September 6th, 2018
Daily Market Commentary
- Canadian stocks dropped for a fourth day and followed U.S. peers lower as investors await updates on trade negotiations with Washington. President Trump said the U.S. may find out within days whether Canada will be part of a new continent-wide trade pact. Meanwhile, Canadian Foreign Affairs Minister Chrystia Freeland said both countries need to bring “fresh ideas” to the table.
- Kinder Morgan Inc. hinted at a potential offloading of its remaining Canadian assets following the sale of the contentious Trans Mountain pipeline expansion to the federal government. Speaking at an energy conference Wednesday, Kinder Morgan Chief Executive Officer Steve Kean said that while its Canadian affiliate has “attractive assets” and “no debt on the balance sheet,” the company’s primary objective was to use those projects to support the Trans Mountain expansion.
- Henry Holtmann has seen this before – Canada carving off access to its dairy market as a bargaining chip, and using it in trade talks. Now it could happen again. More than 2,500 kilometers (1,500 miles) from Washington, the third-generation Canadian dairy farmer is closely watching North American Free Trade Agreement talks, where U.S. President Donald Trump has taken aim repeatedly at his sector. Canada could once again barter away a piece of its restricted – and lucrative – dairy market, over outcry from farmers like Holtmann.
- Toronto-Dominion Bank is hiring former Wells Fargo & Co. energy analyst James Spicer to oversee credit research, a person familiar with the matter said. Spicer will join the bank’s TD Securities unit in Toronto next week, where he’ll be senior energy analyst and head of credit research, said the person, who asked not to be identified pending an official statement from the firm. Spicer, ranked No. 1 high-yield energy analyst for 2018 by Institutional Investor, had worked as a managing director and senior high yield analyst at Wells Fargo for eight years.
- As Canada’s prairies continue to churn out more and more canola, there’s mounting concern about the rapid spread of a soil-borne disease that’s threatening to crimp yields. Clubroot is taking hold in parts of Canada’s vast prairies. It’s an invasive disease that grows like a cancer on canola roots, preventing the plant from taking up water and nutrients, cutting yields and potentially killing plants.
- European equities fell for a third straight day with banks and miners leading declines as investors consider the potential impact from the selloff in emerging markets amid concern about an economic slowdown. The Stoxx Europe 600 Index opened down about 0.4 percent after closing on Wednesday at the lowest since April 9. BHP Billiton was down 0.4 percent after adjustment for going ex-dividend, while HSBC Holdings retreated 0.6 percent and Banco Santander slid 0.7 percent.
- U.S. stock index futures rise slightly as Kim Jong Un announces he wants to denuclearise during President Donald Trump’s term, signaling a willingness to revive stalled talks. Emerging markets remain a worry as they approach a bear market, led by the Philippines. Emerging economies hold the key to sentiment, with recent losses fueling fears that turmoil could spill over into developed markets. While focus remains on efforts from Argentina to Indonesia to sustain confidence, the potential for President Donald Trump to announce another round of tariff hikes on Chinese imports as soon as Thursday also looms large.
- Japan’s Topix slid for a sixth day as a strong earthquake in the northern island of Hokkaido added to economic risks already heightened by recent natural disasters and the threat of a global trade war. All but two of the 33 industry groups fell, dragging the benchmark toward its longest slump since May. Exporters including Murata Manufacturing Co. and Nidec Corp. declined on concern President Donald Trump may go ahead with planned tariffs on another $200 billion of Chinese goods.
- Oil traded near $69 a barrel as an industry report showed U.S. crude inventories declined last week, with government data due later. Futures in New York erased earlier losses after slumping the most in three weeks on Wednesday amid tumult in emerging markets. The dollar held steady. The American Petroleum Institute was said to report U.S. crude stockpiles fell 1.17 million barrels last week, despite a 631,000-barrel build at the Cushing, Oklahoma, storage hub.
- Gold rises above $1,200/oz as dollar edges lower and as investors watch for further signs of emerging-market turmoil.
- The U.S. and India pledged to deepen strategic ties on Thursday despite the Trump administration’s threats of sanctions over purchases of Iranian oil and Russian weapons. Secretary of State Michael Pompeo and Pentagon chief Jim Mattis were in New Delhi on Thursday for high-level talks with their Indian counterparts. They signed an agreement on military communications, agreed to host tri-services war games in 2019 and expressed hope that Indian firms could get more involved in the U.S. defense sector supply chain.
- Eduardo Saverin, co-founder of Facebook Inc., said social networks are heading for more regulation and change, as political pressures mount and users fragment into specialized interests. Governments will inevitably get involved in regulating networks like Facebook and Twitter in the wake of attempts to manipulate public opinion and interfere in elections, he said. He spoke only hours after Facebook Chief Operating Officer Sheryl Sandberg and Twitter Chief Executive Officer Jack Dorsey appeared before the U.S. Congress.
- Clorox Co. says it will add detailed ingredient labels to more U.S. household disinfecting products than required by a new California law as it looks to appeal to a more conscious consumer. The maker of Pine-Sol and its namesake wipes and bleach plans to list ingredients for 350 more household disinfecting products sold in the U.S. — beyond the 300 that are already getting labels under California’s Cleaning Product Right to Know Act signed into law last year.
