July 8, 2021
Daily Market Commentary
- Canadian stocks were mostly unchanged, paring earlier losses on Wednesday. The S&P/TSX Composite was flat in Toronto, paring earlier loss of as much as 0.3%. Industrials were the best performers, led by Waste Connections and GFL Environmental. Meanwhile, health care sector was the worst performer, led by pot stocks. Meanwhile, rail cars carrying goods for export are finally starting to trickle back in toward Vancouver, after train movement to and from British Columbia’s west coast was largely halted in the past week amid wildfire damage on two main tracks.
- It will cost about C$75 billion ($60 billion) to zero out greenhouse gases from oil sands operations by 2050, with a good deal of the costs borne by taxpayers and many loose ends yet to be tied up, according to two of the industry’s top CEOs. To achieve the goal announced last month, about half of the emission cuts would need to come from capturing carbon at oil sands sites and sequestering it deep underground, which may require as much as two-thirds government capital like in Norway, Mark Little, chief executive office of Suncor Energy Inc., said in an interview. It’s still unclear how and when most of the projects will be implemented, or which agreements will be needed, but it’s clear the industry doesn’t want to do it alone. “We haven’t been able to find any jurisdiction in the world where carbon capture has been implemented, where the national government or the state governments are not very significant partners in that investment,” Alexander Pourbaix, CEO of Cenovus Energy Inc., said in the same interview “I don’t think any of us would ever be in a position to go at this on our own. It’s just too significant an undertaking.”
- A SoftBank Group Corp. fund is leading a $215 million investment in Clear Finance Technology Corp., a Canadian growth capital startup that provides money to small online businesses. Clear Finance, which operates under the name Clearco, provides funding to technology entrepreneurs in exchange for revenue-sharing agreements. It pitches itself as an alternative to venture capital for owners who don’t want to give up equity. In April, the Toronto-based company was valued at nearly $2 billion after a Series C capital raise. Tokyo-based SoftBank is leading this latest round through its Vision Fund 2. Intuit Inc., Bow Capital and Park West also participated, according to a statement.
- European stocks sank on Thursday, with the region’s benchmark dropping the most in nearly two months, as investors shifted out of this year’s best performers amid concerns over the tapering in Federal Reserve stimulus. The Stoxx Europe 600 Index, which had been hovering just below its record high earlier this week, was down 1.7% as of 11:54 a.m. in London, in a broadretreat led by cyclicals. Miners fell the most amid weaker base metal prices. Banking stocks, which are strongly correlated to bond yields, also tumbled. European equities have traded in a range since hitting a record last month, as investors turned wary of the spreading covid delta variant, increasing price pressure and signs of tightening monetary policy.
- U.S. futures slumped with stocks amid growing anxiety that the spread of Covid-19 variants will upend growth expectations, undoing popular reflation trades. Bonds rallied. Contracts on the the S&P 500 and Nasdaq 100 tumbled more than 1%, signaling a retreat from new records set Wednesday in the underlying gauges. U.S. 30-year Treasury yields fell below 1.90% for the first time since February as inflation expectations eased. Traders are getting edgy over whether the rapid spread of the delta strain will knock back growth and prospects for central bank normalization.
- Asian equities dropped amid continued losses in Hong Kong-listed Chinese tech stocks and concern over rising coronavirus cases in various countries. Tencent and Alibaba were once again the biggest drags on the MSCI Asia Pacific Index, which headed for its seventh loss in eight sessions. Hong Kong led declines around the region, with the Hang Seng Index falling 3% on its way to eight straight losses and its longest losing streak since 2015. Stocks in China also fell amid the broad regional selloff. China’s State Council signaled the central bank could make more liquidity available for banks to boost lending to businesses, including by cutting the reserve requirement ratio. The country’s rising private-sector debt amid credit expansion coupled with accelerating inflation “may conspire to decelerate economic growth,” CICC analysts wrote in a note.
- Oil fell for a fourth day in New York as concerns over the delta coronavirus variant rose, and a dispute at the heart of OPEC kept the market guessing on the prospects for supply. West Texas Intermediate futures lost 1.2%. The renewed spread of the virus is bringing on anxiety about global growth, driving equities lower and reversing bets on reflation. The dollar is also near the highest level since April, making commodities priced in the currency less attractive. The World Health Organization urged caution on the pace of reopenings worldwide, with many regions seeing infections spreading. Indonesia is in the throes of a major outbreak, Thailand is set to consider a partial lockdown, and Japan is planning to declare a state of emergency over the Tokyo Olympics.
- Gold gained for a seventh day as U.S. bond yields continued to sink and investors mulled Federal Reserve minutes that showed policy makers wanted a more solid economic recovery before setting a timeline for tapering. Rates on 10-year Treasuries fell to their lowest since February as stocks and equity futures retreated amid growing anxiety that the spread of Covid-19 variants will upend growth expectations. The move boosted bullion, which bears no interest. Notes from the Fed’s June meeting indicated officials weren’t ready to schedule the withdrawal of the bank’s massive bond-buying program, given uncertainties around the economic outlook. But they also acknowledged the need to plan for tapering, and reiterated the possibility for stimulus to be pared back sooner than anticipated.
