How the Euro Could Defy Analysts and Options Market Ahead of Fed By Bloomberg



(Bloomberg) — Euro bulls may be looking at a longer wait before they can break free, with a compelling case that the shared currency may head lower into next week’s Federal Reserve monetary policy decision.

It comes in defiance of consensus views among analysts for the euro to rebound, an expectation also reflected by current pricing in the options market. The common currency slipped to a seven-week low of $1.1026 on Friday, at a time when the median estimate of analysts in a Bloomberg survey calls for a move to $1.1400 by end-June and sentiment through options remains bullish for the common currency. That’s turned the currency’s charts bearish in the short-term and may leave long positions looking exposed.

The euro failed to gain traction even after euro-area composite PMI data offered pockets of promise and the European Central Bank warned investors not to assume that policy is on autopilot mode. Momentum selling emerged earlier when the Governing Council’s meeting on Thursday didn’t offer signs that it was looking to tighten monetary policy soon.

Volatility in the euro fell to fresh record lows this week, a pattern that supports the case of it being used as a funding currency of choice for carry trades. That came as Europe became the focus of global trade relations, after U.S. Commerce Secretary Wilbur Ross said tariffs on auto imports from the European Union remained under consideration.

The main check point for the market next week is Wednesday’s Fed rate call. Any rebound for the euro may depend on U.S. monetary policy rhetoric sounding more-dovish-than expected. A strong aversion to riskier trades and the ongoing dominance of tight ranges in the spot market could also help.

But don’t forget that the Fed isn’t expected to cut interest rates any time soon and the hurdle remains high for officials to sound outright dovish as the latest data have positively surprised the market, undermining the chances for a euro boost. That leaves the shared currency’s bulls looking for traction elsewhere. Market jitters over the economic effects of a China-originated virus could prompt outflows out of emerging markets and back to the euro area.

Euro bulls’ best chance may be with short-term traders who look to fade dips as expectations for a large move next month stand at multi-year lows. Technically, the euro remains in a bearish trajectory below its 55-daily moving average, currently at $1.1095, and may target a move below $1.0950, which could satisfy the projection of a head and shoulders pattern that was completed this week.

A lower volatility environment has pressured the euro in the past two years, yet at the moment it is just what could offer some short-term relief.

What to Watch:

  • Chinese New Year Saturday; Italy holds local elections in the region of Emilia-Romagna the following day in the latest challenge for the ruling coalition
  • Fed Chairman Jerome Powell holds a news conference after the FOMC rate decision on Jan. 29; highly-anticipated Bank of England policy decision comes the next day; Governor Mark Carney to speak
  • Policy maker speeches coming up include Bank of Canada’s Deputy Governor Paul Beaudry and Riksbank Governor Stefan Ingves
  • Economic releases include euro area GDP and CPI; U.S. personal spending, GDP; Sweden retail sales and Norway unemployment; see data calendar
  • NOTE: Vassilis Karamanis is an FX and rates strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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BBC’s Hall to step down ahead of crunch funding talks with British government By Reuters


© Reuters. BBC Director General Tony Hall makes a statement after the publication of the Janet Smith Report in London,

By Paul Sandle

LONDON (Reuters) – The BBC’s most powerful man will step down in six months to allow a new person to lead negotiations with Prime Minister Boris Johnson’s government over a financing model for the publicly funded broadcaster.

Director General Tony Hall said he would leave in the summer after seven years at the helm of Britain’s biggest news provider, its most powerful cultural institution and the voice of the country to millions around the world.

His successor will have to fight for the future of the organization and its funding model, which some critics say is outdated in the era of subscription services such as Netflix (NASDAQ:).

Johnson has questioned if the 98-year-old corporation should continue to be supported by an annual fee paid by all viewing households regardless of how much they use its services.

Hall, who was appointed director general in 2012, said one leader should oversee both a mid-point charter review in 2022 and a 2027 renewal.

“It must be right that the BBC has one person to lead it through both stages,” Hall, 68, said in an email to staff.

“As our country enters its next chapter it needs a strong BBC, a BBC that can champion the nation’s creativity at home and abroad, and help play its part in bringing the UK together.”

