October 17th, 2019

Daily Market Commentary

Canadian Headlines

• Canadian stocks were little changed for a second day as materials were the best performers, while tech stocks were the worst. The S&P/TSX Composite advanced slightly to 16,427 in Toronto. Barrick Gold Corp. contributed the most to the index gain, increasing 1.7%. Aritzia Inc. had the largest increase, rising 16%. Meanwhile, Canadian consumer prices continued to hold steady in a tight range around the Bank of Canada’s inflation target, giving policy makers one less reason to consider immediate interest rate cuts. Annual inflation in September was unchanged at 1.9%, Statistics Canada reported Wednesday. That was below economist expectations for a 2.1% reading.
• Barrick Gold Corp., the world’s second-largest producer of the metal, said third-quarter gold production was slightly below levels in the previous period but it was still on track to meet its guidance this year. Third-quarter gold output was affected by operational restrictions at the North Mara mine in Tanzania, the Toronto-based miner said Wednesday in a statement. Barrick reiterated that 2019 production was “trending” toward the top end of the 5.1 million to 5.6 million ounce guidance range while costs were likely to be at the lower end of forecasts.
• BHP Group set a deadline of early 2021 to decide whether to push ahead with its divisive $20 billion Jansen potash project in Canada, an initiative that would add the production of fertilizer alongside metals, coal and oil. The company will seek approval by February 2021 to begin a first stage of the mine development in Saskatchewan, Melbourne-based BHP said Thursday in a statement. The initial phase, which is forecast to cost as much as $5.7 billion, would operate for at least a century and could be ready to enter production within five years of winning the go-ahead, according to filings.

