April 16, 2021

Daily Market Commentary

Canadian Headlines

• Canadian stocks climbed to a new high on Thursday after mining and tech companies outperformed. The S&P/TSX Composite index rose 0.8% in Toronto. Miners were the best performers as most metals rallied, while health care stocks performed the worst as pot stocks declined. Meanwhile, the Canadian housing market hit a record. More properties changed hands in March than any month in history as sky-high prices lured more homeowners to try to cash in.
• Canadian oil sellers are sending exports to the U.S. West Coast, an unexpected move prompted by the staggered global demand recovery from the pandemic. For the second time this month, a tanker will load crude from eastern Canada’s oil-rich Newfoundland province and head to the U.S. West Coast, shipping fixtures compiled by Bloomberg show. The BP Plc-booked Aquasurazo is set to receive supplies this weekend destined for the Cherry Point refinery in Washington. Last week, a Chevron Corp.-chartered vessel loaded at the same province and is en route to deliver crude to plants in California. The rare voyages reflect the changing needs — albeit temporary — of the largest buyers of Newfoundland’s crude. While a swift vaccine rollout is boosting consumption in the U.S., demand remains muted in Europe with various lockdown restrictions in place. Canada is also facing similar confining measures. The shifts in consumption are resulting in growing piles of unsold supply in the Atlantic Basin.
• Canada issued new rules to bring down wireless costs, forcing large carriers including BCE Inc. and Rogers Communications Inc. to offer inexpensive plans and resell access to their networks to smaller players. The decision by the telecommunications regulator makes it easier for regional providers such as Quebecor Inc. and Cogeco Communications Inc.to compete on wireless plans with the sector’s three dominant companies — Rogers, BCE and Telus Corp. Only companies that own spectrum in Canada will be eligible to participate in the “mobile virtual network operator” framework, cutting out foreign players because of domestic ownership rules. It applies for seven years, according to the decision released Thursday by the Canadian Radio-television and Telecommunications Commission.