With everything from news broadcasts and shipping forecasts to sci-fi dramas such as “Doctor Who” and iconic natural history documentaries pioneered by David Attenborough, the BBC has shaped British culture for almost a century and is seen as one of the country’s key levers of soft power.

But in recent years, the Beeb, as it is known in Britain, has come under criticism for awarding extravagant salaries to its stars, paying some women less than men and for what some politicians say is a London-centric bias.

It is funded by what is in effect a 154.50-pound ($198) annual “license fee” tax on all television-watching households. Its TV, radio and online content reaches 92% of the population.

‘PRECIOUS BBC’

The director general, who joined the BBC as a news trainee in 1973 and led its news operations from 1996 to 2001, had to restore public faith in the broadcaster after a historic sex abuse scandal.

He agreed to a new funding deal in 2015 but had to take on the funding of the license fee for over-75s – a big hit to its finances.

Since then, he has clashed with the government over funding and the BBC has faced accusations of political bias from the government, the opposition Labour Party and Scottish nationalists.

Hall defended the BBC in his email to staff, saying its values had never been more relevant but that the organization had to keep adapting.

“In an era of fake news, we remain the gold standard of impartiality and truth. What the BBC is, and what it stands for, is precious for this country. We ignore that at our peril.”

Johnson said on the campaign trail last month he was “certainly looking at the license fee”.

The BBC has long argued that the fee allows it to deliver hard-hitting and diverse news and entertainment to the whole of the United Kingdom while remaining independent from the state.

Hall floated the notion last year that the license fee could be replaced with a Netflix-style voluntary subscription model after 2027, but he warned that the broadcaster would have to reduce the breadth of its output under such a model.

“It would be very, very different to the sort of BBC you have now, because you would be giving subscribers what they want, not the breadth of the population,” he said.



BBC’s Hall to step down ahead of crunch funding talks with British government


LONDON (Reuters) – The BBC’s most powerful man will step down in six months to allow a new person to lead negotiations with Prime Minister Boris Johnson’s government over a financing model for the publicly funded broadcaster.

FILE PHOTO: BBC Director General Tony Hall makes a statement in London, Britain February 25, 2016. REUTERS/Adrian Dennis/pool

Director General Tony Hall said he would leave in the summer after seven years at the helm of Britain’s biggest news provider, its most powerful cultural institution and the voice of the country to millions around the world.

His successor will have to fight for the future of the organization and its funding model, which some critics say is outdated in the era of subscription services such as Netflix.

Johnson has questioned if the 98-year-old corporation should continue to be supported by an annual fee paid by all viewing households regardless of how much they use its services.

Hall, who was appointed director general in 2012, said one leader should oversee both a mid-point charter review in 2022 and a 2027 renewal.

“It must be right that the BBC has one person to lead it through both stages,” Hall, 68, said in an email to staff.

“As our country enters its next chapter it needs a strong BBC, a BBC that can champion the nation’s creativity at home and abroad, and help play its part in bringing the UK together.”

With everything from news broadcasts and shipping forecasts to sci-fi dramas such as “Doctor Who” and iconic natural history documentaries pioneered by David Attenborough, the BBC has shaped British culture for almost a century and is seen as one of the country’s key levers of soft power.

But in recent years, the Beeb, as it is known in Britain, has come under criticism for awarding extravagant salaries to its stars, paying some women less than men and for what some politicians say is a London-centric bias.

It is funded by what is in effect a 154.50-pound ($198) annual “license fee” tax on all television-watching households. Its TV, radio and online content reaches 92% of the population.

‘PRECIOUS BBC’

The director general, who joined the BBC as a news trainee in 1973 and led its news operations from 1996 to 2001, had to restore public faith in the broadcaster after a historic sex abuse scandal.

He agreed to a new funding deal in 2015 but had to take on the funding of the license fee for over-75s – a big hit to its finances.

Since then, he has clashed with the government over funding and the BBC has faced accusations of political bias from the government, the opposition Labour Party and Scottish nationalists.

Hall defended the BBC in his email to staff, saying its values had never been more relevant but that the organization had to keep adapting.

“In an era of fake news, we remain the gold standard of impartiality and truth. What the BBC is, and what it stands for, is precious for this country. We ignore that at our peril.”

