July 30, 2021
Daily Market Commentary
- Canada’s telecommunications companies will pay C$8.9 billion ($7.2 billion) to buy licenses for 5G wireless airwaves, with Rogers Communications Inc. spending the most to protect its No. 1 position in the market. Toronto-based Rogers committed C$3.3 billion in the government’s spectrum auction, while BCE Inc. spent C$2.1 billion and Telus Corp. more than C$1.9 billion, according to a statement by the industry ministry. The three companies dominate the sector, with more than 10 million wireless customers each. Spectrum is never cheap, but the amount is far more than what analysts expected, another sign that so-called midband frequencies are viewed as crucial by wireless companies seeking to establish an edge in 5G services. A U.S. midband auction earlier this year resulted more than $80 billion in spending, led by Verizon Communications Inc. and AT&T Inc.
- Sun Life Financial Inc. Chief Executive Officer Dean Connor, whose construction of the insurer’s $245 billion alternative-assets manager marks one of the top achievements of his tenure, said private investments will remain attractive in the low-yield world that lies ahead. With low interest rates and an abundance of capital seeking opportunities depressing bond yields, the premium offered by investments with limited liquidity such as private credit, infrastructure and renewable-energy projects will continue to draw interest, Connor said in an interview. Sun Life has already made certain real estate investments available to Canadian group pension plan members, and retail investors will seek out similar opportunities, he said.
- European stocks fell from a record high, paring the longest streak of monthly gains in eight years, amid investor concerns about the outlook for growth and China’s tightening regulatory grip. The Stoxx 600 Index was 0.5% lower at 12:05 p.m. London time, after slipping as much as 0.9%. The benchmark remains almost 2% higher for July and is set to rise for a sixth month, its best run since 2013. More cyclical and economically sensitive sectors, such as travel, miners and automakers, led Friday’s retreat, while real estate outperformed. The strong start to the earnings season and generous central-bank support have allowed European stocks steer through a virus surge, inflation pressure and a Chinese regulatory crackdown this month. However, with equities trading near all-time highs, investors are weighing the risks and whether it’s time to take profits on the rally.
- U.S. equity futures retreated with stocks Friday as investors worried about slowing growth at megacap technology companies and China’s crackdown. Treasuries rose. Nasdaq 100 contracts slid as Amazon.com Inc. slipped in premarket trade after its sales outlook missed expectations, adding to this week’s cautious forecasts from Facebook Inc. and Apple Inc. S&P 500 futures also fell. European equities dropped from a record.
- Chinese stocks fell on Friday, rounding off a volatile week for investors struggling to price in Beijing’s tightening regulatory grip after a rout pushed the nation’s key equity index to the brink of a bear market. The CSI 300 index fell 0.8% on the day and 5.5% for the week, the worst since February. In Hong Kong the Hang Seng Index, which earlier this week saw its biggest two-day loss since 2008, dropped 1.4%. Alibaba Group Holding Ltd. slipped 4.2% while Meituan lost 5.9%. Tencent Holdings Ltd. declined 2.6%. Investors are grappling with an uncertain regulatory landscape, given the range of industries targeted by the government. From derailing Ant Group’s blockbuster IPO to rules curbing monopolistic practices across the internet space, reducing leverage in the property industry and reforming the tutoring sector, the investor playbook continues to rapidly change. About $1.5 trillion of market value has evaporated in those sectors since February, according to data compiled by Bloomberg.
- Oil headed for a second weekly gain as signs of tighter supplies helped assuage fears over the resurgent pandemic’s threat to demand. Futures held above $73 a barrel in New York, up 1.9% this week even as some countries renewed curbs on movement amid a spike in Covid-19, most notably in Southeast Asia. Prices were supported by a further plunge in U.S. crude inventories — the ninth in 10 weeks — and signals that the Federal Reserve will continue measures to support the economy. There’s confidence the oil market will continue to strengthen, with Royal Dutch Shell Plc chief Ben van Beurden predicting “a strong recovery in demand” as economic activity picks up again.
