October 10th, 2019

Daily Market Commentary

Canadian Headlines

• Canadian equities rose the most in nearly five weeks as the trade sentiment see-saw continued, boosting consumer discretionary and industrial stocks. The S&P/TSX Composite Index added 0.5% to 16,379.87, tracking U.S. stocks higher after China said it was still open to reaching a partial trade deal with the U.S.
• Talk of independence is largely hushed in Quebec these days, yet the federal separatist party is rising from the abyss and could soon hold sway in Canada once again. Just a year ago, the Bloc Quebecois was trying to recover from an internal feud that split its lawmakers and left it leaderless. Polls now suggest the tide has turned. The Bloc is on track to win the most seats in a decade, making it a potential powerbroker in parliament assuming the two largest parties fail to win a majority in the Oct. 21 national elections.
• Candidates promising home-buyer incentives during Canada’s election campaign risk igniting already lofty prices without tackling the critical issue of supply, a real estate firm warns. Even with consistent economic conditions and no new housing policy changes, home prices will rise by 1.5% in the fourth quarter to an aggregate C$632,226 ($474,252) over the same period last year, according to a report Thursday by Royal LePage. Housing affordability has become a key issue in the federal election campaign. Prime Minister Justin Trudeau is pledging to boost the cap on homes eligible for a 10% government-equity stake to almost C$800,000 in costly markets like Vancouver and Toronto while the Conservatives plan to review the mortgage stress test for first-time buyers, remove it from mortgage renewals and extend mortgage amortizations.
• The sale of Iamgold Corp. has stalled after the mid-tier Canadian gold miner failed to reach an agreement with several Chinese suitors, people with knowledge of the matter said. Chinese gold producers including China National Gold Group Corp., Shandong Gold Mining Co. and Zijin Mining Group Co. had all shown interest in Iamgold, said the people, who asked not to be identified as the information is private. But discussions stumbled over price as well as concerns related to ongoing Sino-Canada political tensions, the people said.

