December 23, 2021

Daily Market Commentary

Canadian Headlines

  • Prime Minister Justin Trudeau’s government is expanding the number of businesses that can use Covid-19 aid programs as the omicron variant fuels a surge in cases and new restrictions in Canada. At a press conference with Finance Minister Chrystia Freeland, Trudeau said companies and individuals affected by new capacity limits will be eligible for extended financial help. Firms can receive wage and rent subsidies of 25% to 75% depending on how much revenue they’ve lost, the government said in a statement.
  • Quebec expects its daily coronavirus infections tally to jump 40% in just 24 hours, confirming its status as Canada’s Covid-19 hot spot as it imposes measures to slow down hospitalizations. Premier Francois Legault said indoor gatherings at homes and restaurants will be limited to six people starting Sunday; a report on daily infections Thursday will probably show about 9,000 new cases, up from 6,361 on Wednesday, he said.
  • Agnico Eagle sent its Nunavut workers home amid a Covid-19 outbreak and plans to resume activities in the territory in early 2022. The Company has decided to send home the Nunavut-based workforce from its Meliadine, Meadowbank and Hope Bay operations as well as its Nunavut exploration projects, after 13 presumptive cases of Covid-19 at those locations since Dec. 18. All Nunavut-based workers currently on site will be sent home and those that are currently off-site will not return to work for a period of at least three weeks. The company is monitoring activities at its other operations and it will reassess its response on an ongoing basis.


