April 29, 2021

Daily Market Commentary

Canadian Headlines

• BCE Inc. said its first-quarter revenue rose 1.2% from a year earlier, to C$5.7 billion ($4.6 billion), beating analysts’ average estimates of C$5.60 billion. The Montreal-based company added 32,925 new postpaid mobile phone subscribers. Average billing per mobile user fell 3.4% to C$70.34. BCE’s profitability beat expectations. Adjusted earnings were 78 Canadian cents per share, which was better than the average analyst estimate of 73 cents but 1.3% lower than a year ago. “Keeping the country connected and informed while building momentum in a recovering economy, Bell delivered continued sequential quarterly improvement in our results, including positive revenue and adjusted Ebitda growth for the first time since the beginning of the Covid crisis,” Chief Executive Officer Mirko Bibic said in a written statement.

World Headlines

• European equities rose on Thursday, boosted by robust earnings across various sectors and reassurance from the Federal Reserve that it has no plans to hit the brakes on stimulus support soon. The Stoxx Europe 600 Index climbed 0.4% as of 11:39 a.m. in London, moving closer to a record reached earlier this month. Telecoms led gains as Nokia Oyj rallied 16% after saying it’s well placed to reach the top end of its profitability forecast for the year. Total SE and Royal Dutch Shell Plc boosted energy shares after reporting better-than-forecast profits. Banks got a boost from rising U.S. Treasury yields and positive reports. Standard Chartered Plc reported an 18% rise in first-quarter profits, while Nordea Bank Abp jumped after results topped estimates. HSBC Holdings Plc advanced after announcing plans to offer its ultra-rich clients in Asia direct access to its investment bankers.
• U.S. stock-index futures raced ahead, and Treasury yields rose, as the Federal Reserve’s dovish assurances and blow-out earnings from technology giants cemented conviction the world’s largest economy is resurgent. The June contract on Nasdaq 100 Index climbed 0.9%, outperforming a gain for S&P 500 futures. Apple Inc. and Facebook Inc., whose big beats vindicated investors’ heightened expectations, climbed in premarket New York trading. The 10-year rate headed for the biggest weekly increase since March 19, and a key gauge of commodities was on course for the longest daily rally in more than three years. The Fed strengthened its assessment on the economy, reaffirming aggressive support amid a need for further progress in employment and inflation. Chair Jerome Powell dismissed worries about price surges or anecdotes of labor shortage, implying the central bank is prepared to run the economy hot for a while. President Joe Biden unveiled a $1.8 trillion spending plan targeted at American families, adding to the economic optimism.
• Asian stocks rose and were set for a second day of gains, as investors cheered American President Joe Biden’s ambitious spending plans and buoyant earnings from U.S. tech giants like Apple. China stocks rose for a third session in their longest streak of gains this month, on the back of solid first-quarter earnings growth by financial and consumer staples companies. The CSI 300 Index gained 0.9%, while Hong Kong’s Hang Seng rose 0.8%. India’s S&P BSE Sensex Index pared an advance of as much as 1.3% and traded little changed as the South Asian country continued to report record daily coronavirus cases. The nation’s biggest conglomerates and global giants such as Amazon.com Inc. stepped in to help ease the country’s pandemic-induced crisis.
• Oil extended gains after closing at a six-week high as signs of strengthening demand in key markets offset concerns a Covid-19 resurgence in some countries, especially India, will damp consumption in the near term. Futures in New York traded above $64 a barrel after climbing more than 3% over the previous two sessions. A gauge of demand for U.S. petroleum products increased last week to the highest in more than two months. Fuel demand may get another boost as China breaks for an extended holiday on Saturday, with mobility expected to climb to a record. Broader markets also climbed on Thursday after the Federal Reserve strengthened its assessment on the U.S. economy and reaffirmed aggressive policy support.
• Gold steadied, as bond yields moved higher after Federal Reserve Chair Jerome Powell dismissed talk of reining in support for America’s “uneven” recovery. The metal on Wednesday rebounded from the lowest in more than a week as Powell said the U.S. economy is a long way from the Fed’s goals, and any inflationary pressures are down to transitory factors. The bank kept its key interest rate near zero and Powell said it’s “not time yet” to consider reining in the bank’s $120 billion of monthly asset purchases. Also on Wednesday, President Joe Biden pledged $1.8 trillion in spending on social care, adding to his administration’s $2.25 trillion infrastructure package.
