January 12th, 2021
Daily Market Commentary
- Canadian equities snapped a five -day winning streak Monday, following U.S. equities lower. The S&P/TSX Composite Index fell 0.6%, the most since December 31. Health care was the only group that gained as marijuana shares continued to climb. Canada’s top banking regulator dashed hopes that the country’s lenders will be able to follow U.S. peers in resuming share buybacks soon, saying it won’t reverse its safeguards on the financial system as the Covid-19 pandemic rages. Royal Bank of Canada Chief Executive Officer David McKay says Canada is in a race to vaccinate enough people in the next three months to safely reopen its economy. On the deals front, Quebecor CEO Pierre-Karl Péladeau’s C$6/share offer for Transat through his private investment firm may still fall short of Air Canada’s offer, Scotiabank said.
- QuadReal Property Group has bought a majority stake in eight of Realstar Group’s U.K. rental housing developments for about C$1 billion ($784 million). Seven of the properties are located in London and one is in Manchester, according to an emailed statement from Realstar, a Canadian real estate investment management company that specializes in rental housing. QuadReal, the real-estate arm of British Columbia Investment Management Corp., already owns stakes in six Realstar properties that are operated by the UNCLE brand
- Canadian households are preoccupied with shoring up their finances this year, according to a new survey, a thriftiness that could be a drag on the recovery. Three out of four Canadians in a poll conducted by Nanos Research Group for Bloomberg News say their top financial priority is to pay down debt or retain an elevated level of savings. Only 11% said they plan to make a major purchase. The extent to which households will use up an unexpected accumulation of savings is one of the key unknowns in coming months. Amid a massive downturn last year, Canadians became significantly better off financially because of income support payments from the government, surging real-estate prices and stock-market gains.
- European equities climbed on Tuesday, with cyclical sectors recovering from yesterday’s losses amid optimism over the prospect of further economic stimulus and the rollout of vaccines. The Stoxx Europe 600 Index was up as much as 0.4% before paring its gains to trade 0.2% higher at 9:07 a.m. in London. Energy stocks were among the top risers as oil jumped after the dollar declined, with the market assessing the potential for more supply. Travel and leisure and banking stocks also led the advance. European equities last week rallied to the highest level since February on optimism that the Democrats’ win in Georgia will usher in more fiscal stimulus, and as countries across Europe pushed on with Covid-19 vaccination plans. At the same time, there’s rising concern about speculative excess and elevated valuations, which Goldman Sachs Group Inc. strategists said are the highest since the technology bubble era.
- Global stock markets stabilized after Monday’s losses, with investors feeling confident enough in the economic recovery and vaccine rollout to buy the dip in some risk assets. The mood across markets was mildly positive and investors are continuing to assess how the rise in Treasury yields changes the financial landscape. While progress on a vaccine gives reason to be hopeful, there are lingering concerns over the speculative excess and froth that’s driven stock markets to all-time highs in the middle of a pandemic. “Stocks are fading the bad news,” said Sebastien Galy, a senior strategist at Nordea Investment Funds. “What we are seeing is a feedback loop from higher expected fiscal spending feeding into higher U.S. Treasury yields, which translated into the fear that the price of risk is increasing. But there is realization that if this process is getting too fast, the Fed is likely to step in.”
- Japanese stocks closed higher after swinging between gains and losses for most of the day, helped by boosts from pharmaceutical makers and utilities. Electronics makers also boosted the Topix, while services and retail stocks fell. Tokyo Electric Power Co. climbed 9%, the most since March 25, leading peers higher as power prices surged amid cold weather in Japan. Chugai Pharmaceutical Co. jumped after the U.K. said it will encourage use of its arthritis drug Actemra to treat critically ill Covid-19 patients. Takeda Pharmaceutical Co. climbed after announcing that it aims to increase revenue to 5 trillion yen ($48 billion) by fiscal year 2030. In Asia, China’s CSI 300 Index rallied to a 13-year high, driven by a surge in financial and securities stocks. The yuan reached the highest since 2018 versus a basket of trading partners’ currencies on upbeat growth prospects.
- Oil in New York climbed to a new 10-month high as the dollar declined, increasing the appeal of commodities priced in the currency. Futures rose 1.5% to above $53 a barrel, to the highest since February 2020. Prices have climbed in recent days after promises of unilateral output cuts from Saudi Arabia spurred a further rally. Oil has surged more than 45% since the end of October, boosted by Covid-19 vaccine breakthroughs and commitments from OPEC and its allies to curb oil output. Recent Democrat victories in U.S. elections have also spurred expectations of economic stimulus, while commodity index rebalancing is also expected to buoy prices this week.
- Gold climbed, snapping the longest run of daily declines since November, as the dollar weakened and investors turned their focus to the next round of massive U.S. stimulus. President-elect Joe Biden is set to release plans for a multitrillion-dollar stimulus package on Thursday, paving the way for an acceleration in inflation. That could boost the appeal of gold, which has been weighed down in recent days by a rebound in the U.S. currency and a surge in 10-year Treasury yields.
