October 2nd, 2019
Daily Market Commentary
- Canopy Growth Corp. has completed an all-cash deal for a majority stake in BioSteel Sports Nutrition Inc. as the marijuana company seeks to expand its product offering. “This acquisition allows us to enter the sports nutrition space with a strong and growing brand as we continue towards a regulated market of food and beverage products that contain cannabis,” Canopy CEO Mark Zekulin said in a statement Wednesday. No terms were provided, though Canopy will own 72% of BioSteel, with an agreed upon path to complete ownership. Paradigm Capital Inc. was BioSteel’s financial adviser.
- Cenovus Energy updated 5-year business plan includes production growth of 2% to 3% per year, with total production seen at about 550,000 boed by the end of 2024.
- European equities extended yesterday’s declines as a stream of negative economic data fueled concerns about a global slowdown. The benchmark Stoxx Europe 600 Index dropped 0.6%. Polish fashion retailer LPP SA slumped 5.2% after third-quarter earnings showed growing pressure on margins, and Tesco Plc declined 1% on the surprise news that Chief Executive Officer Dave Lewis is stepping down. The FTSE 100 Index retreated 0.7% as Prime Minister Boris Johnson prepares to send his final Brexit offer to the European Union. European stocks had surged to a 16-month high at the end of September, but October hasn’t started off well.
- S&P 500 futures drop as much as 0.2% and hit session low, reversing earlier gain, as concerns mount about a global slowdown following negative economic data. Contracts on the three main American equity indexes signaled a weak start in New York, after the underlying indexes slumped the previous day when a gauge of U.S. manufacturing posted the weakest reading since the end of the last recession.
- Japanese stocks declined after disappointing U.S. manufacturing data stoked concern over a slowdown in the global economy. Electronics makers were the biggest drag on the Topix index after the yen strengthened against the dollar overnight. Automakers also dropped after weak U.S. auto sales in September, with Japan’s three majors suffering double-digit declines. The S&P 500 fell the most in over five weeks on Tuesday after a U.S. factory index slipped to the lowest since June 2009.
- Oil steadied after sliding for six days in a row as signs of tighter supply in the U.S. and OPEC jostled with ongoing concern that a fragile global economy is eroding fuel demand. Futures held near $54 a barrel in New York after falling 8.6% since Sept. 23. The American Petroleum Institute reported U.S. inventories declined by 5.9 million barrels last week, according to people familiar with the data. The government’s Energy Information Administration will release official figures later on Wednesday and analysts surveyed by Bloomberg are predicting an increase.
- Gold held Tuesday’s gain as investors awaited more U.S. data for clues on haven demand and monetary policy after poor global factory numbers earlier this week. Bullion rebounded from an almost two-month low to end Tuesday higher after a U.S. manufacturing gauge posted the weakest reading in a decade and the International Monetary Fund trimmed its growth outlook. Prices have been pressured by a stronger dollar and occasional indications of a possible thaw in the trade war. Attention will now turn to more U.S. data due this week, including the ADP employment report on Wednesday and the monthly jobs report on Friday.
- Germany’s five leading research institutes slashed their forecasts for economic growth, as manufacturers in Europe’s biggest economy struggle with waning global demand and lingering trade disputes. Gross domestic product will expand by 1.1% in 2020, the experts predicted in their latest bi-annual outlook published Wednesday in Berlin. In April, they expected growth of 1.8%. Their report forms the basis of the government’s forecasts, due to be updated around the middle of this month.
- Blackstone is acquiring a 65% controlling interest in Great Wolf Resorts and will form a new $2.9 billion joint venture to own the company as part of the deal.
- TD Ameritrade says its U.S. brokerage firm will eliminate commissions for online exchange-listed stock, ETF (domestic and Canadian) and option trades effective Oct. 3.
- Boris Johnson outlined his plan for a new Brexit agreement and warned the European Union to compromise or watch the U.K. walk away from talks and leave the bloc without a deal. The U.K. prime minister declared that Britain is “ready” to break away from the EU without an agreement in four weeks’ time, if officials in Brussels do not back down. In his first keynote speech as prime minister at his Conservative Party’s conference, Johnson said his team is putting forward details of his “constructive and reasonable” blueprint in Brussels on Wednesday.
- The U.S. economy’s growth rate is losing speed, prompting questions over how slow it can go and still avoid crashing into a recession. Whereas expansion below 2% used to almost guarantee the economy would subsequently contract, some economists now reckon the U.S. can wobble around 1%-1.5% without falling over.
