October 17th, 2017
Daily Market Commentary
- Canadian stocks were less than 150 points shy of their closing record as gains in oil and copper drove a gauge of commodities to its highest level in six months. The S&P/TSX Composite Index fell 4.5 points or less than 0.1 percent to 15,802.70 at the market close in Toronto. Information technology stocks were the biggest gainers, rising 0.6 percent.
- Bombardier Inc. discussed a potential sale of a stake in its C Series program with Chinese firms before reaching a pact with European giant Airbus SE, according to people familiar with the talks. Airbus announced Monday it acquired a majority stake in the jet project for nothing, reshaping the airline sector amid a trade dispute with Chicago-based Boeing Co.
- The U.S. wrapped up the fourth round of Nafta trade talks with a bombshell proposal to dismantle Canada’s dairy sector, adding to a list of demands its trading partners say would be impossible to accept as negotiations grow more fraught. The proposal delivered Sunday would effectively kill Canada’s so-called supply management system by fully eliminating tariffs on supply-managed products over 10 years.
- Brookfield Asset Management Inc., Canada’s biggest alternative-asset manager, bought a controlling stake in TerraForm Power Inc.from the bankrupt clean-energy giant SunEdison Inc. For every share, investors were offered $9.52 in cash or the option of keeping stock following the close of the merger, according to a statement issued Monday.
- Canada’s largest stock exchange may delist marijuana stocks that run afoul of U.S. federal law which considers the drug illegal. The Toronto Stock Exchange will contact all companies that cultivate, distribute or possess marijuana, or offer services related to the drug in any jurisdiction, by the end of the year. If they’re found to be in violation of U.S. federal law, they could ultimately be delisted.
- European stocks are little changed as investors assess earnings reports from companies including Pearson and Merlin Entertainments. The Stoxx Europe 600 Index adds less than 0.1%. Pearson jumps 7.8% after saying full-year operating profits would be in the upper half of its earlier forecast, while Merlin slumps 18% after projecting 2017 Ebitda below analysts’ estimates.
- Asia’s regional stock benchmark was little changed, holding near its highest level in 10 years, while a gauge of mining stocks advanced after Rio Tinto Group signaled it’s on track for record annual iron ore shipments.
- Rising tensions in OPEC’s second-biggest producer as Iraq’s government violently clashes with the semi-autonomous Kurdish region are sustaining oil’s gains, for now. Fighting in Kirkuk, home to Iraq’s oldest-producing fields, has shut production from two deposits that pump a combined 275,000 barrels a day.
- Gold slipped and palladium failed to hold gains above $1,000 after data signaled resilience of U.S. economy, supporting case for continued increase in interest rates.
- Long copper, short iron may prove to be one the commodity trades of the year. While both are staples of the raw materials world for infrastructure and consumer products, they’re taking very different paths in 2017 as the red metal surges and the material used in steel retreats. Three-month copper burst above $7,000 a metric ton on the London Metal Exchange this week to the highest since 2014.
- U.S. inflation will accelerate in the year ahead, making bonds linked to consumer prices cheap relative to other debt, according to Pacific Investment Management Co. There are signs of wages picking up in different industries and regions in the U.S., though this hasn’t yet spilled over to inflation, Scott Mather, Pimco’s chief investment officer for core fixed-income strategies, said in Seoul, where he’s attending a forum.
- Morgan Stanley beat Wall Street expectations for third-quarter results Tuesday, reporting earnings of $0.93 per share. Morgan Stanley produced strong results despite the heavy, but not unexpected, hit to its trading business. While fixed income, currencies, and commodities (FICC) trading declined 20%, equities trading was relatively even compared to last year with revenues coming in at $1.9 billion.
- While competitors race to catch up with Netflix Inc., the largest online TV service in the world is adhering to a simple strategy to maintain its lead: you have to spend money to make money. The streaming pioneer will deploy as much as $8 billion on programming next year, as much as a third more than in 2017. The increase alone is almost as much as HBO spends annually. Netflix, based in Los Gatos, California, will also pony up more than $1 billion for marketing.
