November 14th, 2018

Daily Market Commentary

 

Canadian Headlines

• Fewer Canadians are feeling strained by higher interest rates even as borrowing costs rise, polling data show, findings that should bolster the Bank of Canada’s confidence to tighten credit further. Some 41 percent of Canadians say higher borrowing costs are having a negative impact on their personal spending, down from 43 percent three months ago, according to a survey by Nanos Research taken after the central bank raised interest rates in October, for a fifth time since mid-2017.
• Canada’s competitive advantage in cannabis is disappearing. Half of the 10 biggest marijuana companies trading in Canada are now U.S. based, including MedMen Enterprises Inc. of Los Angeles, Curaleaf Holdings Inc.of Wakefield, Mass., and Green Thumb Industries Inc. of Chicago. Quincy, Florida-based Trulieve Cannabis Corp. and Boulder, Colorado-based Charlotte’s Web Holdings Inc. are among the top 10. Canadian companies still take the top three spots north of the border, though the biggest pot company by market value, Nanaimo, British Columbia-based Tilray Inc., is listed in the U.S. and has a market value of $10.4 billion
• Calgary voters recommended the city abandon a bid to host the 2026 Winter Olympics, as concerns about potential costs outweighed the prospect of an economic boost. The vote was 56 percent against versus 44 percent in favor, according to unofficial results posted by the city. The vote is non-binding, meaning that the Calgary City Council still needs to vote on whether to suspend work on the bid.

 

 

