January 11th, 2021

Daily Market Commentary

Canadian Headlines

  1. Great Canadian Gaming Corporation, trading shy of 52 week highs, over the weekend announced that it will be reopening Casino Nova Scotia – Halifax at 12pm AST on Monday, January 11. The property will reopen with a reduction in hours of operation, will offer slot machine play along with limited table games and food and beverage amenities, and with guest capacity of approximately 20% of the property’s maximum facility capacity prior to its first closure on March 16, 2020.

World Headlines

  1. European stocks fell on Monday as traders assessed valuations following a rally that pushed shares near a 10-month high. The Stoxx Europe 600 Index fell 0.6% at 8:40 a.m. in London, with most sectors in the red. Utilities and autos fared the worst, down 1.2% or more, while banks outperformed. Dollar strength boosted U.K. exporters but the FTSE 100 still edged lower. Equities in Europe climbed last week as countries ramped up Covid-19 vaccination programs and U.S. Democrats won control of Congress, sparking speculation of further stimulus. The gains come even as countries like Britain and Germany urge the public to adhere to harsh social restrictions to control the disease.
  2. After a buying frenzy swept across global markets last week, investors are starting Monday in a cautious mood. The dollar climbed against all its major peers, with demand supported by elevated Treasury yields. European stocks pulled back from a 10-month high and S&P 500 futures dipped. Benchmark Treasury yields topped 1% last week on bets that Democratic lawmakers will enact big spending packages to drive the economic recovery out the pandemic. The move reset expectations for a range of asset classes and sparked debate over whether higher yields might jeopardize the current environment of easy financial conditions.
  3. Asian stocks dipped on Monday after the regional benchmark posted its best weekly gains in two months last week. China’s stock benchmark fell 1% as investors questioned whether the highest valuations in 13 years for the CSI 300 Index make sense. Malaysia’s stock gauge dropped 1% as investors awaited new coronavirus measures. Australia and New Zealand were also among laggards. South Korea stocks closed 0.1% lower after rising as much as 3.6% earlier led by Samsung Electronics. The nation’s retail investors bought a record amount of Kospi shares on Monday.
  4. Oil edged lower as the dollar strengthened, with the steam coming out of a rally that pushed crude to the highest level in 10 months. Futures in New York lost 0.9% as the dollar’s gains reduced the appeal of raw materials such as oil that are priced in the currency. Both West Texas Intermediate and Brent crude are trading in overbought territory, according to the 14-day relative strength index, signaling prices are due for a correction. Crude rose late Friday after U.S. President-elect Joe Biden proposed trillions of dollars in stimulus to counter the economic toll of the coronavirus pandemic. The rally added to a weekly gain underpinned by Saudi Arabia’s pledge for deeper output cuts. The kingdom also increased its oil prices to Asia, a move followed by Iraq and Abu Dhabi.
  5. Gold’s sharp tumble is sounding a warning about potential vulnerabilities across markets. Investors last year became used to everything from stocks and bonds to gold and digital coins delivering major gains. But 2021’s rise in Treasury yields along with recent dollar strength threaten more losses for the yellow metal, and represent a mix that could test other assets too. Gold slid as much as 1.7% on Monday after suffering its worst three-day decline through Friday since August. The technical picture for the metal is also worsening, as a Jan. 6 peak marks a potential so-called “double top” pattern that some strategists argue presages more losses.
  6. Copper fell for a second day as investors weighed a rebound in the dollar, while a flurry of virus cases in China raised concerns about the impact of the pandemic on the world’s top consumer of the metal. Copper on the London Metal Exchange fell as much as 2.3%, the most in a month, before trading down 1.9% at $7,980 a ton by 11:35 a.m. local time. That eroded last week’s advance to the highest since 2013. All base metals declined, with nickel dropping 1.8% to $17,350 a ton.
  7. President-elect Joe Biden’s plan to pass a multi-trillion dollar economic stimulus package early in his administration faces challenges in a closely divided U.S. Senate, with a potential impeachment trial for Donald Trump that could add to delays. Biden is set to release his proposals — the price tag for which has yet to be unveiled — on Thursday. The package will feature a range of support for state and local authorities long blocked by Republicans, a bump in direct payments to $2,000 and expanded unemployment benefits, along with funding for vaccine distribution, school re-opening, tax credits, rental relief and aid to small businesses. Parts of last month’s $900 billion aid bill start running out in mid-March, and may not prove enough to forestall an economic contraction this quarter as the coronavirus continues to surge and wreak record deaths. Failure to win congressional approval by then could wallop equities, which climbed to a record last week after Democrats won Senate control in the Georgia runoff elections, spurring expectations of a major new stimulus.
