November 9th, 2017
Daily Market Commentary
- Canada is sounding a note of caution as nations push this week to save a blockbuster Pacific trade pact, saying speed shouldn’t take priority over getting a good deal. “We are at the table, we’re being constructive, we’re being creative but let’s be honest, some are difficult discussions,” Trade Minister Francois-Philippe Champagne said in an interview in Vietnam on the sidelines of the Asia-Pacific Economic Cooperation summit. “This is not about speed, this is about outcomes.” The Trans-Pacific Partnership — a pact that would knit together 40 percent of the global economy — has been in doubt since Donald Trump withdrew the U.S. in one of his first acts as president, citing a perceived risk to U.S. jobs. Since then, the remaining 11 nations, which include Canada, Japan and Australia, have struggled for a way forward.
- Investors are fuming over the collapse of a $750 million mining deal that sent a tiny magnesium explorer soaring, sparking criticism that Canada’s light-handed approach to regulating its venture market needs to get heavier. Canada’s investment regulator won’t be reversing the trades on West High Yield (W.H.Y.) Resources Ltd. from Oct. 5, when the Calgary-based penny stock surged almost 1,000 percent on a deal to sell its main assets to an unknown buyer.
- Cameco Corp. is suspending some mining and milling operations as weak uranium prices buffet the Canadian firm. Production at the McArthur River mining and Key Lake milling operations will wrap up by the end of January 2018, and the workforce at those locations will temporarily fall by about 845 people, the Saskatoon, Saskatchewan-based company said Thursday in a statement. Cameco, which said it expects the layoffs and work stoppage to last about 10 months, also reduced its annual dividend 80 percent, to 8 cents Canadian per common share from 40 cents.
- European stocks are steady as investors assess earnings from companies including Siemens, Commerzbank and Burberry, while energy shares slide following recent rally. The Stoxx 600 is little changed, while the U.K.’s FTSE 100 falls 0.2% as Brexit talks are set to resume in Brussels with no indication that a breakthrough is in reach.
- The dollar declined and Treasury yields edged lower as President Donald Trump challenged China over what he called unfair trade practices. Investor attention has focused on Asia this week, where Trump has embarked on an 11-day tour. In Beijing Thursday, he said China is taking advantage of American workers and companies with unfair trade practices, but he blamed his predecessors in the White House rather than China for allowing the massive U.S. trade deficit to grow.
- A measure of Asian stocks pulled back after breaching its record high closing level as investors paused amid a global bull run that’s taken indexes to all-time highs. The MSCI Asia Pacific Index was little changed at 171.89 as of 2:24 p.m. in Hong Kong after paring a 0.7 percent gain that drove it past its November 2007 closing peak of 172.32.
- Oil steadied near $57 a barrel in New York as data showing U.S. crude output at the highest in at least three decades countered concerns sparked by a political purge in top exporter Saudi Arabia. U.S. output expanded for a third week to 9.62 million barrels a day, the highest in weekly Energy Information Administration data going back to 1983. Crude inventories rose 2.24 million barrels last week.
- The gold market is going soft. After rallying through the first eight months of the year, prices have weakened during September and October. Global gold demand fell 9 percent in the third quarter to 915 metric tons as investor buying slowed and tougher Indian regulations weighed on demand, according to a report from the World Gold Council.
- As the rest of Washington fixated on tax reform and a new Federal Reserve chair last week, the Treasury Department unveiled a borrowing strategy lacking fanfare but having potentially big implications for the bond market and the U.S. economy. In a step that could limit upward pressure on long-term interest rates from bigger budget deficits and a reduced Fed balance sheet, the Treasury will break from a policy in place since 2009 and stop attempting to lengthen the maturity of the government’s debt.
- The euro-area economy will grow at the fastest pace in a decade this year, while the U.K. heads into an extended slowdown, the European Commission said, highlighting the increasing divergence between the continent and the British economy. Raising its 2017 forecast for the 19-country bloc to 2.2 percent from 1.7 percent in May, the EU’s executive arm cited “resilient private consumption,” and it predicted a 2.1 percent expansion in 2018.
- The headline number is impressive: A quarter-trillion dollars worth of deals from China that President Donald Trump can use to show he’s creating opportunities for U.S. businesses and jobs for his base. The reality, however, is that the roughly 15 agreements unveiled on Thursday are mostly non-binding memorandums of understanding and could take years to materialize — if they do at all. A day earlier, Commerce Secretary Wilbur Ross announced $9 billion of deals, many also MOUs with few details, rather than contracts.
- AT&T Inc. won’t sell CNN and never proposed such a deal, Chief Executive Officer Randall Stephenson said as a battle escalated with antitrust officials over the $85.4 billion acquisition of the network’s owner ,Time Warner Inc. Discussions of individual assets, including the division that includes CNN, have come up in conversations between the companies and Justice Department officials, according to people familiar with the matter.
- Total SA agreed to buy the upstream liquefied natural gas assets of Engie SA for an enterprise value of $1.49 billion, making the French oil major the second-largest player in the global LNG market. The deal “enables Total to accelerate the implementation of its strategy to integrate along the full gas value chain, in an LNG market growing strongly,” Chief Executive Officer Patrick Pouyanne said in a statement on Wednesday. “Total will also become an integrated player in the U.S. LNG market.”
