November 10th, 2020

Daily Market Commentary

Canadian Headlines

1. Canadian stocks jumped on Monday with global equity markets after Pfizer Inc. said its Covid-19 vaccine prevented more than 90% of infections in a large-scale study. The S&P/TSX Composite Index climbed 1.2% in Toronto, paring some an early gain of as much as much as 2.7%. The index closed Monday session at its highest since Oct. 15. The risk-on rally was fueled by traders piling into cyclical stocks, including energy, which as a group climbed almost 10% today. Suncor Energy Inc. and Canadian Natural Resources Ltd., the largest Canadian oil producers, rose more than 20% on Monday.
2. Premium Brands Holding Corp. and a coalition of Mi’kmaq First Nations agreed to buy Clearwater Seafoods Inc. for C$537 million ($413 million) in a deal touted as the single largest investment in the seafood industry by an Indigenous group in Canada. Premium Brands partnered with a group led by the Membertou First Nationto acquire Atlantic Canada’s wild seafood company for C$8.25 a share, a 14% premium to Monday’s price. The transaction is valued at about C$1 billion including debt. The acquirers will each hold a 50% stake in Clearwater, which will continue to operate as a distinct entity. “Clearwater on its own is a world-class seafood company with a great management team, best-in-class products and a globally respected brand,” George Paleologou, chief executive officer of Richmond, British Columbia-based Premium Brands, said in a statement. “In partnership with us and the Mi’kmaq First Nations communities, it will become an even stronger business.”
3. Tilray slumps 9.6% in premarket trading, reversing its three-day winning streak, after reporting third-quarter revenue and Ebitda that missed the average analyst estimate. Pot stocks have surged for three days after strong earnings results from Aurora Cannabis and Canopy Growth on Monday, optimism that a Joe Biden presidency will be favorable to the industry and a Covid vaccine candidatereleasing promising results. The sector is now seeing a stock reversal, with Sundial Growers dropping 9%, while Akerna Corp. slipped 13%. The ETFMG Alternative Harvest exchange-traded fund, or MJ, sliding about 3.9%.

