February 3, 2021
Daily Market Commentary
- CIBC said that the previously announced transaction to sell a significant portion of its majority stake in CIBC FirstCaribbean to GNB Financial Group Limited didn’t receive approval from FirstCaribbean’s regulators, according to a statement.
- Telus International IPO announces pricing of 37m subordinate voting shares at $25.00 per share, at the top end of the $23 to $25 range, according to a statement. Offering is expected to generate gross proceeds to Telus and Baring Private Equity Asia of $925m or $1.06b if the underwriters exercise their over-allotment option in full.
- European stocks extended a risk-on advance as concern over retail speculation faded and investors embraced optimism over earnings, while Italian shares jumped after Mario Draghi took on the mandate of premier-designate. The Stoxx Europe 600 Index added 0.6% by 12:18 p.m. in London. Rallying Italian banks pushed the FTSE MIB Index up 2.6% as former European Central Bank President Draghi accepted a request from Italy’s head of state to try to form a government that will tackle the pandemic and a devastating recession. Stocks in Europe are on track for their best three-day gain since November, after slumping last week on worries about retail-trading volatility. Data on Wednesday showed euro-area services and composite PMI were revised upward for January, while in the U.S., Senate Democrats put a $1.9 trillion stimulus plan on a fast track to passage.
- Nasdaq 100 futures led gains in U.S. premarket after tech giants Alphabet Inc. and Amazon.com Inc. posted strong results and the retail-trading frenzy subsided. GameStop shares reversed an earlier drop. After sinking 60% on Tuesday, GameStop shares reversed a drop in premarket trading to rise 7.8%, with AMC Entertainment Holdings also erasing losses to trade higher. Treasury Secretary Janet Yellen has summoned U.S. financial regulators to discuss the recent market volatility.
- Asian stocks rose for a third consecutive day, with stocks in Vietnam and Japan leading advances among national benchmarks. Consumer discretionary and financial stocks accounted for the biggest subgauge boosts to the MSCI Asia Pacific Index. Toyota Motor was the biggest driver of gains in Japan’s Topix after several of its affiliates raised their profit forecasts ahead of the automaker’s earnings results due out next week. Hong Kong-listed tech giant Tencent and Meituan extended this week’s strong surges. The two stocks helped the Hang Seng Index recoup intraday losses and finish the day higher.
- Oil extended gains after closing at the highest level in more than a year as declines in U.S. and Chinese crude stockpiles added impetus to a rally driven by tightening global supplies. Futures in New York climbed to trade above $55 a barrel. The American Petroleum Institute reported crude inventories fell by 4.3 million barrels last week, people familiar with the data said. It would be a seventh decline in eight weeks if confirmed by government data later Wednesday. Chinese stockpilesdropped to the lowest in almost a year, according to data provider Kayrros. The tighter supplies are bringing traders flocking back to the oil market. Holdings of WTI futures contracts are now at their highest level since April, having jumped by the equivalent of more than 235 million barrels so far this year.
- GlaxoSmithKline Plc will work with CureVac NV to help boost production of its experimental vaccine and improve the shot to help protect against multiple variants of the pathogen. A World Health Organization team visited the Wuhan laboratory that’s been at the center of months of speculation over how the disease jumped to humans. U.K. Health Secretary Matt Hancock said the 2011 movie “Contagion,” depicting the breakdown of society during a pandemic, influenced his planning for the vaccines rollout. AstraZeneca Plc’s vaccine showed 82% effectiveness with a three-month gap between two shots in a study that bolstered the U.K.’s controversial decision to extend the interval between doses.
- Treasury Secretary Janet Yellen has summoned U.S. financial regulators to discuss recent volatility in financial markets, in her first public effort to address the tumult involving GameStop Corp. shares and broker-dealer Robinhood Markets Inc. Yellen called a meeting with the Securities and Exchange Commission, the Federal Reserve Board, the Federal Reserve Bank of New York and the Commodity Futures Trading Commission, the Treasury said in a statement late Tuesday. The Biden administration and regulators have faced pressure in recent days to respond to the market frenzy.
