October 20th, 2017
Daily Market Commentary
- Having built an impressive lead in artificial intelligence, Canada is keen to do the same in driverless cars — specifically the lidar (laser radar) technology that lets these vehicles see where they’re going. The nation’s main contender is LeddarTech Inc. The Quebec City-based company makes solid-state technology it says is better and cheaper than earlier versions of lidar and sells it to parts makers, which in turn bake it into their hardware.
- Finance Minister Bill Morneau will divest all shares in his family’s company as questions about his personal finances cloud the outlook for the Canadian government’s push to overhaul the tax code. Morneau said Thursday in Ottawa he will place his family’s assets in a blind trust and divest about one million shares of Morneau Shepell Inc., a human resources company founded by his family and that he once led. While the issue is politically explosive, there is no clear sign Morneau violated ethics rules.
- It took a day, but Barrick Gold Corp.’s tentative deal with Tanzania’s government to end a tax dispute at its African subsidiary is becoming clearer. In a press conference and two statements, the world’s largest gold producer revealed that Acacia Mining Plc would pay Tanzania’s government $300 million and divide the future “economic benefits” of its mining operations in the African nation.
- European stocks rise, trimming their first weekly loss in six, amid earnings reports and optimism about the prospect for U.S. tax cuts. The Stoxx Europe 600 Index adds 0.3%, led by mining shares, after yesterday’s biggest drop since August.
- The dollar climbed and Treasuries fell after the latest developments in Washington buoyed optimism about the chances for tax reform and odds rose that an insider may become the next Fed chief. The greenback jumped against all its G10 peers after the U.S. Senate adopted a budget resolution, giving impetus to President Donald Trump’s planned tax cuts.
- Asian stocks were mixed as Japan’s market erased a decline after political developments in Washington led to a weaker yen. The MSCI Asia Pacific Index was little changed at 166.91 at 4:43 p.m. in Hong Kong.
- A surge in crude prices faded as Iraq sought to restore flows from fields in a disputed region after violence had curbed output in OPEC’s second-biggest producer. Futures fell 0.9 percent in London, further eroding the gain of 3.4 percent from last Friday through Wednesday as tensions flared in the Kirkuk province.
- Gold heads for fifth weekly drop in six as the dollar gains after a U.S. Senate vote gave renewed momentum to President Donald Trump’s tax cut plans.
- General Electric Co. slashed its 2017 profit forecast as its new boss grapples with one of the deepest slumps in the beleaguered manufacturer’s history. The revision underscores the severity of the challenges facing Chief Executive Officer John Flannery, who took over Jeffrey Immelt’s longtime post in August. With hurdles from poor cash flows to slumping power-generation markets, GE is by far the biggest loser on the Dow Jones Industrial Average this year and has seen a quarter of its market value evaporate.
- A potentially explosive battle is brewing over a seldom-discussed aspect of the looming MiFID II laws, which will force traders of any European asset class to hand over personal identification such as passport numbers to every venue they trade on. The massive data-collection exercise will drag in tens of thousands of investors and traders, who some trading venues say may simply refuse.
- Daimler AG and Volvo AB, the world’s two biggest makers of commercial vehicles, reported robust profit gains as a recovery in truck demand gathers steam in North America and Asia. Volvo’s third-quarter adjusted earnings before interest and taxes surged 45 percent to 7.02 billion kronor ($862 million), the Gothenburg, Sweden-based company said Friday, beating analyst estimates and propelling the stock to an all-time high.
- As the Catalonia conflict enters uncharted territory, both sides are upping the ante. Officials in Madrid are finalizing plans for taking control of the rebel region. They’ll be rubber-stamped at an extraordinary cabinet meeting on Saturday when Prime Minister Mariano Rajoy returns from a summit in Brussels, where he’s looking to shore up his support among European leaders. The Catalans meanwhile are working out how they might stage a unilateral declaration of independence.
- Negotiators from Asia-Pacific nations are gathered in Vietnam to push forward trade deals while mindful that the U.S. could be a spoiler as it toughens its stance. “Trade has been an issue where the drafting has become somewhat more complicated in the last few international meetings,” Angel Gurria, Organization for Economic Cooperation and Development secretary general, said in an interview on Friday. “This is something we still are trying to find, I think, common ground.”