  8. House Speaker Nancy Pelosi is readying Democrats for a lightning-fast second impeachment of President Donald Trump this week that risks consuming Congress in a bitter political fight just as President-elect Joe Biden’s administration is attempting to get off the ground. With a groundswell of anger among Democrats over the storming of the Capitol on Jan. 6 by a mob encouraged by Trump, Pelosi said Sunday night the House would take up a resolution to impeach Trump for the second time in less than two years unless Vice President Mike Pence and the cabinet invoke the 25th Amendment this week to remove Trump from office. “In protecting our Constitution and our Democracy, we will act with urgency, because this President represents an imminent threat to both,” Pelosi said in a letter to House Democrats. An article of impeachment accusing Trump of “Incitement of Insurrection” over his actions encouraging the mob that staged the deadly assault has drawn more than 200 Democratic co-sponsors and is set for introduction on Monday.
  9. China said an expert team from the World Health Organization will visit on Jan. 14 to investigate the origins of the coronavirus, following a rare rebuke last week from the global health group over a delay in travel permits. A new cluster erupted in Suihua city of northeastern province Heilongjiang, while a move to prevent the spread of infections to the capital city from nearby Hebei is triggering a spike in food prices. Three London transit workers died in recent days, a labor union said, demanding more safety guarantees. Germany called on its citizens to drastically curtail social contact after the nation’s death toll climbed above 40,000.
  10. Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 10th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $2.09 billion in the week ended Jan. 8, compared with gains of $1.51 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $2.09 billion.
  11. Faraday & Future Inc., an electric-vehicle startup, is in talks to go public through a merger with Property Solutions Acquisition Corp., a blank-check firm, according to people with knowledge with the matter. The special purpose acquisition company is seeking to raise more than $400 million in equity to support the transaction, which is slated to value the combined entity at around $3 billion, the people said. As with all deals that haven’t been finalized, it’s possible that terms change or talks fall apart. A Faraday spokesman didn’t respond to multiple requests for comment. A Property Solutions representative declined to comment. The firm’s shares surged 37% to $13.84 as of 5:35 a.m. Monday in New York, before the start of regular trading.
  12. The white-knuckle Bitcoin ride took another twist Monday as the worst two-day tumble in the digital currency since March stoked concern that the polarizing cryptocurrency boom may run out of steam. Bitcoin, the largest cryptocurrency, slid as much as 21% over Sunday and Monday to as low as $32,389. That’s the biggest two-day slide since global markets were first roiled by the pandemic last year and follows a record high of almost $42,000 on Jan. 8. “It’s to be determined whether this is the start of a larger correction, but we have now seen this parabola break so it might just be,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore.
  13. Ramsay Sime Darby Health Care Sdn. has picked arrangers for an initial public offering in Malaysia that could raise about $300 million, according to people with knowledge of the matter. Credit Suisse Group AG, Malayan Banking Bhd. and Morgan Stanley have been chosen to work on the planned listing of the health care firm, said the people, who asked not to be identified as the information is private. The share sale in Kuala Lumpur could take place as soon as the second half of this year, the people said. Ramsay Sime could add more banks to the lineup later, the people said. Deliberations are ongoing and hence details of the offering including size and timeline could still change, they said.
  14. Twitter Inc. shares fell 7% in pre-market trading after the social media platform permanently banned outgoing President Donald Trump. The company confirmed its decision in a blog post on Friday, saying Trump’s tweets breached policies by risking incitement to violence. It cited his posts on the riots in the U.S. capital last week. It’s a watershed moment for technology platforms that have faced conflicting pressures on one hand to restrict misinformation and hate speech, and defend free speech on the other.
  15. President-elect Joe Biden Monday named Ambassador William J. Burns to be his CIA director. Burns, 64, a longtime diplomat, is currently the president of the Carnegie Endowment for International Peace. He served as deputy secretary of state under President Barack Obama. The appointment comes as both Democrats and Republicans have raised concerns about the politicization of the U.S. intelligence apparatus and as many of America’s most important diplomatic relationships have come under strain from President Donald Trump’s “America first” foreign policy.
