March 8, 2021

Daily Market Commentary

Canadian Headlines

  • Mullen Group Ltd. is pleased to announce that it has entered into a letter of intent to acquire Mississauga based APPS Transport Group Inc. and the businesses: APPS Cartage Inc. and APPS Cargo Terminals Inc.  The LOI contemplates standard due diligence and the execution of a purchase and sale agreement, both of which have been initiated.  The transaction is scheduled to close on June 1, 2021, subject to regulatory approval. APPS, a well-established transportation and logistics company founded in 1985, provides less-than-truckload along with truckload, intermodal and some warehousing services primarily from their head office in Mississauga, Ontario, with services extending into five locations throughout western Canada. Through a combination of company trucks, independent owner operators, and interline partners, APPS and its dedicated group of 300 plus employees, service the commercial supply; food & beverage; and retail & consumer sectors which supports the business-to-business along with the business-to-consumer E-Commerce space.

World Headlines

  • European stocks advanced as cyclical sectors rallied amid the rise in government bond yields. The Stoxx 600 Index was up 0.7% at 9:19 a.m. London time, with energy stocks, travel & leisure and banks among the best-performing sectors. Insurer Phoenix Group Holdings Plc and education publisher Pearson Plc advanced after their earnings. European stocks have mostly seen a positive start to the month as a rotation into cyclical stocks gathered pace, with autos, banks and oil firms leading gains, although the technology sector has been a notable laggard amid a rise in bond yields.
  • U.S. stock futures dropped as rising Treasury yields brought renewed pressure to equities with lofty valuations. Contracts on the Nasdaq 100 fell 1.5% in early trading and S&P 500 futures were lower, tracking losses in Asia. Ten-year Treasury yields reached 1.6% and the dollar strengthened against all its major peers. Tesla Inc. slid 3% in premarket trading, while Apple Inc. and Microsoft Corp also dropped. Global markets have become preoccupied by the risks associated with rising Treasury yields and fears that government aid programs could overheat economic growth. President Joe Biden’s $1.9 trillion stimulus package is widely expected to pass through the House when lawmakers take up the bill on Tuesday.
  • Brent oil erased gains as the market shrugged off an attack on the world’s largest crude terminal in Saudi Arabia. Futures in London earlier surged above $71 a barrel, the highest since January 2020, before retreating to trade little changed. The assault on a storage tank farm at Ras Tanura on Sunday was intercepted, Saudi Arabia said, and oil output appeared to be unaffected. Oil has rebounded this year amid OPEC+ supply cuts and recovering demand, with economies emerging from the coronavirus crisis. The rally quickened last week after the producer alliance made a surprise pledge to keep output steady in April, prompting a raft of investment banks to raise their price forecasts.
  • Copper rose in London amid optimism over the U.S. stimulus package and better-than-expected Chinese trade data. Gold dropped as the dollar strengthened and bond yields climbed. Base metals were on a firmer footing following a 2% slump last week, the steepest weekly drop since September. In the U.S., the House is ready to give final passage to President Joe Biden’s $1.9 trillion Covid-19 relief plan, the second-biggest economic stimulus in U.S. history. In China, exports surged in the first two months of the year, reflecting strong global demand for manufactured goods. While the U.S. package could boost economic growth — aiding industrial metals like copper — investors fear it could also drive inflation higher, forcing policymakers to tighten monetary policies. The dollar also climbed, making commodities more expensive for buyers using other currencies.
  • Elon Musk is getting into the Texas power market, with previously unrevealed construction of a gigantic battery connected to an ailing electric grid that nearly collapsed last month. The move marks Tesla Inc.’s first major foray into the epicenter of the U.S. energy economy. A Tesla subsidiary registered as Gambit Energy Storage LLC is quietly building a more than 100 megawatt energy storage project in Angleton, Texas, a town roughly 40 miles south of Houston. A battery that size could power about 20,000 homes on a hot summer day. Workers at the site kept equipment under cover and discouraged onlookers, but a Tesla logo could be seen on a worker’s hard hat and public documents helped confirm the company’s role.
  • Almost a year after the coronavirus outbreak officially became a pandemic, health officials are still facing challenges in bringing it under control, as global cases rose for a second week. Anthony Fauci said caseloads remain “very high,” even as the U.S. recorded a full week with fewer than 70,000 daily infections for the first time since mid-October. Brazil is facing more cases and deaths than ever, and Italy is considering tougher controls to counter a surge of infections tied to variants. Vietnam began vaccinations, with medical workers getting the first shots, while India is seeing a jump in inoculations after a sluggish start. Decisions by two states to remove all virus restrictions have reignited a political debate in the U.S., as a poll showed Americans appear to be wary of aggressively loosening rules.