Johnson said on the campaign trail last month he was “certainly looking at the license fee”.

The BBC has long argued that the fee allows it to deliver hard-hitting and diverse news and entertainment to the whole of the United Kingdom while remaining independent from the state.

Hall floated the notion last year that the license fee could be replaced with a Netflix-style voluntary subscription model after 2027, but he warned that the broadcaster would have to reduce the breadth of its output under such a model.

“It would be very, very different to the sort of BBC you have now, because you would be giving subscribers what they want, not the breadth of the population,” he said.

Additional reporting by Kate Holton; editing by Guy Faulconbridge and Andrew Heavens



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U.S. Dollar Little Changed, AUD/USD Pair Rises Ahead of Jobs Data By Investing.com


© Reuters.

By Alex Ho

Investing.com – The U.S. dollar was near flat on Monday in Asia, while the Aussie dollar gained ahead of the release of the country’s latest jobs data.

The U.S. dollar index was near flat at 97.365. Figures released by the Commerce Department on Friday showed U.S. housing starts in December were well above economists’ estimates for 1.38 million and were the biggest gain in 13 years.

Retail sales were also on the rise and a gauge of manufacturing activity rebounded to its highest in eight months.

The positive data reduced chances that the Federal Reserve would slash rates when it meets later this month.

Meanwhile, the pair rose 0.2% to 0.6886 as traders awaited Australian jobs data due on Thursday. The Reserve Bank of Australia meets next month and might announce further stimulus following three rate cuts last year amid widespread bushfires.

The pair also rose 0.2% to 0.6620.

The gained 0.2% against the U.S. dollar after jumping late last week on strong economic growth figures. China reported that its gross domestic product grew 6% in the fourth quarter, meaning economic growth slowed to 6.1% in 2019. While this is in line with expectations, it’s also the country’s weakest growth in nearly three decades.

The pair was near flat at 110.17.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Stocks pinned near record highs ahead of U.S.-China trade deal


LONDON (Reuters) – World stock markets were flat on Monday, hovering just below record levels ahead of the expected signing of a Phase 1 China-U.S. trade deal, although markets have yet to see details of the agreement.

After rising in early trade, European shares were last down 0.2% by midday. Germany’s DAX fell 0.3%, France’s CAC 40 gained 0.05% and Britain’s FTSE 100 added 0.19%. The pan-European STOXX 600 index fell 0.22%. [.EU]

U.S. S&P 500 e-mini stock futures were looking more bullish, rising 0.31% to 3,274.8, just short of record highs.

MSCI’s All Country World Index, which tracks shares across 47 markets, was up 0.02%, just short of a record high hit last week.

Tensions between the U.S. and Iran after the U.S. killing of a top Iranian general put investors on guard against risk last week, knocking global stocks off a record high set in the first trading week of the year. But with no further escalation in conflict and focus shifting toward this week’s trade deal, markets have rebounded.

“Last week there was a lot of focus on the conflict between Iran and the U.S. However, the ‘modest’ Iranian response to the killing of Suleimani and even some more conciliatory comments from Trump have taken the U.S.-Iran conflict more or less away from the financial agenda,” said Arne Rasmussen, chief analyst at Danske Bank in a note to clients.

China’s commitments in the Phase 1 trade deal with the United States were not changed during a lengthy translation process and will be released this week as the document is signed in Washington, U.S. Treasury Secretary Steven Mnuchin said on Sunday.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.64%, touching its highest level since June 2018.

South Korea’s trade-sensitive Kospi added 1.04% and Hong Kong’s Hang Seng was up 1.11%, while Taiwan shares increased 0.74% in the first trading day after Taiwan re-elected President Tsai Ing-wen by a landslide on Saturday.

Mainland Chinese shares lagged the regional index after China’s major equity indexes logged their sixth consecutive weekly rise last week, the longest such streak since the first quarter of 2019.

The benchmark Shanghai Composite Index was up 0.19% in the afternoon, turning around from losses earlier in the session.

Investors in China are looking ahead to trade and economic growth data due this week, which is expected to shed more light on early signs of economic improvement after the country logged its slowest pace of growth in nearly three decades in the third quarter.

