July 16, 2021

Daily Market Commentary

Canadian Headlines

  • Canada will be able to welcome fully vaccinated travelers from all countries by early September if “the current positive path of vaccination rate and public health conditions continue,” Justin Trudeau said. U.S. citizens and residents who’ve had a full course of Covid-19 vaccines could be allowed in for non-essential travel as early as mid-August, according to a summary of a meeting with provincial leaders provided by the prime minister’s office late Thursday. The government is expected to share more details on these plans early next week.
  • Brookfield Asset Management Inc. plans to launch its own private real estate investment trust after taking over the management of a portfolio of properties currently overseen by subsidiary Oaktree Capital Management. The Canadian alternative asset manager is making the move to enhance the scale of the company, leveraging Brookfield’s track record as an owner and operator of real estate, according to people familiar with the strategy. The plan is to expand the portfolio over time to compete with rival REITs managed by Blackstone Group Inc.and Starwood Capital Group, they added.
  • Canadian stocks advanced Thursday with Alimentation Couche-Tard Inc. leading the market higher following its investor day. The S&P/TSX Composite Index rose 0.2%, with consumer staples and materials leading. Health care and energy slipped. Telecom shares including Rogers Communications Inc. fell after a report that the country’s wireless spectrum auction may have raised about C$8 billion ($6.4 billion).

World Headlines

  • U.S. stock-index futures rose with Treasury yields as investors assessed the earnings upshot of economic reopening and the outlook for Federal Reserve support in the face of high inflation. Contracts on the Russell 2000 Index advanced 0.5%, while S&P 500 Index futures reversed losses of as much as 0.3%. Moderna Inc. jumped in premarket trading after the vaccine maker was named to the U.S. equity benchmark. The 10-year Treasury yield pared its third weekly decline. Bitcoin ground lower for a second day.
  • European stocks rose modestly on Friday, as investors kept watch on the fast spreading delta variant of the coronavirus that causes COVID-19, and absorbed a fresh batch of earnings. U.S. stock futures were steady ahead of retail sales data. The Stoxx Europe 600 index rose 0.2% to 452.21, with similar gains for the German DAX 30 and French CAC 40 . The FTSE 100 index rose 0.6%, as heavily weighted oil companies such as Royal Dutch Shell and BP rebounded from losses on Thursday.
  • China stocks dropped on Friday with consumer shares leading the loss, but are on track to post a weekly gain, boosted by the central bank’s surprise cut in cash that banks have to hold as reserves and hopes for further easing policies.
  • Gold headed for a fourth weekly gain amid dovish comments from Federal Reserve Chair Jerome Powell that saw Treasury yields drop to near their lowest since February. Speaking on Thursday, Powell defended the central bank’s continued support for the U.S. economy even as inflation runs at uncomfortable levels, reiterating comments made this week that it was still too soon to scale back stimulus. That saw Treasury yields extend declines on Thursday, though they partially rebounded Friday, weighing on gold.
  • Oil headed for the biggest weekly loss since mid-March as a resurgence of Covid-19 threatened the outlook for global fuel demand. Futures traded around $72 a barrel in New York, and are heading for a weekly decline of 3.4%. The fast-spreading delta variant is triggering renewed restrictions on movement as it sweeps across the globe, eroding fuel consumption in several Asian countries that had buoyed the recovery.
  • Treasuries are cheaper by as much as 3bp at long end of the curve after facing pressure during Asia session and London morning as U.S. stock futures recouped some of Thursday’s losses. Focal points include retail sales data and potential for rate-lock flows linked to next week’s credit offerings to influence price action.
  • Wheat futures headed for the biggest weekly gain in four years in Chicago on mounting concerns that adverse weather from Europe to North America will threaten supplies. Downpours in parts of the European Union are stalling harvest efforts and weighing on grain-quality hopes. Analysts including SovEcon have pared crop estimates for top shipper Russia as early yields disappoint. Plus, drought and scorching heat baking fields in Canada and the northern U.S. are hurting spring-wheat prospects.
  • Moderna gains 8% after the vaccine maker was named to the S&P 500 Index in one of the most noteworthy additions to the index since Tesla Inc. joined late last year. Didi Global drops 7% after China dispatched a team of officials to conduct on-site inspections at the firm as part of a probe into the ride-hailing giant. Fibrogen (FGEN) slumps 35% in premarket trading after the U.S. FDA Advisory Committee voted against approving roxadustat for the treatment of anemia.
  • The Biden administration warned investors about the risks of doing business in Hong Kong, issuing an advisory that said China’s push to exert more control over the financial hub threatens the rule of law and endangers employees and data. A senior administration official said developments over the last year in Hong Kong present operational, financial, legal, and reputational risks for multinational firms that necessitated the advisory, issued Friday by the State and Treasury, Homeland Security and Commerce departments.
  • Greenland dropped all plans for future oil exploration on environmental grounds, saying the price of extraction was “too high.” The island’s socialist-led government, in office since April, has made climate concerns central to its legislative program. While the decision to scrap planned exploration is a win for environmental groups, it cuts off potential investments that could have aided efforts to gain economic independence from Denmark.
  • China’s national carbon market opened with a flurry of trades that sent prices surging, yet it’ll be years before the system helps the top polluting nation curb its emissions. State-owned oil giant China Petroleum & Chemical Corp., known as Sinopec, and China Energy Investment Corp., one of the world’s top coal producers, were among companies to join the start of trading Friday, when carbon allowances rose to a 10% daily limit within about 10 minutes of the launch.
  • U.S. President Joe Biden signaled progress toward lifting a ban on travel from Europe, raising hopes for a reopening of the $40 billion North Atlantic air corridor 16 months after flights were grounded by Covid-19. Shares of Air France-KLM, Deutsche Lufthansa AG and IAG SA gained in Europe after Biden said his Covid-19 advisers are weighing when to lift the prohibitions. German Chancellor Angela Merkel raised the issue in a White House meeting on Thursday.
  • The death toll from the floods that devastated parts of western Germany rose to at least 103, with scores of people unaccounted for after houses  collapsed and roads and bridges were badly damaged. Many rail lines and streets remained blocked and tens of thousands were without electricity Friday as rescue workers toiled in the worst-hit areas in the states of North Rhine-Westphalia — which is run by conservative chancellor candidate Armin Laschet — and Rhineland-Palatinate.
  • U.S. President Joe Biden, China’s Xi Jinping and other world leaders will meet virtually on Friday as part of an informal APEC meeting focused on ending the Covid-19 pandemic and supporting the global economic recovery as Asia struggles with a deadly resurgence of virus cases. New Zealand Prime Minister Jacinda Ardern, whose country is chairing the Asia-Pacific Economic Cooperation this year, has called an unprecedented additional meeting of the heads of its 21 member economies before a formal summit later this year. The group includes the U.S., China, Taiwan, Japan, Australia and Canada, as well Southeast Asian and Pacific-facing countries.

“The journey of a thousand miles begins with a single step.”– Lao Tzu

*All sources from Bloomberg unless otherwise specified