• Copper rallied to within 50 cents of $10,000 a ton, with the focus turning to whether it will take out the all-time high set in 2011 as rebounding economic growth and climate pledges spur demand. The metal has been among the best performers in a month where raw materials from aluminum to iron ore have surged to the highest in years. The rally is being fueled by stimulus measures, near-zero interest rates and signs that economies are recovering from the pandemic. A global clean-energy transition is also set to boost consumption of copper, which is used in everything from electric vehicles to solar power systems.
• The U.S. government told its citizens to leave India, which reported a record number of daily infections and deaths Thursday. The country has confirmed 18.4 million Covid-19 cases in total and over 204,000 deaths. New cases rose globally for a ninth week as a surge in India outweighed declines in most regions, according to the World Health Organization. U.S. President Joe Biden urged all Americans to get inoculated and touted his administration’s success in rolling out vaccines and fighting the pandemic, saying in his first address to Congress that it has been one of the “great logistical achievements” in history. Moderna Inc. said it would make as many as 3 billion vaccine doses next year as it expands investment in factories in the U.S. and Europe. Moves to restart travel are building in Europe, with Britain and France planning digital vaccine passports. Deutsche Bank AG is considering one of the most flexible return-to-office policies among big international banks.
• President Joe Biden declared the U.S. has turned the corner on a pandemic that’s killed more than half a million Americans and crippled the economy, promising tax increases on the wealthy to pay for ambitious plans to spend trillions on infrastructure, education and other Democratic priorities. “America is on the move again,” Biden said in his first address to a joint session of Congress on Wednesday. “Turning peril into possibility. Crisis into opportunity. Setback into strength.”
• China Vanke Co., the country’s largest developer by market value, is working with an adviser to prepare for a listing of its property management business in Hong Kong that could raise about $2 billion, according to people with knowledge of the matter. The Shenzhen-based company is holding talks with several other banks for the offering, which could take place as soon as the end of this year, the people said. The use of technology in its real estate management could help boost the unit’s valuation, the people said, asking not to be identified as the information is private.
• A pandemic surge and political turmoil are dimming the appeal of the bigger bond markets in the developing world while boosting the case for lesser-trod frontier locales, according to Goldman Sachs Asset Management, which oversees about $1.9 trillion. Angus Bell, a London-based money manager at the firm, said the pandemic surge in India, the residual sanctions threat in Russia and the Huarong debt saga in China are among the reasons his $5.6 billion GS Emerging Markets Debt Portfolio is underweight each of the so-called BRICS nations of Brazil, Russia, India, China and South Africa.
• Moderna Inc. said it would produce as many as 3 billion doses of its Covid-19 vaccine next year as it makes new investments to bolster output at several factories in the U.S. and Europe. The biotech company said it would increase supply by 50% at its Norwood, Massachusetts, plant, which makes much of the vaccine substance used in shots for the U.S. market. The investments would also enable partner Lonza Group AG, which is making supply for foreign markets, to double its output at a factory in Switzerland that makes vaccine substance. Vaccine output at third factory in Spain operated by another partner, Laboratorios Farmaceuticos Rovi SA, would also more than double under the plan. The increased production from the company-owned and partner factories is expected to ramp up in late 2021 and early 2022, Moderna said. The exact amount of doses Moderna produces next year will depend on the mix of production between the current vaccine, which uses a higher dose, and pediatric vaccines and booster shots now in human trials that are likely to use smaller doses, it said.
• Credit Suisse Group AG is suing a Georgian billionaire and his communications adviser over their decision to publish a copy of a report from Switzerland’s banking regulator on its handling of a former banker convicted of fraud. The two sides will lock horns in a court hearing in London Thursday where Credit Suisse will seek to extend a preliminary order forcing the report to be removed from the CSVictims.com website. The public relations firm behind the website, Metigen, will ask the court to lift the injunction pending a decision on whether there needs to be a full trial. The dispute is the latest in a long running battle between the Swiss bank and investors who were victims of Patrice Lescaudron, who was convicted of orchestrating a scheme to fake trades to cover losses that ran into the millions of dollars. The investors, including former Georgian Prime Minister Bidzina Ivanishvili who is also a defendant in the London lawsuit, believe Credit Suisse should bear some responsibility for the rogue banker’s crimes.