Japan’s Nikkei was closed for a holiday. It fell sharply early last week when Iran attacked bases hosting U.S. military in Iraq, only to rally almost a thousand points when the two countries stepped back from hostilities.

The main event of the week will be the signing of the Phase 1 trade deal between the United States and China on Wednesday. The Trump administration has invited at least 200 people to the White House for the ceremony.

“A calmer geopolitical backdrop and the signing of the U.S.‑China Phase 1 agreement is, on balance, favorable for global growth,” said Joseph Capurso, an FX strategist at CBA.

“However, the 86-page Phase 1 agreement has not yet been made public. There are doubts how comprehensive the deal is, and whether the Phase 1 agreement will be implemented in full by both governments.”

Washington has reserved the right to re‑impose tariffs if it judges China is not abiding by the deal.

Xie said China’s fourth-quarter and 2019 full-year GDP figures, due on Friday, are also likely to draw scrutiny as investors look for signs that improvements seen in recent manufacturing surveys are reflected in broader growth and investment figures.

PERFECT FOR RISK

Wall Street slipped and bonds rallied on Friday when data showed U.S. nonfarm payrolls missed forecasts with a rise of 145,000, while wages and hours worked were soft.

“This is the perfect employment report for the Fed to continue to run the economy ‘hot’, as views on the natural rate of unemployment continue to drop,” said Alan Ruskin, Deutsche Bank’s global head of FX strategy. “This is perfect for risky assets.” 

The euro was flat on Monday at 1.1121, up from a $1.1083 low on Friday. Support comes in around $1.1060, while the recent peak at $1.1239 marks stiff resistance.

The dollar was firm on the yen at 109.84 but faces tough resistance around 109.70 where rallies have repeatedly failed in the past couple of months.

Against a basket of currencies, the dollar was 0.14% higher at 97.488, well within the recent trading range of 96.355 to 97.817.

The pound slipped 0.86% to $1.2963 after Bank of England policymaker Gertjan Vlieghe said he will vote for a cut in interest rates later this month, barring an “imminent and significant” improvement in the growth data.

FILE PHOTO: Pedestrians leave and enter the London Stock Exchange in London, Britain August 15, 2017. REUTERS/Neil Hall

Spot gold slipped 0.6% to $1,552.30 per ounce, having hit a seven-year top last week of $1,610.90 at the height of Iran-U.S. tensions.

Oil prices were slightly firmer after suffering their first weekly loss since late November. [O/R]

Brent crude futures were down 0.25% at $64.82 a barrel, while U.S. crude fell 0.15% to $58.96 a barrel.

Reporting by Ritvik Carvalho; additional reporting by Wayne Cole and Andrew Galbraith in Shanghai and Sydney, editing by Ed Osmond



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U.S. Dollar Flat Ahead of Inflation Data, Trade Deal Signing in Focus By Investing.com


© Reuters.

Investing.com – The U.S. dollar was flat on Monday in Asia ahead of the release of the latest inflation data. The potential signing of the phase one trade deal later this week is also in focus.

The U.S. dollar index that tracks the greenback against a basket of other currencies last traded at 97.078 by 11:35 PM ET (03:35 GMT), unchanged from yesterday’s close.

The latest U.S. inflation figures, due on Tuesday, are expected to remain broadly in line with the 2% inflation target, while retail sales numbers from the holiday season will also be closely watched.

A number of Federal Reserve officials will also speak this week. Boston Fed President Eric Rosengren and Atlanta Fed head Raphael Bostic will both discuss the economic outlook in appearances on Monday. Kansas City Fed President Esther George is due to deliver remarks on Tuesday, while Patrick Harker of the Philadelphia Fed and Robert Kaplan of the Dallas Fed are both due to make appearances on Wednesday.

The pair dropped 0.2% to 1.3036. Figures on fourth-quarter growth, trade, industrial output, retail sales and inflation all due to be released this week. The data will be closely watched after Bank of England Governor Mark Carney last week promised a “relatively prompt response” if economic weakness persists.

On the Brexit front, the U.K. is due to leave the EU on Jan. 31. It is uncertain whether 11 months will be enough to reach a deal. EU chief Ursula von der Leyen has earlier warned that a comprehensive U.K.-EU trade deal is “impossible” by the 2020 deadline.