World Headlines

1. Europe’s stock traders are looking ahead to life after Covid-19, upending the pandemic winners and losers in the latest leg of the rally. Cruise operator Carnival Plc, cinema chain owner Cineworld Group Plc, British Airways parent IAG SA and mall owner Klepierre SA all climbed for a second day on Tuesday, while lockdown beneficiaries such as Delivery Hero SE, online grocer Ocado Group Plc and tech stocks led losses in the Stoxx Europe 600 Index. Equities have rebounded strongly from an October slump, with the Stoxx 600 poised for its best monthly gain since April 2009. Value sectors like banks and energy shares are outperforming after Joe Biden’s U.S. presidential win dispelled political uncertainty, adding to positive news about a Covid-19 vaccine by Pfizer Inc. and BioNTech SE.
2. Global equities are losing momentum after a six-day rally that sent stocks to all-time highs. Across markets, investors dumped expensive technology shares and snapped up small-caps and cyclicals that are primed to benefit from an economic recovery from the pandemic. Futures on the Nasdaq 100 slumped 1.5%, while contracts on the Russell 2000 rose almost 2%. Boeing Co. jumped 3.5% in U.S. pre-market trading. After a searing rally that sent global equities to an all-time high, it’s no wonder that investors are taking a breather to reassess valuations and the economic outlook ahead. While Pfizer Inc.’s vaccine progress and the end of U.S. elections have ushered in a wave of optimism, there are still hard questions about production and transportation of the shot and the fate of another U.S. economic stimulus package.
3. Japanese shares advanced for a sixth day, even as the rally lost some steam in afternoon trading Tuesday and telecommunications and technology stocks fell. Railways, banks and automakers were the biggest boosts to the Topix after news of progress on a Covid-19 vaccine. The Nikkei 225 Stock Average broke above the 25,000 mark in the morning session before pulling back. The blue-chip gauge is still trading near its highest level since 1991. Trading value on the first section of the Toyo Stock Exchange topped 4 trillion yen ($39 billion), the highest since May 29.
4. Oil extended gains, following Monday’s rally on optimism that a potential Covid-19 vaccine could boost a recovery in transport demand. Crude futures in New York approached $41 a barrel, after advancing more than 10% at one point on Monday. It comes after early findings showed that a vaccine developed by Pfizer Inc. and BioNTech SE protects most people from the virus. While headline prices are gaining, there have also been sharp moves in the structure of the curve. Brent futures for six months ahead were at their strongest versus 12 months out since March, a sign that traders are growing more positive on supply and demand balances for the second half of the year. In another sign of strength, The Middle Eastern Dubai benchmark was trading in a bullish backwardation structure.
5. Gold recovered from the biggest slump in three months as markets sobered up to the potential hurdles for Pfizer Inc.’s new coronavirus vaccine. Copper fluctuated below a two-year high. A study showing a vaccine by Pfizer Inc. and BioNTech SE protects most people from Covid-19 sent equities soaring and havens crashing on Monday on bets it could be a game-changer in the fight against the pandemic. Outflows from SPDR Gold Shares, the world’s biggest bullion exchange-traded fund, hit their highest in more than six weeks. On Tuesday, gold prices recouped some of the losses and copper steadied as questions raised by vaccine specialists about producing and distributing the shot tempered the euphoria.
6. While Monday’s rally across credit and other risk assets appears to be fading, it could be still another active day in the primary market after nearly $19 billion of high-grade debt priced at a cheaper cost to borrowers than their outstanding debt. There are a few whispers about potential acquisitions in the works, including transactions separately targeting software makers Planview and Workfront. Junk issuers will also likely be encouraged to come forward after yields rode a rally in risk assets to a record low of 4.56% on Monday
7. Europe’s largest oil and gas companies have made the most progress within the sector to transition to cleaner energy while majors in Asia and Russia are at the bottom of the pack, according to a new carbon tracker measured by Bloomberg Intelligence. The metrics, which were created to help investors measure integrated oil and gas companies’ progress in shifting to cleaner fuels, show France’s Total has the highest score, at 9.33 points out of 10. Russia’s Gazprom Neft is the lowest, with 0.26 points. This year, oil companies have rushed to announce ambitions to slash their carbon footprints — despite share prices in most plunging — to show that their business will be sustainable in a low-carbon world.
8. Peloton Interactive Inc. jumped in premarket trading on Tuesday after the fitness technology company announced a multi-year partnership with celebrity Beyonce Knowles. Shares jumped as much as 7% after the company said it’s collaborating with Knowles, the most requested artist by Peloton’s global community of more than 3.6 million members, according to a statement. The pact will produce a series of workouts. The partnership will commemorate homecoming season, which is an annual fall celebration for students at historically Black colleges and universities. Both Peloton and Knowles are also giving away two-year digital memberships to students at 10 of the institutions.
