March 15, 2021
Daily Market Commentary
- Rogers Communications Inc. agreed to buy rival Shaw Communications Inc. in a C$20 billion ($16 billion) deal that unites Canada’s two largest cable providers. The C$40.50-per-share cash offer has the support of Shaw’s board, the companies said Monday. The proposal represents a 69% premium to Shaw’s most recent closing price. The transaction represents the merger of companies controlled by two of Canada’s most powerful business families, who have co-operated as well as competed over the years in the battle against telecommunications rivals Telus Corp. and BCE Inc. Rogers and Shaw have carved up, and sometimes traded, rival cable territories — with Shaw focused on Canada’s western provinces and Rogers dominating Ontario. Rogers said the deal will add to earnings and cash flow per share in the first year after closing and that cost savings from the deal will top C$1 billion annually within two years.
- Canaccord Genuity Group Inc. said RF Capital Group Inc.rejected a proposed takeover and has declined to engage in talks about a deal since September. The C$2.30-a-share offer was made in a letter sent last Tuesday and was dismissed by RF’s board the following day, Canaccord said in a statementMonday. Representatives of the Richardson family, which owns about 44% of RF Capital’s outstanding shares, rejected an invitation to discuss the proposal, Canaccord said. The offer represents a 31% premium to RF’s most recent closing price, and would have an equity value of about C$366.6 million ($294.3 million), based on RF’s 159.4 million shares outstanding. “The opportunity to bring together two of Canada’s leading independent wealth-management businesses presents compelling synergies and economic benefits not only for our own business and shareholders, but also for RF Capital shareholders,” Canaccord Chief Executive Officer Dan Daviausaid in the statement.
- Uranium exploration/development company Denison Mines jumped 20% in U.S. premarket trading after the company said it will be added to Canada’s benchmark index S&P/TSX Composite index on March 22.
- European stocks rallied on Monday, led by gains in travel and leisure stocks as concerns over higher bond yields receded and investors focused on the future reopening of economies from lockdowns. The Stoxx 600 Index was up 0.4% by 10:34 a.m. London time. The Stoxx Travel & Leisure Index rose as much as 3.2% to a record intraday high, propelled by gains in gambling companies, as shares in Flutter Entertainment Plc soared after the gaming company said it’s mulling options for its U.S. sports betting business. Among individual movers, Hennes & Mauritz AB climbed as much as 3.1% after the retailer said sales began to rebound this month amid an easing of lockdown restrictions, while Danone SA gained up to 5.8% after the company’s board of directors ousted Chairman and Chief Executive Officer Emmanuel Faber amid investor pressure.
- U.S. futures and European stocks climbed, with investors focused on the strength of the global economic recovery and progress in delivering vaccines. American Airlines Group Inc. and Carnival Corp. climbed in early trading. U.S. Steel Corp. advanced after saying it expects earnings to improve on the back of strong market conditions. Investors remain preoccupied with rising long-term borrowing costs and their implications for reflation trades and the rotation in the stock market from growth to value shares. The benchmark Treasury yield hovered around 1.61% on Monday.
- Asian stocks declined as investors sold technology-related names and bought cyclicals. Economically sensitive firms including Hong Kong insurer AIA Group and auto giant Toyota Motor were among the biggest boosts to the MSCI Asia Pacific Index. Tencent dragged on the measure, falling for a second day amid concernsover Chinese government oversight. Hong Kong stocks advanced, driven by AIA as well as Xiaomi, which jumped after a U.S. court blocked the Defense Department from restricting American investment in the Chinese smartphone giant. China’s stocks declined as persistent liquidity concerns overshadowed data showing the strength of the nation’s economic recovery.
- Oil held above $69 a barrel in London after a raft of economic data from China added to signs of recovery from the coronavirus pandemic. Brent futures traded up 0.4% after earlier climbing 1.2%. Figures from China for the first two months of the year showed a surge in industrial output, underscoring the strength of its V-shaped rebound and reinforcing expectations for increased energy demand. Citigroup Inc. raised its full-year Brent forecast. China processed more than 14 million barrels a day in January and February, and refiners have kept consumption above that level every month since June. There are also signs that demand is picking up in other countries. The number of U.S. air passengers hit a 12-month high on Friday, while road use is creeping up in parts of Europe.
