April 15, 2021
Daily Market Commentary
- Canadian shares gave up their session gains on Wednesday after tech and marijuana stocks declined. The S&P/TSX Composite index fell 0.2% in Toronto. Tech and health care sectors were the worst performers, while energy and materials were the best. Oil price surged to the highest level in a month — breaking out of a weeks-long holding pattern — as shrinking crude stockpiles in the U.S. supported hopes for a global demand recovery. Meanwhile, Prime Minister Justin Trudeau is about to make a pitch for tens of billions of dollars in new spending after racking up one of the developed world’s largest deficits. There’s one problem: Canada’s economy doesn’t need it.
- Canada-based investors were the biggest private-equity purchasers of Indian real estate last quarter, before a new wave of coronavirus infections threatened to dampen appetite. The sector attracted a total $3.2 billion from 19 debt and equity PE deals during the period, according to a report from Knight Frank published Thursday. That’s about 80% of such inflows in full year 2020 and 48% of 2019. “The strong momentum was predominantly driven by two major factors: a spill over of certain deals from 2020 and the rise in investor confidence due to the drop in COVID-19 infections during early parts of 1Q 2021,” the research firm said. “The sustainability of this momentum in investors’ sentiments will therefore depend on how soon the second wave of infection subsides and also the pace of vaccination.”
- European equities rose on Thursday, as investor optimism for a strong earnings season outweighed lingering concerns over the region’s troubled vaccination campaign and rising infections in Asia. The Stoxx Europe 600 Index rose for a third day, climbing 0.3% as of 12:23 p.m. in London, on course to set a fresh record high. Food and beverage stocks and healthcare led gains, while while banks and insurance shares fell. The U.K’s FTSE 100 Index rose by 0.5% as Diageo Plc gained 1.9% to its highest since January 2020. The Stoxx 600 Index has hit successive records highs, amid expectations of a solid rebound from the steepest recession in living memory. Monetary stimulus, coupled with a spending spree from governments across Europe, has pushed the gauge up by 9.8% this year, as vaccinations progress, paving the way for a reopening of economies later in the year and a consumption-led boom.
- U.S. futures rose with stocks on Thursday as investors cheered solid earnings reports and awaited key economic data. Treasury yields fell. Contracts on the S&P 500 advanced 0.4% after the underlying index eased back from an all-time high on Wednesday. Bank of America Corp. and other financialstocks rose in the U.S. pre-market after the lender posted better-than-expected trading revenue. Meanwhile, BlackRock Inc. said its assets under management rose to a record $9 trillion in the first quarter. Expectations of a strong economic recovery, combined with optimism over monetary and fiscal stimulus, have pushed equities near record levels as company reporting continues. Data due Thursday on U.S. jobless claims and retail sales will be keenly watched, as will any developments on the vaccine rollout.
- A gauge of Asian equities was steady Thursday after U.S. indexes eased from all-time peaks as a drop in cryptocurrency exchange Coinbase Global Inc. overshadowed strong bank earnings. Shares fell in Hong Kong and China as the Chinese central bank’s liquidity operations signaled it’s seeking to contain rising leverage. U.S. equity futures edged higher, after Coinbase traded down in its Nasdaq debut overnight and the S&P 500 Index retreated. European contracts dipped.
- Oil eased, cooling some of a rally that pushed prices up by almost 5% on Wednesday. Futures in New York traded near $63 a barrel on the back of the longest run of gains in more than a month. Signs of a stronger U.S. market are abounding. The number of miles driven on U.S. interstates rose versus the same period in 2019 for the first time since the pandemic began. U.S. crude inventories dropped the most in almost two months last week, while a gauge of gasoline demand ticked higher for a seventh straight week.
- Gold climbed higher after Federal Reserve Chairman Jerome Powell reiterated his dovish view on monetary policy, keeping bond yields and the dollar on a downward trajectory. The preconditions the Fed has set out for interest-rate hikes are unlikely to be met before 2022, let alone this year, Powell said Wednesday in a virtual event hosted by the Economic Club of Washington. The Fed will likely scale back bond purchases before considering raising rates, he added. The U.S. central bank enters its traditional blackout period on public comment on Friday night ahead of the April 27-28 meeting of the Federal Open Market Committee.
