Briefing highlights
- Trump just about done in, markets rule
- Amaya, William Hill call off potential merger
- Manufacturing sales rise in August
Trump just about done in
Currency markets have decided that Donald Trump is just about done in. But when it comes to polls and politics, a market player notes, one should “never say never.”
You can gauge this by the fortunes of the Mexican peso, which is seen as a proxy for the fortunes of Mr. Trump because of his stated policies on trade with America’s southern neighbour.
“The probability of a Trump victory has declined significantly,” said Shaun Osborne, Bank of Nova Scotia’s chief foreign-exchange strategist, noting that over the past couple of weeks the peso had gained about 5.5 per cent by Monday.
Not only has the currency made strides, but speculators are also changing their bets.
The latest report from the U.S. Commodity Futures Trading Commission (CFTC) showed shorts in the peso dropping notably as of last Tuesday, slipping to a six-week low “as sentiment improved in line with Trump’s falling probability of victory,” said Royal Bank of Canada senior currency strategist Elsa Lignos.
“The most notable phenomenon is an apparent unwind of U.S. election risk hedges, with MXN, CAD and the broad USD seeing positioning improvement,” Daniel Hui and Ladislav Jankovic added in a report on the CFTC numbers, referring to the Mexican, Canadian and U.S. currencies by their symbols.
Bipan Rai, executive director of macro strategy at CIBC World Markets, said the latest CFTC data “does signal some relief that Trump may not win,” but that has more to do with the peso than the loonie.
“The market is short both currencies, but the degree of paring in the MXN was far more notable in the last release,” Mr. Rai said.
“The CAD figure likely reflects other concerns, likely that the market is still somewhat underpricing the Fed for later this year,” he added, referring to the possible timeline for interest rate increases by the Federal Reserve.
Then there are internal showings.
IG, for example, has its own indicator based on what its clients are saying and doing with their funds.
“There has been a clear shift in expectations for the U.S. election, with IG clients now seeing an 83-per-cent change of a Hillary Clinton victory based on the presidential binary market,” said IG analyst Joshua Mahony.
London Capital Group senior market analyst Ipek Ozkardeskaya agreed the currency markets are betting on a Clinton victory.
But, as the Brexit vote showed us, watch out if the polls are wrong, as unlikely as that seems at this point.
“The markets price in Clinton’s victory almost as a done deal, yet don’t seem to be ready for a Trump triumph,” Ms. Ozkardeskaya said.
“The proof is that we have hardly seen any sell-off following Donald Trump’s most shocking words,” she added.
“Of course, the mispriced risk is the worst risk. If the U.S. citizens happened to choose Donald Trump as their president, we could see a significant sell-off in U.S. stocks, bonds and also the U.S. dollar.”
Amaya, William Hill call off deal
Let’s hope you didn’t bet on this one.
Canada’s Amaya Inc. and Britain’s William Hill PLC are walking away from a potential merger, dashing a major deal in the gambling industry.
“Together with our financial advisers, we evaluated a wide range of strategic alternatives to maximize shareholder value and have concluded that remaining an independent company is in the best interest of Amaya’s shareholders at this time,” chairman Divyesh Gadhia said in a statement.
For its part, William Hill signaled opposition to the deal from its shareholders.
“After canvassing views from a number of William Hill’s major shareholders, the board has decided that it will not pursue discussions with Amaya,” the company said.
Manufacturing sales rise
Canada’s manufacturing sector scored an up month in August, with sales rising 0.9 per cent.
Shipments rose in 15 of the 21 industries measured, accounting for 69 per cent of the sector, Statistics Canada said.
This was led by food, an industry that saw stronger sales for a second straight month. Indeed, its sales now stand at a record $8.6-billion.
Metals, petroleum and coal products also gained.
Inventory levels fell 0.5 per cent, unfilled orders 1.3 per cent, and new orders 0.9 per cent, marking the second straight decline.