March 23, 2021
Daily Market Commentary
- Canadian equities fell Monday after a decline in industrial and cannabis companies. The S&P/TSX Composite Index dropped 0.2%, the lowest since March 10. Railway stocks Canadian Pacific Railway Ltd. and Canadian National Railway Co. tumbled after the former’s plan to buy Kansas City Southern. Gold declined amid concern that Treasury yields may rise further as investors brace for key U.S. bond auctions. Meanwhile, the Canadian dollar remained as the best-performing Group-of-10 currency this year.
- George Weston Limited intends to focus on its Retail and Real Estate businesses as it launches a process to sell Weston Foods. Announcement follows a strategic review by the Board of Directors that determined these two pillars will remain the Company’s most significant drivers of long-term value creation. Company intends to commence an orderly sale process shortly, ensuring that a smooth transition plan is in place as Weston Foods continues to support its customers and workforce.
- The U.S., U.K., and Canada joined the European Union to impose sanctions against China over alleged human rights abuses on the Uyghurs in Xinjiang, drawing an immediate reaction from Beijing. The EU kicked things off with sanctions that target four Chinese nationals and one entity. The U.S., Canada and the U.K. — chairing the Group of Seven meetings this year — largely mirrored these actions that are largely symbolic and unlikely to impact China’s economy or behavior. In the U.K., Foreign Secretary Dominic Raab said, “we’re sending the clearest message to the Chinese government that the international community will not turn a blind eye to such serious and systematic violations of human rights and we will act in concert to hold those responsible to account.”
- Toronto-Dominion Bank agreed to buy Headlands Tech Global Markets LLC, a quantitative fixed-income trading company, to help expand in the municipal and corporate bond markets. “This acquisition further strengthens our electronic bond-trading infrastructure and underscores our commitment to delivering data-driven innovation and growing our global platform,” TD Securities Chief Executive Officer Bob Dorrance said in a statement Tuesday. Financial details of the purchase weren’t disclosed. Headlands, with 15 employees and offices in Chicago and San Francisco, has proprietary software that offers fully automated market-making services, according to the statement. Toronto-Dominion said in January it was open to acquisitions that take advantage of the economic downturn. In the fiscal first quarter, the company reported wholesale-banking revenue of C$1.31 billion, up 25% from a year earlier, on higher trading-related revenue and loan, underwriting and advisory fees.
- European shares retreated, tracking Asian markets lower, as concern over the roll out of vaccines and tighter restrictions weighs on investor sentiment. The Stoxx 600 Index was down 0.4% as of 9:48 a.m. in London, with autos and travel shares the weakest sectors, while real estate and utilities outperformed. Turkish stocks headed for their worst two-day plunge in 20 years in the wake of the central bank chief’s dismissal over the weekend. Investor optimism that the coronavirus had been brought under control is being put to the test as cases increase and after Germany agreed to place the country into hard lockdown over Easter. In addition, the leading U.S. agency on infectious diseases has said AstraZeneca Plc may have given outdated data about its Covid-19 vaccine trial. The Stoxx 600 Index is still less than 3% from its pre-pandemic high.
- U.S. equity futures slipped with stocks and bonds jumped as a planned lockdown in Germany sparked concerns about the strength of the global economic recovery. The dollar strengthened, while the 10-year U.S. Treasury yield slid for a second day ahead of this week’s offerings, which include a seven-year note, a maturity that fared poorly in last month’s auction. WTI crude oil dropped below $60 a barrel on concerns about the near-term demand outlook.
- Asian stocks fell as investors sold financial companies after a drop in bond yields as well as other stocks expected to benefit from reflation and economic reopenings. Banks including Japan’s MUFG and Sumitomo Mitsui Financial were among the biggest drags on the MSCI Asia Pacific Index as the 10-year U.S. Treasury yield fell for a second day. Automakers such as Toyota Motor and Geely Automobile also weighed on the measure. Benchmark indexes in Hong Kong and China led losses in the region as stricter regulations on the e-cigarette industry rippled through the markets. Traders also pointed to profit-taking on the carbon-neutral theme.