World Headlines

  • U.S. stock futures posted modest gains amid bets the omicron variant won’t derail a recovery after studies showed it’s less severe than other strains. S&P 500 and Dow Jones futures climbed 0.2% while Nasdaq 100 futures were 0.1% higher. U.S. stocks have advanced over the past two days amid signs the omicron variant won’t thwart growth, with consumer confidence rising by more than expected in December.
  • European equities climbed for a third day as the latest coronavirus studies fueled optimism that economic growth can withstand omicron risks. The Stoxx Europe 600 rose 0.6% as of midday in London, hitting a two-week high. Travel & leisure and automotive shares were among the top gainers.
  • Asian stocks were on track to gain for a third straight day, bolstered by signs the omicron strain is less severe than previous variants. Tech and communication services sectors led the advance. The MSCI Asia Pacific Index climbed as much as 0.9%, with Tencent as the biggest contributor to gains after a 4.2% rally in Hong Kong. The Chinese internet giant declared a one-time dividend in the form of’s shares worth more than $16 billion, causing the latter’s stock to plunge intraday by the most on record.
  • Sentiment in Asia improved as a trio of studies found that the omicron variant led to lower hospitalization risk than the delta strain, and Pfizer Inc.’s Covid-19 pill gained clearance for emergency use in the U.S. Separately, lab results indicated a third dose of AstraZeneca’s vaccine significantly boosted antibodies against the strain though another study released late in the Asia day found that three doses of Sinovac’s vaccine weren’t enough to protect against it.
  • Travel and leisure is the top-performing sector in Europe on Thursday amid optimism of fewer hospitalizations linked to the omicron variant of Covid-19. Airlines shrug off a profit warning from Ryanair (+1.1%) that was first reported late in the trading session on Wednesday. British Airways-owner IAG adds 3.7%, Wizz +3.3%, hotelier Whitbread +2.6%, Deutsche Lufthansa +2%, caterer Sodexo +0.8%.
  • Gold held an advance as the dollar weakened, while silver got a boost from signs of an improving U.S. economy. The Bloomberg Dollar Spot Index steadied on Thursday after its biggest three-day drop since the end of November, boosting bullion’s appeal. Silver held gains after the final U.S. gross domestic product reading was revised higher, bolstering the outlook for metals exposed to industrial production. Bullion is heading for the first annual loss in three years as central banks reduce pandemic-era stimulus to fight surging inflation. Spot prices advanced 0.2% to $1,806.65 by 9:56 a.m. in Singapore.
  • Aluminum extended this year’s second-best gain among base metals as Europe’s energy crisis disrupted supply from the region’s top smelter, while iron ore declined for a second day as rising inventories in China take the steam out of a six-week rally.
  • Oil held near the highest settlement in four weeks as traders weighed falling U.S. crude stockpiles against the threat to demand from the omicron virus variant. Futures in New York traded below $73 a barrel, though liquidity is dwindling heading into the holiday period. U.S. crude inventories dropped by 4.72 million barrels last week, according to government data, almost twice the median estimate in a Bloomberg survey. That offset some concerns about the impact of the omicron variant on global consumption. Trading volumes are starting to thin before Christmas, while open interest — the total number of oil contracts held by traders — for crude, gasoline and diesel futures combined is at its lowest in almost six years. Both could leave the market prone to sharp moves amid thin liquidity.
  • European natural gas prices plunged more than 20% on Thursday as this year’s stellar rally attracted a flotilla of U.S. cargoes. At least 10 vessels are heading to Europe, according to ship-tracking data compiled by Bloomberg. Another 20 ships appear to be crossing the Atlantic, but are yet to declare their final destinations. U.S. cargoes of liquefied natural gas will help offset lower flows from Russia, Europe’s top supplier. Prices also declined as weather forecasts for Northwest Europe turned milder, with temperatures expected to rise above seasonal norms next week. Benchmark Dutch front-month gas fell as much as 22% to 135.03 euros in Amsterdam, erasing this week’s gains. Lower gas prices also dragged down power, with German electricity for next year slumping 15% to 277 euros per megawatt-hour, the biggest decline since Oct. 7. The French contract for February dropped 24% to 775 euros per megawatt-hour, after hitting a record above 1,000 euros on Tuesday.
  • The highly-mutated omicron variant appears less likely to land patients in the hospital with Covid-19 than the delta strain, according to preliminary data from a trio of studies. Researchers in Scotland found omicron was associated with a two-thirds lower risk of hospitalization compared to the earlier variant, though it was 10 times more likely than delta to infect people who’d already had Covid. An Imperial College London team working with a larger data set found that people with omicron were almost half as likely to need an overnight hospital stay. The fresh data add to a study showing South Africans were 70% less likely to develop severe disease and 80% less likely to be hospitalized if they contract the new variant.
  • China locked down the western city of Xi’an on Thursday to stamp out a persistent Covid outbreak, its biggest such move since the pandemic started in Wuhan, underscoring how the country’s zero-tolerance approach hasn’t allowed it to move on since the virus emerged nearly two years ago. The 13 million residents of Xi’an were told to remain in their homes and to designate one person to go out every other day for necessities, triggering fights over access to food. Non-essential travel out of the city was banned. This came after a second round of mass testing pinpointed 127 Covid infections scattered across 14 districts, making containment of the virus “grave and complicated,” the official Xinhua News Agency reported.
  • Former Treasury Secretary Lawrence Summers warned of a testing period for the U.S. economy in coming years, with the risk of recession followed by stagnation. In an interview with the Bloomberg Economics “Stephanomics” podcast, Summers said that the Federal Reserve had been late to spot the dangers of inflation and that delayed action to cool prices could potentially tip the economy into a slump. “If I thought we could sustainably run the economy in a red-hot way, that would be a wonderful thing, but the consequence — and this is the excruciating lesson we learned in the 1970s — of an overheating economy is not merely elevated inflation, but constantly rising inflation,” Summers said. “That’s why my fear is that we are already reaching a point where it will be challenging to reduce inflation without giving rise to recession.”
  • Russia is continuing to build up forces close to Ukraine even as it’s preparing for security talks with the U.S., keeping up pressure with a deployment that could turn into a rapid invasion or a long-term threat. Citing “further troop movements on the border,” German Foreign Minister Annalena Baerbock told reporters “my concern is great” and called for dialogue Wednesday. Russia now has 122,000 troops within 200 kilometers (120 miles) of the border, according to Ukraine’s Security and Defense Council. The U.S. and its European allies have warned Russia of massive consequences if it attacks neighboring Ukraine as they struggle to decipher President Vladimir Putin’s intentions. The Kremlin denies it plans to invade.
  • Intel Corp. apologized after its opposition to Xinjiang labor sparked a backlash against the U.S. chipmaker in China, highlighting how multinational companies are increasingly getting caught up in a geopolitical spat between two global powers over issues such as human rights. The chipmaker sent a letter asking suppliers not to use any labor or products sourced from Xinjiang “in order to ensure compliance with U.S. legal requirements,” it said in a WeChat statement Thursday. The company had no other intention and did not mean to express a position on the matter, according to the statement.
  • Tesla Inc. has agreed to take the majority of battery-ready graphite from a production facility planned in Louisiana, as it races to secure supplies of the key material in a market dominated by China. Melbourne-based Syrah Resources Ltd. will supply Elon Musk’s company with graphite anode material for an initial four years, with an option to buy additional volumes subject to further expansion at Syrah’s Vidalia plant, the Australian company said in a statement. The Louisiana facility is planned to process graphite from Mozambique to become the first U.S.-based source of graphite anodes for the country’s fast-growing electric vehicle and lithium-ion battery manufacturing industry. The deal with Tesla would help underpin a final investment decision on the production plant expected next month and help secure local supply, Syrah’s Managing Director Shaun Verner said by telephone. China produces almost all of the graphite used in producing materials for anodes, demand for which is forecast to increase fivefold by the end of the decade, according to Bloomberg NEF.
  • Tencent Holdings Ltd. plans to distribute more than $16 billion of Inc. shares as a one-time dividend, a surprise retreat from the Chinese e-commerce firm after Beijing moved to curtail the power of tech monopolies. The unexpected move to divest most of its stake in China’s No. 2 online retailer comes as Beijing punishes the country’s tech giants for anti-competitive behavior, including maintaining closed ecosystems that favor certain companies at the expense of others. Tencent’s handout may buy goodwill with the government, which has pushed for the dismantling of barriers and for tech firms to share the wealth. As part of the deal, Tencent President Martin Lau will exit JD’s board effective Thursday.

Happy Holidays

*All sources from Bloomberg unless otherwise specified