The Daily – September 13th
Canadian stocks are hovering close to their all-time intraday highs, climbing for a third-straight day. Materials and tech stocks are leading the charge, while health care underperforms. U.S. stocks rose as investors weighed whether the Trump administration and China are closer to a trade deal. The S&P/TSX Composite Index rose 0.2% to 16,648.49 in Toronto at 11 a.m. Shopify contributed the most to the index advance, while Eldorado Gold had the biggest percentage gain, rising as much as 9.5%. Aurora Cannabis was the biggest laggard, falling as much as 11% intraday.
When Canopy Growth Corp. announced a plan to acquire cannabis researcher Ebbu Inc. for $330 million last October, it touted the company's intellectual property as the primary reason for the deal, mentioning it five times in the short press release. A year later, Canopy is struggling to turn that intellectual property into patents. One of Ebbu's first applications was rejected twice by the U.S. Patent and Trademark Office. When it was then narrowed significantly in a renewed attempt at approval, it was rejected a third time.
A team of Bank of Montreal commercial bankers have traded their suits and ties for Ford F-150 pickups to reach Canada's remote regions and build up a part of their business that has yet to see a bad loan. Indigenous banking is one area Chief Executive Officer Darryl Whitetargeted in June when he vowed increased support for small-business lending and sustainable finance, as well as inclusiveness and diversity. The Toronto-based bank plans to double the size of its C$4.4 billion ($3.4 billion) book of indigenous commercial loans, deposits and investments by 2025.
Canadian health-care logistics firm ATS Healthcare is weighing an initial public offering, seeking to raise roughly C$150 million ($113 million), according to people familiar with the matter. The Vaughan, Ontario-based company is working with the Royal Bank of Canadaon the share sale, which is expected to occur later this year, the people said, asking not to be identified because the matter is private. ATS Healthcare has yet to decide whether to proceed with the IPO and may choose to remain private, they said.
Canadian Prime Minister Justin Trudeau tackled the issue of housing affordability in his first campaign stop, including a promise to impose a federal speculation tax for non-residents. Trudeau is also pledging to raise the cap on the first-time home buyer plan to just under C$800,000 ($607,000) on homes in Toronto, Vancouver and Victoria if he's re-elected, from about C$505,000 previously. The prime minister kicked off campaigning for the Oct. 21 election on Wednesday in Ottawa before traveling to British Columbia overnight. He spoke to reporters in Victoria.
European equities opened little changed, poised for a fourth straight weekly advance, after Mario Draghi's effort to bolster the region's economy and help lenders weather lower rates fueled gains in banking shares. The Stoxx Europe 600 Index fell less than 0.1%. UBS Group AG added 1.7% and BNP Paribas SA increased 1.4%. Roche Holding AG climbed 1.6% after Bank of America raised the stock to buy. The European Central Bank offered a mixed blessing to equity investors on Thursday by introducing stimulus measures while at the same time giving limited long-term relief to banks. BNP Paribas said the extra liquidity will give a short-term boost to euro-zone stocks. There's also growing optimism for a U.S.-China trade deal ahead of expected high-level talks next month.
A gauge of emerging-market equities rose to the highest level in more than six weeks and currencies extended gains as risk-on sentiment took hold before the Federal Reserve meeting next week and amid signs of a thaw in the U.S.-China trade war. MSCI's index of developing-nation currencies extended its longest winning streak since January to eight days, led by the Russian ruble. The stocks gauge was set to post a fourth week of gains and close at the highest level since July 31. The Turkish lira weakened the most among emerging-market currencies, giving up some of the gains clocked after the central bank cut its benchmark repo rates less than traders had feared on Thursday.
Gold jumped the most in more than a week and palladium climbed to an all-time high after the European Central Bank cut interest rates further below zero and said it will start open-ended bond purchases. Precious metals are rallying after ECB President Mario Draghi painted a gloomy picture of the region's economy and said there's "headroom to go on at quite a long time" with quantitative easing. Low rates are a boon to assets that don't offer yields. Draghi's comments added to demand for metals as haven assets.