- Jeff Bezos has a formulation about one-way doors and two-way doors—decisions that are irreversible and permanent and those that can always be unwound. Stepping through what’s almost certainly a one-way door on Tuesday, Bezos said he will resign as chief executive officer of Amazon.com Inc. and become executive chairman later this year. He will hand day-to-day control to Andy Jassy, his longtime head of Amazon Web Services, a swiftly growing division that has almost singlehandedly changed the way companies buy the technology that powers their businesses. With that comes at least a partial end to one of the most epic runs in modern business history. Yet, Bezos’s move feels, in many ways, natural and even inevitable. Over the last 25 years, the Amazon founder, now 57, led the company through perhaps the most fertile period of any American business ever. Amazon was first just an idea at the Wall Street hedge fund D. E. Shaw & Co., where Bezos was a vice president; then it was an online bookseller and high-flying dot-com stock during the late 1990s. Bezos then rescued the company from the internet bust by formulating and guiding new inventions like the Kindle, Amazon Prime and AWS. Over the last decade, he has piloted Amazon to a $1.7 trillion market capitalization, where it currently occupies the same rarified trillion-dollar air as Microsoft Corp. and Apple Inc.
- GameStop Corp.’s rapid reversal paused on Wednesday, although last week’s massive peak remains a distant memory after frenzied trading activity cooled. The stock rose 7% to $96.30 at 6:15 a.m. in U.S. premarket trading, still almost 80% below the record intraday peak of $483 set on Thursday after a community of day traders collaborated to take on the Wall Street establishment and inflict multibillion-dollar losses on hedge funds with large short positions. GameStop, the poster child for Redditors looking to squeeze short sellers, plunged 60% Tuesday, and has now erased more than $27 billion in market value from last week’s all-time high. Several other favorites of the Reddit community — including movie-theater chain AMC Entertainment Holdings Inc. and clothing retailer Express Inc. — have also had the wind taken from their sails, though AMC rallied slightly to $8.66 in premarket trading.
- Mario Draghi, the former president of the European Central Bank, has been tapped to become Italy’s next prime minister in a bid to steer the virus-battered country out of its worst recession since the end of World War II. Sergio Mattarella, Italy’s head of state, will meet Draghi on Wednesday after two rounds of talks failed to seal an agreement among parties on a new premiership for the outgoing Giuseppe Conte, who had hoped to make a comeback. Instead, the president is poised to formally ask Draghi to try to form a government. Italy’s bonds rallied, sending the 10-year yield to a two-week low at 0.58% and narrowing the premium over its German counterpart seven basis points to 107, the lowest since Jan. 12 at 8:15 a.m. in Rome. Futures on the benchmark FTSE MIB index jumped 2.7%.
- Shiseido Co. agreed to sell its shampoo and affordable skin-care business to CVC Capital Partners in a deal worth 160 billion yen ($1.5 billion), as the Japanese beauty giant shifts more of its focus to making and selling high-end skin products. The operations divested include Shiseido’s well-known drugstore brands, including Tsubaki hair-care products and Senka face wash, the company said in a statement Wednesday. The company had earlier confirmed it was in talks to sell the unit following a Bloomberg report last month. Shiseido, founded more than 140 years ago as a pharmacy in Tokyo’s Ginza district, has been revamping its portfolio as the coronavirus outbreak has changed up cosmetic and personal care routines, dealing a blow to beauty companies. The lifestyle and personal care business represented about 10% of Shiseido’s revenue in 2019, with annual sales of about 100 billion yen.