World Headlines

• European stocks swung from gains to losses as a long-anticipated meeting on trade between America and China approached, and after contrasting reports on the talks spurred volatile trading in Asia. Treasuries were steady, while the dollar slumped.
• U.S. stock index futures indicate a negative start as contrasting reports on a long-anticipated trade meeting between America and China spurred volatile trading in Asia and Europe. Contracts on the S&P 500 Index fluctuated earlier amid concern that the gathering scheduled for Thursday and Friday in Washington might be cut short. Futures were whipsawed during the Asia session after Bloomberg reported that next week’s planned tariff hike could be suspended, and following a report that President Donald Trump may let some U.S. companies supply Huawei Technologies Co.
• Earlier, futures were whipsawed during the Asia session after Bloomberg reported that next week’s planned tariff hike could be suspended, and following a report that President Donald Trump may let some U.S. companies supply Huawei Technologies Co. The yuan reversed a decline on news that the White House was considering a currency pact with Beijing.
• Oil held losses near a two-month low as pessimism persisted over the global economic outlook and American crude inventories expanded more than expected. Futures were little changed in New York after earlier falling as much as 2.3% on a report that the U.S. and China had made no progress in deputy-level trade talks and the Beijing delegation would leave Washington a day early. Prices later recovered following a separate report that there was no change in the schedule. Meanwhile, American crude stockpiles rose for a fourth week running.
• Gold prices remained almost unchanged at the bullion market here on Thursday amid muted spot demand. International gold prices on Thursday held firm on trade talk worries and economic growth concerns after reports that China has scheduled back the meeting to single day from two days earlier, he said.
• Boris Johnson is meeting his Irish counterpart Leo Varadkar for crucial talks over lunch as the U.K. and European Union seek a way through the Brexit impasse with time running out to reach a deal. While neither side is brimming with optimism, Ireland’s government said an agreement is “not impossible,” though wide gaps remain.
• The White House is looking at rolling out a previously agreed currency pact with China as part of an early harvest deal that could also see a tariff increase next week suspended, according to people familiar with the discussions. The currency accord, which the U.S. said had been agreed to earlier this year before trade talks broke down, would be part of what the White House considers to be a first-phase agreement with Beijing. It would be followed by more negotiations on core issues like intellectual property and forced technology transfers, the people said.
• In Indonesia, exchange-traded funds tracking the nation’s equities have hit a new milestone. With investors turning their focus to cheaper and more liquid instruments, the market value of ETFs listed on the nation’s exchange reached 14.4 trillion rupiah ($1 billion) at the end of September. That’s up 35% from last year, data compiled by Bloomberg show. ETFs have grown in popularity globally in recent years, and they’re now gaining traction in Indonesia as characteristics such as their transparency and flexibility attract investors, according to Guntur Putra, chief executive officer of PT Pinnacle Persada Investama. That’s even as U.S.-China trade tension as well as concerns over Indonesia’s economy and a volatile currency have pushed the equity market down this year.
• Morgan Stanley’s infrastructure arm agreed to buy German wind farm operator PNE Wind AG for 300 million euros ($331 million), highlighting investor appetite for renewable energy. PNE Wind’s board accepted a bid of 4 euros a share from Morgan Stanley Infrastructure Partners, which intends to delist the stock, according to a statement Thursday that confirms an earlier Bloomberg News report. Demand for renewable energy is rising amid falling prices and an investor push to curb emissions and fight climate change. Honda Motor Co. agreed last month to buy 320 megawatts of electricity from wind and solar farms in Texas and Oklahoma, the biggest ever clean-power purchase by an automaker.
• OPEC and allies including Russia will do “whatever it takes” to prevent another oil slump as the global economy weakens, said Secretary-General Mohammad Barkindo. The U.S.-China trade dispute has “cast a shadow” over oil demand and a failure to reach a deal would be “catastrophic” for the market, the Organization of Petroleum Exporting Countries’ top official said at the Oil & Money conference in London on Thursday. Barkindo said every member of the group that he’s spoken to, including Russia, has committed to ensuring the crude surplus doesn’t return.
• Exchange-traded fund investors are continuing to load up on precious metals, buying palladium at the fastest pace in a year and pushing gold holdings closer to a record. The purchases have come as investors sought a haven amid concerns about the global economy and on bets of looser monetary policies by central banks including the Federal Reserve. Palladium-backed ETFs have expanded by almost 31,000 ounces so far in October, heading for the biggest monthly increase since August 2018.
• President Recep Tayyip Erdogan said he would “open the doors” for 3.6 million refugees currently in Turkey to seek shelter in Europe, should his country come under undue criticism. Erdogan’s threats came a day after Turkish troops began a major incursion into northeastern Syria, drawing criticism from the U.S., many European nations and Arab states. The lira hovered near its weakest level since late August against the dollar while stocks and government bonds fell amid the threat of punitive actions by the U.S. Congress.
• The unprecedented power shutdown by California’s PG&E Corp.has spread deeper into densely populated cities near San Francisco, ensnaring millions of people and raising the prospect that much of a major metropolitan area could go without electricity for days. The bankrupt utility said late Wednesday that it had begun a second round of power cuts that will plunge another 234,000 customers in cities including Berkeley and Oakland into darkness. It’s part of the biggest blackout ever orchestrated to prevent strong winds from knocking down electrical lines and igniting fires. Half a million homes and businesses in Northern California were already in the dark, cut off by PG&E earlier.
• UCB SA agreed to buy Ra Pharmaceuticals Inc. for about $2.5 billion to join forces with one of its largest competitors in developing a rare-disease medicine, the field behind many recent industry tie-ups. The Belgian drugmaker will pay $48 a share in cash for Cambridge, Massachusetts-based Ra Pharmaceuticals, UCB said Thursday. That’s more than double the U.S. company’s closing price Wednesday. UCB’s stock rose less than 1% in Brussels trading.
• Proxy adviser ISS has recommended Sunrise Communications Group AG shareholders vote against the company’s planned $6.4 billion acquisition of Liberty Global Plc’s Swiss cable unit, dealing a blow to Chief Executive Officer Olaf Swantee’s effort to wrap up the deal. “Sunrise appears to be overpaying for assets in a transaction that appears to have debatable long-term strategic merit,” ISS said in a note obtained by Bloomberg News on Thursday. The company’s shares rose 2.1%.
• Indiabulls Housing Finance Ltd. plunged on Thursday, as the rebuff to its plan to merge with Lakshmi Vilas Bank Ltd. put a dent in hopes that shadow lenders could use such combinations to get better access to liquidity. The Reserve Bank of India rejected the merger plan, Chennai-based Lakshmi Vilas said in an exchange filing late Wednesday, without disclosing the reason for the central bank’s decision. Shares of Indiabulls Housing fell as much as 20% in Mumbai on Thursday, while the shadow lender’s dollar bonds also slumped. Lakshmi Vilas’ shares fell close to 5%.
• China plans to ask the U.S. to lift sanctions on its biggest shipping company at high-level trade negotiations in Washington this week, people familiar with the matter said. Officials plan to raise the issue of penalties against the Dalian units of China COSCO Shipping Corp., which the U.S. accuses of knowingly violating restrictions on carrying Iranian petroleum, said the people, who asked not to be identified discussing a private matter. Four other Chinese entities were also sanctioned last month along with Cosco. The people did not say if the Chinese delegation planned to seek relief for those companies.
• In a promotional video, Amazon.com Inc. says its Cloud Cam home security camera provides “everything you need to monitor your home, day or night.” In fact, the artificially intelligent device requires help from a squad of invisible employees. Dozens of Amazon workers based in India and Romania review select clips captured by Cloud Cam, according to five people who have worked on the program or have direct knowledge of it. Those video snippets are then used to train the AI algorithms to do a better job distinguishing between a real threat (a home invader) and a false alarm (the cat jumping on the sofa).
• Delta Air Lines Inc. warned that earnings are likely to fall short of Wall Street’s expectations this quarter as cost pressures worsen and pricing power weakens. Fourth-quarter earnings will range from $1.20 to $1.50 a share, Delta said Thursday as it reported financial results for the previous three-month period. That compares with the $1.51 average of analyst estimates compiled by Bloomberg.

*All sources from Bloomberg unless otherwise specified