  16. NCR Corp. offered to buy Cardtronics Plc for more than $1.7 billion, beating an earlier bid for the ATM operator from Apollo Global Management Inc. and another company. NCR, based near Atlanta, proposed a $39 per share all-cash deal, according to a statement on Monday. That compares with the $35 put up by private-equity firm Apollo and Hudson Executive Capital LP late last year. Cardtronics, which has a network of 285,000 ATMs across 10 countries, has benefited from partnering with lenders looking to offer customers access to cash while they cut the number of full-scale branches. The trend has helped to offset a longer-term decline in transactions using hard currency.
  17. Euronext NV said it resumed index derivatives trading after a technical issue forced a halt. Index-related futures, such as FTI and FCE, are now trading normally on the Optiq platform of Euronext, the exchange operator said in a statement, adding that trading on all other segments wasn’t impacted. Today’s halt is the latest in a series of recent glitches. An Oct. 19 outage shuttered share trading for three hours across Europe and also affected the closing auction that day. A subsequent glitch on Nov. 2 halted dealings in warrants and certificates for an hour.
  18. The U.K. said its coronavirus vaccine rollout will accelerate with the opening of seven regional centers at sports and conference venues, amid warnings hospitals are struggling to cope as cases surge. Health Secretary Matt Hancock said Sunday the U.K. is “on course” to meet its vaccine target with more than 200,000 people receiving doses every day and the total now standing at about 2 million. The government publishes daily data from Monday, when Hancock will visit one of the new centers before holding a press conference in Downing Street to lay out the vaccination strategy.
  19. Malaysia’s medical glove makers, one of the hottest pandemic trades, have seen bearish bets surge since the Southeast Asian nation lifted a ban on the practice at the start of this year. Since Malaysia’s decision took effect on Jan. 1, stocks worth 1.8 billion ringgit ($447 million) have been sold short, of which more than 90% were glove makers such as Top Glove Corp., according to data from Malaysia’s stock exchange compiled by Bloomberg. The resumption of short selling is spurring volatility and amplifying woes of glove makers already pressured by vaccine rollouts after last year’s nosebleed rally. Top Glove, the biggest in the sector, has lost about a third of its value since a peak in October.
  20. The fallout from U.S. sanctions on Chinese military-linked companies widened as banks and money managers raced to comply with a vaguely worded executive order from Donald Trump that bans new investments starting Monday. Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. will delist 500 structured products in Hong Kong, filings show. The city is the world’s largest market for such contracts with more than 12,000 of them, according to Hong Kong Exchanges and Clearing Ltd. Products being pulled include warrants and callable bull/bear contracts on the benchmark Hang Seng Index, the Hang Seng China Enterprises Index and China Mobile Ltd. The $14 billion Tracker Fund of Hong Kong managed by State Street Global Advisors Asia Ltd., the island’s most actively traded ETF, won’t make new investments in companies covered by the ban after saying it’s no longer “appropriate” for U.S. investors.
  21. The U.S. has classified Yemen’s Houthis as a foreign terrorist organization following a series of attacks on oil tankers in the Red Sea and as Washington seeks to increase pressure on Iran in the final days of Donald Trump’s presidency. The move will give the U.S. “additional tools” with which to counter security threats in the Persian Gulf, according to Secretary of State Michael Pompeo. The Houthis are backed by Iran in Yemen’s civil war and have been blamed for several missile strikes and other attacks on Saudi Arabia, some of which they’ve claimed responsibility for. “The designations are intended to hold Ansarallah accountable for its terrorist acts, including cross-border attacks threatening civilian populations, infrastructure, and commercial shipping,” Pompeo said Sunday in a statement, referring to the group by another name. “Rather than distance itself from the Iranian regime, it has embraced the world’s leading state-sponsor of terrorism even more.”
  22. Three of OPEC’s biggest oil producers raised monthly pricing for shipments to Asia, their largest regional buyer, after markets tightened on Saudi Arabia’s plan to slash output. Iraq, Abu Dhabi and Kuwait all raised pricing for February sales to Asia, taking their cue from the Saudis, who announced a similar increase last week. Iraq is the largest producer in the the Organization of Petroleum Exporting Countries after Saudi Arabia. The United Arab Emirates, in which Abu Dhabi holds most of the oil, and Kuwait rank third and fourth within the cartel, respectively.