- Royal Philips NV has picked Lazard Ltd. to advise on a potential initial public offering of its home appliance business as the Dutch conglomerate considers options for divesting the unit, people familiar with the matter said. Philips is starting to explore a listing more seriously as markets remain strong and some bidders have faced difficulties conducting due diligence amid the pandemic, the people said, asking not to be identified because the information is private. A deal could value the unit, which produces everything from coffee makers to air purifiers, at around 3 billion euros ($3.6 billion), one of the people said.
- Exchange-traded funds added 67,258 troy ounces of gold to their holdings in the last trading session, bringing this year’s net purchases to 91,024 ounces, according to data compiled by Bloomberg. The purchases were equivalent to $123.6 million at yesterday’s spot price. Total gold held by ETFs rose 0.1 percent this year to 106.8 million ounces. Gold declined 3.2 percent this year to $1,838.03 an ounce and by 1.2 percent in the latest session.
- China is taking decisive steps to protect itself from a widening U.S. technology ban, with imports of computer chips and the machines that make them surging last year. Chinese businesses bought almost $32 billion of equipment used to produce computer chips from Japan, South Korea, Taiwan and elsewhere, a 20% jump from 2019, a Bloomberg analysis of official trade data shows. And with companies like Huawei Technologies Co. stockpiling supplies ahead of U.S. sanctions, imports of computer chips climbed to almost $380 billion — making up about 18% of all of China’s imports for the year.
- Spotify Technology SA fell as much as 6.7% in premarket trading after its full-year revenue forecast for 2021 missed average analyst expectations. The world’s biggest audio streaming company expects revenue for 2021 of 9.01 billion euros ($10.83 billion) to 9.41 billion euros, it said in a statement Wednesday. Analysts expected 9.28 billion euros to 10.09 billion euros, according to a consensus compiled by Bloomberg. Spotify said that while it remains optimistic about business trends this year, “we face increased forecasting uncertainty versus prior years due to the unknown duration of the pandemic and its ongoing effect on user, subscriber, and revenue growth.” The downbeat outlook came after fourth-quarter results that exceeded analysts’ estimates. The Swedish company added 25 million customers in the period to reach 345 million monthly active users, ahead of the expected 343 million. And total premium subscribers reached 155 million, up 24% year-over-year.
- Ant Group Co. and Chinese regulators have agreed on a restructuring plan that will turn Jack Ma’s fintech giant into a financial holding company, making it subject to capital requirements similar to those for banks. The plan calls for putting all of Ant’s businesses into the holding company, including its technology offerings in areas like blockchain and food delivery, people familiar with the matter said. One of Ant’s early proposals to regulators had envisioned putting only financial operations into the new structure. An official announcement on the overhaul could come before the start of China’s Lunar New Year holiday next week, the people said, asking not to be identified discussing private information. Alibaba Group Holding Ltd., which owns about a third of Ant, erased losses in Hong Kong trading on Wednesday after Bloomberg reported the agreement. The stock closed with a 0.4% gain.
- Sony Corp. raised its annual operating income outlook by 34% after reporting stronger-than-expected holiday-quarter earnings, banking on a rebound in gaming and smartphone sales. The Tokyo-based company now expects to make 940 billion yen ($8.9 billion) in the fiscal year ending March, up from 700 billion previously. It’s expecting a pickup in divisions spanning pictures, music and games as well as its imaging unit providing camera sensors for Apple Inc. iPhones and other devices. Sony launched its latest PlayStation 5 console in the period and sold 4.5 million units despite production challenges limiting its availability. It also added 1.5 million PlayStation Plus subscribers, taking it to 47.4 million. The subscriber growth and software sales helped Sony beat all analyst estimates with 359.2 billion yen in operating profit for the quarter ended December.