- Gold headed for the biggest weekly gain in more than two months on a weaker dollar, and as investors bet the Federal Reserve will maintain its support for the U.S. economy after growth data missed forecasts. Gross domestic product expanded at a 6.5% annualized rate in the second quarter, the Commerce Department’s initial estimate showed Thursday. The median forecast called for an 8.4% gain. The yield on 10-year Treasuries rose and the dollar eased after the report, although yields are down again Friday. Bullion has bounced back this week as the real yield on 10-year Treasuries sank to a record low and investors expanded holdings in gold-backed exchange-traded funds. Speaking after a policy meeting on Wednesday, Chair Jerome Powell signaled the Fed wants to see more progress toward its goals before paring the stimulus it’s deployed to combat the pandemic’s fallout.
- New research indicates that even those who are inoculated can carry enough of the virus to be infectious, the New York Times reported, citing the Centers for Disease Control and Prevention. An agency document showed that the delta variant may also cause more severe illness than previous variants, the Washington Post said. The findings are fueling renewed restrictions across the U.S., especially in states where the variant is causing a spike in new cases. President Joe Biden will require federal workers to prove they’ve been vaccinated or wear masks and submit to frequent testing.
- President Joe Biden made his best effort to juice vaccinations on Thursday, as the delta variant of coronavirus sweeps the U.S., ordering federal employees to get shots or face strict public health precautions and offering ordinary American holdouts $100 for a jab. But his latest announcement showed the limit of his powers, and what happens next in the pandemic is largely out of the president’s hands. White House officials had hoped that with free vaccines in plentiful supply across the country, most Americans would voluntarily get inoculated, snuffing out the pandemic. But Biden missed a target of getting at least one shot into 70% of adult arms by July 4, and only about 49% of the U.S. population is fully vaccinated, according to the Centers for Disease Control and Prevention.
- Amazon.com Inc. emerged as the essential store for homebound shoppers during the coronavirus pandemic, propelling its sales and profits to new highs. Now, the rush online is slowing down as vaccinated consumers peel away from computers and smartphones and revert to old habits like traveling and dining out. The world’s biggest e-commerce retailer on Thursday reported sales and gave a forecast that fell short of expectations. Shares declined about 6.2% in early trading before New York exchanges opened on Friday. It marked the first time Amazon had missed quarterly sales estimates since 2018.
- Chevron Corp. is reviving share buybacks that were suspended more than a year ago, signaling confidence that strong cash flows from high commodity prices will be sustained well into the future. The repurchases will begin during the current quarter and range between $2 billion and $3 billion a year, around half the amount it devoted to the program before it was suspended in early 2020. Chevron’s move followed similar steps by Royal Dutch Shell Plc and TotalEnergies SE, which reinstated buybacks on Thursday. Stock repurchases are being revived or raised across the board as sectors as diverse as steelmakers, retailers and manufacturers ride the crest of economic expansion. In particular, Big Oil executives are seeking to reward shareholders as commodity prices rise, a turnabout from previous booms when excess cash was poured into costly growth projects.
- Deutsche Bank AG has lost a string of U.S.-based wealth management executives over the past year, as Chief Executive Officer Christian Sewing struggles to expand in the lucrative business of managing rich people’s money while keeping a lid on expenses. At least 10 senior bankers and numerous junior employees across the world’s largest wealth management market have left, according to people familiar with the matter. Deutsche Bank also shuttered its Chicago-based wealth management operations, the people said, asking not to be identified discussing the private information.
- Robinhood Markets Inc. may have performed poorly after its initial public offering, but it got some high-profile support from Cathie Wood. Wood’s flagship ARK Innovation exchange-traded fund (ticker ARKK) purchased almost 1.3 million shares of the company on Thursday, according to Ark Investment Management’s daily trading report. At Robinhood’s closing price of $34.82, that gives the ETF a more than $45 million stake. Even after pricing the IPO at the low end of its range, Robinhood ended its first day down 8.4% from the offering price, the worst-ever performance for a U.S. debut of its size, according to data compiled by Bloomberg.
