February 2, 2021
Daily Market Commentary
- Canadian stocks rose on Monday with the broader market, led by mining companies and tech firms. The S&P/TSX Composite index rose 2.1% in Toronto, the most since June as the Reddit-fueled surge in silver prices pushed mining stocks higher. Silver miners were among the top stocks Monday after price of the precious metal jumped to an almost eight-year high. All eleven sectors closed in the green. Meanwhile, Canadian pension plans returned 10% last year, thanks to a strong recovery in equity markets around the world, according to data from Bank of New York Mellon Corp.
- Constellation Software Inc.’s spinoff Topicus.com Inc. is set to begin trading in Toronto on Tuesday, and at least one analyst says there could be some initial volatility. Toronto-based Constellation’s spin-out is part of the company’s broader acquisition strategy, and while both Constellation and Topicus operate in vertical software, the latter focuses on European markets. Shares of Topicus, or ticker TOI CN, could see volatility given “potentially strong demand, offset by potential index selling,” wrote Thanos Moschopoulos, a Toronto-based analyst at BMO Capital Markets with a buy-equivalent rating on Constellation. BMO pegged a value of C$58 ($45) apiece to Topicus shares.
- Canada granted an emergency loan to a company selling beach holidays, the first sign of a rescue package awaited by the industry after Prime Minister Justin Trudeau barred travel to Mexico and other sun destinations. Two related firms, Sunwing Airlines Inc. and Sunwing Vacations Inc., will receive a combined C$375 million ($292 million) under a federal loan facility aimed at large employers, a government agency said Monday. The Sunwing companies have nearly 3,000 Canadian employees, the agency said in a statement. The announcement comes three days after Trudeau introduced sweeping new restrictions on international travel, including a suspension of flights to the Caribbean and Mexico for three months. Travelers coming into Canada will now be tested on arrival and will have to quarantine at designated hotels, at their own expense, for as long as three days to await results.
- European stocks rose for a second day as concerns about volatile retail trading receded, making way for optimism about U.S. stimulus and progress on vaccines. The Stoxx Europe 600 Index was up 1.2% by 11:23 a.m. London time, with autos and financial services among the leading sectors. Travel and leisure advanced after U.K. Prime Minister Boris Johnson said he’s “optimistic” people will be able to have summer holidays this year. Hotel operators Whitbread Plc, InterContinental Hotels Group Plc and Accor SA climbed. Shares in silver miners like Fresnillo Plc tumbled along with the price of the precious metal as a retail frenzy driven by Reddit traders eased. Earnings were also in focus, with BP Plc shares sliding 2.7% after the oil major’s fourth-quarter earnings fell short of expectations.
- Global stocks climbed on renewed hopes for stimulus, progress on vaccinations and receding concerns about volatile retail trading. Silverpulled back from an eight-year high. S&P 500 futures rose after Monday’s surge. GameStop Corp. retreated in pre-market trading alongside silver as the retail frenzy showed indications of cooling. Treasuries dipped alongside the dollar and oil climbed. Asian stocks advanced. Signs of progress toward fresh U.S. stimulus and expanding vaccination programs have boosted sentiment. Fears that speculative buying stirred up on social media could derail the equity bull market are also receding. The long end of the Treasury curve hit its steepest since 2016, underscoring ongoing confidence in a global recovery.
- Asian stocks rose for a second day, following a rally in U.S. peers as concerns eased that the recent turmoil spurred by speculative buying will derail the bull market. The region’s benchmark MSCI Asia Pacific Index is set to register its best two-day gain in three months. Vietnam, India and Taiwan led gains among national benchmarks. Chipmakers TSMC and Samsung were among the biggest drivers of the MSCI Asia Pacific Index. Hong Kong stocks also advanced, boosted by Tencent after its chairman Pony Ma was praised in state media for his entrepreneurship.
- Oil soared toward $55 a barrel in New York, touching its highest level in a year as the virus-recovery rally continued. West Texas Intermediate futures rose 2.4%, while the global Brent benchmark came back within sight of $60. Gains in broader markets spurred crude, while a weaker U.S. dollar also buoyed commodities priced in the currency. Oil has risen steadily since late last year as coronavirus vaccines and supply curbs from OPEC and its allies spur hopes that global stockpiles will continue to slide. There are pockets of physical-market strength, too. Royal Dutch Shell Plc raided the North Sea market Monday, buying the most benchmark-grade cargoes in a single day in 10 years in the S&P Global Platts pricing window. The oil major also bid for a further seven shipments in a flurry of activity.
- Iron ore’s blistering rally of 2020 has hit the buffers in the opening weeks of 2021. Futures sank more than 5% on Tuesday to head for the lowest close in almost two months as investors weighed improved shipments from top exporters and signs China’s robust demand may be starting to wane. Prices swooned below $150 a ton, following a loss in January. Iron ore has suffered a sharp turnaround as the demand outlook dims in China, which has vowed to cut back on steel output. In addition, mills’ profitability is taking a hit; port inventories are rising; and the steel industry PMI has worsened. Negative factors — including large-scale mill overhauls and headlines on tightening liquidity — have lowered the intensity for consumption of steel-making raw materials, according to Huatai Futures Co., adding that investors remain cautious before the Lunar New Year period.