- Chinese President Xi Jinping pledged to hold a successful Winter Olympics next year in Beijing, responding to challenges the event faces from the coronavirus pandemic and international criticism over alleged human rights abuses in Xinjiang. “With the active support and participation of all parties, we’re confident about overcoming the impact of the pandemic and hosting a simple, safe and splendid Olympics,” Xi told a gathering of ambassadors in Beijing that was covered by state television Wednesday evening. The Beijing Winter Olympics set for February will be a test for Xi to see if he can calm tensions with global powers that have raised the possibility of boycotts. His government will also need to provide assurances about Covid-19 protection measures after the U.S. and others criticized a World Health Organization report in March on the origins of the coronavirus, calling it incomplete and faulting data and access provided to its authors by China.
- The Biden administration is poised to impose a raft of new sanctions on Russia, including long-feared restrictions on buying new sovereign debt, in retaliation for alleged misconduct including the SolarWinds hack and efforts to disrupt the U.S. election, according to people familiar with the matter. Russian bonds fell and the ruble dropped the most since December on the news. The sanctions, the first of which could be announced as early as Thursday, reflect an attempt by the U.S. to balance the desire to punish the Kremlin for past misdeeds but also to limit the further worsening of the relationship, especially as tensions grow over a Russian military buildup near Ukraine.
- India reported more than 200,000 new infections on Thursday — its highest one-day surge since the pandemic broke out. A senior official in Japan’s ruling party indicated that canceling the Tokyo Olympics was an option as cases in the city rose to the highest in more than two months. A Centers for Disease Control and Prevention panel ended discussion of the Johnson & Johnson vaccine without taking a vote, while J&J itself said it continues to believe in the positive benefit-risk profile of its Covid-19 shot. Greece plans to lift a seven-day compulsory quarantine for visitors from the European Union and five other countries including the U.S. and U.K. as of next week, according to a person familiar with the matter.
- Bank of America Corp.’s traders and investment bankers reaped another windfall, joining their Wall Street rivals in capitalizing on the stock market’s wild ride this year. Revenue from sales and trading rose 17%, a bigger jump than expected, while equity underwriting fees more than tripled. The results echo blockbuster profits at JPMorgan Chase & Co. and Goldman Sachs Group Inc., which benefited from increased trading amid stock-market volatility and a flurry of activity by blank-check companies. As the Covid-19 pandemic drags on, U.S. banking giants have remained resilient. Their Wall Street operations picked up the slack for other divisions, bringing in deal fees and activity from clients who were reacting to financial-market gyrations. Main Street units fared worse, as millions of Americans lost their jobs and businesses were shuttered. But there are some indications that consumers are starting to spend again as the vaccine rollout and stimulus efforts help the economic recovery pick up steam.
- Thermo Fisher Scientific Inc. has agreed to acquire PPD Inc. a provider of clinical and research services to the pharma and biotech industries, for $17.4 billion as health-care dealmaking soars amid the pandemic. Thermo Fisher will pay $47.50 a share for PPD, according to a statement Thursday, and will assume about $3.5 billion of debt. The price represents a premium of about 24% to the PPD closing price Tuesday, before reports of a possible deal. The drug-testing field has become a hotbed of activity as the pandemic runs into its second year. Companies around the world are seeking to roll out new Covid-19 drugs and vaccines, even as they continue with their more standard business lines of developing new cancer therapies and other treatments.
- Deliveroo Plc Chief Executive Officer Will Shu said that market gyrations, a rotation away from technology stocks and the blowup of investment firm Archegos Capital Management contributed to the firm’s disappointing debut on the London Stock Exchange. “We went public in a really volatile environment, and there’s some things you just can’t control at the end of the day,” Shu said in an interview after the company reported its first-quarter financial results on Thursday. “The last two weeks also show we have a big job ahead of us to tell our story.” Shu also said that he’s “confident in the sustainability” of the company’s freelance worker model, telling analysts on a call that it’s held up to legal scrutiny so far and reflects what riders want.
