October 18th, 2017

 

Daily Market Commentary

Canadian Headlines

• Canadian stocks edged closer to an all-time high as an aerospace deal sent Bombardier Inc. shares soaring and the telecom sector rose ahead of earnings. The S&P/TSX Composite Index added 14 points or 0.1 percent to 15,816.90, the highest close since February. Telecom shares led the way, gaining 0.7 percent. Rogers Communications Inc. will report third-quarter results later this week.
• Nafta talks are switching gears and slowing down as key obstacles emerge, with Canada and Mexico rejecting what they see as hard-line U.S. proposals and negotiators exchanging their strongest public barbs yet. U.S. Trade Representative Robert Lighthizer, Mexican Economy Minister Ildefonso Guajardo and Canadian Foreign Minister Chrystia Freeland wrapped up the fourth round of North American Free Trade Agreement talks in Washington on Tuesday and said negotiations will run through the end of March 2018, abandoning a December target.
• By relinquishing control of its C Series jets to longtime rival Airbus SE, Bombardier Inc. is scaling back its ambitions to build jetliners for the world’s airlines. The deal marks a step away from what had been touted as the crown jewel of Canada’s biggest aerospace company before it was tarnished by cost-overruns and trade disputes. With the future of the C Series now up to Airbus, the Montreal-based manufacturer is likely to sharpen its focus on private jets and trains -– two businesses with higher margins.
• Canada’s banking regulator released final rules that will make it tougher for borrowers to take on uninsured mortgages, adding to a growing list of measures to rein in the nation’s housing markets. The Office of the Superintendent of Financial Institutions announced measures targeting borrowers in the uninsured segment of the mortgage market that has been responsible for the bulk of growth recently. A mortgage doesn’t need to be insured against default if the borrower makes a down payment of at least 20 percent.

 

 