“We will go as far as we can, but the truth is that our partnership cannot and will not be the same as before and it cannot and will not be as close as before because with every choice comes a consequences with every decision comes a trade off,” she said earlier this month.

The pair and the pair both rose 0.2%.

The safe-haven yen retreated as Asian equities traded higher today. The pair slid 0.2% to 109.62.

The pair lost 0.2% to 6.9004. China’s GDP data is due later this week.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Forex – USD stays strong ahead of signing of trade deal By Investing.com


© Reuters.

Investing.com – The U.S. dollar remained strong on Friday and was set to end the week on a high note just days before the signing of a phase one trade deal between the U.S. and China.

The was flat at 97.45 by 9:30 PM ET (02:30 GMT).

The pair was down 0.02% to 0.6855 and the was down 0.11% to 0.6607. The Australian dollar was helped on Friday by strong retail sales data. Australia’s statistics agency said retail sales jumped 0.9% in November, more than double the expected 0.4% increase.

The pair was up 0.02% to 109.53.

The People’s Bank of China (PBOC) set the reference rate of the yuan at 6.9351, stronger than the 6.9497 fix set on Thursday. The yuan has been strengthening over the past few weeks.

On Thursday, China’s National Bureau of Statistics reported that consumer prices rose 4.5% in December from a year earlier while producer prices fell 0.5%.

Meanwhile, markets continue to look forward to the signing of a phase one trade deal between the U.S. and China next week.

The was down 0.01% to 1.3064 after the passage of Prime Minister’s Boris Johnson’s Brexit bill, which sets the stage for the United Kingdom to leave the European Union by January 31.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Oil Dips as 2019 Ends; Big Gains on Year, Big Challenges Ahead By Investing.com


© Reuters.

Investing.com – Oil prices fell on the last day of 2019, but still rounded the year out with the biggest annual gains in three. A rebound forecast in U.S. shale crude production could, however, pose greater challenges for the market in 2020.

New York-traded , the U.S. crude benchmark, settled down 62 cents, or 1.0%, at $61.06 per barrel. Despite that drop, WTI rose 11% for December, its largest monthly gain since January.

London-traded , the global oil benchmark, settled down 67 cents, or 1%, at $66.65 per barrel. Notwithstanding Tuesday’s slide, the U.K. crude standard settled up 7% for December, its largest monthly advance since April.

For the year, WTI rose 34% while Brent had a 24% gain, the biggest annual gains since 2016 for both benchmarks.

Oil’s 2019 rally was largely helped by production cuts carried out by OPEC. Since January, the Saudi-led OPEC, joined by its ally Russia under the OPEC+ alliance, has tried to observe a daily production cut of 1.2 million barrels. In December, as that arrangement was about to expire, OPEC+ said it would deepen those cuts to 2.1 million barrels per day from the start of 2020.

Despite its plan for stiffer production cuts, OPEC+ could have a tougher time keeping oil prices up in 2020 as U.S. shale oil output could rebound next year, some long-time traders in oil said.

While production as a whole hit a record high of 12.9 million barrels per day in 2019, shale oil output, which accounts for more than half of U.S. total production, has been somewhat restrained this year. U.S. crude producers as a whole cut the number of in the country to 677 this year from 885 at the end of 2018, a drop of 208 rigs, or 24%.

“The main reason for the 24% cutback in actively-drilling U.S. oil rigs this year was the price uncertainty that persisted midyear,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. WTI hovered between $50 and $55 during most of the summer months, weighing on the broader oil market.

Kilduff said with the OPEC decision to double down on production cuts taking effect only in early December, it will take U.S. drillers some time to turn their spigots back on in full and plow ahead with production.

“With oil prices being the way they are, one can bet on more challenges ahead for production,” Kilduff added. “WTI at above $60 is very, very remunerable to U.S. shale. OPEC will have to take a lot more off the market to face that wall of shale supply headed the global market’s way.”

Non-OPEC oil supply, led by the U.S. shale, is forecast to grow by 2.1 million barrels a day in 2020, according to the Paris-based International Energy Agency (IEA).

Global demand for oil, meanwhile, is set to increase by 1.2 million barrels a day next year, the EIA said.