- DNB ASA, the biggest bank in Scandinavia’s wealthiest economy, unveiled a cash bid to buy Sbanken ASA in a deal valuing it at 11.1 billion kroner ($1.3 billion). Oslo-based DNB is offering 103.85 kroner per share, which is about 30% above Sbanken’s closing price on Wednesday. Shares in the lender rose 29% to 103.20 kroner when trading started in the Norwegian capital on Thursday. DNB gained just over 1%. DNB said it’s entered into a “transaction agreement” with Sbanken, and that shareholders representing about 29% of Sbanken’s stock have, “on certain terms and conditions,” agreed to accept the offer. That includes Altor Invest 3 AS and Altor Invest 4 AS, which hold a combined 25%. DNB already holds about 1%, it said. Sbanken’s board has also recommended the offer.
- BlackRock Inc.’s assets under management rose to a record $9 trillion in the first quarter as equity markets climbed, buoyed by fresh government stimulus and the accelerating deployment of vaccines. Fixed-income attracted the biggest inflows with a net $60.8 billion in the period, followed by equities at $49.9 billion, New York-based BlackRock said Thursday in a statement. Total net flows reached a record $172 billion. Net flows into long-term investment products, such as mutual funds and exchange-traded funds, totaled $133 billion as of March 31. In the same period last year, investors withdrew a net of $18.7 billion as panic selling followed the declaration of a pandemic, ending the longest bull market in history.
- JPMorgan Chase & Co. set a goal to finance $2.5 trillion in initiatives that combat climate change and advance sustainable development, amid a push by U.S. banks to step up their environmental and social activities. The bank’s commitment spanning the next ten years will include $1 trillion of financing for projects that bolster cleaner energy sources, it said Thursday in a statement. JPMorgan will also fund transactions that support socio-economic development in developing countries as well as initiatives that advance economic inclusion in communities such as affordable housing and healthcare. The largest U.S. bank joins rival Bank of America Corp. in boosting financing for projects that advance a low-carbon economy amid calls by the White House for businesses to do more to curb pollution. Eliminating emissions has become a major talking point for bank executives this year as the finance industry attracted greater scrutiny for funding the world’s biggest emitters. Goldman Sachs Group Inc., Citigroup Inc. and Bank of America have all set net-zero greenhouse-gas emissions targets in their financing activities.
- For Joe Biden, withdrawing the remaining U.S. troops from Afghanistan was a recognition of the inevitable after 20 years of war with no clear victory in sight. The president’s critics argue it will obliterate American leverage over the Taliban and doom the country’s few but fragile gains. Biden, speaking Wednesday from the same room where President George W. Bush announced the start of the war in Afghanistan in 2001, cast his decision as the ultimate buck-stops-here moment, fulfilling a goal that three previous presidents had promised but failed to deliver on. He would finally end the longest of the country’s “forever wars,” refusing to risk more taxpayer funds — and American blood — on a far-away conflict.
- U.S. public health advisers concluded a meeting on Johnson & Johnson’s Covid-19 vaccine without a vote, effectively extending a pause on its use while they seek more data on a rare clotting side effect. After scrutinizing evidence related to the blood clots during an hours-long emergency meeting Wednesday, advisers to the U.S. Centers for Disease Control and Prevention said they lacked adequate information to make recommendations on how to respond to reports of the rare blood clots. The CDC’s Advisory Committee on Immunization Practices didn’t give a precise date for when they’ll reconvene to reconsider the vaccine. That leaves J&J’s shot in limbo. The delay isn’t expected to slow the U.S. vaccination campaign much, the Biden administration has said, with shots from Pfizer Inc. and Moderna Inc. flowing. Still, an extended pause could cast doubt about the shot that’s helping vaccinate rural communities and other hard-to-reach populations.
- London new-home sales fell to their lowest level in almost nine years in the first quarter, led by a lack of interest from landlords and a dearth of buyers for central properties. Sales of the homes tumbled 39% to 3,703 compared with the same period last year, according to data compiled by Molior London and seen by Bloomberg News. The researcher calculates the numbers based on transactions at projects with at least 20 units. London’s housing market is in flux as a premium on space and greenery causes the value of suburban houses to rise and apartment prices to fall. Sentiment in the new homes market improved in March as Prime Minister Boris Johnson’s timetable for easing lockdown restrictions boosted confidence, according to Molior.
- An attack targeting Iran’s primary nuclear-fuel facility and Tehran’s retaliatory vow to begin enriching uranium close to weapons grade will confront diplomats seeking to revive a stricken atomic agreement when they meet on Thursday. Envoys from Iran and six world powers will convene in Vienna for a third meeting in 10 days with the Persian Gulf once again convulsed by the crisis. They’re trying to coordinate a U.S. return to the 2015 nuclear deal and Iranian compliance with its enrichment commitments. The immediate challenge will be to defuse tensions.
