October 29th, 2018
Daily Market Commentary
- U.S. pot companies are pushing north of the border in search of capital. Curaleaf Inc., a Massachusetts-based company backed by Moscow banking veteran Boris Jordan with roughly 30 pot stores open in 12 states, is raising $350 million through a private placement that values the company at about $4 billion. The stock is set to start trading Monday in Canada through a reverse takeover on the CSE and will be one of the most valuable U.S. pot companies.
- Hexo Corp., a cannabis producer that’s flown under the radar of the pot-stock frenzy, is looking to the Big Apple to get a little more attention. Hexo is following better known rivals such as Canopy Growth Corp. and Aurora Cannabis Inc. to list shares on the New York Stock Exchange in December. The Gatineau, Quebec-based company, which sees itself as a potential takeover target as it ramps up partnerships with food and cosmetics companies, is betting the listing will attract more global investors.
- Equities globally have lost almost $8 trillion of value this month, set for the biggest wipeout since the height of the financial crisis a decade ago on concerns ranging from peak earnings growth and the U.S.-China trade war to the end of easy money and rising rates. But stocks are starting to look cheap, while traders are paring wagers for Federal Reserve hikes in 2019.
- Contracts for the S&P 500, Dow Jones and Nasdaq indexes all rallied as the European morning wore on, tracking a jump for the Stoxx Europe 600 Index after HSBC Holdings Plc earnings beat expectations. Automakers surged as sources said China’s top economic planning body is proposing cutting the taxlevied on car purchases by half. Earlier in Asia the mood had been more cautious and shares were mixed, falling in Tokyo, China and South Korea and gaining in Hong Kong, Australia and India.
- Japanese stocks declined Monday as concerns about China outweighed a boost from the latest set of local results. The Topix index rose as much as 1.1 percent in the morning session amid optimism over earnings of companies including Shin-Etsu Chemical Co., which beat analysts’ estimates for its second-quarter results and boosted its forecasts for the full year. Japanese index gains disappeared after the Chinese market opened. The Shanghai Composite Index fell 2.7 percent following results from Kweichow Moutai Co. and Wuliangye Yibin Co.
- Oil traded below $68 a barrel as traders assessed mixed supply signals from producers. Futures in New York dropped as much as 0.7 percent after falling 2.2 percent last week. Russia suggested on Saturday the country may keep its output at the current level above the Soviet-era record or raise production further, and warned of a potential supply shortage. That’s just days after the Organization of Petroleum Exporting Countries and its allies signaled they could cut output in 2019.
- Gold traded lower as the dollar strengthened, but the precious metal is still heading for the first monthly gain in seven as investors flock to havens on heightened risk aversion in markets following the equity sell-off. The rise in the dollar on Monday was reflected by a similar drop in the price of gold. The precious metal is seeking a fresh stimulus as the sell-off in equities that boosted gold recently stalled. Money managers cut their short position on bullion to the smallest in three months in the week to Oct. 23, while holdings in exchange-traded funds rose in October.
- China is considering cutting a tax on most cars in half to jumpstart flagging sales in the world’s largest automotive market, triggering a surge in stocks from Volkswagen AG to Daimler AG. The country’s top economic planning body submitted a plan to key policymakers to lower the purchase tax to 5 percent for passenger vehicles with engines no bigger than 1.6 liters, according to people familiar with the matter. No decision has been made on implementation, said the people, who asked not to be identified because the information isn’t public.
- Liquefied Natural Gas Ltd. delayed plans for an American LNG export project citing “headwinds” from the U.S.-China trade war. Its shares plunged the most on record. The Perth-based company postponed a final investment decision for its U.S. Magnolia LNG project to the “first part” of 2019 from this year, it saidMonday. The previous target was announced “prior to the trade tensions that have manifested over the past months.” Shares fell 23 percent to A$0.415 in Sydney.
- IBM’s $33 billion purchase of Red Hat Inc. — the world’s second-largest technology deal ever — is aimed at catapulting the company into the ranks of the top cloud software competitors. The cash deal, IBM’s biggest by far, boosts the 107-year-old computer-services giant’s credentials overnight in the fast-growing and lucrative cloud market — and gives it much-needed potential for real revenue growth. The company once synonymous with mainframe computing has been slow to adopt cloud-related technologies and has had to play catch-up to market leaders Amazon.com Inc. and Microsoft Corp. in offering computing and other software and services over the internet. Shares of IBM slumped in premarket U.S. trading.
- Angela Merkel’s decision not to run for a new term as leader of the Christian Democratic Union opens the race to succeed her as head of the party. Whoever gets the post will have an inside track to eventually become the CDU’s candidate for chancellor.