• Unilever Plc joined other consumer-goods companies in benefiting from a boom in sales of everything from ice cream to cleaning products as shoppers emerge warily from lockdowns. The maker of Knorr bouillon cubes on Thursday guided for a strong first half but a more tempered end to the year amid significant uncertainty in key markets such as India and Brazil. The comments come days after larger rival Nestle SA reported a blowout quarter and maintained its full-year forecast and Reckitt Benckiser Group Plc’s sales beat estimates as the pandemic continued to fuel demand for its Dettol and Lysol cleansers.
• Royal Dutch Shell Plc took the opportunity to pay down its heavy debt burden as profit surged by more than expected in the first quarter. The energy giant became the latest oil major to restore earnings to pre-pandemic levels, thanks to a sharp recovery in the prices of crude, natural gas and chemicals. As the industry recovers, investors are demanding higher returns and Shell took another step toward giving them what they want. After slashing its dividend last year, the company went ahead with a planned 4% increase to the payout. It also managed to pay off $4.1 billion of net debt, moving closer to the level of borrowing that will allow it return extra cash to shareholders.
• BT Group Plc is in talks to sell a stake or all of its sports-broadcast division, BT Sport, possibly to a U.S.-based media or tech giant, according to people familiar with the matter. Potential bidders include Walt Disney Co., Amazon.com Inc. and the Len Blavatnik-backed sports streaming platform DAZN, said the people, who asked not to be identified because the deliberations are private. Lazard Ltd. is advising on the process, and it isn’t yet clear how much money a stake may fetch, the people said. “Early discussions are being held with a number of select strategic partners, to explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth,” BT confirmed in a statement Thursday. They may or may not lead to an outcome, it said. Shares rose as much as 3% to 164.6 pence in early London trading to their highest price in 14 months.
• Airbus SE said it’s considering adding a large freighter to its lineup, going after rival Boeing Co.’s dominance in a segment that’s boomed during the coronavirus pandemic. Airbus Chief Executive Officer Guillaume Faury signaled Thursday the planemaker will look to invest more in cargo planes to become a bigger player. He told Bloomberg Television the company is looking at a wide-body freighter, and hinted this would be an A350. While Airbus has established a decisive lead over Boeing in the market for narrowbodies, it’s long lagged behind in bigger, more expensive twin-aisle aircraft that can also be made as dedicated freighters. The pandemic has seen demand for cargo planes grow amid an e-commerce boom, helping Boeing pad deliveries with freight versions of its 777, 767 and outoing 747 jets.
• The global chip shortage is going from bad to worse with automakers on three continents joining tech giants Apple Inc. and Samsung Electronics Co. in flagging production cuts and lost revenue from the crisis. In a dizzying 12-hour stretch, Honda Motor Co. said it will halt production at three plants in Japan for around five to six days next month; BMW AG flagged it will pause production at its plants in Germany and England; and Ford Motor Co.reduced its full-year earnings forecast due to the debilitating chip shortage, which it sees extending into next year. Automakers are expected to lose tens of billions in revenue this year because of the crisis. Now, the very companies that benefitted from surging demand for phones, laptops and electronics during the pandemic that caused the chip shortage, are starting to feel the pinch. After a blockbuster second quarter, Apple Chief Financial Officer Luca Maestri warned that supply constraints are crimping sales of iPads and Macs, two products that performed especially well during lockdowns. Maestri said this will knock $3 billion to $4 billion off revenue during the fiscal third quarter.
• Joe Biden took the riskiest step of his presidency with a call for higher taxes on the wealthy to fund a massive investment in the nation’s social safety net, betting he could sell the American public on sweeping change following a pandemic that exacerbated economic and social divides. Biden devoted his first address to a joint session of Congress to a call for “a once-in-a-generation investment in our families,” prescribing trillions of dollars in new spending for infrastructure, child care, paid leave, community college tuition, and a bevy of subsidies for working class families. And in a full-throated confrontation of Wall Street, Biden said the nation’s wealthiest taxpayers and companies should foot the bill. He declared investors “didn’t build this country” and said the wealthy had lined their pockets during the pandemic without paying their fair share.
