October 22nd, 2018
Daily Market Commentary
- Rotating strikes at Canada’s state-owned mail carrier will start in four cities early Monday unless a last-minute deal over collective agreements is reached, according to the union involved in the negotiations. The strikes will last 24 hours and could delay mail delivery, the Canadian Union of Postal Workers said in a statement. The work stoppages will begin at 12:01 a.m. local time in Windsor, Ontario, as well as in Edmonton and Victoria. In Halifax, it will start at 1:01 a.m., the union said.
- Boom times are back for at least one company in Canada’s oil heartland. Canadian Pacific Railway Ltd. may match or exceed its record 2014 pace of 110,000 crude carloads next year as a pipeline crunch stokes demand for shipping by train, Chief Executive Officer Keith Creel said late Thursday in an interview from Calgary, where the company is based.
- On the bright side, everything that was down last week in Europe is up today. The catch is that many of these recoveries are starting to resemble a dead-cat bounce. The Stoxx Europe 600’s strong open on Monday began to falter as Italy’s relief rally faded. The country’s populist leaders hinted at a softer stance on the budget and Moody’s Investors Service at least didn’t downgrade its debt to junk, but now the FTSE MIB is up just 0.3 percent, after surging as much as 2 percent earlier.
- U.S. equity futures advanced alongside European stocks after Chinese officials pledged to support the world’s second-biggest economy, helping to kick start a rally in Asia. The dollar and Treasuries were steady, while Italian bonds rose. Risks still abound across global markets, from the continuing U.S.-China trade showdown and tension surrounding the killing of a Saudi journalist to Italian budget fears and President Donald Trump’s unpredictable actions ahead of American midterm elections.
- After all that anxiety and anticipation for Monday’s open on Chinese stocks, here we are: the biggest surge in over two years for Shanghai shares, and a more than 2 percent rebound in Hong Kong. But that’s about it. The MSCI Asia Pacific Index has swung between gains and losses this morning, eking out a meager 0.4 percent advance as of 4:33 p.m. in Singapore. Japan’s Topix index erased its earlier loss to end little changed. And really, no other market in the region has rallied the way they did in Hong Kong and China.
- Brent steadied near $80 a barrel as Saudi Arabia dismissed using its oil wealth as a political tool following the killing of journalist Jamal Khashoggi. Futures in London rose as much as 0.8 percent. Saudi Arabia’s Energy Minister Khalid Al-Falih said his country has used its oil responsibly and separated it from politics, according to an interview with Russia’s TASS news agency. He said the kingdom has no intention of repeating the 1973 oil embargo, in which it and several regional allies squeezed supplies to the U.S. and Europe.
- Gold held an advance as investors weighed measures to buoy China’s stock market with signs that a trade war between the Asian country and the U.S. isn’t letting up. White House economic adviser Larry Kudlow accused China of doing “nothing” to defuse the spat, the Financial Times reported. Equities in Shanghai surged the most since March 2016 after verbal support from authorities, plans to cut personal income taxes and President Xi Jinping’s vow of “unwavering” support for the country’s private sector.
- Qatar Petroleum plans to raise about 2.7 billion riyals ($751 million) by selling 49 percent of its stake in an aluminum plant it owns with Norsk Hydro ASA, with subscription open only to Qatari citizens. State-owned Qatar Petroleum, which formed Qatar Aluminum Manufacturing Co. to hold its 50 percent stake in the Norsk Hydro joint venture, will sell almost half of the entity to the public next week at 10.1 Qatari riyals a share, QP’s Chief Executive Officer Saad Sherida Al Kaabi told reporters in Doha.
- President Donald Trump has promised a new middle-income tax cut plan to land days before the midterm election, a move aimed at boosting his party’s chances of holding its Congressional majorities — yet Republican tax policy-makers know nothing about it. Party leaders were caught off-guard by Trump’s comments, made Saturday after a rally in Nevada, that “we’re looking at a major tax cut for middle income people,” and that House Republicans, including Speaker Paul Ryan, are working on a possible bill.