World Headlines

• The Stoxx Europe 600 Index had been fluctuating before word of the accord emerged, but it jumped as every major national gauge in the region advanced. Futures for the three main U.S. equity gauges joined the rally. The new withdrawal agreement has been completed just in time for EU leaders to assess it when they gather for summit talks in the Belgian capital later in the day.
• U.S. equity futures advanced with European stocks on Thursday and the pound strengthened as a new Brexit deal was announced, though moves eased as investors assessed its chances of winning crucial support. Treasuries led a government bond retreat.
• Earlier in Asia, stocks fell in Tokyo, Sydney and Seoul, rose in Hong Kong and were barely changed in Shanghai. Taiwan Semiconductor, the primary chip supplier to Apple, projected current-quarter revenue ahead of analysts’ estimates. The Australian dollar strengthened after the country’s jobless rate unexpectedly fell and full-time employment climbed.
• Oil traded near $53 a barrel after an industry report showed a sharp jump in U.S. inventories, adding to concern that supply keeps growing while demand ebbs. Futures were down 0.2% in New York, paring earlier losses of as much as 1.1% after the European Union and the U.K. reached an agreement on Brexit. The American Petroleum Institute reported crude inventories rose by 10.5 million barrels last week, according to people familiar with the data. That would be the biggest increase since February 2017 if confirmed by official Energy Information Administration figures due Thursday.
• Palladium is closing in on $1,800 an ounce as prices continue to scale fresh highs amid supply concerns. Gold edged lower after U.K. and European officials reached a deal on Brexit. Palladium’s renewed rally has driven its 14-day relative strength index well above the key 70 level that suggests to some traders prices may be poised to drop.
• Dubai’s biggest bank is seeking to raise 6.45 billion dirhams ($1.76 billion) from a rights share offering as it expands abroad and courts more foreigners to its stock. The state-controlled Emirates NBD PJSC plans to offer 758.8 million shares at 8.5 dirhams each, it said in a statement. That compares with its closing price of 13.15 dirhams on Oct. 16 and represents a discount of about 35%. The issue opens Nov. 10 and will close Nov. 20.
• Taiwan Semiconductor Manufacturing Co.’s plan to spend as much as $15 billion on technology and capacity in 2019 — roughly 50% higher than originally envisioned — is spurring hopes that the dawn of fifth-generation networks will rev up global chip and smartphone demand. The primary chip supplier to Apple Inc. told investors it’s sharply increasing its estimate for 2019 capital expenditure to between $14 billion to $15 billion from as much as $11 billion previously, and Chief Financial Officer Wendell Huang said 2020 spending will be similar. The Taiwanese company also projected current-quarter revenue ahead of estimates, an affirmation that the latest iPhones have proven a hit with consumers.
• HSBC Holdings Plc may partially exit stock trading in some developed Western markets as part of a cost-cutting drive by Noel Quinn, the interim chief executive who wants the top job on a permanent basis. Equities sales and trading units in France, Germany, U.S. and the U.K. are likely to be scaled back, according to people familiar with the matter, who asked not to be identified as the details are private. HSBC’s Asian equities operation isn’t affected by the review, the people said. The lender, which makes the bulk of its earnings in the Greater China region, is embarking on the cuts as part of broader plans to reduce its headcount by thousands across different businesses. It also joins European firms including Deutsche Bank AG in pulling back from equities. Chairman Mark Tucker is pushing for HSBC to take more radical action on costs, and installed Quinn in August after ousting John Flint as chief executive officer.
• Negotiators from the U.K. reached an agreement with officials in Brussels Thursday that could pave the way for Britain to finally break 46 years of ties with the European Union this month. The pound rose. The withdrawal agreement was completed just in time for EU leaders to assess it when they meet in the Belgian capital. European Commission President Jean-Claude Juncker hailed it as “fair and balanced.” The deal now needs the backing of the U.K. Parliament, with a vote expected on Saturday. That’s the final, treacherous hurdle for Prime Minister Boris Johnson to clear before he can complete his ambition of leading Britain out of the EU. Earlier on Thursday Northern Ireland’s Democratic Unionist Party signaled it did not accept key aspects of the agreement being drafted. That position did not change after confirmation of the deal.
• As India works to bring some of the burgeoning offshore rupee trading back home, the exchange that will likely spearhead the move says it’s prepared to cut trading fees to zero to take on overseas rivals. The India International Exchange (IFSC) Ltd., also known as India INX, plans to waive commissions initially, a strategy it used to bolster liquidity in its equity and gold derivatives contracts.
• Hong Kong’s hedge fund industry saw its biggest quarterly outflow since the global recession a decade ago, a shift that may deepen concern about investor sentiment in the protest-wracked financial hub. Net redemptions totaled about $1 billion in the three months ended September, the most since the second quarter of 2009, according to data compiled by Eurekahedge Pte. Analysts from the research firm said that while anti-government protests in Hong Kong have unnerved markets, the outflow was in keeping with redemptions from hedge funds globally after poor returns from a number of managers in 2018.
• A White House meeting between Donald Trump and congressional leaders to contain fallout from the Syria crisis broke down abruptly Wednesday, with the president hurling insults at House Speaker Nancy Pelosi, who accused him of having a “meltdown.” Pelosi said Trump appeared to be “shaken” after 129 Republican lawmakers backed a resolution rebuking him for withdrawing U.S. forces from Syria. Senate Democratic leader Chuck Schumer said Trump’s insults of Pelosi during a “nasty diatribe” prompted Democratic leaders to leave.
• The Chinese foreign ministry said it has detained two American citizens who run an English-teaching business in China, a development that comes amid rising diplomatic tensions and a broader trade war between the two countries. Jacob Harlan and Alyssa Petersen were detained in the eastern province of Jiangsu in late September “on suspicion of organizing others to cross the border,” foreign ministry spokesman Geng Shuang told reporters at a regular briefing in Beijing on Thursday.
• HNA Group Co. has been stymied in an attempt to sell out of plane lessor Avolon Holdings Ltd., in what would have been one of the indebted Chinese conglomerate’s biggest divestments to date as it unwinds a global deal spree, people with knowledge of the matter said. HNA reached out to Orix Corp. in the past few months to gauge the Japanese financial group’s interest in buying its remaining 70% stake in Avolon, according to the people. Orix decided in the end that it wasn’t interested in pursuing a deal, the people said, asking not to be identified because the information is private.
• Netflix’s performance in international markets and strong content schedule ahead of the Oscars were cheered by analysts, sparking a pre-market jump of 7.9% in the shares. The update added to investor confidence, with JPMorgan expecting Netflix to add subscribers “at a healthy pace” in the fourth quarter, warding off rising competition from media giants in the streaming wars. Netflix’s shares have gained 7% so far this year as of Wednesday’s close.
• Honeywell International Inc. increased its 2019 profit forecast, sidestepping a global industrial slowdown by tapping robust demand for aircraft parts. Adjusted earnings this year will be at least $8.10 a share, up from a previous forecast of at least $7.95, the company said in a statement Thursday as it reported earnings. The company maintained the upper end of its outlook at $8.15 a share

*All sources from Bloomberg unless otherwise specified