September 1st, 2017
Daily Market Commentary
- The loonie soared after Canada’s economy accelerated more than forecast in the second quarter, boosting bets the central bank will increase rates for the second time this year — possibly as early as next week. The Canadian dollar rose 1.1 percent to C$1.2483 per U.S. dollar at 4:09 p.m. in Toronto, reversing earlier losses to be the top gainer among its Group-of-10 peers on Thursday.
- Lululemon Athletica Inc. just reassured investors that the athletic apparel trend isn’t dead. Shares of the retailer surged in late trading after the company posted second-quarter profit and sales that topped analysts’ estimates. Lululemon also delivered a forecast for the year that beat projections. The stock rose as much as 8.5 percent to $62.45 in late trading in New York. It had fallen 11 percent this year through Thursday’s close. Excluding some items, second-quarter profit was 39 cents a share. That topped the 35 cents projected by analysts.
- Settling stock and bond trades in the U.S. is about to get a lot faster as regulators cut the after-trade wait to two days from three, freeing up capital that would otherwise be frozen. Stock trades as well as corporate and municipal bonds purchases will settle in two days starting on Sept. 5, down from the three-day standard in place since the 1990s. On the same day, equities in Mexico will also shift to T+2 settlement — the industry jargon for the practice — as will Canadian stocks and bonds.
- European equity funds suffered their biggest outflows in 26 weeks as a continuing rally in the euro heightened investor concerns over the region’s exporters. Investors pulled $1.4 billion from the region’s stock funds, Bank of America Merrill Lynch said in a research report, citing EPFR Global data. That was the second consecutive week of outflows.
- U.S. equities now look more attractive relative to Treasuries for income-seeking investors. The S&P 500 blended 12-month forward dividend yield offers about two basis points more than U.S. 10-year notes currently pay, after the summer bond rally. Lower interest rates help bulls justify lofty equity prices but to bears they portend weak economic growth that will undercut risk assets soon enough.
- Asia’s stock benchmark index headed for a third weekly gain as signs of economic resilience in the U.S. and China outweighed concern of geopolitical risks triggered by North Korea’s launch of a missile over Japan.
- Tropical Storm Harvey has boosted gasoline while dragging down crude as it shuts down about a quarter of refining capacity in the world’s biggest oil user. Motor fuel prices slipped 1.2 percent on Friday, the first decline in front-month futures in almost two weeks, after a 25 percent gain in August. Crude in New York extended declines following the worst month since March.
- Gold retreats after posting its best month since January as the dollar nudges higher ahead of U.S. jobs data due Friday.
- The dollar is poised for its best weekly gain against the yen in two months as a U.S. jobs report due Friday is expected to add to recent data showing robust economic growth. Traders are looking toward the August employment report after data showed there were fewer jobless claims last week than economists estimated. Personal spending and income rose, while second-quarter growth was better than expected in releases this week.
- U.K. manufacturing expanded at the strongest pace in four months in August, lifted by both export orders and domestic demand. A measure of factory output rose to 56.9 from a revised 55.3 in July, according to IHS Markit’s Purchasing Managers’ Index. That exceeds the 55 forecast by economists in a Bloomberg survey and is well above the 50 level dividing expansion from contraction.
- Sweden’s Saab AB offered to build its Gripen warplanes in India with billionaire Gautam Adani’s conglomerate as a partner, stepping up efforts to win a potential $25 billion contract that could be the world’s biggest fighter-jet order in play. The collaboration with the Indian partner would include design, development and production of the Gripen aircraft for the South Asian country, along with other high-technology products, the two said in a joint statement in New Delhi Friday.
- State-owned conglomerate China Merchants Group is exploring acquisitions of offshore rig operators, which have struggled to recover from a collapse in oil-industry spending, people with knowledge of the matter said.
- Indivior Plc shares plunged as much as 41 percent in London trading after a U.S. court cleared the way for a generic version of the company’s medicine to treat dependence on illegal or prescription opioids. The drugmaker’s financial guidance assumed no generic rivals for its Suboxone Film treatment, the Slough, England-based company said in a statement Friday.
- The fraught Brexit negotiations are now about “who blinks first,” but British voters may yet reverse their decision to pull out, said Jose Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development.
- After a third round of Brexit talks ended in acrimony, the moment could be approaching when national leaders have to step in and break the deadlock. The question is whether Theresa May has the skills to do it.
- President Donald Trump is considering attaching an increase in the U.S. debt limit to an initial $5.95 billion disaster aid funding request for Hurricane Harvey, two administration officials said, a move aimed at lowering the risk of an unprecedented default. The White House request, which could come as soon as Friday, would include $5.5 billion to the Federal Emergency Management Agency and the remainder to the Small Business Administration.
- Traders are cutting back on supplies of diesel to Europe from the U.S. after Hurricane Harvey curbed the nation’s crude processing capacity by almost a quarter. Exports from the U.S. Gulf are set to slump the most this year in early September, leaving Europe to look elsewhere to replenish stockpiles that look far from plentiful for the time of year. ICE gasoil, Europe’s diesel benchmark, is showing signs of strain into the winter, with a deepening in the so-called backwardated structure since Harvey hit the U.S. Gulf last week.
- Indian Prime Minister Narendra Modi plans to overhaul his cabinet to boost efforts to spur flagging growth and soothe increasing signs of social tension before state elections this year and the national vote in 2019. Skill Development Minister Rajiv Pratap Rudy and junior Human Resources Development Minister Mahendra Nath Pandey resigned Thursday night, according to two members of the ruling Bharatiya Janata Party.
- Macau’s biggest junket operator wants to be more than a middleman lender for Chinese high rollers, so it’s spending billions of dollars to transform itself into an overseas casino operator on par with Las Vegas Sands Corp. and Wynn Resorts Ltd. Suncity Group, which operates VIP rooms where monthly bets recently surpassed HK$130 billion ($17 billion), is looking for partners in Japan after investing in a Vietnam resort scheduled to open in 2019. The company’s international plans include owning stakes in casinos and bidding on contracts to manage others’ casinos.
- Japan’s benchmark bond yield fell below zero percent for the first time since November, providing room for the central bank to further scale back its debt purchases. The 10-year dropped to -0.005 percent, after first reaching zero percent on Tuesday when North Korea launched a missile over Japan. Global yields have been sliding as traders pared back expectations for the pace of policy tightening from major central banks.
- Tencent Music Entertainment Group, controlled by China’s biggest social network operator, is seeking new funding at a $10 billion valuation ahead of an initial public offering, people familiar with the matter said. The operator of karaoke and Spotify-like streaming apps plans to sell about 3 percent of its shares to strategic partners, including record labels.
- Carlyle Group LP and Advent International have revived plans to sell their jointly owned German refractory metals and chemical maker HC Starck GmbH, according to people familiar with the matter. The buyout firms may sell the business in parts and are working with advisers from Lazard, said the people, who asked not to be identified because the deliberations are private. The latest move comes after past failed attempts tosell or list the business.
- Anbang Insurance Group Co., one of the biggest targets of a Chinese government campaign to reduce financial risk, has registered more than 20 new products with the nation’s insurance regulator as the company seeks to revive its business with more traditional offerings.
*All sources from Bloomberg unless otherwise specified