August 13, 2021
Daily Market Commentary
- Canadian equities declined Thursday, led by commodity-exposed sectors including energy and materials. The S&P/TSX Composite Index fell 0.2%, with seven of 11 sectors dropping. Oil closed lower as traders assess how the spreading delta variant will impact world fuel demand the rest of the year.
- Kansas City Southern’s board rejected this week’s bid from Canadian Pacific Railway Ltd. and said it plans to delay a shareholder vote to approve a $30 billion acquisition by Canadian National Railway Co. if the U.S. rail regulator hasn’t made a key decision on the deal by day’s end on Aug. 17. The decision to wait for the U.S. Surface Transportation Board to make a ruling comes after Canadian Pacific made a second, higher bid for Kansas City Southern on Aug. 10. That bid of $27 billion is still below Canadian National’s offer, and Kansas City Southern urged its shareholders in a statement Thursday to approve the CN deal at an Aug. 19 shareholders’ meeting.
- Canada Prime Minister Justin Trudeau is planning to call a snap election for Sept. 20, Reuters reports, citing four unidentified people familiar with the matter. Formal announcement is expected to come Sunday.
- Asian stocks fell for a second day, and were set to erase the week’s earlier advance, as technology heavyweights dropped on a combination of concerns over China’s regulations and chip demand. The MSCI Asia Pacific index lost as much as 0.6% on Friday, on pace for a weekly drop. The biggest drags were a gauge including the largest makers of memory chips and a measure of consumer-discretionary stocks including Alibaba Group. South Korean equity gauges were among the worst performers in the region as Samsung Electronics sank to its lowest level since December.
- European stocks headed for the longest winning streak since 1999 as bullishness swept across markets after a blowout earnings season and economic recovery out of lockdowns. The Stoxx 600 Index rose 0.2%, poised for a tenth straight record close, and France’s CAC 40 approached the highest in more than two decades. U.S. stock futures were steady after the S&P 500 closed at a record high. Walt Disney Co.advanced in pre-market trading after reporting better-than-expected quarterly results.
- US stock futures wavered near record highs Friday as investors took heart from upbeat corporate earnings, while oil futures slid as concerns grew about demand growth. Dow Jones futures were up 0.15%, S&P 500 futures rose 0.11% and Nasdaq futures gained 0.1%, as of 05:02 am E.T. on Friday. The S&P 500 closed at a new all-time high Thursday after producer-price inflation beat analyst estimates and jobless claims fell for the third week in a row.
- Oil steadied at the end of a volatile week in which the fast-spreading delta virus variant continued to cloud the demand outlook. Futures traded near $69 a barrel in New York after slipping on Thursday. The latest Covid-19 wave is leading to tighter curbs on movement across the globe, although there are mixed assessments on its impact. The International Energy Agency reduced its demand forecasts for the rest of the year, while Goldman Sachs Group Inc. predicts only a transient hit to consumption.
- Gold edged higher, though still headed for a second straight weekly loss amid concerns that the Federal Reserve may soon curb its massive monetary stimulus. The durability of the global economic recovery has dimmed the appeal of the haven asset in recent weeks as some Fed officials signaled they’re ready to discuss softening ultra-loose monetary policy. U.S. data on Thursday added to signs of rising inflation pressures and a strengthening labor market.
- Iron ore extended its decline as China’s steel industry vowed to enforce efforts to cut output this year. The government will work closely with the industry to develop plans for staggered steel production cuts over winter, Shanghai Securities News reported, citing Ministry of Ecology and Environment deputy director Wu Xianfeng. Major producers such as Jiangsu and Shandong have already made arrangements to reduce output in the second half, he said.
- Workers at the Andina mine in central Chile began a strike Thursday after rejecting owner Codelco’s final wage offer, in a stoppage that may tighten global copper supplies. Members of two unions representing about 70% of the Andina workforce walked off the job after snubbing a proposal made by the state-owned company in mediated talks.
- U.K. wages are rising as companies scramble to recruit workers to help them recover after the last coronavirus restrictions eased in July, a survey showed. The Recruitment & Employment Confederation, whose jobs report was one of the first to flag labor shortages in the second quarter, counted a near-record numbers of online job adverts posted last week. It was the fourth-highest weekly figure since the start of the pandemic.
- Treasury yields are rising amid optimism over the global recovery but there has been a run on Eurodollar options betting the Federal Reserve will opt not to raise interest rates at all. Traders this week have been busy snapping up Eurodollar call options on underlying March 2025 futures that target three-month Libor to fix below 0.5%. These pay off if markets price the Fed keeping its benchmark at its lower bound until then. Futures markets are currently anticipating Libor will rise to about 1.47% by the first quarter of 2025.
- Belarus’s authoritarian regime, weighed down by sanctions imposed by the U.S. and European Union, is set to get an almost $1 billion lifeline from the International Monetary Fund. That’s happening despite calls for the IMF to cut off President Alexander Lukashenko’s government following Western accusations of fraud in last year’s election and his brutal repression of protests that followed.
- A Covid outbreak that has partially shut one of the world’s busiest container ports is heightening concerns that the rapid spread of the delta variant will lead to a repeat of last year’s shipping nightmares. The Port of Los Angeles, which saw its volumes dip because of a June Covid outbreak at the Yantian port in China, is bracing for another potential decline because of the latest shutdown at the Ningbo-Zhoushan port in China, a spokesman said.
- Americans with weakened immune systems will be allowed to get three shots of a Covid-19 vaccine after U.S. regulators authorized giving an extra dose to the most vulnerable people. The U.S. Food and Drug Administration’s action expands the use of vaccines from Moderna Inc., Pfizer Inc. and BioNTech SE for organ transplant recipients and patients with other conditions like cancer that hobble the body’s natural infection-fighting response. The agency’s decision doesn’t apply to other fully vaccinated individuals, it said in statement.
- Donald Trump’s fundraising committee has hired two political operatives familiar with campaigns in Iowa, the state that typically kicks off the race for the White House, signaling his interest in running in 2024. An aide with Save America, the leadership political action committee that Trump began after losing the 2020 election, told staff and advisers in a memo Thursday that Eric Branstad and Alex Latcham are joining as senior advisers.
- Airbnb falls 4.8% in U.S. premarket trading with analysts saying its disappointing guidance for 3Q will provide fuel to bears on the stock, though they argue that the long-term attractions of the company remain intact. The shares are up 3% in 2021 to $151.15 through Thursday’s close.
- Disney shares climb 5% in U.S. premarket trading after the group reported a strong recovery for its Parks business and a solid quarter for its Disney+ streaming service, with analysts expecting further good news from the latter to emerge as the year goes on.
- Wish shares tumbled as much as 31% premarket amid investor disappointment in the mobile e-commerce platform operator’s 2Q revenue shortfall and projection that 3Q revenue would decline further. The report led to two downgrades, including a two-step cut at JPMorgan to underperform.
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”— Ayn Rand
*All sources from Bloomberg unless otherwise specified