- U.S. prosecutors and Internal Revenue Service agents spent four years piercing the veil of secrecy that billionaire money manager Robert F. Smith wove to hide more than $200 million in income. Last year, according to people familiar with the matter, a team led by the Justice Department’s top tax prosecutor argued to then-Attorney General William Barr that the evidence warranted indicting Smith, who had made headlines for pledging to pay the student debt of a Morehouse College graduating class. But rather than expose a man worth about $7 billion to a possible prison term and potentially force him to give up control of his private equity firm, Vista Equity Partners, Barr signed off on a non-prosecution agreement. It required Smith to admit he had committed crimes, pay $139 million and cooperate against a close business associate indicted in the largest tax-evasion case in U.S. history—Texas software mogul Robert T. Brockman.
- Apollo Global Management Inc. bolstered its cash hoard in the fourth quarter despite the fallout from co-founder Leon Black’s business connections. The New York-based firm garnered $13.3 billion in inflows, mostly from credit including structured and corporate funds, according to a statement Wednesday. The private equity business benefited from the hot market for blank check companies, which gather pools of cash for acquisitions. It raised $817 million to make investments through Apollo Strategic Growth Capital. Some big Apollo investors put their commitments on hold after more information surfaced about Black’s ties with convicted sex offender Jeffrey Epstein. A New York Times report in October said Black, 69, had wired at least $50 million to Epstein after his 2008 conviction for soliciting prostitution from a teenage girl. He wasn’t accused of a crime.
- CCC Information Services Inc. is teaming up with a special-purpose acquisition company to go public in a deal that values the IT provider to car insurers at $6.5 billion. CCC will merge with a SPAC backed by Dragoneer Investment Group, the companies plan to announce Wednesday. Chicago-based CCC’s technology allows policyholders of insurance companies to upload photos into a mobile app from an accident scene and, moments later, get a repair estimate via artificial intelligence. The company counts more than 300 insurers, 25,000 collision-repair facilities, dozens of auto makers and thousands of parts suppliers as its clients. Its technology connects these parties to get claims handled and vehicles repaired after wrecks.
- In the beginning was the Big Bang. It was 1986, and the moribund British economy appeared stuck in an unbreakable cycle of postindustrial decline. Then came the jolt that opened up U.K. financial markets to the world and turned the City of London into the nation’s dynamo. Banks gathered in the Square Mile, and companies flocked to list on the newly deregulated stock exchange. Caricatured gents in bowler hats meeting over tepid ale were displaced by a generation of Gordon Gekko-style traders. More than three decades of near unbroken growth ensued as the Big Bang propelled London to the status of Europe’s preeminent financial center with the vast majority of trading in bonds, euro-denominated foreign exchange, and derivatives.
- Elon Musk has a long history of run-ins with the local, state and federal officials who oversee his growing empires at Tesla Inc. and SpaceX. The world’s richest person shows no signs of changing his ways as U.S. President Joe Biden takes office and bolsters the regulatory agencies defanged by his predecessor. In the past week alone, Musk has tangled with the Federal Aviation Administration over a December rocket test flight that ended in flames and begrudgingly agreed to recall some Tesla cars at highway-safety officials’ urging. And while he announced Tuesday he was taking a break from Twitter — the platform that previously got him fined by the Securities and Exchange Commission — Musk had already used his favorite social-media megaphone in the preceding days to roil stocks of companies from Etsy Inc. to Shopify Inc.during a retail-trading frenzy.
- The U.S. has gone to court in an attempt to seize 2 million barrels of oil that it claims came from Iran, as Joe Biden’s administration shows little sign of taking a softer line on Tehran. The Department of Justice filed a case in a U.S. district court, seeking to seize the cargo on the Greek-owned Achilleas tanker, according to a statement on Tuesday. The U.S. alleges that Iran’s Islamic Revolutionary Guard Corps and the IRGC-Qods Force covertly shipped the oil abroad. They “attempted to disguise the origin of the oil using ship-to-ship transfers, falsified documents, and other means, and provided a fraudulent bill of lading to deceive the owners of the Achilleas,” the department said.
“If you want what fate wants, then nothing can happen against your will.” – Chuang Tsu
*All sources from Bloomberg unless otherwise specified