September 27th, 2018
Daily Market Commentary
- Canadian stocks climbed slightly on Wednesday, even after the nation signaled that this week’s Nafta deadline could come and go without a deal — with Prime Minister Justin Trudeau citing a “range of paths” forward while his U.S. envoy digs in on two issues. The S&P/TSX Composite Index climbed less than 0.1 percent, with telecom and consumer discretionary stocks climbing most. Health care firm saw the largest decline, as pot stocks continued their wild price swings. Real estate stocks also fell.
- The Trump administration is set to push forward a Mexico-only Nafta update — but that doesn’t mean Canada is out of luck. Officials from Washington and Ottawa remain at loggerheads in trade talks despite weeks of face-to-face negotiations to update the North American Free Trade Agreement and keep it as a three-country deal. The impasse raises fears the U.S. will leave Canada, its biggest export market, out of the renegotiated trade bloc, resulting in potential barriers for more than $500 billion in annual cross-border trade.
- Cenovus Energy Inc. signed deals to transport heavy crude by rail to the U.S. Gulf Coast from Alberta as a pipeline bottleneck depresses Canadian oil prices. The oil-sands producer signed three-year agreements that cover about 100,000 barrels a day of heavy crude to various destinations along the Gulf of Mexico, according to a statement. Canadian National Railway Co. will move the crude from Cenovus’s Bruderheim Energy Terminal starting in the fourth quarter, while Canadian Pacific Railway Ltd. will ship out of USD Partner LP’s terminal in Hardisty beginning in the second quarter of next year.
- The next LNG investment cycle may be primed for a liftoff. Royal Dutch Shell Plc and its partners are set to announce a final investment decision on their C$40 billion ($31 billion) liquefied natural gas terminal in western Canada as early as next week, Bloomberg reported Wednesday. This would be the first FID for a greenfield, onshore export project since Russia’s Yamal LNG in December 2013.
- European shares fell on Thursday as investors digested the latest twists in the Italian budget talks and the potential effects from the Federal Reserve meeting. The Stoxx Europe 600 Index fell 0.2 percent, with Milan’s FTSE MIB dropping 1.2 percent. The banking, mining and autos sectors led the losses overall in Europe.
- Futures on U.S. stocks held steady after sharp losses late in the previous session. The single currency dropped, pushing the dollar higher, and though an auction of Italian bonds was well received, the debt fell alongside the country’s shares as political jockeying continued with 2019 budget targets in the balance. Britain’s pound fell as the EU was said to discuss no-deal contingencies. The Fed’s statement handed ammunition to hawks and doves alike as investors parsed the language for clues on monetary policy. After most U.S. markets closed, President Donald Trump said he was “not happy” about the rate increase.
- Asia shares fell as investors weighed the ongoing risk of a trade dispute between China and the U.S. and the Federal Reserve’s decision to raise rates and flag another hike before the end of the year. The MSCI AC Asia Pacific Index lost 0.4 percent as of 4:42 p.m. in Hong Kong. Japan’s Nikkei 225 Index snapped an eight-day rally, while South Korea’s Kospi rose to a three-month high in its first trading session of the week. Hong Kong closed lower, erasing earlier gains after HSBC Holdings Plc and other banks raised the city’s lending rate for the first time in 12 years.
- Oil climbed after the U.S. Energy Secretary ruled out the release of emergency crude reserves, adding to concerns that the loss of Iranian supplies will tighten markets. Futures in New York climbed as much as 1.4 percent. Energy Secretary Rick Perry said on Wednesday the government isn’t planning to tap emergency oil stockpiles to prevent prices from surging when American sanctions on Iranian crude are implemented in early November. Total SA’s Chief Executive Officer said prices may be heading for $100 a barrel, but warned this could hurt demand.
- Palladium rises for a 9th day, closing in on record price set in January. Gold treads water, heading for a 6th month of declines.