- President Joe Biden and congressional Democrats signaled they’re intent on a large pandemic relief bill, potentially without Republican support, even after a White House meeting with GOP senators on Monday that both sides described as productive. While the 10 senators who participated described the meeting as “excellent” with “a very productive exchange of views,” in a joint statement, White House Press Secretary Jen Psaki said Biden had emphasized that Congress had to act urgently and “boldly” and had pointed out many areas of disagreement with the Republicans. House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumermeanwhile introduced a budget resolution on Monday, the first step required to use a procedure called “budget reconciliation” that would allow much of Biden’s $1.9 trillion stimulus to pass the Senate with only 51 votes.
- Exxon Mobil Corp. posted a $19.3-billion writedown of U.S. natural gas and other assets, capping the first annual loss for the Western world’s largest oil company in at least four decades. Excluding the historic impairment, Exxon returned to profit in the fourth quarter, earning 3 cents per share, and ending a run of three consecutive quarterly losses. That compares with the Bloomberg Consensus estimate for a 2-cent profit. Exxon is emerging from the wreckage of 2020 facing the worst crisis in its modern history. In addition to growing criticism of its environmental record, financial performance has eroded to the point where its fabled dividend, the third-largest in the S&P 500 Index, is under pressure. Exxon extended the $3.7 billion payout for another quarter last week but hasn’t increased it since early 2019 and is relying on borrowed cash to sustain.
- Chancellor Angela Merkel promised all Germans a first vaccine dose by the end of September, as long as drugmakers stick to delivery commitments. Deaths linked to Covid-19 in England and Wales reached the second-highest level of the pandemic, highlighting the severity of the latest wave. Infections remain high in Israel and may even be rising despite a nationwide lockdown, though the proportion among the 60-plus age group has fallen. Japan extended a state of emergency for metropolitan areas by a month, while Hong Kong threatens to knock down the doors of residents who don’t respond to authorities conducting mandatory-testing blitzes. In the U.S., President Joe Biden intends to continue pushing for a large pandemic relief package even if he has to bypass Senate Republicans. More Americans have received at least one dose of a vaccine than have tested positive for the virus, a positive milestone.
- Bumble Inc., the dating app where women make the first move, set the terms for a U.S. initial public offering that could raise as much as $1 billion. The Austin, Texas-based company plans to sell 34.5 million shares at $28 to $30 apiece, it said in a Tuesday filing with the U.S. Securities and Exchange Commission. Bumble was founded in 2014 by Chief Executive Officer Whitney Wolfe Herd. It plans to list around Valentine’s Day, people with knowledge of the matter have said. Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co. are leading the offering. Bumble plans to list its shares on the Nasdaq Global Select Market under the symbol BMBL.
- Exchange-traded funds cut 70,448 troy ounces of gold from their holdings in the last trading session, bringing this year’s net purchases to 23,766 ounces, according to data compiled by Bloomberg. This was the fifth straight day of declines, the longest losing streak since Dec. 7. The sales were equivalent to $131.1 million at yesterday’s spot price. Total gold held by ETFs was little changed this year to 106.8 million ounces. Gold declined 2 percent this year to $1,860.78 an ounce and rose by 0.7 percent in the latest session.
- Supporters of Myanmar’s military rallied in the nation’s largest city as it moved to suspend all flights through April, raising fresh concerns about the army’s crackdown a day after it seized power in a coup and detained senior government officials and activists. The rally in the commercial capital Yangon is the first since de facto leader Aung San Suu Kyi and her colleagues were taken in early morning raids on Monday. “It is not a coup, but just an act of retaining the power to prevent others from misusing it,” a monk, Tipitaka Thitsar Pwintlin, told the pro-military crowd, urging them to thank the army for protecting the nation and its majority Buddhist religion.
- OPEC and its allies can celebrate their success in buoying world oil markets when they gather this week. But the coalition will soon be faced with some tough choices. Last month’s pledge by Saudi Arabian Energy Minister Prince Abdulaziz bin Salman to slash production by a further 1 million barrels a day has buttressed global markets against the latest onslaught from the pandemic. A price rebound to $57 a barrel in London is shoring up the producers’ revenues. While that relieves OPEC+ of any need to adjust policy on Wednesday, it’ll need to start considering how long to restrain output — a calculation clouded by the potential return of supply from fellow member Iran.
- A Moscow court is deciding whether to jail Russian opposition leader Alexey Navalny for as long as 3 1/2 years, as President Vladimir Putinseeks to crush resurgent protests against his rule. The district court is to rule Tuesday on demands by penal authorities and prosecutors that Navalny, 44, serve the term in prison instead of the suspended sentence he received for a 2014 fraud conviction, for alleged violations of his probation. Security outside the court was heavy, with riot police detaining about 100 protesters around the court as Navalny’s supporters gathered outside, according to monitoring group OVD-Info. A prison van brought the Kremlin critic to the court from the Moscow jail where he has been held. Navalny stood in the glass defendant’s cage in the courtroom, clad in a blue sweater and jeans. He joked with his wife, Yulia, sitting in the front row, about seeing TV reports of her detentions at protests since his arrest. “I’m proud of you,” he said.