- Ukraine is preparing to sell Eurobonds after clinching a new $3.9 billion loan program with the International Monetary Fund that should reassure investors fretting the country will follow other developing peers into crisis. The government has mandated BNP Paribas SA, Citigroup Inc., Goldman Sachs Group Inc. and JPMorgan Chase & Co. to organize a sale of 10-year dollar debt and a roadshow to start in London and the U.S. this week, according to a person familiar with the matter who isn’t authorized to speak publicly and asked not to be identified. Investment bank Dragon Capital in Kiev said Monday that Ukraine may seek to raise $1.3 billion to $2 billion by the end of November.
- Fiat Chrysler Automobiles NV agreed to sell its car-parts unit, Magneti Marelli, to KKR & Co.’s Calsonic Kansei in the first major deal for the Italian-American carmaker under new Chief Executive Officer Mike Manley. The transaction, valued at 6.2 billion euros ($7.1 billion), will create Japan-based Magneti Marelli CK Holdings, according to a statement Monday. Beda Bolzenius, chief executive officer of the acquirer, will lead the combined entity, which will supply components to Fiat Chrysler through a multiyear agreement. The Italian business will remain in Milan, according to a statement Monday.
- The U.K. is blurring more red lines in the Brexit negotiations, raising the chances of clinching a deal but also heightening the danger Theresa May will be toppled before she can deliver it. On Monday, the prime minister will face angry lawmakers as she defends in Parliament the progress she’s made in talks so far. She’ll say that headway made over the past three weeks means a divorce deal is 95 percent done. But it’s the trickiest part that’s outstanding.
- Ivan Glasenberg, who built Glencore Plc into a dominant force in commodities trading and became the face of the industry, told investors he plans to retire in three to five years, according to people familiar with the matter. Glasenberg discussed his succession plan in recent meetings and said he has started training three to four front runners as the next chief executive officer, said the people, who asked not to be identified because the conversations were private. Glasenberg, who turns 62 in January, anticipates retiring between the ages of 65 and 67, and believes the next leader should come from a younger generation, the people said. A spokesman for Glencore declined to comment.
- Nidec Corp., a Japanese supplier to Apple Inc., and Germany’s Schaeffler AG are among bidders competing for Taiwanese components maker Precision Motion Industries Inc., according to people familiar with the matter. Nidec and Schaeffler are conducting due diligence as they weigh binding offers for the closely held company, the people said, asking not to be identified because the matter is private. The potential sale, which has also attracted buyout firms, could value the Taichung-based firm at more than $1 billion, said the people.
- China’s attempts to find new investors for Anbang Insurance Group Co. are gathering pace, as Cerberus Capital Management LP to Swiss Re AG size up the embattled insurer and its overseas operations. Cerberus and Swiss Re are among parties that have held preliminary discussions about buying a stake in Anbang, people with knowledge of the matter said. Temasek Holdings Pte has separately held on-and-off talks over the past several months about investing in Anbang and some of its assets, Bloomberg News reported last week.
- Jacobs Engineering Group Inc. agreed to sell its energy, chemicals and resources unit to Australia’s WorleyParsons Ltd. for $3.3 billion to focus on its higher growth and margin aerospace and infrastructure businesses. Jacobs will get $2.6 billion in cash and about 58.2 million WorleyParsonsshares, worth around $700 million and equal to about 11 percent of its stock, the Dallas-based company said in a statement. The deal is expected to close in the first half of 2019.
- The European Union and U.S. are reviewing their trade ties, spurred by U.S. accusations that the bloc is duping American businesses. But don’t expect a complete overhaul of their more than $1 trillion commercial relationship anytime soon. Even though President Donald Trump notified Congress Oct. 16 that the U.S. intends to begin official trade talks with the 28-nation EU, formal negotiations are yet to get underway and quarreling between the two sides signals an arduous process lays ahead.
*All sources from Bloomberg unless otherwise specified