- Gold gained as investors weighed concerns over inflation ahead of the Federal Reserve’s meeting this week for guidance on policy responses. Treasury Secretary Janet Yellen said U.S. inflation risks remain subdued as the Biden administration pumps $1.9 trillion in pandemic relief into the economy and a return to full employment comes into view. Some prices that fell last year when the coronavirus spread across the U.S. will recover, “but that’s a temporary movement,” she said on ABC’s “This Week” on Sunday. A strong recovery from the pandemic is likely to prompt Fed Chair Jerome Powell and his colleagues to lift interest rates in 2023, but that isn’t going to show up in their forecasts this week, a survey showed. Economists surveyed by Bloomberg News expect the U.S. central bank’s own projection, released at the same time as its policy statement on Wednesday, will show the Fed keeping rates either at or near zero throughout that year.
- AstraZeneca Plc’s vaccine, once expected to be a mainstay of protection for much of the world, remains shrouded in controversy as more countries limit its use. The company said a review shows no evidence of an increased risk of pulmonary embolism or blood clotting. New coronavirus cases rose worldwide for a third straight week, even as the death toll from Covid-19 continues a steady drop. The U.S. is reporting fewer infections, but countries from India to Italy are seeing a resurgence, and hot spots are emerging in places like Papua New Guinea that had seemingly escaped the pandemic last year. Austria’s health minister said he’s observing “the start of a third wave” in the country. Hong Kong expanded its vaccination campaign to young adults aged 30 years old and above after the vast majority of people in its priority groups shied away from taking a shot.
- President Joe Biden is planning the first major federal tax hike since 1993 to help pay for the long-term economic program designed as a follow-up to his pandemic-relief bill, according to people familiar with the matter. Unlike the $1.9 trillion Covid-19 stimulus act, the next initiative, which is expected to be even bigger, won’t rely just on government debt as a funding source. While it’s been increasingly clear that tax hikes will be a component — Treasury Secretary Janet Yellen has said at least part of the next bill will have to be paid for, and pointed to higher rates — key advisers are now making preparations for a package of measures that could include an increase in both the corporate tax rate and the individual rate for high earners. With each tax break and credit having its own lobbying constituency to back it, tinkering with rates is fraught with political risk. That helps explain why the tax hikes in Bill Clinton’s signature 1993 overhaul stand out from the modest modifications done since.
- Bitcoin dropped by as much as 9.2% on Monday as traders eased up on stimulus-fueled bets that had powered the digital token to a fresh record over the weekend. The largest cryptocurrency was trading at $56,325 as of 10:56 a.m. in London, after topping out at $61,742 on Saturday. Bitcoin reached its latest all-time high on optimism that some of the pandemic relief payments in the U.S. will end up chasing the digital token’s towering rally. “This looks like a normal consolidation after a big rally,” said Nick Jones, chief executive officer at crypto wallet and exchange Zumo. “We believe that gains seen by Bitcoin and many other cryptocurrencies this year will be sustained although as always with crypto, it won’t be a steady curve.”
- Food-delivery company Deliveroo is seeking to raise 1 billion pounds ($1.4 billion) in a London stock market listing, buoyed by a rise in demand for its services during lockdowns. Besides the 1 billion pounds of new stock, some existing investors plan to sell shares, Deliveroo said in a statement Monday, without providing details. Deliveroo, whose backers include Amazon.com Inc., was valued at more than $7 billion in a January funding round. Deliveroo will list with a dual-class share structure that will give founder and Chief Executive Officer Will Shu outsized voting rights for three years. As such, the stock is confined to the London Stock Exchange’s standard segment and can’t be included in benchmark indexes such as the FTSE 100, despite its expected size.
- Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 19th straight week of inflows. Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $2.11 billion in the week ended March 12, compared with gains of $755.2 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $15.4 billion.
- The U.S. policy of stopping Iran from exporting oil suffered a setback after a United Arab Emirates sheikh laid claim to a cargo that Washington seized and alleged is from the Islamic Republic. A company controlled by the Emirate of Fujairah’s ruler told a U.S. court that the roughly 2 million barrels of crude was originally from Iraq. Fujairah International Oil & Gas Corp., wholly owned by Sheikh Hamad bin Mohammed Al Sharqi, said it’s an intermediary seller of the oil, according to a claim filed in a federal court in the District of Columbia.
- The Bank of Russia is considering moving faster than previously signaled to tighten monetary policy and may bring its key interest rate up by 125 basis points or more before the end of the year, according to a person with knowledge of the discussions. A surge in inflation and concerns about government plans to increase spending mean the central bank may raise the rate in several steps to 5.5% or possibly even 6% — though that’s currently seen as less likely — by the end of the year, the person said, speaking on condition of anonymity to discuss deliberations that aren’t public. The rate now stands at a record low of 4.25%. Such a fast move to tighten monetary policy would represent a dramatic shift for the central bank, which until recently had said its posture would remain accommodative into 2022 in order to sustain the economic recovery. Economists expect no more than 50 basis points of hikes this year, according to Bloomberg surveys.
