In the U.S.:
- The US and Canada reached a deal to overhaul NAFTA, with Mexico already on board. The trade agreement will preserve the dispute mechanism, though Canada also agreed to provide US dairy farmers access to 3.5% of its ~$16B annual domestic dairy market. Of note, the deal did not resolve steel and aluminum exports and has yet to be put to a legislative vote.
- Vice President Pence accused China of meddling in US democracy and stated that Beijing wanted another president. He also argued that China uses debt diplomacy to broaden its influence, engages in currency manipulation, and engages in theft of US technology.
- Nonfarm payrolls for September fell to 134K versus August’s upwardly revised 270K reading. The unemployment rate ticked down 0.2% to 3.7% marking the lowest level since Dec-69. Of note, there was some expectation the reading would miss due to the effects of Hurricane Florence.
AvalonBay Communities, Inc. (AVB) announced an agreement to sell an 80% interest in five Manhattan apartment communities, containing 1,301 units and 58k sq.ft. of retail, to Invesco Real Estate for approximately $760M. AvalonBay intends to use the net proceeds of approximately $460M for general corporate purposes, which may include the acquisition, development and re-development of apartment communities.
- September official manufacturing PMI fell to 50.8 versus August’s 51.3 reading. The escalating trade war with the US is decelerating growth in new orders and production.
- August headline nominal wages rose 0.9% y/y versus July’s 1.6% y/y reading. Wage growth continued to move away from Prime Minister Shinzo Abe’s 3% target due to slower overtime earnings growth and a sharp drop in special payments.
Keppel REIT is rumored to put Singapore’s Bugis Junction Towers up for sale. The 15-story building is located in the near the central business district and was valued at $382M as of last year.
- Reuters reported that EU’s Brexit negotiators told national diplomats in Brussels late Thursday that a divorce deal with Britain was “very close” and both have discussed ways to avoid extensive checks on the Irish border after Brexit. The news was welcomed as the Irish Border was one of the main sticking points in the Brexit negotiations.
- The Italian budget remained in the headlines this week after ECB President Draghi met with Italian President Mattarella to highlight the risks of the proposed new budget. Bloomberg noted that the budget’s assumed growth rates of 1.5% in 2019, 1.6% in 2020, and 1.4% in 2021 were unrealistic given that the median growth rate was no more than 1.2%.
Brookfield Property Group confirmed this week that it was in the preliminary stages of considering a possible cash offer for UK shopping center REIT Intu Properties. Brookfield indicated that it was working with a consortium of existing Intu investors that include Saudi Arabia’s The Olayan Group and Intu’s largest shareholder The Peel Group. Olayan Group and Peel Group currently own approximately 29.9% of the share capital of Intu. The combination of a very challenging retail environment in the UK and an abandoned takeover offer from UK peer Hammerson Plc earlier this year has resulted in Intu’s share price being under pressure for much of the year. Recall that Brookfield was the majority shareholding in US retail REIT General Growth Properties, which it took private earlier this year.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.