That means the world will need 900,000 fewer barrels of oil every day from both OPEC and non-OPEC producers alike, a situation that could sharply offset OPEC+ production cuts.

For the bulls, the coming year may still have a positive start from the phase one of the U.S.-China trade deal, which, according to a tweet by President Donald Trump on Tuesday, will be signed on Jan. 15. Yet, the positive impact of that deal could just be fleeting if U.S. crude production starts ramping up strongly.



Gold prices rise ahead of holiday season By Investing.com


© Reuters.

Investing.com – Gold prices rose on Monday morning in Asia as investors opted safe-haven asset ahead of Christmas and New Year holidays.

U.S. inched up 0.25% to $1,484.55 by 10:59 PM ET (3:59 AM GMT), recovering from the day before amid a steady dollar. The stayed mostly flat at above 97.

U.S. President Donald Trump said on Saturday that the U.S and China would “very shortly sign their so-called Phase One trade pact. Under the deal, the U.S. would agree to reduce some tariffs in exchange for a big jump in Chinese purchases of American farm products, according to Reuters.

The market is waiting for further developments that would ease the month-long China-U.S. trade tensions.

But until the two countries finally sign the deal, the uncertainty over the China-U.S. trade deal remained. Fears for the global recession and a dovish stance by the Fed have also supported gold prices to rise around 15% this year.

Furthermore, the Fed left borrowing costs unchanged at its last policy meeting earlier this month and signalled that the U.S. policymakers would not boost the economy soon in 2020. The uncertain economic outlook is expected to weigh on the gold prices next year.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.



Pulled IPOs cap subdued year for Canadian deals, signal challenges ahead By Reuters



By Nichola Saminather

TORONTO (Reuters) – The scrapping of a second Canadian IPO in as many months this week caps a year of declining activity, highlighting the challenges facing issuers as trade uncertainty and the growth of passive investing weigh on new offerings.

The lucrative initial public offerings (IPO) business is unlikely to see a significant pick-up in 2020 as it faces headwinds from challenging economic conditions, which are set to keep equity markets cautious, and from the rise of index funds, investors said.

That is not good news for Canadian banks, many of which have large investment banking operations that suffered declining earnings in fiscal 2019.

Canadian IPOs are down 44% to C$937 million ($704 million) so far this year, on course for their lowest level since 2016, according to Refinitiv data. Banks in North America earn about 6% of IPO value as underwriting fees.

Elliott Management-backed Triple Flag Precious Metals dropped IPO plans on Wednesday, citing lackluster demand from investors.

An economic cycle about a decade into expansion and global trade uncertainties are contributing to investors’ “reticence to get involved in anything that might be perceived as additionally risky,” said Rick Hutcheon, president and chief operating officer at RKH Investments.

As the fund management industry undergoes a structural shift with more passive managers investing in index-tracking funds, the appetite for IPOs, particularly involving smaller companies unlikely to be included in benchmarks, will remain subdued, said Bryden Teich, portfolio manager at Avenue Investment Management.

Canadian banks posted an average 11% drop in fourth-quarter earnings from their capital markets businesses versus a year ago, Scott Chan, an analyst at Canaccord Genuity, wrote in a note this week.

As capital markets businesses are “inherently market sensitive, future performance could be adversely impacted by macroeconomic conditions,” Chan said.

Last month, waste management company GFL Environment scrapped its listing, which was expected to be Canada’s biggest IPO, after institutional investors urged the firm to price its shares below the marketed range.

Mergers and acquisitions have fallen 15% so far this year from 2018 to C$226 billion, while equity deals dropped to C$28 billion, the lowest level in at least five years, according to Refinitiv data.

“Survival mergers,” where struggling companies combine to cut costs, could drive some pick-up in M&A activity in 2020, Hutcheon said. This has been happening in the gold mining sector and could pick up among battered energy companies, he added.

BMO Capital Markets (TO:) and CIBC World Markets (TO:) were the top bookrunners for IPOs this year, according to Refinitiv.

Goldman Sachs & Co (N:) and TD Securities (TO:) were the leading financial advisers for M&A deals, while Morgan Stanley (N:) and RBC Capital (TO:) topped advisers on secondary equity deals.