- The European Union is preparing to start legal action against the U.K. in a major escalation of tensions between the two sides less than three months after Brexit was formally completed. It follows Britain’s unilateral decision to delay implementing a key part of the Brexit deal relating to Northern Ireland. The move could ultimately lead to financial penalties or trade tariffs being imposed against the U.K. The European Commission is due to set out the exact nature of its action later on Monday, according to two people with knowledge of the talks who spoke on condition of anonymity.
- Tencent Holdings Ltd. shares fell a second day on concern regulators are now turning their sights to Pony Ma’s business empire, fueling a $62 billion wipe-out that one brokerage says obliterated most of the value of its online finance business. The stock fell more than 4% in Hong Kong on Monday, following a 4.4.% drop on Friday. China’s top financial regulators see Tencent as the next target for increased supervision after the clamp down on Jack Ma’s Ant Group Co., people with knowledge of their thinking have said. Like Ant, Tencent will probably be required to establish a financial holding company to include its banking, insurance and payments services, according to one of the people.
- Blackstone Group Inc. and Starwood Capital Group have agreed to acquire hotel owner and operator Extended Stay America Inc. for $6 billion, a bet that a rare bright spot for the lodging industry during Covid-19 can shine brighter as the U.S. emerges from the pandemic. The companies said details of the deal, which real-estate executives say is the largest sale in the hotel sector during the Covid-19 period, will be released Monday. Extended Stay is a midprice hotel chain that focuses on lodging for guests interested in staying for weeks or longer, offering kitchen facilities and more space than a typical hotel room. During the pandemic, its rooms and suites attracted essential workers, healthcare professionals and others who needed to travel.
- Republican members of Congress are trooping to the U.S.-Mexico border to put a spotlight on a surge of migrants at the frontier that they say is the result of President Joe Biden’s shift from the hardline immigration policies of his predecessor. Less than two months into Biden’s term, both parties are already framing their messages on immigration — a perennial political flashpoint — for the 2022 election to decide control of the House and Senate. “On the border, we see that Biden’s policies created a border crisis,” House GOP leader Kevin McCarthy said last week as he prepared to lead a dozen other Republicans on a trip Monday to a detention center in El Paso. “President Biden announced that it was his priority to offer citizenship for 11 million undocumented immigrants. What did he think would happen?”
- Roche Holding AG agreed to buy GenMark Diagnostics Inc. for about $1.8 billion to gain a provider of fast tests for infectious diseases, including Covid-19. The Swiss drugmaker will pay $24.05 a share in cash, it said in a statement Monday. That’s 30% more than Friday’s closing price. The boards of both companies approved the transaction. GenMark’s tests can detect multiple pathogens from a single patient sample. The pandemic has fueled demand for tests that can swiftly diagnose Covid-19 and other diseases, kindling a wave of deal-making in the diagnostics field. The transaction is Roche’s largest since the takeover of Spark Therapeutics Inc. in 2019.
- Verizon Communications Inc. is following up on the year’s largest bond issue by borrowing in Europe and Australia to fund purchases of 5G airwaves. The U.S. telecommunications company is offering three benchmark-size tranches of euro notes maturing in eight, 11 and 14.5 years, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. It’s also considering Australian dollar Kangaroo bonds. On the heels of a $25 billion bond sale in the U.S. this month, New York-based Verizon is looking to tap international bond investors to help finance its spectrum. It plans to deploy the network “as quickly as possible,” according to an investor who received a marketing presentation Monday. Spending on spectrum will reach about $45.5 billion this month, with a total outlay of almost $53 billion planned.
- Former President Donald Trump is vowing to take revenge on the Republicans who voted for his impeachment by backing candidates willing to take them on in a primary. But the new congressional map based on the 2020 Census may do some of the work for him. Six of the 10 House Republicans who voted to impeach Trump are from states expected to lose congressional seats when legislatures redraw their districts based on state-level population data from the Census Bureau coming in April. And at least three live so close to their district boundary that it’s possible they’ll be moved to another district, potentially forcing them to run against another incumbent. The game of congressional musical chairs could complicate an already extraordinary mid-term election in 2022 that will test Trump’s post-presidency power to shape the Republican Party, and President Joe Biden’s ability to govern with the razor-thin congressional majority he has now.
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*All sources from Bloomberg unless otherwise specified