- The pandemic’s global death toll has surpassed 4 million as the delta variant spreads. A growing disparity in access to inoculations is leaving poorer nations exposed even as rapid vaccine rollouts allow life to start to return to normal in countries like the U.K. and U.S. Japan is set to declare a new state of emergency over the coronavirus, as a local newspaper reported that fans would be banned from Olympic events in Tokyo to stem surging infections. The World Health Organization is urging caution on reopenings worldwide with most regions seeing rising case counts. A study by top international scientists concludes that animal contagion is the most likely explanation for the pandemic’s genesis.
- Zomato Ltd., the Indian food delivery startup backed by Jack Ma’s Ant Group Co., plans to raise 93.75 billion rupees ($1.3 billion) in an initial public offering, boosting its target by about 14% as demand in its home market rises. The bulk of this will be new shares priced at 72 rupees to 76 rupees each, while investor Info Edge India Ltd. will sell as much as 3.75 billion rupees of stock, according to an advertisement in the Financial Express newspaper Thursday. The IPO opens July 14 and closes July 16. Zomato is among Indian companies taking advantage of a stock rally that has propelled the country’s benchmark index to record highs. The company vies with main rival Swiggy as well as smaller contenders in a fast-growing Indian food-services market that Sanford C. Bernstein & Co. estimates will balloon to $97 billion by 2025.
- Thailand’s top Covid panel is set to consider a partial lockdown of the nation’s worst virus-hit regions, including the Bangkok metropolitan area, to quell the deadliest wave of infections. The national task force will meet on Friday to decide on Health Ministry’s proposals for stay-at-home orders and a ban on travel between provinces for two weeks, Permanent Secretary of Public Health Kiattiphum Wongrajit told reporters on Thursday. While essential businesses and services such as food markets and hospitals may be allowed to operate, people will be barred from traveling for non-essential activities, he said. The proposed curbs are similar to a national lockdown last year when all the non-essential businesses were closed and a ban on social gatherings and local travel was in force for about a month, according to Kiattiphum. The partial lockdown may cover the greater Bangkok area — home to more than 10 million people and contributing about 45% to the nation’s gross domestic product — and some provinces with high Covid cases, he said.
- Private equity firms PAG and Xinchen Capital are among investors considering taking part in Wanda Light Asset Commercial Management Co.’s funding round, which could raise about 20 billion yuan ($3.1 billion), according to people familiar with the matter. The local government of Zhuhai, a city in Guangdong province, is also weighing contributing more funds after making an earlier investment of 3 billion yuan into the Dalian Wanda Group Co. unit, the people said. Some other investors have been in further negotiations with the company, said the people, who asked not to be identified as the information is private. Wanda Light Asset primarily operates and manages its parent’s 381 Wanda Plaza commercial complexes in more than 200 cities. The fundraising could value the Wanda unit at about 200 billion yuan, Bloomberg News reported in May. The company plans to complete the funding round before a planned $3 billion IPO in Hong Kong, the people have said.
- Renters returning to Manhattan are signing leases at a record rate, helping to chip away at a mountain of vacant apartments. The number of available units dropped 38% in June from the previous month to 11,853, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. While still elevated from pre-pandemic levels, the inventory has been reduced by more than half since January. New Yorkers who may have retreated to the suburbs at the height of the pandemic last year are coming back, and they’re racing to take advantage of lower rents while they still can. They’re agreeing to deals with fewer landlord concessions and longer lease terms.
- Investors are backtracking on reflation bets, with the bond rally extending as central banks signal continued support and stocks falling as Covid-19 variants threatened reopening prospects. U.S. 30-year yields fell below 1.90% for the first time since February, even as the Federal Reserve discussed tapering its bond purchase program at its meeting last month. German and Chinese 10-year yields hit multi-month lows as traders positioned for a prolonged easy stance by the European Central Bank and the People’s Bank of China. Doubts over inflation and growth reverberated across markets. Europe’s cyclical stocks led declines, while haven bids drove the Swiss franc and Japanese yen to the top of the currency leader board.
- The European Central Bank raised its inflation goal and said it’s willing to tolerate a limited overshoot of the target, the outcome of a strategy revamp aimed at bolstering the economy after years of lackluster prices and growth. In the culmination of an 18-month review published Thursday, policy makers agreed to seek consumer-price growth of 2% over the medium-term with a “symmetric” aim that could “imply a transitory period in which inflation is moderately above target.” The euro and government bonds extended gains after the announcement. The common currency climbed to a day high of $1.1846, while German 10-year yields held near a three-month low of -0.34%
- Chancellor of the Exchequer Rishi Sunak hinted he may abandon the U.K. government’s “triple lock” pledge on pension increases, saying his decision will be guided by “fairness.” The election manifesto promise means the state-funded pensions rise every year by the highest of three measures: annual growth in average earnings, inflation, or 2.5%. But the pandemic has led to volatile data, with earnings plunging last year because of the effect of millions of workers going on furlough, and rebounding strongly this year.