- Oil fell in London on concerns about the demand outlook and as the futures curve flipped into a structure indicating near-term weakness. Brent futures slumped 3.4%. The nearest contract traded at a discount to the next one for the first time since January — a pattern known as contango that indicates oversupply — after a precipitous selloff in recent days. The dollar also climbed, making commodities priced in the currency more expensive. An advance in U.S. Treasuries also showed haven buying in broader markets as risk appetite wanes. There are concerns over the demand outlook. Covid-19 cases are surging in India and threatening the economy’s recovery from a rare recession, while Germany will extend its curbs and impose an Easter lockdown. In the U.S., New York City’s mayor urged a pause on reopening.
- Gold was steady as investors await the latest comments by Federal Reserve Chairman Jerome Powell and brace for key U.S. bond auctions, which could see Treasury yields rise and further weigh on the precious metal. The economy seems to be gathering steam, though it is still far from fully recovering from the damage wrought by the pandemic, Powell said in prepared testimony to be delivered Tuesday to the House Financial Services Committee. He reiterated that the Fed will remain dovish as long as it takes. Powell, together with Treasury Secretary Janet Yellen, will kick off two days of congressional hearings assessing the policy response to the Covid-19 crisis. Traders will also focus on this week’s bond auctions, which include a seven-year note, a maturity that fared poorly in last month’s sales and sent benchmark yields sharply higher. The 10-year U.S. Treasury yield has eased from its highest in about 14 months.
- Germany will impose a hard lockdown over the Easter period to try to reverse a wave of Covid-19 infections. The European Union and Britain edged toward breaking their deadlock over AstraZeneca Plc’s shots. Meanwhile, the leading U.S. agency on infectious diseases said Astra may have released outdated information about its vaccine trial, dealing another potential setback to the shot. Progress in fighting the pandemic is showing signs of stalling. While fatalities in the U.S. and U.K. ease, places like India and eastern Europe are seeing a resurgence. Hungary is short of doctors and nurses, forcing hospitals to put out a call for untrained volunteers. Citigroup Inc. is starting “Zoom-Free Fridays” to help cut down on workplace malaise brought on by the pandemic.
- Amazon.com Inc. could raise as much as 107 million pounds ($148 million) by selling some of its stake in Deliveroo Holdings Plc in the food-delivery startup’s London initial public offering. Amazon will own 11.5% of Deliveroo following its listing, down from the 15.8% it holds now, according to the prospectus for the sale. That implies the retailer could sell as many as 23.3 million shares, which at 4.60 pounds each — the top end of the range at which Deliveroo is marketing the stock — would be worth 107 million pounds, according to Bloomberg calculations. London-based Deliveroo started taking investor orders on Monday in the sale of as much as 1.77 billion pounds of stock. The company is looking to raise 1 billion pounds from the IPO, with the rest of the proceeds going to Amazon and other early investors.
- Baidu Inc.’s stock offering in Hong Kong Tuesday marks an unlikely resurgence for founder Robin Li, who has fought his way back to relevance in China’s technology industry after squandering a near-monopoly in search. The internet giant raised $3.1 billion in the biggest homecoming by a U.S.-traded Chinese firm in the city since JD.com Inc. last June. Li’s firm has more than tripled its valuation from the trough last March, with about half the gains coming in the past three months as Baidu’s bets in AI finally start to pay off in areas like cloud and electric vehicles. It’s a rare stretch during which the company has outperformed larger rivals Alibaba Group Holding Ltd. and Tencent Holdings Ltd., whose shares have struggled in the wake of China’s campaign to crack down on its freewheeling tech industry.
