October 23, 2017
Daily Market Commentary
- President Donald Trump’s threat to tear up the North American Free Trade Agreement is falling on deaf ears in Canadian markets. Magna International Inc. and other Canadian companies that rely on trade with the U.S. and Mexico are rising even as Trump attacks the “worst trade deal ever made” and negotiators exchange barbs over “troublesome” U.S. demands to overhaul the pact. Canadian stocks are on the cusp of a record high, while the loonie has gained 6.4 percent this year versus the U.S. dollar.
- If he wants, Stephen Poloz can say he has some wiggle room on rates. How quickly the economy can expand without triggering inflation is one of the key questions Bank of Canada policy makers are asking ahead of Wednesday’s rate decision and monetary policy report. The faster they believe it can run before overheating, something Governor Poloz may indicate this week, the longer he can afford to wait on raising interest rates.
- European stocks are little changed as investors assess corporate earnings, while tensions in Catalonia weigh on Spanish equities. The Stoxx 600 adds less than 0.1%, led by health care, after ending last week with its first weekly decline in six. Spain’s IBEX 35 Index drops 0.5%, after Spanish Prime Minister Mariano Rajoy announced plans to clear out the entire separatist administration in Barcelona and take control of key institutions.
- Dollar strengthens and 10-year Treasury yields hover near 2.40 percent on optimism President Donald Trump is close to pulling off a tax overhaul and may soon select the next Fed chief.
- Asian stocks were set to gain for the first time in five days, with Japanese equities rising as Prime Minister Shinzo Abe’s ruling coalition maintained its majority in the nation’s general election.
- Oil traded near $52 a barrel as OPEC reported record compliance with pledged production cuts and U.S. drilling slowed again. December futures were little-changed in New York. OPEC and its partners including Russia achieved a record-high level of compliance to output cuts during September.
- Gold extending losses after the dollar strengthened and an election victory for Japanese Prime Minister Shinzo Abe dented haven demand.
- China home prices rose in the fewest cities since January 2016, adding to signs of a property slowdown as curbs on buyers bite. New-home prices, excluding government-subsidized housing, in September rose in 44 of 70 cities tracked by the government, compared with 46 in August, the National Bureau of Statistics said on Monday. Prices fell in 18 cities from the previous month and were unchanged in eight.
- A day after a landslide election victory, Prime Minister Shinzo Abe pledged to seek a broad consensus on revising Japan’s 70-year-old pacifist constitution and reiterated there was no fixed schedule for change. Abe, 63, saw his ruling coalition retain its two-thirds majority in the 465-member lower house on Sunday, bolstering his chances of staying in office through 2021. While the margin of victory makes it easier to change the constitution, any shift could spark unease in China and South Korea, where memories of Japan’s past aggression run deep.
- Ryanair Holdings Plc’s pilot uprising shows little signs of abating, with an ad-hoc group demanding that a wage increase turned down by London Stansted crews be doubled and extended across the budget airline’s European bases. The unofficial European Employee Representative Council made the proposal to pilots after cockpit crews at Ryanair’s biggest base rejected the existing offer, according to a document sent to pilots on Sunday and seen by Bloomberg. The group has asked for feedback from air crew and pledged to organize strikes if a deal can’t be reached.
- Noble Group Ltd. warned of a more than $1 billion third-quarter net loss as it agreed to sell most of its oil business to Vitol Group, prolonging the embattled commodity trader’s survival while highlighting the challenges ahead. The long-awaited deal to sell its prized oil-trading unit provided little immediate relief to the Hong Kong-based company — shares fell the most in three months on Monday as Noble said it would lose money on the deal.
- Russian billionaire Oleg Deripaska’s En+ Group Plc announced a price range for its initial public offering, indicating a valuation as high as $8.5 billion before it issues new shares. En+ wants to sell shares and global depositary receipts in Moscow and London at $14 to $17 apiece, the company said in a statement on Monday. This implies a pre-IPO value between $7 billion and $8.5 billion. The offering is expected to represent between 15.8 percent and 18.8 percent of the issued share capital on a fully diluted basis, excluding the over-allotment option.