9. China Merchants Bank Co. and other state-backed lenders have emerged as the biggest winners from new regulations that derailed Ant Group Co.’s massive stock listing, as China aims to level the playing field between fintech giants and traditional banks. Merchants Bank, known as the retail bank king in China, has soared 19% in Hong Kong this month to a record high, its biggest seven-day advance in more than five years. Other Chinese lenders gained, including Agricultural Bank of China Ltd., while Alibaba Group Holding Ltd., an affiliate and one-third shareholder of Ant, lost 6%. Chinese banks, trading near record low valuations, rallied after financial regulators last week proposed new rules to curb the rapid growth and leverage at the nation’s more than 200 micro-loan lenders, putting a surprise halt to Ant’s $35 billion initial public offering. The authorities on Tuesday turned up heat on internet giants including Alibaba with antitrust rules to curtail their growing dominance.
10. A little-known agency head who has delayed triggering a formal government transition to the Biden administration has been a top official at the organization when it sided with President Donald Trump in disputes. Emily W. Murphy, the Trump-appointed administrator of the General Services Administration, has not yet declared Joe Biden as the apparent winner of the presidential election, a decision that would unlock millions of dollars in transition funding but contradict Trump’s unfounded assertion that he won. Murphy, who declined through a spokesperson to comment, was at the GSA when it decided to keep housing the Trump International Hotel in downtown Washington’s Old Post Office Pavilion and when it abruptly reversed plans to relocate the nearby FBI headquarters that could free up real estate for a competitor.
11. Mink farms threaten human health and will likely continue to do so in the pandemic, according to Denmark’s top epidemiologist, who said the industry represents “far too high” a risk. The U.S. reported a record number of new cases on Monday, the fifth straight day with more than 100,000 new infections, and appears poised to hit record hospitalizations later this week. In Europe, Hungary is tightening its lockdown measures after Prime Minister Viktor Orban dropped his opposition to doing so. Ukraine’s president tested positive.
12. Amazon.com Inc. became the European Union’s latest Big Tech target as regulators escalated a case into how it uses rivals’ sales data on its platform and added a new probe into whether it unfairly favors its own products. The European Commission said it suspects Amazon violated antitrust rules over its use of non-public business data from independent sellers on its marketplace that could benefit the company’s own retail arm. The EU regulator will also probe how Amazon chooses products for a prominent “buy box” and whether Amazon pushes retailers to use its own logistics and delivery services. “We do not take issue with the success of Amazon or its size,” Margrethe Vestager, the EU’s antitrust commissioner, told reporters at a press conference in Brussels on Tuesday. She said the EU’s concerns focus on “very specific business conduct” linked to Amazon’s dual role as a retailer and a platform for smaller merchants.
13. Thyssenkrupp AG is in talks with the German government over an aid package for its struggling steel unit worth at least 5 billion euros ($5.9 billion), well exceeding the group’s current market value in a key push to secure its survival. Chancellor Angela Merkel’s government has signaled a willingness to provide financial support to shore up the unit and ensure future domestic production of an environmentally friendly form of steel, according to people familiar with the matter. While a wide range of aid is still being debated, the steelmaker and politicians are exploring about 2 billion euros in liquidity from a government fund and at least 3 billion euros in grants, said the people, who cautioned the amount is fluid and could still change considerably during the negotiations.
14. Shareholders in Unibail-Rodamco-Westfield rejected a 3.5 billion-euro ($4.1 billion) share sale that was the key plank in a turnaround plan for the Franco-Dutch shopping center landlord. Investors instead voted to appoint three new members to the company’s supervisory board that had been proposed by an activist shareholder group, according to a statement Tuesday. They include former Unibail chairman Leon Bressler and French technology billionaire Xavier Niel, who came out last month in opposition to the proposal. The rejection leaves Unibail’s proposed 9 billion-euro rescue plan plan in tatters. The activist group has called instead for the landlord to sell its Westfield malls in the U.S. to raise cash and refocus on Europe.
15. President-elect Joe Biden is moving more forcefully to make the transition to the White House even as Senate Majority Leader Mitch McConnell and other senior Republicans give President Donald Trump cover to pursue his legal challenges to the outcome of the election. Biden, who is likely to name his chief of staff this week, is also forging ahead on policy. After naming his transition’s coronavirus task force on Monday, Biden plans to speak Tuesday on the Affordable Care Act, the same day the Supreme Court takes up a case that could gut the Obama administration’s signature health-care law. Biden has promised to expand it in the face of the worst pandemic in a century. Yet as Trump continued to rage on Twitter and without evidence that his victory had been stolen by fraud, McConnell said Monday that the president is “100% within his rights” to challenge the election results. And Attorney General William Barr authorized Justice Department officials to open inquiries into potential irregularities in the presidential election, though he acknowledged there’s no conclusive evidence.
16. Beyond Meat Inc. will provide Yum! Brands Inc.’s Pizza Hut with plant-based Italian sausage for a new line of pizzas, the faux-meat maker’s latest conquest in the restaurant industry. The offerings, called the Beyond Italian Sausage Pizza and Great Beyond Pizza, were co-created by the companies, which say the ingredients will have the same flavor and texture of Pizza Hut’s Italian pork sausage. The topping is made from a base of pea and rice proteins. Consumers are increasingly gravitating to plant-based meat that mimics the taste and feel of the real thing, Pizza Hut Chief Brand Officer David Graves said in a phone interview. Beyond Meat CEO Ethan Brown, meanwhile, said the partnership could produce more products in the future.