World Headlines

• European shares advanced Friday, hitting a fresh record, as investors focused on corporate earnings and economic data for signals on the strength of the recovery. The Stoxx Europe 600 Index was up 0.5% as of 10:30 a.m. in London, led by gains in the automotive sector as car sales surged, with Daimler AG climbing 2.5% after it said first-quarter earnings “significantly” topped estimates. Basic resources stocks advanced amid positive read across for aluminum stocks from U.S. bellwether Alcoa Corp.’s results. Robust economic data from the U.S. and China has provided investors some confidence that the global recovery is underway. The Stoxx 600 is up about 10% this year on the back of monetary stimulus and a spending spree from governments across Europe, with investors betting that a gradual reopening of economies will lead to increased consumption.
• Global stocks hit all-time highs on Friday and U.S. futures were steady as record growth figures from China highlighted the strength of the recovery. Along with healthy corporate earnings, China’s first-quarter gross domestic product numbers are giving fresh impetus to the reflation trade. In the U.S., Thursday’s retail sales and weekly jobless claims data signaled an accelerating recovery in the world’s biggest economy. Investors will look for further confirmation as the reporting season picks up pace next week, with around 80 S&P 500 members and more than 50 Stoxx 600 firms announcing.
• In Asia, Chinese shares outperformed after a report showed the nation’s economy soared in the first quarter. The data from Beijing added to Thursday’s string of positive economic figures out of the U.S., boosting futures on the small-cap Russell 2000 and Dow Jones Industrial Average indexes. Treasuries held onto Thursday’s gain, with traders suggesting foreign buying and geopolitical risks may have contributed to the advance.
• Oil edged higher at the end of a week in which prices have climbed on optimism the recovery in demand from the Covid-19 pandemic is improving. Futures in New York rose on Friday and are up more than 7% this week. China’s economy soared in the first quarter, while the country’s refiners processed more than 14 million barrels a day again in March. A Chinese mega-refiner and some Japanese oil companies have also been snapping up crude cargoes, boding well for the physical market. Positive signs from Asia follow a pick-up in the U.S. this week. Data in recent days showed jobless claims falling to a new pandemic-era low, and retail sales and gasoline demand expanding. The global market may see a temporary lull due to new virus outbreaks, according to the the International Energy Agency, but the agency followed OPEC in boosting its full-year estimates for consumption.
• Gold climbed to the highest since February amid a retreat in bond yields and a report that top buyer China may import more of the metal. After weeks trading in a narrow range, gold has advanced as Treasuries and the dollar head for weekly losses. Prices extended gains on Friday after Reuters reported that China has given banks permission to import a large amount of bullion to meet domestic demand, citing people familiar with the matter. About 150 tons will likely be shipped in the coming months, it said. Chinese gold demand jumped at the start of the year as jewelry sales at big urban retailers more than doubled during the Lunar New Year holiday from a year earlier. Metals Focus forecast last month that the country’s gold jewelry demand will grow almost 30% this year.
• Americans wishing to become homeowners will be hoping that today’s housing starts release will show the recent torrid pace of construction continues. The last seven reports have seen single-family home starts come in above a one-million annualized pace, a streak not seen since July 2007. This has been a welcome relief for a housing market suffering from a drought of new supply. Home prices have risen an average of 4.5% each year since 2010, and one of the driving forces behind this march higher has been the fact that there aren’t many of them being built. The decade 2010 to 2019 saw just 683,000 of new single-family homes built on an annualized basis, the lowest level since the 1950s.
• China’s economy strengthened in the first quarter of the year as consumer spending rose more than expected, putting it on course to join the U.S. as twin engines for a global recovery in 2021. Gross domestic product climbed 18.3% in the first quarter from a year earlier, largely in line with the 18.5% predicted in a Bloomberg survey of economists, though that record-breaking figure was mainly due to comparisons with a year ago when much of the economy was shut due to coronavirus. Retail sales beat expectations while industrial output growth moderated.
• Morgan Stanley became the latest bank to get swept up in the implosion of Archegos Capital Management, reporting $911 million in total losses related to the debacle. “The current quarter includes a loss of $644 million related to a credit event for a single prime brokerage client, and $267 million of subsequent trading losses through the end of the quarter related to the same event,” Morgan Stanley said Friday in announcing first-quarter earnings.
• The EU probably won’t renew its coronavirus vaccine contracts with AstraZeneca and Johnson & Johnson, France’s industry minister said on BFM TV on Friday. The U.K. is on track to vaccinate 75% of its population with two doses within four months, while the EU may have to push its target back to December. German Chancellor Angela Merkel defended her plan to take greater control over the country’s pandemic restrictions. Indonesia aims to welcome foreign tourists to resort islands that have curbed Covid-19 infections and vaccinated a significant portion of their local population, while Thailand is preparing to shut schools and ban the sale of alcoholic beverages to stem a fresh outbreak.
• Europe’s auto sales soared last month from a depressed level a year ago, making up for a dismal start to the year even as virus-related restrictions persisted in key markets. New car-registrations rose 63% in March, the European Automobile Manufacturers’ Association said Friday. The gains erased an early-year decline to leave sales up 0.9% for the quarter. While automakers are benefiting from easy comparisons to a year ago, when countries were locking down to contain the spread of Covid-19, last month’s sales stack up well even relative to pre-pandemic. The 1.39 million vehicles registered was the highest since June 2019.
• Cathie Wood’s funds have snapped up about $352 million worth of shares in the biggest U.S. cryptocurrency exchange Coinbase Global Inc. over two days, as the stock’s turbulent start continues. Wood’s funds, including her flagship Ark Innovation ETF, bought 341,186 shares in total on Thursday, according to data released by the funds in an email. That takes Ark Investment Management LLC.’s Coinbase purchase past 1 million shares. The stock closed 1.7% lower on Thursday, valuing the exchange operator about 43% lower than the $112 billion it hit in debut.
• Shareholders of mutual-fund distributor Allfunds Group Plc plan to sell as much as 1.96 billion euros ($2.4 billion) of stock in an initial public offering on Euronext Amsterdam, adding to the city’s clout as an international listing venue. Shares in the fund-distribution business will be marketed at 10.50 euros to 12 euros each, according to a statement Friday from the company. The new stock is set to start trading in Amsterdam on April 23. The offering of a 26% stake would value Allfunds at as much as 7.6 billion euros. The banks arranging the sale gathered enough investor demand to cover the full deal size about 45 minutes after they started taking orders, according to terms seen by Bloomberg News. Selling shareholders include private equity firm Hellman & Friedman, Singapore’s sovereign wealth fund GIC Pte, BNP Paribas SA and Credit Suisse Group AG. The company won’t raise any money in the IPO.
