November 1, 2021
Daily Market Commentary
- Australian electricity and gas distribution company AusNet Services has agreed to a binding takeover offer from a consortium including Brookfield Asset Management in a deal that values the business at A$10.2 billion ($7.7 billion). AusNet said its board unanimously supports the A$2.65 per share offer from the group, which also includes pension funds Sunsuper Pty Ltd, Alberta Investment Management Corp., the Investment Management Corp. of Ontario and Healthcare of Ontario Pension Plan. Including debt, the deal is worth A$17.8 billion, Ausnet said in a statement Monday.
- The boardroom fight at Rogers Communications Inc. takes a decisive turn on Monday, when the Supreme Court of British Columbia starts hearing legal arguments in a dispute that has fractured the Rogers family and left the company in limbo. If the B.C. court rules in Edward Rogers’s favor, it means he’ll get the board changes he wants quickly — and Natale could be out the door soon after. If the court forces a shareholder meeting, the uncertainty will drag on for the company and its 24,000 employees.
- Royal Bank of Canada sold C$750 million ($606 million) of perpetual preferred securities, the latest of the nation’s banks to offer instruments that make their balance sheets stronger as they prepare to pay higher dividends to shareholders. Canada’s bank regulators early last year barred the nation’s major lenders from buying back equity or boosting dividends to stockholders, to ensure the institutions stayed strong during the pandemic. The firms and investors expect those restrictions to be lifted soon as the government reduces its Covid-related extraordinary support. But even then banks will still need regulators’ approval to boost their dividends.
- U.S. index futures advanced amid earnings surprises and optimism the recovery in the world’s largest economy is on track. December contracts on the S&P 500 Index climbed 0.4% after the underlying gauge posted the biggest monthly gain since last November. The dollar and Treasury yields advanced as investors awaited this week’s Federal Reserve meeting for clues on stimulus tapering.
- European stocks climbed to a record high, extending gains in November after posting their biggest monthly gain since March, as corporate earnings continue to support risk appetite. The Stoxx Europe 600 rose 0.7% by 9:20 a.m. in London, with banking and automakers leading the gains. In France, the CAC 40 Index approached the highest level on record, with almost all stocks making gains on the gauge. The S&P 500 had closed at a record high on Friday.
- Asian stocks were poised to snap a three-day decline thanks to a rally in Japanese equities, which got a boost from an election victory for the country’s ruling party and Prime Minister Fumio Kishida. The MSCI Asia Pacific Index advanced as much as 0.6%, while Japan’s benchmark Topix and the blue-chip Nikkei 225 Stock Average each added more than 2%. Sony Group, Toyota Motor and Tokyo Electron were among the single-largest contributors to the regional measure’s rise. By sector, industrials and information-technology companies provided the biggest boosts.
- Gold held a decline ahead of key central bank meetings this week that investors expect to shed light on monetary policy and inflation. Bullion dropped the most in two weeks on Friday, paring a monthly gain, and short-term bond yields from Canada to Australia have jumped on bets that monetary authorities will have to hike interest rates to curb inflation.
- Iron ore futures declined for a fourth day in Singapore as the latest economic figures from China signaled a slowdown in the steel and broader manufacturing industries. The steelmaking material has just capped a record string of monthly losses on steel production curbs and an energy crisis that has sparked chaos in coal prices. Steel production probably fell further last month after volumes in September were at the lowest since 2017, the China Iron & Steel Association said in a survey.
- Oil fell as pressure mounted on OPEC+ to boost production at its Thursday meeting. A daily increase of 400,000 barrels will be enough to meet demand, Iraq said. Kuwait supports that level. The U.S. is talking to other nations about how to press OPEC+ to raise output to address supply issues, a senior U.S. official said, but Biden was reluctant to describe his plans if they don’t.
- China will release state reserves of diesel and gasoline to ease supply shortages as a part of an annual rotation. The top two diesel producers also raised supply in coordination with the government, CCTV reported. The country may be forced to start buying crude at elevated prices to replenish its thinning stockpiles, Energy Aspects said.
- The G-20 deal fell well short of what some were pushing for, giving leaders little to take to the COP26 summit this week. The final communique from the two-day summit in Rome mirrored prior pledges made in the 2015 Paris climate accord. Leaders said they remain committed to holding the global average temperature increase well below 2 degrees Celsius.
- China’s economy weakened in October as power shortages and surging commodity prices weighed on manufacturing, while Covid controls hurt holiday spending. The official factory PMI fell more than expected to 49.2 for a second month of contraction. The non-manufacturing gauge also missed. Input and output prices for manufacturers rose, suggesting producers passed on higher costs to customers.
- The U.S. and EU clinched a trade truce on steel and aluminum that will allow them to remove tariffs on more than $10 billion of goods. The full suspension will last two years, during which time they’ll work toward a global accord to permanently end the tariff regime. U.S. negotiations over similar duties with Japan and the U.K. are still in progress.
- The Biden economic plan appears on track even as Democrats squabble over lingering differences. The president expressed confidence Senate holdouts will get on board. House leaders are pushing to get the package finalized, with votes on that and the infrastructure plan this week. A panel meeting today preparing for a House floor vote tomorrow was postponed, but progress was made, an aide said.
- Biden issued an executive order over the weekend to speed up the response to shortfalls of supplies, equipment and raw materials housed in the National Defense Stockpile. The U.S. also is boosting funding to Mexico and Central America to alleviate bottlenecks.
- Treasury Secretary Janet Yellen dismissed recent moves in the bond market that have signaled concern about monetary policy makers squelching economic growth, and expressed confidence in the continuing recovery from the Covid-19 pandemic. Asked in an interview with Bloomberg News Sunday if she was worried by sharp movements in Treasury yields, she responded, “No, not me. I think what we’re going to see is a good, solid recovery. The unemployment rate has gone down considerably, and this is nothing like the recovery from the 2008 financial crisis.”
- The Texas abortion clash goes before the Supreme Court today. Providers and the DOJ are trying to cut through a procedural haze to block the law while Texas and its allies say legal doctrines prevent federal judges from doing so. The justices are considering the cases on an ultra-expedited basis while letting the abortion ban stay in effect in the meantime.
- Iran signaled it will restart nuclear negotiations with Europe toward the end of November, Antony Blinken said. Biden and the leaders of Germany, France, and the U.K. said they still see a chance to revive a deal, but Tehran must change course before sanctions relief. Iran retained Reza Najafi on its talks team; he helped negotiate the original deal.
- Operations at the Antamina copper and zinc mine in the Peruvian Andes, which is 34% owned by BHP, have been suspended because of a lack of public safety in the area.
- India’s cotton output should rise to 36 million bales for 2021-22, while exports are expected to decline, the Cotton Association of India said. Imports are seen unchanged.
- LianBio raised $325 million in a U.S. IPO. The China-focused biotech firm would have a market value of $1.68 billion based on the outstanding shares listed in its filings with the SEC.
- Coca-Cola will buy full control of BodyArmor for $5.6 billion in a deal that values the company at about $8 billion, the WSJ reported. Coke already owns 30% of the sports drink brand.
- BofA will apply to set up a securities firm in China, playing catchup to JPMorgan and Goldman in an expansion into the nation’s financial market. BofA aims to seek regulatory approval early next year, people familiar said.
“Life is like riding a bicycle. To keep your balance, you must keep moving.” — Albert Einstein
*All sources from Bloomberg unless otherwise specified