World Headlines

• The euro headed for its longest losing streak in almost a year as a deadline on Catalonia’s independence looms. Stocks in Europe advanced, while the dollar continued to strengthen helped by speculation that the next Federal Reserve chair will be more hawkish. The Stoxx Europe 600 Index rose led by technology shares, following mixed trading in Asia earlier.
• The greenback advanced as volatility in major currencies fell to a three-month low, while Treasury yields rose. The pound extended a decline amid more headwinds for Brexit negotiations.
• Asian equities fluctuated, with health-care companies tracking an earnings-fueled rally by U.S. peers that helped the S&P 500 Index to close at a fresh record. The MSCI Asia Pacific Index was little changed at 167.42 as of 4:38 p.m. in Hong Kong amid the start of a twice-a-decade congress for China’s Communist Party to reshuffle power and set key policies.
• Oil extended gains as signs of declining U.S. stockpiles pointed to healthy demand while investors weighed potential disruptions to supply because of global geopolitical tensions. Futures in New York rose as much as 0.6 percent after adding 2.5 percent in the past three sessions. An industry report showed U.S. inventories fell last week, with government data Wednesday forecast to show a fourth straight drop.
• Gold extended a drop from near a 3-week high as speculation that the next Federal Reserve chairman will favor higher rates supported the dollar. Palladium’s premium over platinum widened.
• U.K. unemployment held at a 42-year low in the three months through August and the number of people in work approached a record high, according the figures published Wednesday. The latest snapshot of the labor market from the Office for National Statistics may help to explain why the Bank of England appears to be edging toward its first interest-rate increase for a decade.
• Russia’s central bank will discuss a decrease in its key interest rate of as much as half a percentage point next week after it restarted easing following a pause, the head of its monetary-policy department said on Tuesday. Reductions of 25 or 50 basis points will probably be under consideration at a meeting on Oct. 27, according to Igor Dmitriev, who reports directly to Governor Elvira Nabiullina. Policy makers cut the benchmark to 8.5 percent from 9 percent in September.
• Foxconn Technology Group and venture firm IDG Capital are seeking to raise a 10 billion yuan ($1.5 billion) fund to seed startups in automotive technologies from self-driving AI to battery development, according to a presentation for investors. Foxconn and IDG initiated talks with government-backed funds, financial institutions and financiers several months back, according to a document presented to potential investors seen by Bloomberg.
• Angela Merkel is facing pressure to put her stamp on Germany’s next government as the chancellor begins talks on uniting four disparate parties into a coalition to govern Europe’s biggest economy. Almost a month after her Christian Democratic-led bloc emerged weakened from a national election, Merkel meets separately with the pro-market Free Democratic Party and the Greens on Wednesday to sound out the potential for a pact on cabinet posts and policy. It’s an untested combination at the national level, making the stakes that much higher and putting the onus on Merkel’s consensus-building skills.
• The U.S. Securities and Exchange Commission is preparing to give Wall Street a reprieve by telling financial firms they won’t have to overhaul their operations to comply with sweeping new European rules governing investment research, said three people familiar with the matter. By the end of the month, the SEC is expected to provide formal assurances that it won’t object if brokerages break out the cost of market analysis for their European clients, rather than bundling it together with other services, the people said. Europe is requiring that brokers charge separately for research, but doing so could violate U.S. regulations.
• Belgium’s government has picked investment banks to advise on an initial public offering for Belfius Bank SA that people familiar with the matter said could raise about 2.5 billion euros ($2.9 billion). Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and UBS Group AG will work with local banks on the share sale, the Belgian Finance Ministry confirmed after Bloomberg reported the selection of the four.
• Transocean Ltd. is finally sending Pathfinder to its grave, after two years in a Caribbean purgatory that cost about $15,000 a day. The move by the world’s biggest offshore-rig operator signals just how bleak the future looks for deepwater drilling. Pathfinder is the most famous of six floating rigs the company is scrapping in burials that will add up to a bruising $1.4 billion write-off. Competitors are going the same route, jettisoning more rigs in the third quarter than have ever been trashed in a 90-day stretch, according to Heikkinen Energy Advisors analyst David Smith.
• Assurant Inc., a provider of home and mobile-phone insurance, agreed to acquire Warranty Group Inc. from buyout firm TPG. The deal values Warranty Group at about $2.5 billion including debt, according to a statement Wednesday. Assurant will pay about $1.5 billion in stock and $372 million in cash, as well as assuming almost $600 million in Warranty Group’s debt.
• Toyota Motor Corp. is set to unveil a fuel-cell concept car that aims to offer 50 percent more driving range than its current hydrogen-powered sedan in a technology push that defies a rising wave of battery-driven vehicles. Japan’s biggest auto manufacturer is targeting a 1,000-kilometer (620-mile) range for the Fine-Comfort Ride concept saloon under local standards, compared with about 650 kilometers for the current Mirai fuel-cell vehicle, according to a statement Wednesday.
• Rio Tinto Group’s calamitous $3.7 billion coal deal in Mozambique, involving a plan to barge the fuel hundreds of kilometers down the Zambezi River, keeps coming back to haunt the world’s second-biggest miner — already grappling with another African misadventure.
• Senators may have struck a bipartisan deal to prop up Obamacare’s insurance exchanges, but it faces a tortuous path to becoming law. As soon as the deal was announced Tuesday, the Trump administration was sending conflicting signals about the pact reached by Republican Senator Lamar Alexander of Tennessee and Democrat Patty Murray of Washington, which also faces ambivalence from some Republican senators and outright hostility from many House Republicans.
• The U.K. retail industry’s Brexit-linked turmoil deepened as J Sainsbury Plc said it would cut as many as 2,000 jobs, Zalando SE said the market is losing attractiveness and rival online fashion site Asos Plc discussed contingency plans.
• Prysmian SpA, the world’s largest maker of industrial cables, is preparing to make an all-cash offer for its American rivalGeneral Cable Corp., according to people familiar with the matter. Milan-based Prysmian, which supplies mainly the energy and telecommunications industries, may offer a 20 percent premium to General Cable’s stock price before Oct. 2, when Bloomberg News reported its interest, said the people, who asked not to be named discussing the negotiations. That would value the target, based in Highland Heights, Kentucky, at just above Tuesday’s U.S. closing stock price of $22.40 a share, or $1.11 billion.
• Signs of global dollar-funding pressures are bubbling up in currency derivatives, making it costlier for international investors to protect against swings in the greenback when they buy U.S. debt. Cross-currency basis swaps, which money managers and corporate treasurers outside the U.S. can use to borrow in dollars, remain close to the widest levels since January even after quarter-end, when such financing strains typically dissipate. The market was a key indicator of stress during the financial crisis, and while it’s nowhere near the alarming levels of that era, it’s still garnering the attention of analysts.
• Asatsu-DK Inc.’s chief executive officer said he is determined to sever an alliance with top stockholder WPP Plc, seven months after the world’s largest advertising agency called on share owners to vote him out. CEO and President Shinichi Ueno said in an interview that the two-decade old WPP partnership is over and Asatsu-DK is looking for new tie-ups in the industry, the latest salvo in a battle re-ignited by Bain Capital LP’s $1.3 billion bid to buy the Japanese company two weeks ago.
• Qudian Inc., a Chinese online loan provider, raised $900 million in its initial public offering, the fourth-biggest U.S. share sale so far this year. The company sold 37.5 million American depositary shares for $24 apiece, according to data compiled by Bloomberg, after marketing them for $19 to $22 each.

 

 

 

*All sources from Bloomberg unless otherwise specified