• Hedge funds have been a major player in this year’s Treasury selloff, offloading more than $100 billion of the securities since the start of January, according to holdings data. The world’s biggest net sales of U.S. government debt so far in 2021 has been in the financial center of the Cayman Islands, well known as a domicile for leveraged accounts. Investors there dumped $62 billion of US. sovereign bonds in February, after selling $49 billion the previous month, Treasury Department data show. The January and February selling flow also appears to offer some clues about recent price action. Treasuries rallied on Thursday despite stronger-than-expected U.S. economic data, with many participants pointing to short-covering demand as the reason.
• Communities across the U.S. are suddenly revamping their vaccination campaigns to adjust to an indefinite halt in Johnson & Johnson’s doses, which has required officials to reschedule tens of thousands of appointments as they seek to reassure people that Covid-19 vaccines are safe. Health professionals are split on whether the delay should continue. On the one hand, the blood-clotting syndrome that led to the pause in J&J vaccinations is serious and can be deadly. Conversely, with J&J doses out of circulation, that means fewer people are getting immunized even as fast-spreading Covid variants are tightening their grip, and concern about the J&J shots risks expanding vaccine hesitancy.
• A ruling slashing a record French fine against a bank seemed to bode well for UBS Group AG as it fights an even larger 3.7 billion-euro ($4.4 billion) penalty in front of the same judges. But the Swiss lender might be a victim of its own success. According to details of the April 6 decision revealed earlier this week, the Paris appeals court said it had shown leniency to Latvia’s Rietumu Banka because its revenue had plunged by two thirds since first being convicted in 2017. “UBS can hardly argue it’s facing similar circumstances,” said Marion Lambert-Barret, a Paris lawyer at Aldébaran who isn’t involved in the case. UBS finished off 2020 strongly, with fourth-quarter net income of $1.7 billion, meeting or beating all its targets for the year.
• LG Energy Solution will invest $933.5 million in its U.S. unit to build a second electric battery plant with General Motors Co., as the South Korean company boosts resources in America to take advantage of President Joe Biden’s climate agenda. LG Energy and GM will set up a second EV battery plant in the U.S., the Seoul-based firm said in a regulatory filing on Friday, without providing further details including where the factory would be built and its expected annual capacity. A second plant will be needed by GM and LG Energy to make cells for an expanded family of electric cars and trucks planned over the next five years. The automaker has announced that it will build 30 EV models by 2025, with many going on sale in the U.S.
• Dieter Wemmer, a veteran insurance executive who was chief financial officer at Allianz SE, is launching a blank-check company to target deals in the sector where he worked for more than three decades, people familiar with the matter said. Wemmer plans to raise about 250 million euros ($300 million) on the Amsterdam stock exchange in May, the people said, asking not to be identified discussing confidential information. He’s teaming up with Murray Wood and Santiago Corral, co-owners of insurance-focused investment firm Nazare Capital, to create the SPAC. The executives have begun speaking with potential investors, the people said. They’re considering seeking targets among technology players in the insurance space, the people said. Wemmer, who’s a German national, will be executive chairman of the SPAC while Wood will serve as its chief executive officer, according to the people.
• Poland will start ratifying the European Union’s 750 billion euro ($892 billion) pandemic stimulus only in early May, Prime Minister Mateusz Morawiecki said, as the government struggles to secure enough support for the plan. The premier’s admission that the approval will drag beyond the end of this month underlines a deepening split in the ruling coalition and could delay the key element of the EU’s effort to bolster its virus-scarred economy. The junior ruling party of Justice Minister Zbigniew Ziobro is refusing to back the stimulus, arguing it will leave Poland on the hook for the debts of other states. The country’s de facto leader, Jaroslaw Kaczynski, has warned that his three-way alliance could collapse unless the plan is approved.
• Chinese automaker Zhejiang Geely Holding Group Co. will use its new Zeekr electric-car unit to take on tech giants like Apple Inc.and Xiaomi Corp., which also have ambitions to enter the burgeoning EV market. Zeekr Co., which will be run independently, is seen as combining the characteristics of a tech company with Geely’s carmaking expertise, Geely President Andy Conghui An said in an interview with Bloomberg Television. He said that will give it an edge against a new wave of potential rivals from the tech industry, which could see cars become like a piece of hardware that is constantly improved with software upgrades.
• Hong Kong media tycoon and pro-democracy activist Jimmy Laiwas sentenced Friday to a total of 14 months in prison for attending unauthorized protests and charged with more national security offenses as authorities pursue a deluge of cases against the city’s most high-profile dissidents. Lai, 73, and the founder of the pro-democracy Apple Daily newspaper, was sentenced alongside other prominent activists for participating in two protests not approved by police in August 2019, at the height of the city’s unrest. For one of these protests, Hong Kong’s “father of democracy” Martin Lee, 82, was handed a suspended sentence in the same case, as were senior lawyers and former lawmakers Margaret Ng, 73, and Albert Ho, 69, in recognition of their advanced ages and contributions to society, District Court Judge Amanda Woodcock said.
• Spinning wheels aren’t the only things that keep Peloton Interactive Inc. moving — the home-exercise company is also waging patent wars with its rivals. Already a market leader, Peloton benefited spectacularly from the pandemic, minting founder John Foley as a billionaire. But it still has unfinished business: fending off competitors with lawsuits accusing them of copying the technology built into its $2,000-plus stationary bikes. This kind of litigation is common in rapidly evolving industries with several players jostling for dominance. But legal experts say Peloton’s offensive puts its own patents in jeopardy once they are scrutinized in court — despite the company’s claim to be a pioneer of “revolutionary’’ technology. If these patents are declared invalid by early next year, when the battles are expected to play out, Peloton will lose legal protection for innovations it has called “core’’ to its fusion of exercise equipment with interactive live and recorded workouts.

“We are what we repeatedly do. Excellence, then, is not an act, but a habit”― Aristotle

*All sources from Bloomberg unless otherwise specified