- Iranian President Hassan Rouhani said he agrees with the basic framework of a European-led plan to revive the embattled 2015 nuclear deal, while the country’s top cleric warned authorities would continue reducing compliance with the accord until a solution is found. “The plan was acceptable in a sense, in terms of its outlines, as it called for Iran not to pursue nuclear weapons and to contribute to peace in the region and regional waterways,” Rouhani was cited as saying by state TV. He added that it also calls for the removal of U.S. sanctions on Iran, including allowing the resumption of oil exports, key Iranian demands for any negotiations.
- Boeing Co. is entering a crucial month for its grounded 737 Max jetliner and its chief executive officer. Dennis Muilenburg’s future is inextricably tied to that of the plane, which is nearing a key test with the U.S. Federal Aviation Administration amid a flying ban in its seventh month after two deadly crashes. If regulators approve the aircraft to return to the skies, Boeing’s best-selling jet must still win acceptance from airline flight crews and the flying public. For Muilenburg, there’s no playbook for charting a comeback from one of the worst calamities in the history of the aerospace industry. But investors have been betting on Boeing’s resurgence in recent weeks, and any fresh setback for the company’s biggest source of profit would increase the murmurs for a leadership change.
- Joe Biden’s once-clear path to the 2020 Democratic presidential nomination is getting murkier. But it’s not the Donald Trump impeachment scandal involving Biden’s son that’s doing it. The former vice president is being tested by the collective toll of age, verbal blunders and a contrast with Elizabeth Warren’s dramatic plans to overhaul government. Trump’s attempts to tarnish him with scandal have yet to make a dent with Democratic voters — and heightens the Biden campaign’s argument that the president fears him most in a general election. Nationally, Biden’s support has stayed between 26% and 32% since late June, and polls taken after the Ukraine-Trump scandal broke show no clear drop in support. In a Monmouth University poll out Tuesday, 65% of Democrats said Biden probably didn’t pressure Ukraine not to investigate his son’s business work there, while 19% said he probably did.
- A U.K. lawsuit filed against Google by millions of iPhone users over data-collection claims was given the go-ahead by London appeals judges who overturned an earlier ruling that had thrown out the case. The group, known as Google You Owe Us, were seeking as much as 3.2 billion pounds ($3.9 billion), according to documents filed with the court last year. The organization, which represents more than 4 million people, said the Alphabet Inc. unit unlawfully gathered personal information by bypassing Apple Inc.’s iPhone default privacy settings.
- Flutter Entertainment Plc is buying The Stars Group Inc. in a $6 billion all-share deal to create the world’s biggest online gaming group and take advantage of opportunities in the U.S. after the Supreme Court legalized sports betting. The deal allows the owner of gambling brands Paddy Power and Betfair to cut its reliance on Britain, where tighter rules on fixed-odds betting terminals and higher taxes for online betting have upended the industry. The newly opened American market has sparked a land grab, and the company is turbocharging its effort with the purchase of Ontario-based Stars. The new group’s U.K. presence could nevertheless create competition concerns.
- As China’s once-voracious companies retreat from the global property market, smaller neighbor South Korea is filling the void. Korean investors splurged almost $6.8 billion on international commercial real estate in the year through August, according to CBRE Group Inc., more than four times the amount spent by Chinese firms. And that’s before Seoul-based Mirae Asset Management Co. last month clinched an agreement to buy $5.8 billion of U.S. luxury hotels from China’s Anbang Insurance Group Co. in a deal emblematic of the shifting flow of capital emanating from the world’s most-populous continent.
- Credit Suisse Group AG Chief Executive Officer Tidjane Thiam is devoting more face time to top private bankers and holding talks on boosting pay as he seeks to prevent defections after Iqbal Khan’s exit. Thiam has been reaching out to the best revenue generators at the international wealth business to discuss compensation and career prospects since Khan left in the summer, the people said, asking not to be identified because the matter is private. The CEO is paying particular attention to emerging markets such as Brazil, the Middle East and emerging Europe, the people said.
- U.S. auto sales took a big step back in September, setting the stage for hefty incentive spending by carmakers struggling to clear old models from dealers’ inventory. Results were disastrous for leading Asian automakers Toyota Motor Corp. and Honda Motor Co., which both suffered double-digit declines that were worse than analysts anticipated. While a fuller picture will emerge Wednesday when General Motors Co. and Ford Motor Co. are due to report, the poor performance suggests that overall deliveries of cars and light trucks could come in worse than the 12% drop anticipated by analysts, based on six estimates.
*All sources from Bloomberg unless otherwise specified