- HelloFresh, the meal-kit startup backed by Rocket Internet SE, is targeting a market valuation of as much as 1.5 billion euros ($1.8 billion) in an initial public offering this week, the company said in a statement Sunday. The company, which sells meal kits in 10 markets and remains unprofitable, set a price range of 9 to 11.50 euros a share. It’s looking to raise 243 million to 311 million euros to invest in expanding its business. The shares are expected to start trading in Frankfurt Nov. 2.
- Cisco Systems Inc. is close to a deal to acquire software maker BroadSoft Inc., according to people with knowledge of the situation. A deal could be announced as soon as Monday, the people said, asking not to be identified because the details aren’t public. BroadSoft, which has a market value of about $1.7 billion, has been working with Jefferies Group to seek suitors. It earlier attracted interest from buyout firms Searchlight Capital Partners and Siris Capital Group, people familiar with the matter said Oct. 4.
- Linde AG, seeking to save a planned $41 billion tie up with Praxair Inc. to create the world’s biggest industrial gas supplier, lowered the number of shares that its stockholders need to tender for the deal to go through, after struggling to reach a previous level before a looming deadline. The new minimum threshold of 60 percent has to be reached by Nov. 7, the Munich-based company said in a statement on Monday. The previous requirement was for three quarters of its shares to be tendered by Tuesday.
- Royal Philips NV said surging sales in China helped lift the Dutch health-equipment company’s profit by 12 percent in the third quarter. Adjusted earnings before interest, taxes and amortization increased to 532 million euros ($626 million), the maker of medical scanners and diagnostic gear said in a statement on Monday. Sales rose 4 percent on a comparable basis to 4.1 billion euros, missing the average estimate of analysts surveyed by Bloomberg of 4.23 billion euros.
- Arqiva Group Ltd., a U.K. communications-infrastructure provider, plans this year’s biggest initial public offering by a British company after scrapping an attempt to find a buyer. The company intends to sell stock valued at 1.5 billion pounds ($2 billion) and list its shares on the London Stock Exchange, it said in a statement Monday. An IPO, potentially the largest by a U.K. company since that of ConvaTec Group Plc last year, could value the business at about 6 billion pounds including debt, according to people with knowledge of the matter.
- Singapore, among the world’s most expensive places to own a vehicle, will stop increasing the total number of cars on its roads next year. The government will cut the annual growth rate for cars and motorcycles to zero from 0.25 percent starting in February, the transport regulator said on Monday.
- China Literature Ltd., the online reading unit of Tencent Holdings Ltd., has started taking investor orders for a Hong Kong initial public offering that could raise as much as $1.1 billion. The operator of the QQ Reading app and existing investors are offering 151 million shares at HK$48 to HK$55 apiece, according to terms for the deal obtained by Bloomberg. The company will take investor orders Monday through Oct. 31 and aims to begin trading Nov. 8, the terms show.
- Ever since the price of oil collapsed in mid-2014, there’s been a broad consensus among the bond-market crowd that Venezuela was going to default. Not immediately, they said, but at some point down the road. Three years on, that time may have arrived. On Friday, the government-run oil giant PDVSA owes $985 million. Six days later, it’s on the hook for another $1.2 billion. Not only is that a daunting sum for a country whose foreign-currency reserves recently dipped below $10 billion for the first time in 15 years, but it figures to be a logistical nightmare too.
- Spire Healthcare Group Plc rejected a takeover proposal from its biggest shareholder Mediclinic International Plc, saying an offer that values the U.K. private hospital operator at 1.2 billion pounds ($1.6 billion) “significantly undervalues Spire and its prospects.” South Africa’s Mediclinic, which owns almost a third of Spire, approached the company with an offer that valued its shares at 298.6 pence apiece in cash and stock, Spire said in a statement on Monday.
- Intercontinental Exchange Inc. is nearing a deal to buy Royal Bank of Scotland Group Plc’s 4 percent stake in Euroclear, the European giant of securities settlement, according to a person familiar with the matter. ICE, which operates the market for trading Brent crude futures, may announce the purchase of the stake in the the Brussels-based firm, estimated to be worth about 200 million pounds ($263 million), as early as this week, said the person, who asked not to be named as the plan isn’t public.
*All sources from Bloomberg unless otherwise specified