  • Investors added money to exchange-traded funds that buy emerging market stocks and bonds last week. This was the 18th 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 $753.2 million in the week ended March 5, compared with gains of $1.98 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $13.3 billion.
  • General Electric Co. is nearing an agreement to combine its jet-leasing business with Ireland’s AerCap Holdings NV, said people familiar with the matter, in a potential deal that would join the world’s two biggest aircraft financiers in a market roiled by the coronavirus pandemic. A transaction may be announced as soon as Monday, said one of the people, who both asked not to be named discussing the matter. The deal is expected to have a value of more than $30 billion, said the Wall Street Journal, which reported the talks earlier. Shares of both companies rose in pre-market U.S. trading on Monday. Between them, GE Capital Aviation Services, or Gecas, and AerCap have almost 3,000 aircraft owned, managed or on order. A combination would speed GE Chief Executive Officer Larry Culp’s push to streamline the U.S. industrial icon after an epic corporate meltdown.
  • South Korean e-commerce giant Coupang Inc.’s initial public offering is on track to be the largest listing by a Korean company in a decade. And, like most of the major tech offerings these days, it’s happening in New York. There are three big reasons that explain why the U.S. is a better pick for the e-tailer backed by SoftBank Group Corp.’s Masayoshi Son. Perhaps most significantly, New York offers a considerable valuation premium. It also has a deeper, more liquid market, and allows uneven voting rights that would benefit Coupang’s founder, Harvard Business School drop-out Bom Kim. The U.S. has been the destination of choice for mega tech IPOs, with 2020’s biggest debuts Airbnb Inc. and DoorDash Inc. both listed in New York. Chinese e-commerce giants such as Alibaba Group Holding Ltd. and Inc. also went public there. Coupang is seeking to raise up to $3.6 billion in its IPO and could garner a value of more than $50 billion. That would make it the largest float by a Korean company since Samsung Group took its insurance unit public at home in 2010.
  • Stocks linked to Jardine Matheson Holdings Ltd., Singapore’s biggest conglomerate by market value, rallied after saying it will delist the group’s second-largest unit in a $5.5 billion buyout to simplify its structure. Jardine Matheson, whose businesses range from automobiles and hotels to supermarkets, surged 15% after it said in a filing that it will acquire shares that it doesn’t already own in Jardine Strategic Holdings Ltd. for $33 in cash per share. Shares in the latter jumped as much 37%, the most on record before closing 19% higher. Both were among the top gainers in Asia Pacific and contributed the most in the Straits Times Index’s 1.9% surge. The deal, coming in the wake of the global pandemic, marks a significant effort to untangle the structure of an almost two-centuries old company, one of Hong Kong’s last remaining British trading houses. The Jardine group, the inspiration for James Clavell’s novel Noble House, moved its Hong Kong listing to Singapore in the early 1990s, a few years before Britain returned the city to China.
  • Apollo Global Management Inc. will acquire Athene Holding Ltd. in an all-stock deal that values Athene at about $11 billion. The deal is expected to close in January 2022, the companies said Monday in a statement. Apollo was already the annuity seller’s biggest shareholder, with the firm and related entities owning a 35% stake. Apollo established Athene in 2009 and built it into one of the top fixed-annuity providers in the U.S. In 2016, the insurance firm raised $1.08 billion in an initial public offering. Athene has become an essential fixture in Apollo’s financial apparatus, and private equity rivals have since sought to build up their own insurance businesses. “This merger is all about alignment between Apollo and Athene, amongst Apollo’s stockholders and with our limited partners,” Apollo co-founder Marc Rowan said in the statement. “For Apollo and Athene, we will have total alignment to optimize our strategy and allocate capital efficiently.”
  • A sophisticated attack on Microsoft Corp.’s widely used business email software is morphing into a global cybersecurity crisis, as hackers race to infect as many victims as possible before companies can secure their computer systems. The attack, which Microsoft has said started with a Chinese government-backed hacking group, has so far claimed at least 60,000 known victims globally, according to a former senior U.S. official with knowledge of the investigation. Many of them appear to be small or medium-sized businesses caught in a wide net the attackers cast as Microsoft worked to shut down the hack. The European Banking Authority became one of the latest victims as it saidSunday that access to personal data through emails held on the Microsoft server may have been compromised. Others identified so far include banks and electricity providers, as well as senior citizen homes and an ice cream company, according to Huntress, a Ellicott City, Maryland-based firm that monitors the security of customers, in a blog post Friday.