- The abrupt resignation of Acting Homeland Security Secretary Chad Wolf added to the mounting tension in Washington ahead of President-elect Joe Biden’s inauguration next week, with thousands of National Guard troops set to be deployed and the FBI warning of armed protests in all 50 state capitals. As inaugural security preparations intensified, House Democrats accelerated their push to force the ouster of President Donald Trump before his term officially ends, threatening to impeach him for a second time unless he resigns for encouraging the march that led to last Wednesday’s assault on the U.S. Capitol. But Vice President Mike Pence indicated that he’d reject demands to immediately oust Trump through the 25th Amendment to the Constitution as the two met in the Oval Office and agreed to work together for the remainder of the term, according to a senior administration official.
- China’s credit growth moderated in December, suggesting that a massive increase in credit since last year may have peaked as the central bank seeks to normalize policy. Aggregate financing was 1.72 trillion yuan ($266 billion), the People’s Bank of China said Tuesday. That compares to 2.13 trillion yuan in November and 2.1 trillion yuan in December 2019. The median estimate of economists was 2.19 trillion yuan
- Steris agreed to buy Cantel Medical in a cash and stock transaction, representing a total equity value of about $3.6 billion, according to a press release. Cantel common stockholders will get about $16.93 in cash and 0.33787 of a STERIS ordinary share, or a total of value of about $84.66 per Cantel common share based on STERIS’s closing share price of $200.46 on Jan. 11
- Bitcoin rebounded after Monday’s steep plunge left investors grasping for clues about what lies ahead for the world’s largest cryptocurrency. The digital coin rose 4.9% to $35,616 as of 11:30 a.m. in London, following yesterday’s 11% slide. The latest bout of roller-coaster volatility recalls past boom and bust cycles including the 2017 bubble, and has investors debating whether this is a healthy correction or the end of the latest bull run for cryptocurrencies.
- The House is set to issue a largely futile ultimatum to Vice President Mike Pence on Tuesday, demanding he invoke constitutional authority to remove President Donald Trump from office, as a prelude to an expected vote to impeach the president for the second time in little more than a year. Pence met with Trump Monday night and the two agreed to work togetherthrough the end of their term, according to an official, leaving little doubt that the vice president will spurn the House demand. That means House Speaker Nancy Pelosi will go through with a vote on a single article of impeachment as soon as Wednesday. The resolution being pushed through the House by the majority Democrats on Tuesday calls on Pence to invoke the Constitution’s 25th Amendment to convene the cabinet and declare that as a result of his encouraging a mob that stormed the Capitol that Trump is unable to perform as president.
- U.K. Prime Minister Boris Johnson set himself on a collision course with the Chinese government with a thinly veiled attack on traditional medicine, which he said was to blame for the coronavirus pandemic. The practice of using scales from the endangered pangolin to aid virility is “demented,” Johnson said at a meeting of world leaders focused on protecting nature on Monday. “The coronavirus pandemic was the product of an imbalance in man’s relationship with the natural world,” Johnson said. “It originates from bats or pangolins, from the demented belief that if you grind up the scales of a pangolin you will somehow become more potent or whatever it is people believe.”
- The $180 billion asset-management unit of Swedbank AB is expanding a blacklist that targets fossil fuels. As of this month, Swedbank Robur will no longer invest in oil, gas and power production from fossil fuels, it said in a statement. The asset manager, which had already excluded coal from its portfolios, will also shun unconventional fossil fuels such as Arctic oil and gas, shale oil and gas and oil sands. “We want to contribute to a more sustainable development in society, by shifting our investments towards sustainable alternatives and thus influence others to do the same,” said Swedbank Robur’s chief executive, Liza Jonson.
- The European Union reached its eighth supply deal for vaccine doses, and an official said deliveries of shots will speed up appreciably starting in April. Britain is stepping up enforcement of restrictions to tame a surge in cases, even after inoculating almost as many people as the rest of Europe combined. Angela Merkel warned that Germany’s hard lockdown could last into late March, citing the fast-spreading variant that emerged in Britain. In the U.S., daily vaccinations rose by a record, and Trump administration officials plan to urge states to expand access to shots. Two lawmakers said they were exposed to the virus during the storming of the U.S. Capitol building.
- Zoom Video Communications has commenced an underwritten public offering of $1.5 billion of shares of its Class A common stock. Zoom expects to grant underwriters a 30-day option to purchase up to an additional $225m of shares of its Class A common stock at the public offering price.
- Workato Inc. raised $110 million in a funding round valuing the business automation software startup at $1.7 billion. The round was led by Altimeter Capital and Insight Partners, said Chief Executive Officer Vijay Tella. Existing investors Battery Ventures and Redpoint Ventures also participated in the fundraising. A competitor of Salesforce.com Inc.’s Mulesoft, Workato specializes in syncing data among different platforms, including software by Salesforce.com, Marketo Inc. and ServiceNow Inc.