• The Federal Reserve’s agency mortgage bond purchases for this round of quantitative easing are set to hit $2 trillion within the next few weeks after the central bank announced it is keeping its aggressive monetary policy in place. Fed Chair Jerome Powell reiterated his stance Wednesday that it is not the time to even discuss reducing the pace of asset purchases, which have run at an average of about $6 billion of agency mortgage bonds per day this year. While the bulk of those purchases are reinvestments of roll-off from its pre-existing mortgage holdings, $40 billion each month is additive to its balance sheet, which has increased to around $2.25 trillion in agency mortgage bonds.
• Paxos Trust Co., a blockchain startup that caters to financial institutions including PayPal Holdings Inc. and Credit Suisse Group AG, is valued at $2.4 billion after raising $300 million from investors. The New York-based firm will use the new cash to hire more employees and add to its working capital, Chief Executive Officer Chad Cascarilla said in an interview. The capital may also be used for acquisitions, though none are planned, he said. In March, Paxos used its technology to settle stock trades within hours of the transactions, rather than days, in a preview of what may soon be commonplace on Wall Street. The trades were on behalf of customers of Credit Suisse and Instinet LLC, Cascarilla has said. Paxos is testing its technology to transfer shares and money in near-real time in what could be a threat to the Depository Trust & Clearing Corp.’s half-century dominance in equity markets.
• Merck & Co. reported quarterly earnings and sales that trailed Wall Street expectations, as a surge in Covid-19 cases early in the year deterred many people from seeking more routine medical care. Adjusted earnings were $1.40 a share for the first quarter, compared with analyst expectations of $1.62 a share, according to data compiled by Bloomberg. Revenue was $12.08 billion, short of the average analyst forecast of $12.57 billion.
• HSBC Holdings Plc is offering its ultra-rich clients in Asia direct access to its investment bankers as the lender targets becoming a leader in managing wealth in an increasingly affluent region. The London-based bank, which makes the bulk of its profits in Asia, is introducing new institutional services for its family office in Hong Kong and Singapore, which will give access to a full slate of financing and investment products, deal making and institutional market access, the lender said in a statement on Thursday. HSBC is investing $3.5 billion and hiring more than 5,000 new wealth planners to grow its business in Asia over the next three to five years as part of a broader pivot to the region. Like other banks, it has struggled with low interest rates over the past years and is seeking out more fee-based income to boost profitability.
• Comcast Corp. exceeded Wall Street’s sales and profit estimates for the first quarter, benefiting from pandemic-related increases in demand for online services. The cable giant said Thursday that it signed up 461,000 new internet subscribers, or almost 2 million customers since the start of the pandemic. Analysts were forecasting 398,900 new broadband users. Profit in the quarter came to 76 cents a share, excluding items, topping estimates of 59 cents.
• Bristol-Myers Squibb Co. joined other drugmakers in missing first-quarter earnings estimates due to a decline in medical visits and new diagnoses as Covid-19 cases surged at the start of the year. The New York-based company reported $1.74 in adjusted earnings per share, falling short of the $1.81 average analyst estimate compiled by Bloomberg. Revenue was $11.1 billion, according to a statement Wednesday. That narrowly missed analysts’ estimates of $11.2 billion. The pandemic mostly impacted products administered in medical centers, according to David Elkins, the company’s chief financial officer. Treatments that could be taken at home remained resilient, he said. Excluding pandemic-related buying patterns from the prior year, first-quarter revenue grew 8%, according to the statement
• Bain Capital is weighing a deal to extend its investment in Stada Arzneimittel AG, one of Europe’s top listing candidates, as it seeks more time to expand the German drugmaker, people with knowledge of the matter said. The buyout firm is discussing the possibility of selling its 50% stake in Stada to another Bain fund, the people said, asking not to be identified because the information is private. A deal could value the business at more than 10 billion euros ($12.1 billion), according to the people. It invested in Stada through Bain Capital Europe Fund IV, which was raised in 2014, data compiled by Bloomberg show. Bain is considering transferring its holding to a more recent vehicle, the people said. Moving the stake to a newer fund would present an alternative to a sale or initial public offering, allowing Bain to own the business for longer while still returning cash to the original fund’s investors.

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*All sources from Bloomberg unless otherwise specified