- Bank of China Ltd. announced a $17 billion share sale, as the country’s largest lenders shore up their capital buffers in the face of a slowing economy that they’re being called upon to support with more credit. The Beijing-based bank plans to raise as much as 120 billion yuan ($17 billion) by privately placing preference shares, it said in a filing Monday. The money will help it meet more stringent global capital requirements that take effect next year.
- A Boeing Co. 737 Max jet, operated by Indonesia’s Lion Air, crashed in the Java Sea with 189 people on board, making it the model’s first accident and potentially the worst commercial aviation disaster in three years. Flight JT610, an almost brand new 737 Max 8, took off from the capital Jakarta at 6:20 a.m. local time Monday and lost contact 13 minutes later when it was at an altitude of about 3,000 feet, according to Indonesia’s National Search and Rescue Agency. The aircraft was heading for the popular tourist destination of Pangkalpinang, off Sumatra.
- White House officials are largely resigned to losing Republican control of the U.S. House and are bracing for an exodus of staff worried about a torrent of subpoenas from Democratic congressional investigators. President Donald Trump’s team still sees a possible path to victory. But talk of a “red wave” has ceased, advisers inside and outside the White House said. Trump last uttered the boast in public in August. The mood around the president has darkened as many challengers continue to out-raise seasoned Republican incumbents and Democratic enthusiasm surpasses that of the GOP.
- Bharti Airtel Ltd., India’s second-biggest wireless carrier, is delaying a planned initial public offering of its Africa unit due to the turmoil in emerging-market stocks, people with knowledge of the matter said. The company, which was originally aiming to list the unit in London by March, has pushed back the share sale by about half a year, according to the people. It plans to seek an enterprise value of about $8 billion for the Africa business, the people said, asking not to be identified because the information is private.
- Denbury Resources Inc. will purchase Houston-based oil and gas producer Penn Virginia Corp. in a stock and cash deal valued at $1.7 billion that includes the assumption of debt. Denbury will pay 12.4 shares of its common stock and $25.86 in cash for each share of Penn Virginia common stock, according to a statement from the companies Monday. The agreement represents a consideration of $79.80 a share for Penn Virginia shareholders based on Denbury’s closing price Oct. 26, according to the statement.
- Russia is set to suffer the biggest revenue losses from rules mandating cleaner marine fuels from 2020, because the world’s top exporter of the sulfurous residual oil that powers ships doesn’t look prepared for the change. Refineries across the world are bracing themselves for the once-in-a-generation shift intended to reduce pollution caused by ships. While plants in Europe and the U.S. Gulf Coast seem well positioned to make the change to low-sulfur output, Russian companies have done little to prepare.
- Hillhouse Capital Management Ltd. is seeking to raise billions of dollars to invest in beaten-down Chinese stocks after this year’s market rout, according to people with knowledge of the firm’s deliberations. Zhang Lei’s more than $50 billion investment firm may raise about $4 billion to be split between its flagship Gaoling Fund and the Hillhouse China Value fund, said one of the people, who asked not to be named discussing private information. The overall fundraising amount could change, according to the people.
- One of China’s most potent symbols of luxury spending at home — the fiery liquor churned out by Kweichow Moutai Co. — was dealt a $10 billion blow to its market value Monday, the latest company to be hit by anxiety over a pullback in spending by shoppers. Moutai, which makes the baijiu liquor that’s favored by China’s leaders and often prized as a luxury gift, saw its shares plunge to the daily limit Monday after disappointing earnings stoked pessimism. The company on Sunday posted its slowest quarterly profit growth in almost three years.
- Hitachi Ltd. agreed to buy Elliott Management Corp.’s stake in Ansaldo STS SpA for more than $900 million, boosting its control over the Italian railway signaling company after a previous effort to lift its stake failed. The Japanese industrial giant is paying 12.70 euros a share for the 32 percent owned by Elliott, it said Monday in an emailed statement. The deal increases Hitachi’s stake to about 83 percent and the company said it’s offering to buy the rest for the same per-share price. Ansaldo jumped 9 percent to 12.64 euros at 9:58 a.m. in Milan.
- Rio Tinto Group, the world’s second-biggest miner, said a pact to offload its stake in the $20 billion Simandou iron ore project in Guinea to its Chinese partner, Aluminum Corp. of China, has lapsed. The parties had struck a non-binding agreement two years ago, when Rio said it could receive payments of between $1.1 billion and $1.3 billion for the stake, dependent on the project being developed. Rio and its partner, known as Chinalco, will work with Guinea’s government “to explore other options to realize value” from the asset, Rio said Monday in a statement.
*All sources from Bloomberg unless otherwise specified