World Headlines

• European shares opened lower, reversing Tuesday’s rally in late trade, as traders turned cautious on the Brexit deal ahead of a U.K. cabinet meeting later in the day. The Stoxx Europe 600 was down 0.8 percent, with oil & gas and basic resources in the bottom of the list. The auto & parts sector was one of the few winners, as the U.S. is said to hold off on imposing new car tariffs after a trade meeting.
• The oil rout has arrived at an already challenging time for global equities, which have been digesting a downturn in the tech sector, the ongoing trade spat between the two biggest economies as well as a higher-rate regime. With the Trump administration said to be holding off on imposing new tariffs on automobiles there is ground for some optimism, but Brexit and Italian risks linger, American inflation data is out Wednesday and key reports on the crude market are also imminent. Focus will also turn to Federal Reserve Chair Jerome Powell, who speaks Wednesday, with some observers expecting him to calm worries about the central bank pushing its interest rate-hike cycle too far. That comes after the latest read on China’s economy, where retail sales missed estimates, though industrial production held up.
• Japan’s stock market rebounded following the worst selloff in almost three weeks on signs of progress in U.S. and Chinese trade talks. The benchmark Topix rose for the first day in four after losing 2 percent on Tuesday in a rout of technology stocks. Automakers provided the biggest boost in Tokyo after Bloomberg reported the Trump administration will hold off on imposing new tariffs on automobile imports as top officials weigh revisions to a report on national security implications.
• Oil pared losses amid renewed speculation that OPEC and its allies are considering cutting supply next year. Futures in New York steadied after Reuters reported OPEC and its partners are discussing a reduction of as much as 1.4 million barrels a day, deeper than the cut proposed last weekend. The price move followed a record 12 days of declines amid surging supply from Saudi Arabia, Russia and the U.S., and fears of dwindling demand.
• Gold held gains as investors awaited Wednesday’s U.S. inflation report and a speech by Federal Reserve Chair Jerome Powell that may calm some concerns about the central bank pushing its interest rate-hike cycle too far. U.S. consumer inflation probably rebounded in October after easing in September. Meanwhile, Powell will discuss national and global economic issues in a moderated conversation with Dallas Fed President Robert Kaplan.
• The Trump administration will hold off for now on imposing new tariffs on automobile imports as top officials weigh revisions to a report on the national security implications, according to two people familiar with the matter. President Donald Trump met with his top trade advisers on Tuesday at the White House to discuss a draft report on a Commerce Department investigation into the impact of car imports. The people, who spoke on condition of anonymity because the meeting wasn’t publicly announced, said the administration wasn’t ready to act on tariffs and that the report would be subject to further changes.
• Quicken Loans Inc. founder Dan Gilbert agreed to sell his Detroit casino to Penn National Gaming Inc. and Vici Properties Inc. in a deal valued at $1 billion. Penn will pay $300 million and run the Greektown Casino Hotel, Gilbert’s company said Wednesday. Vici, a publicly traded real estate investment trust, will pay $700 million and own the property. The billionaire continues to own casinos in Cleveland and Cincinnati.
• Zee Entertainment Enterprises Ltd.’s parent plans to sell as much as a $1.2 billion stake in India’s biggest publicly traded television network as growing demand for content attracts Netflix Inc. to Amazon.com Inc. Essel Group, which announced the sale plans late Tuesday, said it’s considering selling as much as half of its 42 percent stake in Zee to an unidentified strategic investor. Essel, an investment firm controlled by media tycoon Subhash Chandra, plans to review its options up until April and redirect proceeds toward bigger priorities for the group, it said in a statement. Essel hired Goldman Sachs Group Inc.’s India unit and LionTree to advise on the deal.
• An anticipated pickup in U.K. inflation failed to materialize last month as food, clothing and transport prices declined. Annual consumer-price growth stayed at 2.4 percent in October, the Office for National Statistics said on Wednesday. The figure is below the 2.5 percent predicted by both the Bank of England and economists in a Bloomberg survey.
• OPEC and allied oil producers will cut or adjust production as needed to balance the market, the group’s president, United Arab Emirates Energy Minister Suhail Al Mazrouei, said Wednesday. If OPEC+ needs to reduce output, it will do so, he said in a Bloomberg TV interview in Abu Dhabi. The producers will take whatever steps are necessary to keep the market stable and keep crude inventory levels where they are, Al Mazrouei said. Oil production is above expectations, and OPEC+ needs to change its strategy, he said.
• Investment firm Columbia Pacific Management is considering selling one of its Asia hospital operators in a deal that could value the business at as much as $2 billion, people with knowledge of the matter said. Columbia Asia, which owns about 30 hospitals and clinics across India, Malaysia, Vietnam and Indonesia, is working with advisers to explore options including a sale or initial public offering, according to the people. A process could begin early next year, the people said, asking not to be identified because the matter is private.
• Internet giant Tencent Holdings Ltd. is in talks to join a Chinese investor group pursuing a takeover of Finland’s Amer Sports Oyj, people familiar with the matter said. Tencent, China’s largest social-media company, is considering joining the consortium led by Anta Sports Products Ltd. as a minority investor, according to the people. The buyer group is also in talks with other potential minority partners, though no firm agreements have been reached, the people said, asking not to be identified because the information is private.
• Theresa May will ask her divided Cabinet ministers to back her Brexit deal or quit, as the U.K.’s divorce from the European Union enters its most dangerous phase yet. After negotiators secured a deal on paper in Brussels, the prime minister will try to persuade her team that the plan is not a sellout at a meeting on Wednesday — before she faces her toughest test: getting it through Parliament in the face of near impossible odds.
• ServiceTitan Inc. is the newest startup unicorn out of the Los Angeles area, proving that even plumbing can be a billion-dollar technology business. The company, which makes software for plumbers, electricians and other home-services companies, plans to announce Wednesday that it was valued at $1.65 billion in a new venture capital infusion. Index Ventures led the funding round, which totaled $165 million. The deal adds to a growing list of Southern California startup success stories. But unlike consumer product makers Snap Inc., Sonos Inc. and Ring, ServiceTitan aims to be a backbone for basic, back-office functions.
• U.S. investment-grade credit spreads widened by the most in nine months on Tuesday as a drop in General Electric Co. bonds sparked fears of a broader market selloff. The spread on the Bloomberg Barclays U.S. IG Corporate Bond Index widened to 119 basis points over Treasuries at the close, from 115 basis points on Friday. The 4.55 percent jump in spread was the biggest since Feb. 9, when equities sold off. The bond market was closed on Monday in observance of the Veterans Day U.S. holiday.
• Noble Group Ltd. expects its marathon debt-for-equity restructuring to be completed later this month as shares in the new business begin trading in Singapore, detailing the timeline hours after quarterly earnings that highlighted the challenges the trader will face. The expected restructuring date is Nov. 26, and shares in the so-called New Noble should start trading the following day, the company said late Tuesday. The last day for trading existing stock will be this Friday, ending a run on the exchange for the one-time blue chip that started in 1997. A few hours earlier, Noble Group had detailed its third-quarter loss, saying the core coal-trading business had struggled to make money while it also made bad bets on LNG.
• Snap Inc. said the U.S. Justice Department and Securities and Exchange Commission are looking into allegations it misled investors ahead of its initial public offering last year. “Snap has been responding to subpoenas and requests for information made by staff from the DOJ and the SEC,” the company said Tuesday in a statement. “It is our understanding that these regulators are investigating issues related to the previously disclosed allegations asserted in the class action about our IPO disclosures. While we do not have complete visibility into these investigations, our understanding is that the DOJ is likely focused on IPO disclosures relating to competition from Instagram.”

*All sources from Bloomberg unless otherwise specified