17. After coming ashore in the Florida Keys overnight, Tropical Storm Eta is now hovering just north of the Yucatan Channel and is set to re-strengthen as it meanders over the south-eastern Gulf of Mexico on Tuesday. Flash and urban flooding will be possible for the Bahamas and the remainder of southern and eastern Florida over the next few days with south Florida and western Cuba also at risk, according to the National Hurricane Center. “Eta is stationary, and little overall motion is forecast today, with a slow northward motion is expected tonight through Thursday,” the NHC said in an advisory published Tuesday at 4 a.m Eastern Standard Time. “Maximum sustained winds are near 50 miles per hour (85 km/h) with higher gusts. Some strengthening is forecast during the next day or two, followed by weakening likely starting on Thursday.”
18. Boeing Co.’s 737 Max could be approved to resume commercial service as soon as next week, with U.S. aviation regulators finalizing their review of fixes to the grounded jetliner. The Federal Aviation Administration is set to announce the certification as soon as Nov. 18, said people familiar with the process, who asked not to be named because the deliberations are private. Boeing has begun briefing lawmakers on the plans, which are still subject to change, one of the people said. The U.S. aviation regulator expects to complete its review of changes to the aircraft “in the coming days,” FAA Administrator Steve Dickson said Monday in an emailed statement, without specifying a date. Boeing’s best-selling plane has been banned from the skies since March 2019 after two crashes killed 346 people.
19. U.K. unemployment rose the most since the financial crisis over the summer, raising questions about how many job cuts could have been avoided had Chancellor of the Exchequer Rishi Sunak announced an extension to his furlough program sooner. The number of people looking for work surged by 243,000 in the three months through September, taking the jobless rate to 4.8%, the highest in four years, the Office for National Statistics said Tuesday. Job cuts, known as redundancies in the U.K., increased by a record 181,000 in the quarter to over 300,000.
20. Russia is seizing on a market rally after the U.S. election to sell its first Eurobond in more than a year. The sale will allow Russia to lock in low borrowing costs now in case U.S. President-elect Joe Biden takes a tougher stance toward Moscow. Emerging-market bond yields fell to a record low this week on expectations of increased stimulus and a coronavirus vaccine. “It’s a favorable time to sell,” said Maria Radchenko, head of fixed-income research at Renaissance Capital in Moscow. “Sanctions rhetoric has quieted down and risk appetite has increased sharply since the elections.”
21. Prime Minister Boris Johnson called on Britons to keep following coronavirus restrictions despite early indications of a vaccine breakthrough, saying it is “very, very early days.” In a televised press conference Monday, he said while the world has “cleared one significant hurdle,” there are several more to go before a vaccine can be rolled out for the population. “I just don’t want to let people run away with the idea that this development is a home run, a slam dunk, a shot to the back of the net, yet,” Johnson said after preliminary results showed the Covid-19 vaccine being developed by Pfizer Inc. and BioNTech SE prevented more than 90% of symptomatic infections. “There is a long way before we have got this thing beat.”
22. Xi Jinping’s Communist Party is stepping up efforts to rein in some of China’s most powerful companies, jolting investors and dealing a blow to the country’s richest entrepreneurs. Beijing on Tuesday unveiled regulations to root out monopolistic practices in the internet industry, seeking to curtail the growing influence of corporations like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The rules, which sent both stocks tumbling and sparked a wider selloff in Chinese equities, landed about a week after new restrictions on the finance sector that triggered the shock suspension of Ant Group Co.’s $35 billion initial public offering. While Xi’s government has been steadily tightening its grip on the world’s second-largest economy, it has until recently taken a relatively hands off approach toward businesses that dominate China’s burgeoning internet, e-commerce and digital finance industries. Authorities are concerned the companies have become too powerful, according to Ma Chen, a Beijing-based partner at Han Kun Law Offices.
23. On Monday, cable outlet One America News Network posted two videos to its YouTube account titled “Trump won.” The clips echoed several others telling viewers, falsely, that U.S. President Donald Trump was re-elected and that the vote was marred by fraud. YouTube added a label noting that the Associated Press called the election for Joe Biden. But the world’s largest online video service didn’t block or remove the content. That approach differs from Twitter Inc., which has hidden conspiratorial election posts behind warnings. A few months ago, YouTube released a detailed policy prohibiting manipulated media and voter suppression, but left one gap: Expressing views on the election is OK. The result has been an onslaught of videos aiming to undermine the legitimacy of the election, according to online media and political researchers. Some of this material has spread on other social networks. And several clips, like the two OANN videos on Monday, ran advertisements, profiting from a Google policy that lets content framed as news reporting or talk shows cash in.

 

*All sources from Bloomberg unless otherwise specified