- Payments business Checkout.com has become Europe’s largest startup after a fundraising round led by Tiger Global Management that nearly tripled its valuation to $15 billion. Greenoaks Capital also put money into the business, along with existing investors Insight Partners, Coatue Management and DST Global, bringing the London-based company $450 million in new funding overall, according to Chief Executive Officer Guillaume Pousaz. Checkout.com has seen its growth climb with the acceleration of the broader e-commerce industry in 2020. The company processes payments for businesses such as Pizza Hut Inc., Coinbase Inc. and Sweden’s Klarna AB. It raised money at a $5.5 billion valuation last year and the new funding round makes it the 11th-largest privately-backed startup in the world. The next biggest in Europe would be Chinese-owned Global Switch Holdings Ltd., a London-based data center operator valued at just over $11 billion, and Klarna, according to CB Insights.
- Blackstone Group Inc. is looking to purchase Lucasfilm’s building in Singapore for about S$175 million ($132 million), according to people familiar with the matter. The company has started the process of buying the building known as The Sandcrawler, pending regulatory approval, the people said, requesting not to be named because the matter is private. The move signals Singapore’s property assets continue to be attractive to foreign investors, who see the city’s political, financial and legal stability as an advantage. Other American companies including Amazon.com Inc. and Facebook Inc. are also expanding their presence, while China’s tech behemoths such as Tencent Holdings Ltd. and ByteDance Ltd. are looking to make Singapore a beachhead for Southeast Asia.
- Chancellor Angela Merkel warned that Germany faces hard lockdown measures into late March if authorities fail to contain a fast-spreading variant of the coronavirus. During a video call Tuesday, the German leader said that a strain that surfaced in Britain could lead to a rapid increase in the country’s contagion rates, according to a person on the call who asked not to be identified. The news was first reported by the Bild newspaper. Merkel’s chancellery declined to comment when contacted by Bloomberg.
- The British finance industry will have to be patient as the European Union decides what sort of market access it will allow, according to an official from the 27-nation bloc. U.K. firms’ ability to serve clients on the continent will largely depend on how British regulations evolve, something that still has to be assessed in detail, said Almoro Rubin de Cervin, who’s in charge of international relations at the European Commission’s department for financial services. The industry was mostly left out of the free-trade agreement that Britain struck with the EU late last year and relations now hinge on a process known as equivalence, where each side grants market access if the other’s rules are seen as tough enough.
- The work-from-home phenomenon has triggered a fresh frustration for U.S. corporations: Americans are blowing the whistle on their employers like never before. The proof is in the data, with the U.S. Securities and Exchange Commission receiving 6,900 tips alleging white-collar malfeasance in the fiscal year that ended Sept. 30, a 31% jump from the previous 12-month record. Officials at the agency, which pays whistle-blowers for information that leads to successful investigations, say the surge really started gaining traction in March when Covid-19 forced millions to relocate to their sofas from office cubicles. The isolation that comes with being separated from a communal workplace has made many employees question how dedicated they are to their employers, according to lawyers for whistle-blowers and academics. What’s more, people feel emboldened to speak out when managers and co-workers aren’t peering over their shoulders.
- Trump administration officials on Tuesday plan to strongly encourage states to expand access to Covid-19 vaccinations to anyone older than 65, regardless of underlying conditions, and anyone 16 and older with a pre-existing condition, according to two U.S. officials. Dr. Robert Redfield, director of the Centers for Disease Control and Prevention, will send out a letter to governors making these recommendations on Tuesday. The planned announcement, first reported by Axios, come amid concerns the vaccine rollout has been slower than expected.
- Mercedes-Benz narrowly beat BMW AG for the title of world’s best-selling luxury-car brand in 2020, a year in which cracks started showing in German dominance of the all-important China market. BMW said Tuesday worldwide deliveries for its namesake division fell 7.2% to 2.03 million, coming within 136,000 units of Daimler AG’s main passenger-car line. While Mercedes outsold its archrival and topped the premium auto ranks for a fifth consecutive year, electric-vehicle companies led by Tesla Inc. made serious inroads in the world’s largest market.
- Twitter Inc. has permanently suspended more than 70,000 accounts dedicated to sharing QAnon-associated conspiracy theory content and ratcheted up its enforcement in the wake of the Washington, D.C., riot last week. Many of the affected accounts were run by individuals who were operating several of them at a time, Twitter said in a statement detailing its actions. As part of its latest measures, follower counts for some users may change by as many as thousands. The company had warned against the sharing of QAnon material in the summer and said accounts that tweet or retweet it will continue to have “limited visibility across search, replies, and on timelines and are prohibited from being recommended to others by Twitter.”
- It’s a bold forecast that some say borders on fantasy: Wall Street banks and Federal Reserve officials see powerful employment gains over the next three years that evade the curse of past recessions. If they’re right, millions of Americans will leap back into the workforce as soon as vaccines against the coronavirus roll out. If they are wrong, the U.S. enters another so-called jobless recovery where payroll gains lag a pickup in economic growth and production. The optimists, including Federal Reserve Vice Chair Richard Clarida, say this economic crisis is different because it was caused by something more like a natural disaster than a financial shock. Once the pandemic has subsided, pent-up demand for services, entertainment, and even travel will unleash and companies will hire or rehire.
*All sources from Bloomberg unless otherwise specified