- The Biden administration’s first evacuation flight for Afghans who aided American and other coalition forces has arrived in the U.S., as the administration steps up efforts to relocate interpreters, other military assistants and their families ahead of a final troop withdrawal. The plane, carrying more than 200 people, landed at Fort Lee in Virginia, where passengers were to undergo health screenings and further processing of their Special Immigrant Visas. “Today is an important milestone as we continue to fulfill our promise to the thousands of Afghan nationals who served shoulder-to-shoulder with American troops and diplomats over the last 20 years in Afghanistan,” President Joe Biden said in a statement. “Although U.S. troops are leaving, we will continue to support Afghanistan through security assistance to Afghan forces, as well as humanitarian and development aid to the Afghan people to help them sustain their achievements of the past 20 years.”
- PG&E is criminally liable for the 2020 Zogg Fire near California’s northern border which killed four people, according to a post on Facebook attributed to Shasta County District Attorney Stephanie Bridgett. A final decision as to the nature and grade of charges hasn’t yet been made, according to the post on the Shasta County District Attorney’s Office Facebook account. A “filing decision” will be made before the Sept. 27 anniversary of the blaze, according to the statement. It’s not clear if the the decision refers to whether charges will ultimately be filed, or if it’s more simply a matter of what they’ll be. “This fire caused the deaths of four people and damaged numerous homes and other structures, killed wildlife and harmed our community,” District Attorney Stephanie Brigett’s office posted. “I hope this information brings awareness to the importance of fire prevention during the current drought and severe wildfire season.”
- European natural gas prices retreated from a record high with technical indicators showing the commodity is overbought, while traders assessed the supply crunch that has seen futures more than double this year. “Volatility is likely to remain at elevated levels at European gas hubs today as fundamentals remain supportive but most contracts are trading in overbought territory,” Engie EnergyScan said in a note. Europe is scrambling to build buffer stocks before the heating season starts, with gas reserves in Europe at their lowest level in more than a decade for this time of the year. Rebuilding them hasn’t been easy as pipeline outages in the North Sea are adding to reduced flows from top supplier Russia at a time when cargoes of liquefied natural gas are hard to come by.
- Japanese sentiment toward the 2020 Tokyo Olympics is seeing a shift as competitions and athletes take center stage and the country equals its gold medal record. Previously plagued by concerns over the pandemic and a laundry list of scandals, analyses of Twitter posts by local media found that positive remarks about the Olympics have risen significantly since the opening ceremony on Friday, compared with previously largely critical comments beforehand centered on cancellation and Covid-19. Japanese athletes have been racking up gold medals, including several firsts. With 16 gold medals, the country has already tied its record haul from 2004 and the first Tokyo games in 1964. While some athletes have dropped out after testing positive, Olympics-tied cases have remained relatively contained for now, with no events being called off so far.
- China Evergrande Group’s crisis deepened after a court froze assets of its listed onshore subsidiary, spurring another selloff in its shares and bonds. The entire 20% stake in Shanghai-listed Langfang Development Co., held by the developer’s main onshore unit, was frozen from Thursday for three years, an exchange filing showed. The order is the result of a civil lawsuit between Evergrande units and a state-backed builder on shanty-town homes and infrastructure in Wuhan, a city in central China, the filing said, without providing details.
- Goldman Sachs Group Inc.’s infrastructure arm and Canadian pension fund Ontario Municipal Employees Retirement System are part of a group that is nearing a deal to buy a majority stake in Germany’s Amedes Holding GmbH, a provider of medical diagnostic services including Covid-19 tests, according to people familiar with the matter. The deal would value the business at close to $1.9 billion, including debt, the people familiar with the matter said. Goldman and OMERS along with AXA Investment Managers, the asset management business of global insurer AXA SA management are buying the controlling stake from European buyout firm Antin Infrastructure Partners.
