June 4, 2021

Daily Market Commentary

Canadian Headlines

  • Analysts have raised their forecasts on the high-flying commodity-linked Canadian dollar as a proposed infrastructure spending package in the United States bolsters prospects for the global economy, a Reuters poll showed. The Canadian dollar has been the top performing Group of 10 currency this year, up about 5% against the U.S. dollar, supported by higher commodity prices and the Bank of Canada’s more hawkish stance. On Tuesday, the currency touched its strongest level in six years at 1.2007 per U.S. dollar, or 83.28 U.S. cents. Analysts say 1.20 is a key technical level for the currency.
  • Takeover Battle May Be Foretaste of Pipeline M&A to Come. If you can’t build a pipeline, you can still buy one. The battle to acquire Canada’s Inter Pipeline Ltd. could foreshadow a wave of deals as major pipeline companies in North America find it almost impossible to grow by laying new conduits. Rather than shoulder swelling costs from permitting hiccups, project delays and legal battles that are now typical for proposed pipeline projects, operators and infrastructure funds are pivoting toward M&A. Giants including Williams Cos. and Dominion Energy Inc. have killed multibillion-dollar projects over the past year or so, while Energy Transfer LP has been ensnared in a long court battel to keep its controversial Dakota Access pipeline operating. One of President Joe Biden’s first acts in office was to block the $9 billion Keystone XL conduit.

World Headlines

  • U.S. futures fluctuated with stocks on Friday as traders awaited key jobs data for clues on how much longer officials will keep stimulus in place to support the American economic recovery. The dollar strengthened. Contracts on the S&P 500 Index drifted modestly lower and Treasuries were steady ahead of Friday’s monthly U.S. payrolls data. Consensus estimates point to a gain of 674,000 after April’s disappointing number, with the release likely to spur volatility as traders scramble to reassess the case for ongoing policy accommodation.
  • The biggest threat to President Joe Biden’s vision of energizing the U.S. economy with the largest infrastructure program in decades may not be its challenging path through Congress, but a dire shortage of everything from workers to cement mills. While weeks or months of negotiations will be needed to enact legislation, Republicans and Democrats are united in their support for hundreds of billions of dollars in new spending on infrastructure in coming years. Yet the companies that will be relied on to pave the roads, build the bridges, lay the water pipes and assemble the trains aren’t yet planning to meet those needs, economists and industry insiders say.
  • Bitcoin slid after a cryptic tweet from Elon Musk apparently hinting at a potential split with the largest cryptocurrency, the latest post from the billionaire to buffet the token’s price. The coin dropped as much as 6.3% and was trading at about $36,750 as of 6:28 a.m. in New York. The decline dented this week’s stabilization in the crypto sector after a rout in May. The Bloomberg Galaxy Crypto Index retreated as much as 7.3%.
  • Euro area retail sales slumped more than consensus forecast in April, falling 3.1% after a revised 3.3% increase in March. Sales rose 24% year on year. The U.K. economy showed fresh signs of rebound last month. The construction PMI showed output growth reaching its strongest level since 2014, while the volume of job ads on Adzuna climbed to 127% of pre-pandemic levels last week. Retail footfall also rose as more Brits returned to the shops.
  • Donald Trump is back. if he ever left. He’s the scheduled keynote speaker tomorrow at the North Carolina Republican Party convention. Some GOP leaders fear his rants may distract from the party’s 2022 efforts.
  • Nonfarm payrolls probably rose by 674,000 in May, consensus shows, a sturdy bounce back from April’s lackluster 266,000. The whisper number anticipates another big beat at 800,000 after the ADP print crushed estimates yesterday. The jobless rate is seen declining to 5.9%. About 48% of small businesses had job openings in May, a record, the National Federation of Independent Business said.
  • Janet Yellen meets her G-7 counterparts for the first time in London as she faces pressure to move toward a global tax deal. Her team is downplaying expectations for progress this month, seeing this gathering as a build up to reaching an agreement at the G-20 meetings in July. But European finance ministers are pushing for a common position today.
  • Walt Disney Co. Chairman Bob Iger sold $98.7 million worth of shares in the company, part of what the entertainment giant described as an effort to diversify his portfolio. Iger, 70, disposed of 550,570 shares at an average price of $179.21 on June 1, according to a regulatory filing Thursday. The move cut the shares he owns directly by 50% to 555,865.
  • Vivendi SE is in talks to sell 10% of Universal Music Group to a blank-check firm backed by billionaire Bill Ackman while it prepares to spin off most of the world’s biggest music company. The potential transaction would value the home of Taylor Swift, Drake and Billie Eilish at 35 billion euros ($42.4 billion) including debt, Vivendi said in a statement on Friday, above the 30 billion-euro valuation ascribed to the business in 2019 when China’s Tencent Holdings Ltd. acquired a stake.
  • 63% of adults in the U.S have had at least one shot. Now the CDC’s targets are teens and young adults. L.A. will shut four large vaccination sites and California will allow to-go cocktails after it reopens June 15. HSBC and Goldman will allow all Hong Kong staff into offices starting Monday.
  • Facebook joined the club of EU big tech targets as regulators opened a probe into its classified ad service. It’ll probe whether the company violated competition rules by using data gathered from advertisers to compete against them in classified ads. It’ll also check on the Facebook Marketplace small ad service. The move adds Facebook to a list of targets including Google, Apple and Amazon.
  • Grocery-delivery companies Flink and Getir raised $240 million and $555 million respectively in new funding, jointly marking the latest infusion of investors’ cash into the booming sector. Berlin-based Flink said the money will fuel its expansion and comes alongside a strategic partnership with German supermarket operator REWE Group. It didn’t disclose a valuation; Getir said via email that its own raise valued the Turkish company at $7.56 billion. “The order growth we have seen over the past weeks has been explosive,” Flink founder Oliver Merkel said in a statement. Venture capitalists have poured billions of dollars over the past few months into startups that promise rapid delivery of groceries and convenience items. These investors want to take a portion of consumers’ large grocery budgets as the pandemic accelerated a shift toward online ordering.
  • Oil crept higher with prices trading near their highest level since 2018. Futures in New York erased earlier losses to trade above $69 a barrel. A significant draw in American crude stockpiles added positive signs to a market buoyed this week by the deferring of expectations of when a nuclear deal with Iran would be signed. A U.S. State Department spokesman said on Thursday that there should be a sixth round of negotiations to revive the nuclear deal and “there’s just about every expectation there will be subsequent rounds beyond that.”
  • Indian gold imports plummeted in May after the Covid wave wiped out demand during key festivals and weddings. Inbound purchases slumped to 11.3 tons from 70.3 tons in April, a person familiar said. June purchases may be better as states gear up to reopen, Ila Commodities said.
  • Copper and oil have seen their fortunes diverge this week and that difference may persist for a while, Bloomberg’s Markets Live blog said. Crude benefited from rising demand, falling stockpiles and restrained U.S. production. Copper faces a gradual softening of near-term consumption and concerns the Fed will get around to scaling back its asset purchases.

“In order to be successful, you have to make sure that being rejected doesn’t bother you at all.” – Bill Ackman

*All sources from Bloomberg unless otherwise specified