Oil is set for its biggest weekly decline in nearly two months as the International Energy Agency warned of a looming supply glut. Futures fell 0.3% in New York, down 2.8% for the week. The Organization of Petroleum Exporting Countries and its allies face a significant challenge in managing the market in 2020 as production surges from their competitors, according to the IEA. While OPEC+ didn't discuss deepening its output curbs in Abu Dhabi on Thursday, it put pressure on members to implement their promised cuts in an effort to avoid a supply surplus.
London Stock Exchange Group Plc has formally rejected a takeover proposal from Asian rival Hong Kong Exchanges & Clearing Ltd., saying the bid has "fundamental flaws." The board of the 300-year old British bourse, which is working on its own deal to buy data provider Refinitiv in a $27 billion deal, said HKEX's overtures on Wednesday had problems in its "strategy, deliverability, form of consideration and value."
China said it is encouraging companies to buy U.S. farm products including soybeans and pork, and will exclude those commodities from additional tariffs, in the latest move to ease tensions before the two sides resume trade talks. The Commerce Ministry's announcement on Friday follows a move earlier this week to exempt a range of American goods from 25% extra tariffs put in place last year, as the government seeks to lessen the impact from the trade war. China didn't specify the amount of purchases of pork and soybeans, which are key exports from agricultural states important for President Donald Trump's 2020 reelection bid.
WeWork announced a series of governance changes to assuage investor concerns as it pushes ahead with its embattled listing on Nasdaq. The company will change its high-vote stock from 20 votes to 10 votes a share, and no member of co-founder's Adam Neumann's family will sit on the board, it said in an updated prospectus Friday. WeWork had been targeting a share sale of about $3.5 billion in September, people familiar with the matter said in July. A listing of that size would be second only to Uber Technologies Inc.'s $8.1 billion listing and ahead of Avantor Inc.'s $2.9 billion IPO and the $2.34 offering by Uber's ride-hailing rival Lyft Inc.
Dozens of bankers from Citigroup Inc. to JPMorgan Chase & Co. descended on the heart of Dubai's financial district on Thursday to start work on the mammoth initial public offering of Saudi Aramco. Executives from Morgan Stanley and local investment bank Samba Financial Group also turned up for the kickoff meeting at the opulent Ritz Carlton hotel, just one day after news of their appointment came out. Every now and then, some would exit the closely guarded meeting room — marked by an electronic sign bearing Moelis & Co.'s name — passing guests on their way to the pool overlooking the office towers of Dubai International Financial Centre. Representatives from Saudi Arabia's sovereign wealth fund and finance ministry could also be spotted at the five-star property, which is fronted by a limestone facade and rows of palm trees. Around 5:30 p.m., several of the dark-suited dealmakers began trickling out to relax in the art-deco environs of Cafe Belge, known for its pots of mussels and a selection of Trappist beers costing up to 100 dirhams ($27) a pop.
U.S. central bankers will trim interest rates by a quarter percentage point next week, and again in December, before leaving the target range for their benchmark rate at 1.5%-1.75% for an extended period, according to economists surveyed by Bloomberg. "The Fed does not want to underwrite the ongoing trade war, but has no choice but to try to buffer the economy from the deleterious impact of rising trade uncertainty and tariffs," Kathleen Bostjancic, an economist at Oxford Economics in New York, wrote in comments accompanying her responses.
SoftBank's week went from bad to worse, after public investors and California lawmakers separately turned down the lights on some of the firm's shiniest startups. First, SoftBank urged WeWork to shelve an initial public offering after investors recoiled. If WeWork acquiesces, the move would staunch an important source of capital to one of SoftBank's biggest bets. Then on Tuesday night, the California Legislature passed a labor bill that could force gig economy companies to incur substantial new employment costs and dramatically reshape their business models. SoftBank has put more than $10 billion into WeWork and is a key financier of businesses in the gig economy. It's the biggest investor in Uber Technologies Inc. and also holds large stakes in food delivery startup DoorDash Inc. and dog-walking app Wag Inc., all of which are built on contract labor.