- The Senate adopted a fiscal 2018 budget resolution Thursday that House GOP leaders agreed to accept, a show of unity aimed at speeding consideration of President Donald Trump’s plan to enact tax cuts. The budget cleared the Senate 51-49, with all Democrats and Republican Senator Rand Paul of Kentucky voting against it.
- Noble Group Ltd. suspended its shares from trading in Singapore on Friday pending the announcement of a major transaction, with the commodity trader seeking to clinch a sale of its oil-trading unit in a deal that may be critical to the company’s prospects for survival. The stock was halted at 38 Singapore cents, 2.6 percent lower, after the Hong Kong-based company’s announcement, which was released just after midday in the city-state, and didn’t give details of the planned deal.
- Sprint Corp. and T-Mobile US Inc. may delay an announcement of their planned all-stock merger until several weeks after they release their quarterly earnings, people familiar with the matter said. The companies have been trying to complete a deal in time for their earnings announcement, said the people, who asked not to be identified because the negotiations are private. It now appears unlikely they’ll be able to finalize details by the end of October, when the wireless carriers typically announce earnings, the people said.
- German Chancellor Angela Merkel offered Theresa May the political cover she’s been asking for to take further steps in Brexit talks, calling on both sides to move so that a deal can be reached by year-end. The U.K. prime minister, who was upbeat about the prospect of reaching a good deal, offered a shade more clarity on the divorce bill, and said negotiating teams would continue to hash out the details.
- Investors are getting plenty of chances this month to tap one of the best-performing segments of the year’s initial public offerings: Asia-based companies listing in the U.S. Thirteen Asian companies have raised $2.1 billion in U.S.-listed IPOs and seen their shares climb 47 percent since their listings this year, according to weighted-average share price data compiled by Bloomberg. That compares to an 11 percent climb for the 105 U.S. businesses that listed domestically and raised a combined $23.6 billion.
- Singapore’s Sea Ltd. plans to price shares at $15 in its initial public offering and raise more than $850 million, according to people familiar with the matter. The total amount may be more than $1 billion if an option to sell additional shares is exercised, said one of the people, asking not to be identified because the matter is private.
- Red Kite Management Ltd., the world’s largest metals hedge fund, is suing Barclays Plc for alleged market abuse in the copper market that it claims cost the firm at least $850 million between 2010 and 2013. The case pits a $2 billion hedge fund against a bank that has been hit by a number of scandals in previous years, including large fines for manipulating Libor, the benchmark for interest rates.
- South32 Ltd. is studying a potential bid for Rio Tinto Group’s A$2 billion ($1.6 billion) coking coal portfolio, people familiar with the matter said, as it seeks to take advantage of surging prices for the steelmaking ingredient.
- Swiss Re AG, the world’s second-largest reinsurer, expects about $3.6 billion in claims resulting from a series of natural disasters that have made 2017 one of the most costly years in history for the industry. The company on Nov. 2 will update investors on the impact hurricanes Harvey, Irma and Maria and earthquakes in Mexico will have earnings for the first nine months, Swiss Re spokeswoman Stefanie Weitz said by phone. It will also provide an update on dividends and the status of a share buyback.
- Pearson Plc is in advanced talks to sell its English language training business to a consortium including Baring Private Equity Asia Ltd. and Chinese private equity fund Citic Capital Holdings Ltd., according to people familiar with the matter. A deal could value Wall Street English, which offers language training to adults in centers throughout China, at about $390 million, including debt, the people said, asking not to be identified because the discussions are confidential. North Asian buyout fund MBK Partners has also expressed interest in buying the business, the people said.
- Japanese life insurers, which hold around $740 billion in foreign assets, may reduce currency hedging as the cost of doing so increases with the Federal Reserve pushing up U.S. interest rates. The companies, many of which unveil their second-half investment plans next week, will probably buy more Treasuries if U.S. yields keep rising, according to PineBridge Investments Japan Co. A reduction in hedging may further weigh on the yen, which has dropped against all its major peers in the past six months.
- Honeywell International Inc. posted expanded profit margins and the biggest sales gain in three years as new Chief Executive Officer Darius Adamczyk prepares to shed two businesses. Sales from existing operations rose 5 percent in the third quarter — accelerating a turnaround from 2016 declines — thanks to increases at the aerospace and energy units. That’s the biggest improvement since a similar increase in the third quarter 2014.
*All sources from Bloomberg unless otherwise specified