- Vietnam will begin selling its stake in Saigon Beer Alcohol Beverage Corp. by December, said the country’s trade minister, in a first tranche that could fetch at least $2.9 billion. Prime Minister Nguyen Xuan Phuc approved the ministry’s plan to sell 36.8 percent to 53.6 percent of Vietnam’s largest beer company in the final months of 2017, Vietnam Industry and Trade Minister Tran Tuan Anh said in an interview Thursday.
- Boeing Co.’s $37 billion order, unveiled during Donald Trump’s first visit to China as U.S. president, consists mostly of previously agreed deals, according to officials with knowledge of the matter. The 300 aircraft order from China Aviation Supplies Holding Co., the state-owned company that does bulk orders for local airlines, is mostly for jets that have been agreed upon since 2013 and set to be delivered through 2020.
- The U.S. has proposed another difficult change to the North American Free Trade Agreement that could eventually prevent long-haul Mexican truckers from operating in the country, according to people familiar with the discussions. American negotiators asked to remove Mexico’s long-haul industry from a Nafta chapter on cross-border services, according to an industry official familiar with the proposal who isn’t authorized to speak publicly.
- European Union negotiators agreed to overhaul the region’s cap-and-trade program, approving a plan to bolster carbon prices and adjust the emissions market to more ambitious climate goals in the next decade. EU permits gained as much as 3.4 percent to 7.98 euros a metric ton on Thursday. The provisional deal reached early Thursday between representatives of EU nations and the European Parliament follows more than two years of uncertainty over the fate of the Emissions Trading System after 2020.
- China Literature Ltd.’s red-hot debut may spur parent Tencent Holdings Ltd. to consider spinning off other parts of a $470 billion empire that spans everything from movies to music streaming. Tencent’s e-books business soared almost 90 percent on its debut, Hong Kong’s largest tech coming-out party since 2007. That marked the bestfirst-day performance this year among IPOs of $500 million or more, and it kept up the momentum Thursday by gaining another 1.6 percent.
- AstraZeneca Plc’s revenue rose for the first time in six quarters after the company received almost $1 billion for sharing ownership of a promising new cancer drug with Merck & Co. The payment, stemming from Astra’s so-called externalization program, lifted the Cambridge, England-based drugmaker’s sales by 9.4 percent from a year earlier to $6.23 billion. That surpassed analysts’ expectations of $5.99 billion. The stock jumped by the most in about seven weeks.
- The 10,000 bitcoins that seven years ago famously paid for the delivery of two Papa John’s pizzas would be worth more than $74 million today. The exploding value of the cryptocurrency since its first real-world transaction in 2010 is one reason the U.S. Internal Revenue Service is pushing to see records on thousands of users of Coinbase Inc., one of the biggest U.S. online exchanges. The company’s digital currency platform allows gains to be converted into old-fashioned dollars in transactions that the IRS alleges are going unreported.
- China took steps toward its first investment in U.S. liquefied natural gas as one of its energy giants agreed to advance a $43 billion project that’s been years in discussion and already sidelined by American majors. China Petrochemical Corp., known as Sinopec Group, signed a joint development agreement with Alaska Gasline Development Corp. on the plan to pipe gas from the state’s northern shore to a proposed liquefaction terminal in the south, where it would be shipped abroad.
- Russia’s new bailout mechanism has left the country’s central bank holding a motley collection of companies acquired from failing banks. Now the regulator has to figure out what to do with them. The Bank of Russia has twice used a new rescue fund since the end of August to take over lenders so it doesn’t spend money outsourcing such bailouts to the private sector. The nationalizations of B&N Bank PJSC and Bank Otkritie FC came with a range of businesses that complicate efforts to ultimately sell the banks back into private hands.
- The competitiveness of wind energy is taking a toll on profits, according to Vestas Wind Systems A/S, whose share price took the biggest hit in six years after missing analysts’ estimates. Vestas shares sank as much as 21 percent to 416.60 krone in Copenhagen. More than 5 million shares changed hands so far today, about five times more than the full-day average. The company, the world’s biggest wind-turbine maker, reported earnings before interest and tax that trailed analysts’ estimates.
- Energy giant Exxon Mobil Corp. may have to wait an extra year until 2020 to sanction a multibillion dollar expansion in Papua New Guinea, according to a partner in the project. Reaching a final investment decision to build a third liquefied natural gas train at PNG LNG is more realistic in the first half of 2020 than in 2019, as currently planned, Kevin Gallagher, chief executive officer of Australia’s Santos Ltd., told investors Thursday in Sydney.
- Deutsche Telekom AG may have failed to clinch a mega-merger in the U.S., yet investors aren’t spooked as Europe’s largest phone carrier charts a path on its own. Shares of the company rose as much as 1.7 percent in Frankfurt after it raised its full-year profit forecast on solid growth in its home market Germany and customer additions at T-Mobile US Inc., just days after ending merger talks for the unit.
- Wealthy Saudis are moving assets out of the region to avoid the risk of getting caught up in what authorities call a crackdown on corruption, according to six people with knowledge of the matter. Some Saudi billionaires and millionaires are selling investments in neighboring Gulf Cooperation Council countries and turning them into cash or liquid holdings overseas, the people said. They spoke on condition of anonymity because of the sensitivity of the matter. In Saudi Arabia, some are in talks with banks and asset managers to move money outside the country, the people said.
*All sources from Bloomberg unless otherwise specified