget battle with Italy. Meanwhile, the pound slipped the most in more than a month as pressure mounted on U.K. Prime Minister Theresa May to abandon her Brexit divorce proposal or face defeat in parliament. The euro and the pound have both declined more than 4 percent this year against the dollar as Italy’s political turmoil, the U.K.’s so-far evasive Brexit divorce deal and the European Central Bank’s accommodative monetary policy damp appetite for the currencies.
  • Samsung Biologics Co. shares plunged by a record Monday, wiping about $4.8 billion off its market value, as a planned meeting by regulators spurred concern that a months-long accounting audit would reveal problems with how the firm valued a unit before an initial public offering. The Securities and Futures Commission plans to convene Nov. 14 to discuss possible accounting irregularities related to how one of South Korea’s largest biotech companies valued an affiliate, Samsung Bioepis, before its initial public offering, a spokesman for the financial regulator said Monday. Yonhap News reported on Sunday that the commission would make a final ruling in the case on Nov. 14.
  • Saudi Arabia said OPEC and its allies should reverse about half the increase in oil output they made earlier this year as fears of shortages are supplanted by concerns about oversupply and collapsing prices. Producers need to cut about 1 million barrels a day from October production levels, Saudi Energy Minister Khalid Al-Falih said in Abu Dhabi on Monday. The kingdom will reduce shipments by about half that amount next month, making its second policy U-turn after a summer surge in prices was followed by a swift collapse into a bear market this month.
  • British American Tobacco Plc shares plunged to the lowest level in more than four years on news of a possible ban on menthol cigarettes in the U.S., which would eliminate products such as Newport that generate as much as one-quarter of the company’s profit. The stock fell as much as 11 percent in London, destroying 8.4 billion pounds ($10.8 billion) of market value. U.S. Food and Drug Administration Commissioner Scott Gottlieb plans to pursue new restrictions on tobacco, the Wall Street Journal reported late Friday, citing senior agency officials. That could eliminate a loophole in a flavor ban that has allowed menthol cigarettes to continue to be sold.
  • Microsoft Corp., Google and Samsung Electronics Co. are backing a cybersecurity pledge coming out of Paris that promises to unite tech giants and governments in battling election tampering, compromised electronic components and software hacks. Hundreds of companies, non-profit groups and governments — including France and the U.S., but not China or Russia — have signed the “Paris call for trust and security in cyberspace,” which came about under the auspices of President Emmanuel Macron, French officials said.
  • Takeda Pharmaceutical Co. set a Dec. 5 date for shareholders to vote on its $62 billion deal to acquire Shire Plc, aiming to close its biggest takeover ever by the beginning of next year.
  • Diageo Plc agreed to sell Seagram’s VO whiskey and 18 other brands to closely held U.S. distiller Sazerac Co. for $550 million as the maker of Johnnie Walker focuses on higher-end labels. The world’s largest distiller said the deal will help it develop faster-growing premium drinks in its U.S. portfolio, where it’s pushing new brands like George Clooney’s Casamigos tequila alongside its core whiskey and vodka lines. Sazerac, the closely held Metairie, Louisiana-based owner of Buffalo Trace bourbon, has been fleshing out its portfolio by adding brands such as Southern Comfort.
  • Billionaire Dhanin Chearavanont’s Charoen Pokphand Group is teaming up with companies from Asia and Europe to bid for a 225 billion-baht($6.8 billion) high-speed rail link connecting three international airports in Thailand. The link, one of the largest transportation projects in Thai history, is a key part of the infrastructure agenda championed by the military government that seized power in May 2014. The winning bidder is due to be selected by January, according to the Eastern Economic Corridor Office, the agency overseeing the plan.
  • SoftBank Group Corp. founder Masayoshi Son is seeking to raise 2.4 trillion yen ($21.1 billion) in an initial public offering of his Japanese telecom business that could be the country’s largest IPO yet. The Japanese technology giant said in a prospectus Monday it will sell 1.6 billion shares at 1,500 yen apiece in a new entity, SoftBank Corp., that will start trading on Dec. 19. At that price, the IPO would surpass the offering of former national carrier Nippon Telegraph & Telephone Corp. in 1987.
  • British American Tobacco Plc shares plunged to the lowest level in more than four years on news of a possible ban on menthol cigarettes in the U.S., which would eliminate products such as Newport that generate as much as one-quarter of the company’s profit. The stock fell as much as 11 percent in London, destroying 8.4 billion pounds ($10.8 billion) of market value. U.S. Food and Drug Administration Commissioner Scott Gottlieb plans to pursue new restrictions on tobacco, the Wall Street Journal reported late Friday, citing senior agency officials. That could eliminate a loophole in a flavor ban that has allowed menthol cigarettes to continue to be sold.
  • The most destructive series of wildfires in California history have killed at least 31 people and forced tens of thousands more to evacuate, officials said, as firefighters struggled to gain control in swirling winds. The Camp Fire, which charred the town of Paradise in Northern California, and the Woolsey Fire, in suburban Los Angeles, have destroyed more than 6,700 structures and could cost the state, insurers and homeowners at least $19 billion in damages. Weather forecasters are predicting more winds for the afflicted areas and no sign of the seasonal rain that typically dampens the brush in time to prevent disasters.
  • Apptio Inc., a maker of cloud-based software for technology professionals, agreed to be bought by Vista Equity Partners for $1.94 billion. The cash offer is worth $38 a share, 53 percent above Friday’s closing price, the Bellevue, Washington-based company said in a statement on Sunday. While Apptio’s board has unanimously recommended the deal, the agreement includes a 30-day “go-shop” period that allows the company to solicit potentially better bids.
  • Private equity firm Veritas Capital and Elliott Management Corp. are close to a deal to acquire Athenahealth Inc. for $135 per share, according to people familiar with the matter. The all-cash transaction, which would value Athenahealth at about $5.5 billion, could be announced as soon as Monday, said the people, who asked not to be identified as the details aren’t public. Athenahealth shares closed at $120.35 on Friday, valuing the health-care technology company at about $4.9 billion.
  • Netflix Inc. said it will test a lower-priced version of its film and television streaming service in some markets to boost sales. The company hasn’t committed to lowering prices anywhere, but does want to experiment, Chief Executive Officer Reed Hastings said in an interview Friday. He didn’t say when or where the test would be conducted. A lower-priced offering would be a departure for Netflix, which has maintained or raised prices in major markets as it adds content and invests in local productions to draw subscribers.

*All sources from Bloomberg unless otherwise specified