July 14, 2021
Daily Market Commentary
- The Bank of Canada is expected to continue scaling back emergency levels of stimulus on Wednesday amid growing optimism about the speed of the recovery. The Ottawa-based central bank is unanimously forecast to cut its weekly purchases of Canadian government bonds by one-third to C$2 billion ($1.6 billion) per week when it announces its policy decision at 10 a.m. Wednesday, according to a survey of 17 economists.
- Canadians are eager for in-store shopping as virus restrictions ease, according to geolocation data compiled by SafeGraph Inc. The San-Francisco based analytics firm released complete Canadian data for the first time this week, showing foot traffic at clothing stores is up 44% in June from the same month in 2019, according to a Bloomberg analysis of the numbers. In May, the two-year gain was 19%.
- American stock-index futures were mixed on Wednesday as investors evaluated a surprise U.S. inflation jump that stirred the debate on how long the Federal Reserve will maintain ultra-loose policy.
- European equities eased from a record high as U.K. consumer prices data fueled inflation concerns, while investors braced for a flurry of earnings reports over the coming weeks.
- Asian equities fell after two days of gains, with China and Vietnam leading declines, following a surprise jump in U.S. inflation. The MSCI Asia Pacific Index lost as much as 0.4%, weighed down by financial and industrials stocks. China’s CSI 300 and Vietnam’s VN Index each dropped more than 1%, while liquidity-sensitive ChiNext slid 0.8%. The Hang Seng Index declined 0.6%.
- Gold edged higher as the dollar and Treasury yields pared some of their gains made in the wake of U.S. inflation data that came in significantly higher than expected. Prices paid by U.S. consumers surged in June by the most since 2008, topping all forecasts and testing the Federal Reserve’s commitment to sticking with ultra-easy monetary support for the economy. The dollar and Treasury yields both spiked on the data released Tuesday, though eased on Wednesday to offer some support to gold.
- Oil eased from its highest closing level since October 2018 as signs of a strong U.S. crude market were offset by fears over the delta variant’s threat to demand. Futures in New York traded near $75 a barrel, after climbing 1.6% on Tuesday. American crude inventories declined substantially again last week, according to an industry report published ahead of government data due later on Wednesday. The nation’s oil demand has soared to new heights, with gasoline and diesel returning to pre-pandemic levels.
- Wheat futures rose for the second time in three days in Chicago amid weather concerns in some key producers and an increase in import demand. Parts of Europe face excess rain as farmers begin collecting crops, with areas of eastern France set for a month’s worth of moisture in just a few days, according to Meteo France. Also, consultant SovEcon trimmed its Russian wheat-crop outlook on lower yields, and drought continues to plague parts of North America.
- U.K. inflation accelerated to the highest level in three years in June, driven by widespread price increases that challenge the Bank of England’s argument that the surge will be temporary. Consumer prices climbed 2.5% from a year earlier, exceeding all but two estimates in a Bloomberg survey of 35 economists. Prices rose from May in the vast majority of 12 broad divisions, the Office for National Statistics said Wednesday.
- The European Central Bank is about to take the next step in reinventing the region’s money as it marches toward the creation of a digital euro. Policy makers will decide on Wednesday whether to move to an exploratory phase, which President Christine Lagarde reckons could take about two years. Ultimately, euro-zone citizens could be holding a virtual central-bank currency by the middle of this decade.
- New Zealand’s central bank said it will reduce monetary stimulus by ceasing quantitative easing, a surprise move that sent the currency higher as traders priced in an interest-rate increase as early as August. The Reserve Bank’s Monetary Policy Committee, led by Governor Adrian Orr, on Wednesday held the official cash rate at 0.25%, but said it will halt bond buying under its Large Scale Asset Purchase program by July 23.
