December 15th, 2020
Daily Market Commentary
- Oil traded near a nine-month high as the IEA cautioned that a market glut will last another year. Futures had earlier fallen on concerns that more pandemic lockdowns could slow a global rebound in fuel demand. New York is heading toward a second full lockdown after a surge in infections, with London being placed under England’s toughest coronavirus rules from Wednesday. The International Energy Agency trimmed its demand forecast for next year, and doesn’t expect the crude glut built up during the pandemic to clear until December 2021. That was enough to counter positive data from China, which processed a record amount of crude on a daily basis last month as fuel consumption recovered.
- Workplace productivity software startup ClickUp was valued at $1 billion in a $100 million investment, roughly five times its valuation in a funding round earlier this year. The new round was led by Georgian, a Canadian venture capital firm, with participation from Craft Ventures, which had invested earlier, too. San Diego-based ClickUp is one of several workplace software companies whose growth has accelerated because of remote work during the coronavirus pandemic.
- The world’s biggest maker of oriented strand board is restarting production at a Quebec mill in spring due to increase demand for the plywood substitute, the company said Monday. Norbord Inc.’s Chambord, Quebec, mill was bought in 2016 “with the intention to one day return it to production,” says CEO Peter Winjbergen. Norbord needs this additional OSB production to meet North American demand forecasts. Mill will employ approximately 120 people with annual production capacity of 550 million square feet (3/8-inch basis)
- U.S. stocks are poised to open higher after a four-day slump, the longest stretch since September, with investors taking comfort in the vaccine rollout and progress on stimulus talks. Bristol-Myers Squibb Co. climbed in U.S. pre-market trading after Goldman Sachs Group Inc. added the drugmaker to its conviction buy list. In Europe, Volkswagen AG rallied 5% after the German carmaker’s board eased internal corporate tensions by backing CEO Herbert Diess.
- Asian stocks were set for their worst day this month as energy and materials shares declined. Hong Kong-listed Cnooc was among the biggest decliners on the Asian energy gauge after its parent sent a notice to customers and partners asking them to help ensure sufficient LNG supplies amid a surge in prices. Meanwhile, Yancoal Australia fell 8.4% amid reports that China has formally banned imports of Australian coal while Whitehaven fell 5.9%. European stocks were little changed on Tuesday as talks over a post-Brexit trade deal continue and the U.S. Federal Reserve comes into focus. The Stoxx Europe 600 Index fell 0.1% at 8:14 a.m., dragged by the banking and energy sectors, while autos and miners gained.
- Iron ore futures overturned early losses to trade back above $150 a ton as investors weighed still-robust steel output in China against Morgan Stanley’s view that the recent rally to a multi-year high had taken prices “ahead of fundamentals.” Figures from China showed mills produced a record volume of the alloy for the month of November, although the headline number was below 90 million tons for the first time in seven months. Overall, the data showed the nation’s recovery gathered pace, supported by strong demand from home and abroad. Iron ore has soared this month, with futures in Singapore rallying to the highest level since 2013, on sustained demand from China, coupled with a cut to supply guidance from Brazil’s Vale SA. The run-up in prices has aided BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd. but drawn complaints from China’s leading steel group, which is urging regulators to intervene.
- Gold advanced after the unveiling of a possible new U.S. spending package, with traders also anticipating fresh guidance on monetary policy from the Federal Reserve at its last meeting of the year. A bipartisan group of lawmakers delivered details of a $908 billion relief package, splitting it into two parts in recognition of deep differences over state aid and a liability shield for employers. With Joe Biden now confirmed as president by the Electoral College, leaders in Congress need to find a way to get one or both parts through the House and Senate before the last of the relief provisions from earlier stimulus expire at the end of the year.
- Bridgetown Holdings Ltd., the blank-check company backed by billionaires Richard Li and Peter Thiel, is considering a potential merger with Indonesia’s e-commerce giant PT Tokopedia, according to people with knowledge of the matter. The special purpose acquisition company is exploring the structure and feasibility of a deal with Tokopedia, one of the most valuable startups in the southeast Asian nation, the people said. The SoftBank Group Corp.-backed firm could be valued at $8 billion to $10 billion in a transaction, said the people, who asked not to be identified as the discussions are private.