  23. Eli Lilly & Co. surged in pre-market trading as its experimental treatment for Alzheimer’s disease showed promise in a mid-stage clinical trial. Patients who received donanemab showed significant slowing of decline in a measure of cognition and daily function in patients with early Alzheimer’s disease compared to placebo, Lilly said Monday in a statement. The shares gained 16% in trading before U.S. markets opened. Companies have been searching for a treatment to target beta-amyloid, an abnormal protein that accumulates in the brains of Alzheimer’s patients that’s believed to be linked to the disease.
  24. High in the atmosphere above the North Pole, a spike in temperatures may soon send bone-rattling chills spilling down through the Northern Hemisphere. The icy blasts threatening to sweep across North America, Europe and Asia starting in late January are from the same weather pattern that triggered the 2014 cold snap known as the polar vortex, which plunged temperatures in Chicago to minus 16 degrees Fahrenheit (minus 27 Celsius). It’s common during winter for frigid air to roar down from the Arctic. But the cold mostly stayed bottled up around the North Pole in the season of 2019-2020. Now, after a nearly two-year hiatus, winter is threatening to return at last.
  25. Gilead Sciences Inc. raised its full-year profit guidance, citing stronger-than-expected sales of the antiviral treatment remdesivir for Covid-19 patients amid a new surge of cases worldwide. The Foster City, California-based company now sees adjusted earnings per share of $6.98 to $7.08 for 2020, up from a previous range of $6.25 to $6.60. That’s also above the average analyst estimate, which was equal to the high bound of the company’s earlier forecast range. The company also raised its revenue guidance, helped by expected sales of about $2.8 billion for Veklury, the brand name for remdesivir. The antiviral is one of only a handful of Covid treatments to get an emergency use authorization from the Food and Drug Administration, though some studies have questioned its benefits.
  26. Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co. plan to pause all political contributions, joining a growing list of companies changing or reviewing their donation policies in the aftermath of riots at the Capitol in the past week. Goldman is still formulating its measures that will probably curtail future political giving to the elected leaders who fought to overturn the 2020 result. A representative for the firm confirmed the plan. JPMorgan, the largest U.S. bank by assets, said it’s planning a six-month suspension to both Republicans and Democrats. Citigroup said it intends to temporarily stop all political contributions in the current quarter.
  27. The PGA of America said its board voted to terminate an agreement to host next year’s PGA Championship at a golf course owned by President Donald Trump in New Jersey. “It’s become clear that conducting the PGA championship at Trump Bedminster would be detrimental to the PGA of America brand and would put at risk the PGA’s ability to deliver our many programs and sustain the longevity of our mission,” Jim Richerson, PGA of America’s president, said in a video message. Entering the final week of his presidency, Trump is under mounting pressure after inciting a mob of rioters who stormed the U.S. Capitol. That prompted the House of Representatives to take up a resolution to impeach him for the second time in less than two years unless Vice President Mike Pence and the cabinet invoke the 25th Amendment this week to remove him from office.
  28. The Trump administration’s final days are proving as confounding as ever for companies and investors stuck in the middle of an increasingly contentious U.S.-China relationship. After a week of widespread confusion over the scope of a U.S. ban on investments in businesses linked to China’s military, both Washington and Beijing took steps over the weekend that threaten to further ratchet up tensions and cloud the outlook for cross-border commerce. Secretary of State Michael Pompeo upended decades of U.S. policy on Saturday by removing self-imposed restrictions on how government officials interact with Taiwan, eliciting swift calls for retaliation by China’s state-run media. Pompeo’s announcement came just a few hours before Beijing issued new rules that would allow Chinese courts to punish global companies for complying with foreign sanctions — a move that could theoretically force businesses to choose between the world’s two largest economies.
  29. Pfizer Inc. and BioNTech SE raised their Covid-19 vaccine production target for this year to 2 billion shots, as the partners seek to manage a global rush of countries seeking to order more doses. The partners have already committed more than half that capacity, BioNTech said in a presentation filed on Monday. A new production site in Marburg, Germany, expected to become operational by the end of February will be able to make as many as 750 million doses per year, according to the presentation.

*All sources from Bloomberg unless otherwise specified