- Royal Dutch Shell Plc’s board has urged shareholders to reject a climate resolution filed by Dutch activist investor Follow This in favor of its own energy transition plan, which the company will put to a vote next month. The Anglo-Dutch major said that the Follow This resolution, which asks Shell to set and publish targets consistent with the goals of the Paris climate agreement, is “redundant” given its own “more comprehensive strategy,” according to a company notice. Shell upped its climate ambitions in February, saying that it would produce less oil, more gas and slash carbon emissions over the next three decades. The oil major has now presented those ambitions in an energy transition strategy for a non-binding vote by shareholders in May. The plan will be updated every three years, and investors will get an advisory vote every year on Shell’s progress toward the targets starting 2022.
- Hong Kong marked its first National Security Education Day since last year’s imposition of sweeping national security legislation by Beijing, as the government ramps up efforts to overhaul the school system and instill patriotism in the city’s populace following the protests of 2019. Schools across the city were mandated to hold events including singing the Chinese national anthem and raising flags. In addition, giant billboards promoting the event have been plastered across the city, while the police held an open day where they displayed professional drills, anti-terrorism exercises and displayed armored vehicles.
- SoftBank Group Corp. is investing in Swiggy at a $5.5 billion valuation, the second funding for the Indian food delivery startup in as many weeks as capital floods the world’s fastest growing internet arena. The $450 million funding came from Masayoshi Son’s Vision Fund 2, a person familiar with the matter said. The financing awaits approval from Indian antitrust regulators, the person added, asking not to be identified talking about a private deal. Bangalore-based Swiggy competes with multiple food delivery startups including fellow unicorn Zomato, backed by Ant Group Co. and Tiger Global, and the food delivery arm of Amazon.com Inc’s India unit, which recently unveiled its service to Prime members in dozens of zip codes in the city of Bengaluru, formerly Bangalore.
- Merck & Co. halted development of two experimental drugs for patients hospitalized with Covid-19 and began a final trial of one of them, its highly anticipated antiviral pill, for people with milder disease after getting mixed results about the medicine’s benefits. The pill known as molnupiravir reduced virus levels in patients during a mid-stage study but didn’t show a meaningful benefit in preventing hospitalizations and deaths, the Kenilworth, New Jersey-based company said in a statement. It decided to discontinue its development for the sickest patients, those hospitalized with the infection, after the trial showed it was unlikely to help them.
- Coinbase Global Inc. shares rose premarket on the second day of trading as momemtum builds around the biggest U.S. cryptocurrency exchange and one analyst said its upside potential “could be immense.” The stock traded at $352 at 7:15 a.m. in New York, up about 7.5% from the last close, but still lower than Wednesday’s opening price. After debuting at $381 in its direct listing on Nasdaq Wednesday, Coinbase climbed as high as $429.54 — sending the exchange’s valuation soaring above $112 billion at one point before slipping back as Bitcoin fell from record highs. Despite being unable to sustain its initial strength, positive sentiment toward the stock is starting to build. Cathie Wood’s Ark Investment Management bought about $246 million worth of the stock for three of its funds, while BTIG analyst Mark Palmer initiated coverage with a buy rating, setting a price target of $500 and touting the potential increase in cryptocurrency’s total market capitalization beyond the curent $2.1 trillion.
- PepsiCo Inc. reported stronger-than-expected first-quarter sales, fueled by continued at-home snacking — patterns it expects to stick even as more people return to work. Sales rose 2% on an organic basis and reached $14.8 billion in the quarter, topping the average estimate from analysts. That growth comes as pandemic-weary consumers filled up on salty snacks like Ruffles brand chips, which saw revenue growth in the high single digits in the quarter ended March 20, even compared to last year’s early-pandemic demand surge. “As we look ahead, we expect our organic revenue growth to accelerate in the second quarter and have greater confidence in delivering our financial guidance for the full year,” company management said in prepared remarks, as it reiterated its full-year forecast. It also said it would “sharpen” its cost management initiatives to offset other rising costs, including logistics and raw materials.
“Don’t look for the needle in the haystack. Just buy the haystack!”―
*All sources from Bloomberg unless otherwise specified