  • Porsche AG agreed to lifts its stake in Rimac Automobili, a move that could pave the way for parent Volkswagen AG to sell its ultra-luxury Bugatti brand to the Croatian electric supercar maker. Porsche will invest 70 million euros ($84 million) to raise its stake in Rimac to 24%, from 15%, in a capital increase, the German manufacturer said in a statement Monday. “Our investments in the company Rimac has proved to be absolutely right,” Porsche Chief Financial Officer Lutz Meschke said. “The company has developed very well technologically. We expand our cooperation step by step.” Bugatti, which builds high-priced models including the $5.8 million Divo, sold only about 80 vehicles last year. Its 1,500-horsepower cars are increasingly out of line with VW’s electrification drive costing the group billions.
  • Germany will drastically speed up its coronavirus vaccination campaign and aims to get shots to as many as 10 million people a week from the end of March. But such an ambitious target, mentioned by Finance Minister Olaf Scholz late on Sunday, would require Germany to turbo-charge a rollout that’s been underwhelming so far. It’s distributed about 7.3 million doses in total since inoculations started ten weeks ago, according to Bloomberg’s vaccine tracker. Chancellor Angela Merkel has come under fire for the country’s slow campaign, which has forced the government to prolong lockdowns. The same issue is playing out across the European Union countries, pushing them to sometimes take dramatic steps. Italy last week blocked a shipment of AstraZeneca Plc’s vaccine to Australia, using a recently introduced EU regulation for the first time.
  • Cathie Wood’s exchange-traded funds slumped in the pre-market on Monday, signaling no end to the selling that has wiped 25% from her flagship investing strategy over three turbulent weeks. That’s the longest stretch of weekly losses for the Ark Innovation ETF (ticker ARKK) since the Covid-spurred meltdown last year, according to data compiled by Bloomberg. The fund dropped about 4.3% as of 5:20 a.m. in New York, with other products from Wood’s Ark Investment Management falling in lockstep.
  • Coherent Inc., the laser maker at the center of a fiber-optics bidding war, said it prefers a revised, $6.15 billion takeover offer from II-VI Inc. after the engineering company outbid rival suitor Lumentum Holdings Inc. II-VI offered $170 in cash and 1.0981 of its own common shares for each Coherent share, Coherent said in a statement Monday. The new offer boosts the cash on offer from $130 a share previously, and lowers the stock portion, after a drop in Coherent’s share price in the past two weeks. The latest bid from II-VI represents a “company superior proposal” under the original merger agreement with Lumentum, Coherent said. It said it has notified Lumentum that it will terminate their earlier merger deal unless Lumentum comes back with a new offer by March 11.
  • Panasonic Corp. is set to buy U.S. software developer Blue Yonder for 700 billion yen ($6.5 billion), the Nikkei reported, citing sources familiar with the matter. The acquisition would be Panasonic’s largest to date, surpassing a 1990 investment of roughly $6.1 billion in Universal Studios Inc., according to data compiled by Bloomberg. The Japanese company was sitting on about $13 billion of cash at the end of 2020 and slightly more in debt. Panasonic, which makes batteries for Tesla Inc., intends to twin the American firm’s AI with its own hardware, the newspaper said. Blue Yonder, founded in 1985, makes supply-chain management software and uses artificial intelligence to predict product demand. Its 3,300 worldwide customers include Unilever Plc and Walmart Inc., the paper said.
  • DuPont agreed to buy Laird Performance Materials from Advent International for $2.3 billion, which will be paid from the acquiring company’s existing cash balances according to a press release. DuPont expects the deal to generate about $60 million in pre-taxrun-rate cost synergies by the end of 2024 with the majority realized in the first 18 months post-closing
  • Investcorp Holdings BSC has raised about $1 billion for its first private equity fund focused on North American assets, according to people familiar the matter. The biggest private equity and alternative asset manager in the Middle East is set to complete a first close on the fund soon, and aims to eventually raise about $2 billion, the people said. The fund will focus on investing in areas including technology and data companies, along with supply chain and industrial services. Among the fund’s backers are a Middle East sovereign wealth fund and large asset managers from the U.S. and Europe, the people said, declining to be named because the information isn’t public.

“You never know the how much you really believe anything until its truth or falsehood becomes a matter of life or death to youC.S. Lewis

*All sources from Bloomberg unless otherwise specified