- Procter & Gamble Co. is projecting that its growth will slow amid higher shipping and commodity costs and an easing of pandemic-era demand — presenting an early test for its next chief executive officer, Jon Moeller. The maker of Gillette razors and Downy fabric softener expects organic sales, which exclude the impact of items like acquisitions and currency swings, to grow 2% to 4% in the company’s current fiscal year, which began in July. That’s down from the 6% advance P&G posted for the previous year — a period marked by consumer stockpiling. The slowing pace will be accompanied by $1.9 billion in higher expenses, after tax, from freight and materials like pulp and resins. This, coupled with currency variation, is expected to reduce earnings per share by about 70 cents during the year.
- Mexico’s economy grew less than expected in the second quarter as demand from the U.S. as well as improving domestic consumption translate to a gradual recovery. Gross domestic product rose 1.5% from the previous three-month period, less than the 1.8% median estimate in a Bloomberg survey. From a year ago, GDP grew by 19.7%, according to preliminary data from the national statistics institute published Friday.
- Europe, an early laggard in the developed world’s vaccination drive, has picked up the pace in recent weeks. That’s feeding through to travel behavior, with more people on the move during what is typically the peak vacation period. From Germany to Spain to the U.K., freer borders and looser quarantine requirements are helping fill up planes again. The region has been on a winning streak since late April, when capacity was only a third of pre-pandemic levels. Airlines in Europe are now operating at 66% of 2019 capacity, according to Bloomberg’s weekly flight tracker, which uses data from aviation specialist OAG to monitor the pulse of the comeback. But the surge in demand has also laid bare the strains on an industry that was forced to make deep cuts to make it through the crisis. It’s an issue particularly bedeviling U.S. carriers, where temporary and permanent job losses exceeded 150,000 at the nation’s four largest airlines last year, alongside mass grounding of planes to preserve cash. Now the companies are finding out that bringing back those workers and aircraft is a complex undertaking, putting pressure on their operations.
- Investors representing $14 trillion of assets under management have agreed to step up pressure on companies to fight global warming. The group of 53 investors and asset managers, including JPMorgan Asset Management and GAM Investments, is setting a “new baseline” for the net-zero transition plans they want companies to adopt, according to a statement Friday from the Institutional Investors Group on Climate Change (IIGCC). The demands come as global warming triggers a steady wave of extreme weather events, including deadly floods in Germany, India and China, and wildfires across large parts of the U.S. IIGCC said the investor demands it represents will help set the agenda for next year’s round of annual general meetings.
- Amazon.com Inc. faces the biggest ever European Union fine for a data privacy breach as its lead watchdog hit it with a 746 million-euro ($888 million) penalty for violating the bloc’s tough data protection rules. The Luxembourg data protection authority’s decision on July 16 was disclosed in a regulatory filing by Amazon on Friday. The decision said Amazon’s “processing of personal data did not comply with the EU General Data Protection Regulation.” Amazon said in the filing the fine is “without merit” and will “defend ourselves vigorously in this matter.” The firm will appeal the decision.
- Drought is making one of Brazil’s most important river systems unnavigable, making it more challenging and costly for the commodities powerhouse to get grains and iron ore out to global markets. The Parana River Basin in central Brazil is experiencing its worst water crisis in 91 years, according to the national grid operator, with June flows at 55% of the historical average for the month to sink to the lowest on record. South America’s second-largest river system provides electricity and water to Brazil’s industrialized south and supports river levels in neighboring countries, where drought has also made navigation difficult. The consequences of Brazil’s water woes stretch well beyond the borders of this Latin American nation, with receding waterways causing supply-chain disruptions and bottlenecks in Argentina, the world’s largest soy-meal shipper, and Paraguay. Brazil is the top exporter of soybeans, coffee and sugar and the second biggest supplier of corn and iron ore
“Never quit. Never give up.”– Gabby Douglas, 3 time Olympic Gold Medalist, USA Gymnastics
*All sources from Bloomberg unless otherwise specified