- The president of OPEC reiterated that the oil producers’ cartel shouldn’t rush to increase output early next year and said energy demand was still fragile with the coronavirus raging across parts of the world. Algeria’s Energy Minister Abdelmajid Attar, who holds OPEC’s rotating presidency, said there was no guarantee the group and its allies would raise crude production by 2 million barrels a day by April, even after an agreement earlier this month to reach that level in steps.
- European credit markets strengthened on Tuesday with progress in Brexit negotiations outweighing the impact on sentiment of tightening lockdown restrictions across the region. Gauges of default risk for investment grade and sub-investment grade borrowers retreated and the primary market for syndicated bonds continued to tick over with three deals in the works.
- China’s ravenous appetite for imported meat, which helped fuel a global price rally this year, could be nearing an end. Hog numbers in the world’s biggest pork producer are likely to fully recover from African swine fever by the first half of 2021, according to the agriculture ministry. In the meantime, the government will release more pork from state reserves to bolster supply before the Lunar New Year festival in February. The rapid recovery in China’s pig population could signal that the strength in U.S. hog prices is about to ease. The global benchmark has climbed more than 50% from a low in April on robust exports to China.
- President-elect Joe Biden sought to dispel any questions about the legitimacy of his victory and called on the American people to accept the outcome hours after the Electoral College sealed his win. Seeking to end an unusually long and contentious election, Biden urged the nation to “turn the page” on what he described as “an unprecedented assault on our democracy.” He said he would be the president for all Americans, even those who don’t agree with him. He urged people to focus instead on combating the coronavirus pandemic and its economic fallout.
- Brexit negotiators got back to work in Brussels this week as they push to complete a trade accord before the U.K. leaves the European Union’s single market on Dec. 31. Following a weekend of intense diplomatic activity, Michel Barnier, who leads the EU team, told ambassadors from the bloc that he can see a pathway to a deal — if the two sides can resolve what he called their significant differences.
- Two medical journals published a rare joint editorial urging the U.K. government to ban household mixing over Christmas. Italy’s prime minister said he plans further curbs to slow cases during the festive season, and the Dutch government is imposing stricter rules for five weeks. Almost all of Sweden’s regional hospitals are struggling with staff shortages as the virus spreads faster than health authorities predicted. Hong Kong plans new relief measures before Christmas, and Singapore is creating a new “bubble” facility near the airport.
- Eli Lilly & Co. said it will buy Prevail Therapeutics Inc. for about $1 billion to gain gene therapies that treat neurodegenerative disease such as Parkinson’s. Lilly will pay $22.50 per share in cash payable at closing plus one non-tradeable contingent value right worth up to $4 per share for a total of as much as $26.50 per share, according to a statement. The contingent value right is payable upon the first regulatory approval of a product from Prevail.
- Ameriprise Financial Inc., CI Financial Corp. and the private equity firms GTCR and Reverence Capital Partners are weighing second-round bids for Wells Fargo & Co.’s asset management arm, according to people familiar with the matter. The offers are due later this month, said one of the people, asking not to be identified because the matter isn’t public. Wells Fargo may whittle down the auction to one or two suitors after the next round, depending on how good the offers are, the person said. A final decision hasn’t been made and the firms could decide not to proceed with bids, the people said. The asset management division could fetch more than $3 billion, people familiar with the matter said in October.
- As 2021 approaches, many on Wall Street are bracing for unfamiliar territory: A year when technology companies may not be the biggest stars of the stock market. The Nasdaq 100 Index is on track for its best year in more than a decade with a 43% advance so far in 2020, led by companies with triple-digit gains and eye-watering valuations like Zoom Video Communications Inc. and DocuSign Inc.That’s raising speculation that the rally may fizzle at least for a while in 2021, when the group’s earnings growth is projected to lag behind less-expensive sectors like industrials. “It’s a matter of what’s the more attractive portion of the market,” said Michael O’Rourke, chief market strategist at JonesTrading. “Are you going to pay 40 or 50 times sales or buy something cheaper and wait for the business to normalize?”
*All sources from Bloomberg unless otherwise specified