- Johnson & Johnson will ship some Covid-19 vaccines ordered by the European Union to the U.S. for the last stage of production, raising concern among some member states that the bloc’s inoculation program could be hampered by further delays, according to a diplomatic note seen by Bloomberg. EU ambassadors were told at a briefing last Wednesday that the pharmaceutical company will send a portion of the vaccine produced in Europe to the U.S. for what’s known as fill and finish. In that stage, the shot is put into vials, packaged and shipped for distribution. After diplomats asked whether the process could be carried out in Europe, a senior EU official told the ambassadors that doing some fill and finish in the U.S. was a condition of the contract with the drugmaker, suggesting it could not be renegotiated, according to the note. The official explained that J&J had been transparent about the matter and that the company was intent on delivering on schedule, the note said.
- British businesses ravaged by the pandemic skipped more than 4 billion pounds ($5.5 billion) in rent last year. With the bill coming due, a battle over sharing the pain is heating up. Landlords, acknowledging the damage wrought by almost a year of enforced closures and depleted foot traffic, are demanding lenders bear some burden as about one-fifth of commercial rent is behind. Regulators are urging banks to avoid taking a hard line. Retailers and restaurateurs, hammered by the deepest recession in three centuries, say the pile of debt isn’t their fault. While the debate about who ultimately pays for lockdowns is playing out globally, U.K. Chancellor of the Exchequer Rishi Sunak’s initial response — a property-tax holiday, a furlough program to assist with staff costs and a freeze on evictions — has set up a stark cliff edge at the end of March.
- An Indian court has temporarily restrained Future Group from selling its retail assets to Reliance Industries Ltd., an interim win for Amazon.com Inc. which is opposing the deal with an eye to dominate a large and vital consumer market. The Delhi High Court on Tuesday ordered the Future Group and Indian authorities to ensure the status of the indebted Indian retailer’s assets are maintained as is, putting on hold any further steps toward completing the $3.4 billion sale to billionaire Mukesh Ambani’s Reliance conglomerate. Amazon alleges that the deal violates its own contract with Future Group and had filed an urgent petition last week seeking the suspension. The order can be challenged in a higher court. The freeze bolsters the Jeff Bezos-led e-commerce giant, which had also urged the court to jail Future Group’s founder and seize its assets for violating an October order from the Singapore arbitration court. The cash-strapped Indian retailer — it risks bankruptcy if the deal with Reliance fails — is caught between two of the world’s richest men as they compete for dominance in India’s estimated $1 trillion consumer retail market.
- Blackstone Group Inc. is in exclusive talks to acquire Japanese skincare brand Fancl’s Asia business outside its home country, people with knowledge of the matter said. CMC Holdings Ltd. is working with adviser Morgan Stanley and is seeking more than $600 million for the business, Bloomberg News has reported. The Hong Kong-based company aims to conclude a deal in the first quarter. Deliberations are ongoing, and the seller could decide to engage other potential suitors if the exclusive talks fall apart, the people said, asking not to be identified as the information is private. An external representative for CMC declined to comment. A representative for Blackstone declined to comment.
- Pfizer Inc. said it expects $15 billion in revenue this year from the Covid-19 vaccine it developed with BioNTech SE, a sign of returns to come from the industry’s pandemic response efforts. The New York-based drugmaker said it expects 2021 full-year revenue excluding the vaccine of $44.4 billion to $46.4 billion. Annual earnings per share will be $3.10 to $3.20. Chief Executive Officer Albert Bourla said earlier this month that earnings would top out at $3.10 a share. Pfizer said the guidance was raised primarily because of vaccine revenue.
- When Alphabet Inc. reports earnings on Tuesday afternoon, the company will reveal the profitability of its cloud business for the first time, a move that’s stirred excitement on Wall Street and fueled a rally in the stock. The Google parent is expected to benefit from a jump in digital-ad spending from the recent holiday quarter, much like Facebook Inc., which last week reported its fastest quarterly revenue growth since 2018. The most interesting numbers could come from Google’s Cloud business, though. While this part of the company’s empire has been growing quickly, Google has only ever shared revenue publicly. That changes on Tuesday, when the Cloud division is broken out as a separate reporting segment.
- United Parcel Service Inc.’s profit rose as a surge of online holiday shopping boosted package volume and enabled the courier to raise its prices. Fourth-quarter adjusted earnings increased to $2.66 a share, the Atlanta-based company said in a statement Tuesday. That topped the $2.15 average of analyst estimates compiled by Bloomberg.
“An era can be said to end when its basic illusions are exhausted.” – Arther Miller
*All sources from Bloomberg unless otherwise specified