- China’s escalating trade war with the U.S. has revived prospects of an $18 billion jet order from Airbus SE, with a high-powered delegation from the European planemaker seeking to seal the sale during a visit to Beijing, according to people familiar with the matter. The possible order for about 180 A320 Neo narrow-body planes, first touted in January, will be discussed during the trip involving Airbus Chief Executive Officer Tom Enders and commercial aircraft president Guillaume Faury, said the people, who asked not to be named as the talks aren’t public.
- Ten years after the peak of the financial crisis, Jerome Powell’s Federal Reserve sees a U.S. economy capable of humming along without support from monetary policy. Unemployment is low. Inflation is stable and anchored. Financial conditions merit watching, but don’t look overly worrisome. And against that backdrop, policy makers are raising interest rates gradually despite renewed criticism from President Donald Trump.
- Meituan Dianping’s losses more than doubled in the first half after the on-demand services app backed by Tencent Holdings Ltd. spent furiously to drive deeper into businesses from bike rentals to online travel. The Chinese company is disclosing its first results since completing Hong Kong’s second-largest tech initial public offering in 2018. It posted a 28.8 billion yuan ($4.2 billion) net loss for the first six months, swelled by changes in the value of preferred shares. Its operating loss tripled to 3.9 billion yuan. However, revenue almost doubled to 26.3 billion yuan, buoyed by expansions into hotel bookings and ride-hailing on top of its core food delivery business.
- Marathon Petroleum Corp. bought a storage terminal on the U.S. Gulf Coast for about $450 million, a deal that expands its ability to tap into booming oil exports. MPLX LP, a partnership controlled by the company, purchased the Pin Oak Terminals facility in Mt. Airy, Louisiana, from Swiss commodities trader Mercuria Energy Group Ltd. and partner Dauphine Midstream LLC, according to a statement Wednesday. Mercuria and Dauphine said in a separate release that they’ll retain a stake in the 430-acre facility.
- Michael Avenatti thrives on controversy, and the California lawyer jumped into the center of the biggest firestorm in Washington on Wednesday with the release of a client’s lurid allegations of sexual misconduct by Supreme Court nominee Brett Kavanaugh. The sworn affidavit from a Washington-area woman, Julie Swetnick, set off a fresh round demands from Democrats, skepticism from Republicans, denials from Kavanaugh and an exchange of insults between Avenatti and President Donald Trump on Twitter.
- The European Union has started exploring what emergency measures it may need to take without the U.K.’s cooperation in the case of a “no deal” Brexit, according to people familiar with a meeting between the bloc’s 27 remaining governments. During closed-doors talks in Brussels on Wednesday, ambassadors began to discuss the unilateral steps the EU may take should negotiations collapse before the U.K. leaves on March 29. While that is likely to include continuation of vital services, such as trade in medicine and flights, the individual industries haven’t been confirmed.
- Philip Morris International Inc. forecast that its cigarette-alternative business will rebound from a recent slowdown as it introduces alliances with hotels, dentists and life insurers to try to persuade more smokers to switch. Shipments of the tobacco sticks used in products such as the iQos device will more than double to as many as 100 billion units by 2021, the maker of Marlboro cigarettes forecast Thursday during an investor meeting at its Lausanne, Switzerland, headquarters. That’s more than the number of cigarettes the company currently sells in Latin America and Canada, combined.
- Compass, a real-estate marketplace startup, raised $400 million in an investment round that will bring the company closer to an eventual initial public offering. After the investment, the New York-based company will have a $4.4 billion valuation, a person familiar with the matter said. The financing will help Compass expand its real-estate technology into more cities, including outside the U.S., the firm said in a statement.
- Aetna Inc. said it plans to sell its Medicare prescription-drug business to WellCare Health Plans Inc., a key step toward completing its $67.5 billion merger with CVS Health Corp. Financial terms of the deal weren’t disclosed. In a securities filing, Aetna said that the “purchase price is not material” to the company. The divestiture of the Medicare Part D plans to WellCare may help resolve objections to the CVS-Aetna deal from U.S. antitrust regulators.
*All sources from Bloomberg unless otherwise specified