- France is warning its citizens against vacationing in Spain and Portugal in the latest sign that the rapid spread of the delta variant of Covid-19 could wreck Europe’s summer. With the migration of tens of thousands of holidaymakers already underway on the continent, European Affairs Minister Clement Beaune issued a “message of caution” and advised those who haven’t yet booked to go elsewhere or vacation domestically. The comments come as European Union countries introduce vaccination certificates intended to make travel easier. But the delta strain and the pickup in virus infections are hindering the reopening, with some governments delaying plans to ease restrictions, or even reintroducing them in some hotspots. And as countries look to move past the pandemic, new figures spell out the ongoing human cost, with the global death toll passing 4 million.
- U.S. President Joe Biden said he gave his Russian counterpart a tough message on the need to stop cyberattacks when they met in Geneva last month. Vladimir Putin said he couldn’t agree more. But less than a month later, hackers from Russian military intelligence were breaching the computers of the U.S. Republican National Committee, Bloomberg News reported Tuesday. The Kremlin denied involvement in the latest attack, as it has in all previous ones, but that did nothing to relieve the pressure on Biden from critics of his efforts to repair relations with Russia.
- A powerful agency that China’s President Xi Jinping set up during his first term to police the internet is taking on a new role: regulating U.S.-listed Chinese companies. The Cyberspace Administration of China, which reports to a central leadership group chaired by Mr. Xi, is taking a lead role in Beijing’s just-announced push to strengthen interagency oversight of companies listed overseas, especially those traded in the U.S., and to tighten rules for future foreign listings, according to people with knowledge of the matter. Behind the agency’s rising clout is a desire to fix a lack of coordination between regulators, which has enabled the kind of mixed messages that preceded the blockbuster initial public offering of ride-hailing giant Didi Global Inc. last month.
- Alphabet Inc.’s Google was sued by three dozen states alleging that the company illegally abused its power over the sale and distribution of apps through the Google Play store on mobile devices. State attorneys general said in a complaint filed Wednesday in federal court in San Francisco that Google used anticompetitive tactics to thwart competition and ensure that developers have no choice but to go through the Google Play store to reach users. It then collects an “extravagant” commission of up to30% on app purchases, the states said. Google was accused of paying Samsung Electronics Co., the largest Android manufacturer, to ensure that the Korean company didn’t develop its own competing app store. Additionally, after Fortnite maker Epic Games Inc. began distributing its app outside of Google’s store, Google “bought off” developers to dissuade them from doing the same, according to the complaint. Details of those payouts were blacked out in the complaint.
- China’s authorities signaled they may soon unleash more support for the economy, an unexpected shift in tone that suggests the world’s fastest pandemic recovery may be weaker than it appears. Investor reaction in China provided a clue for markets elsewhere counting on accelerating global growth: the CSI 300 Index of stocks slid as much as 1.2% Thursday after Beijing hinted companies may need fresh funding, while the yuan dropped and bond futures rose the most in a year. A gauge of China shares in Hong Kong, already hit by a tech crackdown, fell to the cusp of a bear market. The State Council’s comments were an abrupt change in rhetoric. Officials have for months stressed how excessive global liquidity risked fueling asset bubbles, while some analysts were predicting tighter policy as recently as June. The concern now is that key economic numbers due next week — including quarterly growth data — may significantly undershoot expectations, a cautionary tale for most economies that reopened later than China.
- The Bank of New York Mellon Corp. agreed to buy fund management technology firm Milestone Group, a step it says will improve efficiency by providing its clients with technology that helps automate investment processes. Terms of the deal were not disclosed. BNY Mellon’s acquisition of Milestone will broaden the bank’s digitization and automation of accounting and asset services for its clients, which include asset managers and asset owners, according to a statement. “This transaction with Milestone is the latest demonstration of BNY Mellon’s commitment to support clients across the investment lifecycle and provide clients with open and flexible digital solutions that enable them to optimize, scale and grow their businesses,” said Roman Regelman, BNY Mellon’s chief executive officer of asset servicing and head of digital.
- The retail industry is poised for its biggest back-to-school shopping season in at least five years, buoyed by parents and students who are primed to snap up gear for the in-person classroom experience after a year of virtual learning. Spending is expected to reach $32.5 billion, up 16% from 2020 and 17% from 2019, according to a forecast from Deloitte LLP. Retailers are bullish that they can benefit from shoppers’ increased comfort with online shopping, honed during the pandemic, and strong demand for everything from school uniforms to markers. Still, retailers and brands have ample challenges to navigate in order to score strong sales. Delays at global ports could contribute to shortages of coveted products, and an elongated shopping season that stretches from June to late September makes it harder to plan inventory flow and promotions. Inflationary pressures abound and could alter shopper behavior, making the season a key test of how well the industry has adapted to a consumer landscape reshaped by the pandemic.
“If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success.”– John D. Rockefeller
*All sources from Bloomberg unless otherwise specified