September 21st, 2017
Daily Market Commentary
- Canadian stocks rose for a fifth day to their highest level in more than three months, led by energy shares amid growing optimism that crude markets are returning to balance. The S&P/TSX Composite Index added 97 points or 0.6 percent to 15,389.60, the highest close since June 9.
- Ontario will try to sell legal pot for a price low enough to squash the black market. The government plans to establish a price for recreational marijuana that isn’t too high in order to eliminate illicit sales, Ontario Finance Minister Charles Sousa told reporters after a cabinet meeting Wednesday. Ontario has been pitched a price range of C$8 ($6.50) to C$13 a gram, and is consulting provinces across the country to determine “a unified price,” he said.
- This month’s pattern of calm for U.S. stocks persisted even after Federal Reserve officials laid out plans to begin selling some of the central bank’s bond holdings. The CBOE Volatility Index, or VIX, is headed for its lowest daily average in any September since calculations begin in 1990. Wednesday’s 0.4-point decline in the VIX, to 9.78, as the Fed announced the monetary-policy shift cut the average to 10.78.
- Asian equities fell the most in almost five weeks after the U.S. Federal Reserve maintained its forecast of raising rates again this year and said it will begin reducing its holdings of securities from next month. The MSCI Asia Pacific Index fell 0.7 percent to 163.37 as of 4:22 p.m. in Hong Kong, snapping a four-day winning streak, led by declines in materials and consumer-staples stocks.
- Equities in Europe advanced, led by banks, and bonds followed Treasuries lower as investors absorbed the Federal Reserve’s plans to pursue both higher interest rates and balance-sheet reduction in the coming months. The Stoxx Europe 600 Index was also boosted by the previous session’s drop in the euro, while lenders including Intesa Sanpaolo SpA benefited from the prospect of higher yields.
- Oil held above $50 a barrel as a decline in U.S. fuel inventories countered a bigger-than-forecast increase in crude stockpiles. November futures slipped 0.2 percent in New York after climbing 1.6 percent Wednesday.
- Gold is set to recover from its slide as the Federal Reserve may raise interest rates less than forecast because of low inflation and U.S. tax reforms could disappoint, while global political risks abound, according to Jason Schenker, president and founder of Prestige Economics LLC. While bullion has dropped more than 4 percent from its high this month, prices are holding gains of 13 percent this year as investors seek a haven from the turmoil surrounding the Trump administration and the threat of war with North Korea.
- S&P Global Ratings cut China’s sovereign credit rating for the first time since 1999, citing the risks from soaring debt, and revised its outlook to stable from negative. The sovereign rating was cut by one step, to A+ from AA-, the agency said in a statement late Thursday. The analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt.
- The U.K. budget deficit unexpectedly narrowed in August as spending fell and the government recorded healthy receipts of value-added tax, stamp duty and national-insurance contributions. The shortfall was 5.7 billion pounds ($7.7 billion) compared with 6.9 billion pounds a year earlier, the Office for National Statistics said Thursday. It left the deficit in the first five months of the fiscal year at 28.3 billion pounds, down 0.7 percent on the year.
- Barcelona is bracing for fresh protests after campaigners for Catalan independence scuffled overnight with Spanish police cracking down on plans for a referendum on secession.
- Google agreed to buy part of HTC Corp.’s engineering and design teams for $1.1 billion, taking on a cadre of veterans that worked on the Pixel phone and could bolster its nascent hardware business.
- Secretary of State Rex Tillerson laid out the U.S. case to European allies about flaws in the 2015 Iranian nuclear accord, hours after President Donald Trump said he’s made his decision about whether to walk away from the pact — but wouldn’t reveal what it was. Tillerson emphasized that the agreement hasn’t stopped Iran from playing a destabilizing role in the Middle East, with its support for the regime of Syrian President Bashar al-Assad, its development of ballistic missiles and its funding of terrorism.
- The Bank of Japan kept its monetary stimulus unchanged Thursday, but a dovish new board member opposed the decision in his first meeting, an unexpected dissension on a board chosen entirely by Prime Minister Shinzo Abe. Still, BOJ Governor Haruhiko Kuroda and his board left its target interest rates and asset purchase program unchanged, a decision expected by all 45 economists surveyed by Bloomberg.
- Iron ore’s under the cosh. The commodity was beaten down again on Thursday in what’s shaping up as a brutal month amid rising concerns that global supplies are poised to expand further while steel output cuts in China over winter will translate into lower demand. Most-active SGX AsiaClear futures retreated as much as 5.9 percent to $63.05 a metric ton, the lowest since July, and traded at $63.39 at 3:47 p.m. in Singapore
- Theresa May’s European Union counterparts are adamant that the U.K. must agree on a financial settlement with the bloc before talks can proceed to trade, according to a survey of the EU’s 27 other members that reveals the depth of resistance to British calls for flexibility. As May prepares to update her government’s position on Brexit in a speech in the Italian city of Florence on Friday, the Bloomberg survey results suggest the prime minister needs to move a long way if she is to enable a shift in October to her goal of addressing Britain’s future relationship with its biggest market.
- Many fund managers are fearful about the Federal Reserve shedding its massive $1.78 trillion mortgage bond portfolio, a step it plans to start next month. Some investors say it’s time to get greedy. Mortgage bond fund managers known as real estate investment trusts have been raising cash at their fastest pace since 2013, giving them enough new capacity to buy more than $30 billion of the securities, according to data compiled by Bloomberg.
- Air traveler satisfaction with U.S. airports has reached an all-time high this year and the reason is what you might call counterintuitive: The Transportation Security Administration. The agency has resolved some of the deep staffing woes that plagued America’s airports in early 2016, and the reduced wait times have had the desired effect, according to the latest J.D. Power ratings released Thursday. Investments by airlines and airports to install self-tagging baggage and check-in kiosks have also boosted customer satisfaction, the report found.
- Americans have a seemingly insatiable hunger for organic chickens. That’s helping to drive growth in the booming specialty industry for farm products. U.S. producers sold $750 million of organic chickens last year, surging 78 percent from 2015, according to data released Wednesday by the U.S. Department of Agriculture. That makes chicken meat the third-largest agricultural commodity, trailing milk at $1.4 billion and eggs at $816 million.
- Kuraray Co., a synthetic fiber and chemicals maker, agreed to pay $1.1 billion for Calgon Carbon Corp., a U.S.-based supplier of purification liquids and gases and related services. Kuraray will acquire all the shares of Calgon Carbon for cash, the Tokyo-based company said in a statement Thursday. Kuraray plans to fund the deal through debt and will make Calgon Carbon a fully owned unit, it said.
- India’s rupee fell to an 11-week low and sovereign bonds slumped on concern the nation’s fiscal deficit will widen after the government said it was considering measures to boost growth. Concerns about India’s public finances heightened as the ET Now television channel wrote in Twitter posts that the government was weighing a stimulus package of 400 billion rupees ($6.2 billion).
- CRH Plc agreed to buy family-controlled Ash Grove Cement Co. of the U.S. in a $3.5 billion deal to expand business in North America amid a worldwide consolidation of building-materials suppliers. Stockholders of the Overland Park, Kansas-based cement maker will get between $449 to $454 per share, according to a statement Wednesday from Ash Grove. That’s as much as 59 percent more than the stock’s closing price on Wednesday in New York.
- AIA Group Ltd. agreed to buy Commonwealth Bank of Australia’s life insurance business for A$3.8 billion (more than $3 billion), in its most ambitious foray beyond the Hong Kong-based company’s core markets in Asia.
*All sources from Bloomberg unless otherwise specified