July 13, 2021
Daily Market Commentary
- Royal Dutch Shell on Tuesday said that it plans to construct a large-scale carbon capture and storage facility at its Scotford Complex near Edmonton, Alberta. The Polaris carbon capture and storage facility would have storage capacity of about 300 million tons of carbon dioxide during its entire operational life. The initial phase of the project is expected to begin operations around the middle of this decade, pending a final investment decision which is expected in 2023, Shell said.
- Canadian regulators imposed tougher conditions on Brookfield Infrastructure Partners LP’s hostile takeover bid for Inter Pipeline Ltd., making it harder for the Toronto-based company to derail a rival deal. Brookfield must get investors to tender at least 55% of Inter Pipeline’s shares for its bid to succeed, the Alberta Securities Commission ruled on Monday. That’s higher than the previous hurdle of 50% plus one. Shares that Brookfield already owns can’t be counted in the number.
- Markets settled into a holding pattern on Tuesday as the second-quarter earnings season got under way and traders awaited key American inflation data. Treasuries and the dollar were steady. Contracts on the S&P 500 were little changed, while those on the Nasdaq 100 edged higher. PepsiCo Inc. gained in pre-market trading after posting the fastest sales growth in at least a decade, while JPMorgan Chase & Co. slipped more than 1% after trading revenue missed estimates.
- European equities edged lower, pausing after the previous session’s record high, with banks extending losses after JPMorgan kicked off the reporting season for U.S. lenders on a down note. The Stoxx 600 Index was down 0.1% at 11:54 a.m. in London. Banks fell the most, with the Stoxx Banks Index trading 0.6% lower. The sector was already trading weaker before JPMorgan’s report after the European Central Bank signaled that it could rein in excessive dividends, while the Bank of England removed restrictions on lenders’ payouts.
- Asian equities rose, bolstered by gains in Hong Kong-listed technology heavyweights following a selloff over Beijing’s crackdown on the sector last week. The MSCI Asia Pacific Index advanced as much as 1%, with consumer discretionary and communication services stocks providing the biggest boosts. Hong Kong’s Hang Seng Index added 1.6%, as Meituan, Tencent Holdings and Alibaba Group rallied.
- Oil rose on optimism that fuel demand will keep rising and tighten the market, despite a Covid-19 resurgence in many regions. Futures in New York added 0.6% after sliding 0.6% on Monday to settle near $74 a barrel. The vaccine rollout has accelerated the demand rebound across major economies, although the spread of the delta variant is a reminder that the recovery will be bumpy. The market is set for a significant tightening if OPEC+ doesn’t resolve a standoff to lift output, the International Energy Agency said.
- Gold steadied ahead of key U.S. inflation data that may give more clues on when the Federal Reserve will start tightening monetary policy. Data on Tuesday is forecast to show another increase for the U.S. consumer price index in June, though at a slightly slower pace than a month earlier.
- Lumber, which at one point was among the world’s best-performing commodities as the pandemic sent construction demand soaring and stoked fears of inflation, has officially wiped out all of its staggering gains for the year. Prices at Monday’s close are now down 0.6% for the year as demand eases and supply expands in response to earlier gains. The rally turned a common building product into a social media sensation and a flash point in the debate over U.S. monetary policy. At one point, lumber futures were trading as high as $1,733.50 per thousand board feet, more than quadruple the level of a year earlier.
- Prices paid by U.S. consumers probably climbed in June at a solid pace as higher commodity and labor costs associated with the reopening contribute to inflationary pressures. The consumer price index is projected to increase 0.5% from the prior month, according to the median forecast in a Bloomberg survey of economists. Though distorted by so-called base effects resulting from the pandemic, the CPI is expected to rise 4.9% from a year ago, near the largest annual gain since August 2008.
- Britain’s biggest banks will be able to increase shareholder payouts after the Bank of England removed restrictions imposed at the height of the pandemic to make sure lenders could weather deep losses. The BOE said Tuesday it is fully removing guardrails that limited dividends this year at HSBC Holdings Plc, Barclays Plc, Standard Chartered Plc and other top lenders. The central bank concluded the industry now has enough capital to resume payments as they wish.
- Shares in Polish tractor and machinery maker dive as much as 38% after Warsaw court rejected a request to allow the indebted company to start recovery procedures and declared its insolvency.
- France’s TotalEnergies SE will sell a stake in a Kurdistan oil field to a small Canadian driller, in a deal that underscores the waning appetite of major energy companies for Iraqi crude assets.
- Google will be fined 500 million euros ($593 million) in France after the search giant failed to follow an order to thrash out a fair deal with publishers to use their news content on its platform. The Alphabet Inc. unit ignored a 2020 decision to negotiate in good faith for displaying snippets of articles on its Google News service.
- Private equity firm Lone Star Funds has agreed to buy chemicals company AOC from buyout firm CVC Capital Partners. The planned transaction is subject to regulatory approval and consultations with AOC’s workers’ council, according to an emailed statement Tuesday, which confirmed an earlier Bloomberg News report. Financial terms weren’t disclosed. The deal values the Dutch business at about 2 billion euros ($2.4 billion) including debt, according to people familiar with the matter, who asked not to be identified discussing confidential information.
- Global vaccinations of seafarers are going too slowly to prevent outbreaks on ships from causing more trade disruptions, endangering maritime workers and potentially slowing economies trying to pull out of pandemic slowdowns. Infections on vessels could further harm already strained global supply chains, just as the U.S. and Europe recover and companies start stocking up for Christmas. The shipping industry is sounding the alarm as infections increase and some ports continue to restrict access to seafarers from developing countries that supply the majority of maritime workers but can’t vaccinate them.
- JPMorgan Chase & Co.’s investment bankers posted their best quarter ever as a record first half in dealmaking bolstered the bottom line. Fees from advising on mergers and underwriting stocks and bonds soared 25% in the second quarter, smashing analysts’ estimates and boosting net income to $11.9 billion. The firm released $3 billion in reserves it had previously set aside for bad loans, almost twice as much as analysts had predicted.
- Boeing Co. slumped after the planemaker said it would deliver fewer 787 Dreamliners this year than originally planned as its mechanics expand their inspections for tiny structural flaws in the jets amid a temporary grounding. The Chicago-based planemaker now expects to hand over fewer than half of the 100 or so Dreamliners stashed in the desert and around its factories, Boeing said in a statement Tuesday. Executives had previously said a majority of the 787 jets in inventory would be delivered this year.
- PepsiCo Inc. reported the fastest sales growth in at least a decade and raised its forecast, benefiting from thirsty consumers returning to restaurants, bars and stadiums and others diving into bags of chips.
- The U.S. will warn American companies this week of the increasing risks of operating in Hong Kong, the Financial Times reported, as Washington seeks to ramp up pressure over Beijing’s crackdown on the financial center. The risks include the Chinese government’s ability to gain access to data that foreign companies store in Hong Kong, the FT said Tuesday, citing three people familiar with the matter it didn’t identify. A new law that allows Beijing to retaliate against anyone complying with anti-China sanctions is also among the U.S. concerns, the newspaper said.
“I don’t want to be liked. I want to be respected.”– Jack Ma
*All sources from Bloomberg unless otherwise specified