December 8th, 2020
Daily Market Commentary
- Prime Minister Justin Trudeau took another activist turn by appointing a prominent advocate of government spending as the top economic bureaucrat in Canada. Michael Sabia, a big-name corporate leader who has run the nation’s largest phone company and second-largest pension fund, was appointed deputy minister of finance Monday. The move formalizes the role he’s played since the early days of the pandemic as a top adviser to both Trudeau and his finance minister, Chrystia Freeland.
- Canadian food prices will increase 3% to 5% next year due to the economic impacts of the pandemic, with bakery goods, meat and vegetables bringing the biggest hikes to grocery bills, according to Canada’s Food Price Report. A family of four could spend C$695 ($543) more on groceries next year to lift the annual household food bill to C$13,907, four Canadian universities said in a study released Tuesday. That marks the highest predicted dollar increase in 11 years of publishing the annual report.
- MindBeacon Holdings has filed a preliminary prospectus to list on the Toronto Stock Exchange, the company says in a filing. Price of common shares to be sold has not yet been determined. TD Securities and Credit Suisse Securities are joint bookrunners.
- U.S. Trade Representative Robert Lighthizer is expected to unveil an enforcement action against Canada over its rules for U.S. dairy imports, according to a government official. The official, who asked not to be named because they aren’t authorized to speak publicly on the matter, said the U.S. had informed Canada of its decision to file the enforcement action. Canada maintains that it is fully within its rights to apply tariff-rate quotas, or TRQs, which follow the rules laid out in the trade deal between the U.S., Canada and Mexico that went into effect in July..
- European stocks declined as market players watched urgent talks to forge a post-Brexit trade deal, while rising virus cases in Europe and the U.S. damped enthusiasm for risk assets. The Stoxx Europe 600 Index was down 0.4% by 11:16 a.m. in London, with travel and retail leading the retreat. The FTSE 100 Index was down 0.5% and the FTSE 250 slipped 0.3% as the pound weakened.
- U.S. stock futures slid Tuesday as political gridlock on both sides of the Atlantic weighed on sentiment amid a continued uptick in coronavirus cases. Futures tied to the S&P 500 edged down 0.4%, suggesting that the broad market gauge may pull back for a second day. Nasdaq-100 futures slipped 0.3%.
- South Korea was the biggest decliner in Asia as traders booked profits amid surging virus cases in the U.S. and a slowing of stimulus talks there. The Kospi retreated from a record, falling 1.6%, the biggest drop in more than five weeks. Hong Kong’s Hang Seng Index fell 0.8%, dragged lower by HSBC after a former pro-democracy lawmaker, who has fled into self-imposed exile, criticized the bank for freezing accounts he and his family held.
- Oil swung between gains and losses as the market weighed the outlook for demand as coronavirus vaccines begin.
- Futures in New York traded below $46 a barrel, driven by fluctuations in the dollar and equities.
- Gold touched a two-week high amid swelling coronavirus infections across the U.S., with markets increasingly looking for a stimulus deal to be reached.
- U.K. Prime Minister Boris Johnson will head to Brussels within days for urgent talks with European Commission President Ursula von der Leyen, amid growing fears on both sides that Brexit trade talks will fail. The two spoke on Monday evening and agreed to meet after they concluded a deal remained far off, despite frantic attempts by their negotiators to break the deadlock as time runs out. A time and date for the meeting has yet to be decided. European Union leaders gather for a summit in Brussels on Thursday and Friday.
- Almost a week after Democratic congressional leaders climbed down from their demand for a multi-trillion dollar stimulus package, Senate Majority Leader Mitch McConnell continued to tout his own plan, endangering prospects for a compromise. McConnell’s top priority — federal limits on Covid-19 related lawsuits against businesses — has emerged as the key potential deal-breaker. Republicans have balked at the six-month moratorium proposed in a bipartisan stimulus package, saying it’s too limited, and talks have stalled.
- The United Arab Emirates will provide Asian oil buyers with a little more crude next month after OPEC+ reached a compromise deal on cuts. While OPEC’s third-largest producer will still reduce supply to Asia in January, the curbs won’t be as deep as this month in percentage terms. Abu Dhabi National Oil Co. plans to cut contractual volumes for its flagship Murban crude by 20%, and trim Upper Zakum and Das by 15%, according to people who were notified by the company. That compares with a 20% reduction for all grades loading in December.
- Jake Sullivan, President-elect Joe Biden’s nominee for national security adviser, expressed guarded optimism for restoring the nuclear accord with Iran even as the country has moved closer to developing nuclear weapons. Sullivan, who spoke Monday at the Wall Street Journal CEO Summit, emphasized that any progress toward preserving or even enhancing the deal forged during the Obama administration would depend on international cooperation.
- The Trump administration has done its best to neuter the Consumer Financial Protection Bureau, giving large banks a reprieve from aggressive enforcement and new rules. With Joe Biden ascending to the White House, Wall Street is worried it will be quickly resurrected. Thanks to a U.S. Supreme Court decision earlier this year, Biden will be able to fire Kathy Kraninger, the watchdog’s Republican director, even though her term isn’t complete — a move likely to happen in the weeks after the inauguration. The banking industry has reason to fear that a new chief will return the agency to its days of meting out stiff sanctions on lenders and credit card companies.
- China is bucking the global trend of greater economic stimulus amid the coronavirus, preferring instead to refocus on controlling its record debt burden. Policy makers are allowing for tighter liquidity in the financial system, a signal that Beijing wants to stabilize the level of debt in the economy.
- Brazil’s consumer inflation unexpectedly accelerated in November on surging food and transportation costs, complicating the central bank’s pledge to hold its key interest rate at a record low. The benchmark IPCA index increased 0.89% from the month prior, above all estimates in a Bloomberg survey that had a median forecast of a 0.78% gain.
- Britain kicked off the first Covid immunization campaign in the western world, with Prime Minister Boris Johnson championing the safety of the vaccine while noting the country “can’t afford to relax now.” The U.S. pledged to secure enough vaccine doses for its population, while the nation is averaging about as many deaths per day from the virus as it did in April. The World Health Organization said it prefers that shots not be made mandatory.
- Tesla Inc. is taking advantage of its surging shares by going back to the capital markets for the third time in ten months and raising as much as $5 billion of common stock. The sale through an “at-the-market” offering program, according to a regulatory filing, meaning the stock will be sold over time at prevailing market prices. After soaring almost 670% this year, Tesla shares dipped as much as 4.2% before the start of regular trading Tuesday.
- Even in a year full of surprises on Wall Street, this one stands out: A Chinese-owned brokerage has quietly built one of the fastest-growing retail trading platforms in the U.S. Webull, founded by Alibaba Group Holding Ltd. alum Wang Anquan, has increased its roster of brokerage clients by about tenfold this year, to more than 2 million, by offering free stock trades with a slick online interface. While that’s still a fraction of the more than 13 million at Robinhood, the broker thatpopularized commission-free trading, Webull says it’s been peeling off users from its rival.
*All sources from Bloomberg unless otherwise specified