- Poland’s plan to build a $9.4 billion central airport 45 kilometers (27 miles) outside of the capital will be a waste of money that would be better spent on improving existing facilities, according to Europe’s biggest low-cost carrier Ryanair Holdings Plc. Warsaw already has two operating airports, whose capacities aren’t fully used and could be expanded instead of building “big new shiny cathedral in the middle of nowhere,” Ryanair Chief Executive Officer Michael O’Leary told a news conference Wednesday. The cost of the project, including new road and train infrastructure, will amount to 75 billion zloty ($20 billion), or more than a fifth of the revenue target in this year’s national budget.
- Britain’s Civil Aviation Authority is stepping up efforts to ensure that airlines and aerospace companies can carry on functioning in the event of a no-deal Brexit. The regulator has briefed government officials on its plans to recruit staff with the expertise to take over the certification of parts and planes should the split cause Britain to leave the European Aviation Safety Agency, which is currently responsible for such approvals.
- KKR & Co. has raised $7 billion from investors for its third infrastructure fund, hitting the limit of its target range at a burgeoning time for the sector. The firm and its employees are plowing about $360 million into the fund, taking its overall size to $7.4 billion, KKR’s global head of infrastructure Raj Agrawal said in an interview. The fund will focus on deals in countries that are part of the Organisation for Economic Co-Operation and Development, mostly in North America and Western Europe.
- Cryptocurrencies dropped sharply for the second time in less than 24 hours, sinking toward a nine-month low amid concern that broader adoption of digital assets will take longer than some anticipated. Bitcoin, the largest cryptocurrency, tumbled as much as 9.8 percent and was trading at $6,358 as of 11:54 a.m. in London, according to Bloomberg composite pricing. The Bloomberg Galaxy Crypto Index, a gauge of the largest digital assets, traded near its lowest level since November 2017 as rival coins Ripple, Ether and Litecoin also slipped more than 4 percent each.
- ChemChina’s chairman is studying potential asset sales as the state-owned company moves ahead with preparations for a long-mooted megamerger with Sinochem Group, people with knowledge of the matter said. Frank Ning, who leads both companies, has started reviewing the businesses of ChemChina and Sinochem to identify areas of overlap and potential synergies, according to the people. Ning is considering pursuing divestitures or initial public offerings of some units, the people said, asking not to be identified because the information is private.
- India’s efforts to sell a $1.6 billion stake in Oil & Natural Gas Corp. has run into concerns that government policies on fuel pricing would weigh on the state-run explorer’s share price, according to people with knowledge of the situation. Investors and fund managers that met with Indian government officials during a U.S. roadshow last month voiced concern that the government may reimpose fuel subsidies and that the nation’s state-set natural gas prices are too low, said the people, who asked not to be identified as the discussions were private.
- Citigroup Inc. is planning to promote bankers Tyler Dickson and Manolo Falco to run a reconstructed version of its investment banking operations, people familiar with the plan said. The lender will likely announce the plan on Thursday to combine its corporate and investment bank with its capital markets origination business, the people said, declining to be identified as the details are private. Ray McGuire, global head of corporate and investment banking, will take on a new role as a vice-chairman at Citigroup, the people said.
- Elliott Management Corp., the activist fund that forced Hyundai Motor Group to scrap an $8.4 billion deal earlier this year, is resuming its push for changes at the South Korean automotive giant. In a letter from Elliott to Hyundai seen by Bloomberg News, billionaire Paul Singer’s fund called for the merger of some key units to bolster shareholder value and improve the group’s structure. One option is for car-parts maker Hyundai Mobis Co. to sell its after-sale service business to affiliate Hyundai Motor Co., and then merge what’s left of Mobis with logistics affiliate Hyundai Glovis Co., according to the Aug. 14 letter.
- Dell Technologies Inc., the world’s largest closely held technology company, reported growing sales, and increased its outlook for the year, in the midst of its $21.7 billion plan to return to public markets. Second-quarter revenue increased 18 percent to $22.9 billion in the period ended Aug. 3, the Round Rock, Texas-based company said Thursday in a statement. Adjusted earnings before interest, tax, depreciation and amortization climbed 13 percent to $2.46 billion. For fiscal 2019, Dell now expects adjusted revenue of as much as $92 billion and adjusted net income of as much as $5.3 billion.
- Novartis AG agreed to sell parts of its U.S. generic drugs business to Aurobindo Pharma Ltd. for $900 million as Chief Executive Officer Vas Narasimhan narrows the Swiss pharmaceutical giant’s focus on innovative medicines and higher-growth areas. The deal comes as Novartis advances with plans to spin off its Alcon eye-care unit and follows the $13 billion sale of its stake in a consumer-health joint venture with GlaxoSmithKline Plc, announced in March.
- Facebook Inc. has contended with data privacy scandals, U.S. lawmaker scrutiny and slowing user growth in 2018. Yet the social network’s shrinking margins are giving investors the most pause. As the internet giant’s shares continue to languish in the aftermath of its $121 billion one-day rout in July, Facebook will need to show that it can jump-start earnings growth to restore faith with investors who have been reluctant to buy, analysts and shareholders say.
- It was 20 years ago this week that then-Federal Reserve Chairman Alan Greenspan questioned whether the U.S. could remain an oasis of prosperity in an increasingly fraught world economy. Now Jerome Powell is getting his first crack at that puzzle as emerging markets crumble. The rout in both the stocks and currencies of emerging nations has prompted strategists from JPMorgan Chase & Co. and BlackRock Inc. to warn of contagion sweeping through the markets. It’s also begun to raise questions about the durability of a global economic upswing that just a year ago was being trumpeted as the most synchronous in decades.
*All sources from Bloomberg unless otherwise specified