- Video streaming platform Bilibili Inc. has raised HK$20.2 billion ($2.6 billion) from a second listing in Hong Kong, the third U.S.-listed Chinese company to sell shares in the financial hub this year. Bilibili priced the Hong Kong offering at HK$808 per share, according to a filing with the Hong Kong stock exchange on Tuesday. The price represents a discount of 2.7% to Bilibili’s Monday closing price of $106.88 on the Nasdaq. The firm sold 25 million shares in the Hong Kong offering. A rapidly-expanding group of overseas-traded Chinese firms is selling shares in Hong Kong, attracted by hot demand for new listings in the Asian financial center. The wave of equity offerings comes as tensions rise between Beijing and the U.S., where fastest-growing technology firms from around the world have long sought to raise capital.
- Cinema stocks in the U.K. and U.S. drop after Cineworld announced a multi-year agreement with Warner Bros Pictures Group which laid out the period of time that theaters have exclusivity to show movies. The pact “cements an industry-wide shortening” of the theatrical window, Morgan Stanley said. Cineworld drops as much as 3.3% in London, paring an earlier gain of 6.3%, while AMC drops 7.1% and Imax falls 7.3% in U.S. premarket trading; Cinemark is indicated lower.
- GV Gold PJSC, a Russian gold miner backed by BlackRock Inc., set a price range for its initial public offering in Moscow that values the company at as much as $1.5 billion. Investors should make bids in the range of 1,650 rubles to 2,050 rubles per share, the miner said in a statement of Tuesday. That would translate to the company being worth as much as 112.7 billion rubles ($1.5 billion), based on the higher end of the range, it said. The pricing is expected around March 30 with trading on the Moscow Exchange starting the same day.
- President Biden’s $1.9 trillion economic stimulus package will send billions of dollars to America’s jobless. It’s also a potential bonanza for scammers. Throughout the Covid crisis, unemployment programs have served as a lifeline, channeling more than $650 billion over the past year to millions of struggling households. But the state-run agencies that distribute the funds have been overwhelmed, making their harried staff as well as their glitchy computer systems easy prey for criminals. At least $63 billion in improper payments have been doled out since last year, much of it fraud, according to February estimates from a watchdog for the U.S. Department of Labor. Now states are bracing for another surge in fraudulent claims after Congress and the White House extended some unemployment benefits into September.
- Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell will enter a heatedly partisan arena on Tuesday to kick off two days of congressional hearings assessing the economic policy response to the Covid-19 crisis. Less than two weeks after President Joe Biden signed a $1.9 trillion pandemic relief bill that failed to win a single Republican vote in Congress, the hearings will feature lawmakers positioning over the impact of the package and plans for the next one. Biden’s advisers are preparing a long-term program that could be as much as $3 trillion, though no decisions have been made, people familiar with the talks said Monday.
- GameStop Corp. gives its first quarterly update later today since it became the poster child for meme stocks, but those results may not matter as much as its less-than-certain effort to recast the brick-and-mortar chain into an online merchant. Individual investors helped drive shares of the video-game retailer up more than 930% this year, and they’re likely to see GameStop report its first profitable quarter in a year after the market closes. Wall Street analysts expect $2.2 billion in revenue for the fourth quarter, data compiled by Bloomberg show. GameStop said in a filing Tuesday that Chief Customer Officer Frank Hamlin will resign from the company after a transition period ending March 31. Its shares were little changed in premarket trading.
- French prosecutors and lawyers for the government said UBS Group AG should be ordered to pay 3 billion euros ($3.6 billion) — 33% less than the original judgment — for allegedly helping French clients hide money from the nation’s tax authorities. Prosecutor Serge Roques asked a Paris court of appeals to impose a 2 billion-euro fine on UBS, acknowledging the limits set by recent guidance from France’s top court. The French state, which is a plaintiff in the case, is also seeking 1 billion euros in damages from the bank in addition to any court-imposed penalties. The request came as part of the company’s appeal of a February 2019 ruling requiring it to pay 4.5 billion-euro in fines and damages, a European record. It was emblematic of a French crackdown on tax evasion that has focused on big banks from HSBC Holdings Plc to Credit Suisse Group AG, who investigators believed encouraged such behavior by its citizens.