- Kobe Steel Ltd. said it will co-operate with the U.S. Department of Justice after the agency requested documents related to the fake data scandal that risks engulfing Japan’s third-biggest steelmaker. Kobe has said some 500 companies worldwide are in a supply chain tainted by admissions that it falsified certifications on the strength and durability of metals going back to 2007, including automotive giants Ford Motor Co. and General Motors Co. and the U.S.’s biggest plane maker, Boeing Co.
- Spain cut its economic forecast for 2018 as the costs of the Catalan crisis begin to mount. Output will grow by 2.3 percent next year instead of the 2.6 percent previously projected, the economy ministry said in an emailed statement just before midnight, citing the impact of the political standoff in Catalonia, which accounts for a fifth of Spain’s gross domestic product, and the related struggle to approve a budget.
- Credit Suisse Group AG’s biggest shareholder on Tuesday dismissed a proposal by a small Swiss activist investor to break up the country’s second-largest bank, saying the current strategy is beginning to pay off. Swiss hedge fund manager Rudolf Bohli, whose RBR Capital Advisors has taken a 0.2 percent stake in Credit Suisse, has “hardly any skin in the game,” David Herro, who says his Harris Associates holds 9 percent of the Swiss bank.
- Airbus SE’s acquisition of a majority stake in Bombardier Inc.’s C Series plane threatens to leave Boeing Co. trailing in the race to develop a new generation of more advanced short-haul jets. At one level, the deal, announced overnight Monday, appears to be a neat way of providing Airbus with a smaller narrow-body aircraft fitting below its own A320-series models and competing with the smallest variants of Boeing’s 737 workhorse.
- HNA Group Co., the Chinese conglomerate engaged in businesses spanning aviation to hospitality, plans to spend 50 billion yuan ($7.6 billion) to build up an online travel service to eventually challenge Ctrip.com International Ltd. The Hainan-based company, which introduced a mobile travel app called HiApp on Tuesday in Beijing, plans to invest the money in startups and acquisitions related to travel, Tong Fu, a director on the board of HNA Group, said in an interview in Beijing.
- Toys “R” Us Inc., the retailer that filed for bankruptcy in North America, has been exploring options for its growing Asian business including a potential initial public offering, people with knowledge of the matter said. The U.S. chain and its local joint venture partner, the billionaire Fung brothers, have been speaking with investment banks to study the feasibility of listing the Asian business on the Hong Kong bourse, according to the people. A deal could value the unit at as much as $2 billion, the people said, asking not to be identified because the information is private.
- A key dynamic that’s been holding down bond yields since the global financial crisis is poised to ease next year — presenting a test to riskier parts of the market, according to analysis by Oxford Economics. In the aftermath of the crisis, banks and shadow financial institutions in developed economies sharply cut back their issuance of bonds, to the tune of about $4 trillion, according to the research group’s tally.
- UnitedHealth Group Inc. said that medical spending by the health insurer’s customers fell in the third quarter, a signal of potentially higher profits at other insurers who report in the coming weeks. The company is the U.S.’s biggest health insurer as well as the first to post third-quarter results. While the decline in medical costs is likely to be seen as good news among its rivals, it’s also a warning for hospitals and other health-care providers for whom that signals lower volumes of business.
- Dalian Wanda Group Co. plans to proceed with a $1.2 billion luxury condominium and hotel complex in Beverly Hills, California, after its development partner, Athens Group, said it exited the project early. Neither Wanda nor Athens would comment on the reasons for the separation, which happened earlier this year and leaves Wanda without a development partner just as condo sales are about to begin.
- Sinclair Broadcast Group Inc. received bids for as many as 10 television stations that could fetch up to $1 billion as it takes steps to win approval of its proposed merger with Tribune Media Co., people familiar with the matter said. Preliminary bids for the stations were submitted last week, said one of the people, who asked not to be identified because the process wasn’t public. Sinclair may sell some or all of the outlets, all in different markets, the people said.
- Takeda Pharmaceutical Co. is considering a potential sale of some of its European pain drug assets, as the Japanese drugmaker seeks to trim its portfolio and raise cash to protect its credit ratings, according to people familiar with the matter.
*All sources from Bloomberg unless otherwise specified