- Senate Democrats on the Budget Committee agreed to set a $3.5 trillion top-line spending level for a bill to carry most of President Joe Biden’s economic agenda into law without Republican support. Democrats on the committee had been divided about the size and scope of the package, with Chairman Bernie Sanders initially pushing a $6 trillion measure that added an expansion of Medicare, immigration reform, more generous childcare benefits and more to Biden’s proposal.
- A new Senate proposal to legalize marijuana would let cannabis companies use banking services and trade on major stock exchanges, according to a person involved in negotiations on the legislation, a potentially dramatic breakthrough for an industry long stymied by federal restrictions. The sweeping new legislation, a draft of which Senate Democrats plan to release Wednesday, would also direct some tax revenue from marijuana sales to minority communities, which faced disproportionate arrests for marijuana possession, keep some federal drug testing provisions, and give the U.S. Food and Drug Administration oversight of cannabis regulation, the person said.
- U.S. Federal Reserve Chair Jerome Powell begins two days of grilling by U.S. lawmakers on Wednesday with the country facing faster-than-anticipated inflation and a new rise in coronavirus infections, a combination that could pull the Fed’s outlook in opposing directions. In sessions that begin at noon before the House Financial Services committee, Powell in opening remarks and in answer to questions by lawmakers will have to resolve a tension that has emerged just in the four weeks since the Federal Open Market Committee met in June: Whether the spread of the coronavirus Delta variant or inflation poses the greater risk both to the economic recovery and to the Fed’s response to it.
- Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell are slated to discuss the hot U.S. housing market and the risks it could pose to the financial system at a meeting with fellow regulators on Friday. The aim of the closed-door session: To make sure the U.S. is not vulnerable to a crisis akin to the one it suffered more than a dozen years ago, when the bursting of a property-price bubble drove top banks to the brink of insolvency and the economy into a deep recession.
- Mediaco surges in U.S. premarket trading as other shares that are favorites with retail traders also gain, rebounding after a group of so-called meme stocks fell on Tuesday. Stock rises 40% at 4:14 a.m. in New York. Others gaining include: Sgoco +14%; Powerbridge +11%; Exela +3.5%
- Cathie Wood’s Ark Investment Management has been selling Chinese tech stocks, with holdings in one of the firm’s funds falling to the lowest on record as Beijing’s crackdown on the sector intensifies. China’s weighting in Wood’s flagship Ark Innovation ETF has plunged to less than 1% from 8% as recently as February, while that of the Ark Next Generation Internet ETF has fallen to 5.4%, the lowest compared to month-end figures since Bloomberg began compiling the data in October 2014. The China weighting in Ark’s fintech ETF has remained steady at around 18%.
- Broadcom Inc.’s discussions to purchase analytics software company SAS Institute Inc. have ended without a deal, according to a person familiar with the matter. An acquisition would have valued Cary, North Carolina-based SAS at $15 billion to $20 billion, said the person, who asked to not be identified because the discussions were private. The talks collapsed after they became public on Monday, the person said.
- Apple Inc. has asked suppliers to build as many as 90 million next-generation iPhones this year, a sharp increase from its 2020 iPhone shipments, according to people with knowledge of the matter. The Cupertino, California-based tech giant has maintained a consistent level in recent years of roughly 75 million units for the initial run from a device’s launch through the end of the year. The upgraded forecast for 2021 would suggest the company anticipates its first iPhone launch since the rollout of Covid-19 vaccines will unlock additional demand. The next iPhones will be Apple’s second with 5G, a key enticement pushing users to upgrade.
- Apple Inc. is working on a new service that will let consumers pay for any Apple Pay purchase in installments over time, rivaling the “buy now, pay later” offerings popularized by services from Affirm Holdings Inc. and PayPal Holdings Inc. The upcoming service, known internally as Apple Pay Later, will use Goldman Sachs Group Inc. as the lender for the loans needed for the installment offerings, according to people with knowledge of the matter
“Expose yourself to your deepest fear; after that, fear has no power, and the fear of freedom shrinks and vanishes. You are free.”– Jim Morrison
*All sources from Bloomberg unless otherwise specified