- Less-crowded trading floors, facial recognition systems and split work areas could all become routine for bankers in Singapore as the Southeast Asian financial hub readies for office life in a post-Covid world. Financial institutions in the city should use more no-touch technology, allow more space for each employee and adopt split teams on trading floors once staff return after the pandemic, according to recommendations from a study commissioned by the city’s banking association and the Monetary Authority of Singapore that was published on Tuesday. Lenders are also being encouraged to use hot-desking, motion detectors, temperature and face-mask detection screening and improved ventilation to avoid potential contamination, according to the report. Staff should be allowed to work from satellite offices or branches in addition to the main headquarters, it said.
- President Joe Biden is betting that a multitrillion-dollar economic plan centered around infrastructure spending will do more than bolster an American economy hammered by the coronavirus pandemic: It will ensure his country’s competitiveness against China for decades to come. “If we don’t get moving, they’re going to eat our lunch,” Biden told lawmakers in a pitch for his proposal shortly after his call last month with Chinese President Xi Jinping. “We just have to step up.” Biden’s advisers will present him this week with a detailed proposal for a plan whose cost could touch $3 trillion, according to three people familiar with the deliberations. Infrastructure and climate change have long been described as key efforts in the pending program, and the new details show the administration is eyeing some $400 billion in so-called green spending, according to one of the people.
- Government and corporate bonds around the world have tumbled in their worst start to a year this century, as markets spooked by the prospect of resurgent inflation turn increasingly volatile. The notes have lost over 3.7% so far in 2021, according a Bloomberg Barclays index of investment-grade securities across currencies going back to 1999. That’s worse than for similar periods in previous years, even after dip-buying in recent days.
- Swelling numbers of Mexicans are heading north across the border, propelled by a deep economic crash and drawn by promises of a stimulus-fueled resurgence in the U.S. Since the middle of last year, the number of monthly apprehensions at the southern border of working-age Mexicans traveling without children has more than doubled to around 40,000, from fewer than 16,000 during the prior two years, in part because of repeat attempts, according to the U.S. Customs and Border Protection. If the rate keeps up, 2021 could see the most Mexican apprehensions in a decade. The increase has been largely ignored as the Biden administration struggles with a wave of unaccompanied children and families from Central America seeking asylum after the end of the Trump administration. The influx increases the challenge for President Joe Biden, who is searching for a solution to a decades-old political puzzle, and accentuates the economic crisis faced by Mexican President Andres Manuel Lopez Obrador, whose government has done little to cushion the blow of Covid-19.
- With virus cases seeming to stabilize in New York City and vaccinations becoming more widespread, city officials intend to send a message that New York is close to returning to normal: On May 3, the city will compel its municipal office employees to begin to report to work in person, according to planning documents shared with The New York Times. Workers will return in phases over several weeks. Mayor Bill de Blasio’s decision to bring the nation’s largest municipal work force back to the office signals a remarkable turnabout in the fortunes of a city that was the national epicenter of the pandemic, coming to symbolize the perils of living in densely packed global capitals.
- Microsoft Corp. is in talks to acquire Discord Inc., a video-game chat community, for more than $10 billion, according to people familiar with the matter. Discord has been talking to potential buyers and software giant Microsoft is in the running, but no deal is imminent, said the people, who asked not to be identified because the discussions are private. Discord is more likely to go public than sell itself, one person said. Representatives for Microsoft and Discord declined to comment. VentureBeat reported earlier on Monday that Discord was engaged in sales talks. San Francisco-based Discord is best known for its free service that lets gamers communicate by video, voice and text, and people stuck at home during the pandemic have increasingly used its technology for study groups, dance classes, book clubs and other virtual gatherings. It has more than 100 million monthly active users and has been elaborating its communication tools to turn it into a “place to talk” rather than merely a gamer-centric chat platform.
“When an online service is free, you’re not the customer. You’re the product.“ – Tim Wu, one of Biden’s tops Antitrust advisors
*All sources from Bloomberg unless otherwise specified