October 19, 2021
Daily Market Commentary
- Rogers Communications Inc. Chairman Edward Rogers said there’s “room for improvement” in the company’s performance and that he has the firm’s best interests at heart as he battles family members over its strategic direction. “It is my responsibility to put the interests of RCI first,” Rogers said in an emailed statement to Bloomberg News, his first public comments since trying and failing to force out Chief Executive Officer Joe Natale and replace him with Chief Financial Officer Tony Staffieri. “It’s disappointing the focus of others has strayed from what is best for the business.” Edward Rogers’s comments signal that he’s planning to continue the boardroom fight that has split the family in charge of Canada’s largest cable and wireless business. His move against Natale was blocked by a majority of Rogers’s board at a meeting in September — including his sisters, Melinda Rogers-Hixon and Martha Rogers, and his mother, Loretta Rogers.
- Silver miner Hochschild Plc plans to spin off the rare earths project it bought two years ago and list the new company in Canada. Hochschild, which mines silver and gold in Peru and Argentina, bought the Chilean project in 2019 for about $56 million. Yet analysts and investors have so far attributed little value to the prospective business. The new company, which has been named Aclara, will raise money through a share sale at the same time to help fund its development, Hochschild said in a statement Tuesday. Hochschild will keep a 20% stake in the business.
- European equities crept higher on Tuesday as investors eyed signs of a robust start to the latest earnings season, potentially taking some focus away from lingering inflation concerns. The Stoxx Europe 600 Index rose 0.2% as of 12:24 p.m. in London, with miners outperforming as some base metal prices headed for record highs, while utilities and media also gained. Airlines slipped on concern around rising fuel costs and Covid-19 infections in the U.K., while health care and staple goods fell too. European stocks have recovered some ground after slumping in September on concern that central bankers would need to raise interest rates in response to a spike in energy prices and broader inflation. Investors are now looking to company earnings commentary for clues on the impact of higher prices on profits.
- U.S. futures rose with European stocks Tuesday as the prospect of solid corporate earnings helped counter concerns stemming from elevated inflation. Treasuries were steady and the dollar declined. Markets are taking some comfort from robust earnings, but also grappling with the prospect of tightening monetary policy to quell price pressures. Traders are waiting to see if a slate of Federal Reserve speakers this week will try to calm the jitters stemming from the scaling back of pandemic-era policy support. Investors are paying close attention to the earnings season to see how higher costs for energy and raw materials are affecting margins.
- Asian equities gained, buoyed by a rebound in technology shares listed in Hong Kong and elsewhere in the region amid better-than-expected earnings and lower valuations. The MSCI Asia Pacific Index climbed as much as 1%, as TSMC and Alibabaprovided some of the biggest boosts. The Hang Seng Tech Index rose to its highest since Sept. 13, as Chinese authorities are said to be considering opening up access for content on Tencent and ByteDance platforms to search engines such as Baidu.
- Oil continued its advance from the highest close in seven years as the U.S. dollar fell and investors assessed the energy crunch roiling global markets. Futures in New York surpassed $83 a barrel Tuesday, gaining as much as 1.4% from Monday’s settle at the highest since October 2014. Meanwhile, the Bloomberg Dollar Spot index fell 0.4%. Russia is keeping a tight grip on gas supplies to Europe and OPEC+ hasn’t pumped enough crude to meet its production target, exacerbating an existing supply crunch in energy markets. Crude has risen for the past eight weeks as the energy crisis — prompted by shortages of natural gas and coal — coincided with a rebound in demand from key economies emerging from the pandemic. Stockpiles are expected to draw this quarter, tightening the market further, although there are signs that higher energy prices are hurting industrial output in Europe and Asia.
- Gold snapped a two-day decline as the dollar weakened and U.S. bond yields retreated, while traders awaited comments from a slate of Federal Reserve speakers this week. Bullion has fluctuated lately as markets assess the possibility of earlier-than-expected tightening by central banks to contain inflationary pressures. Markets are waiting to see if Fed speakers in the coming days will try to calm the jitters stemming from the scaling back of pandemic-era policy support. The metal was supported Tuesday by a fall in Treasury yields, which gained Monday on a global bond selloff. The greenback’s drop to a three-week low also boosted the appeal of the non-interest bearing asset.
- The London copper market remains in a historic squeeze, as a critical shortfall in available inventories drives prices to near-record levels and leaves buyers paying huge premiums for spot metal. Copper tracked by London Metal Exchange warehouses that’s not already earmarked for withdrawal was near the lowest since the 1970s on Tuesday. The dramatic 88% drop in available stockpiles this month has been driven by a steady flow of orders to take metal out of European depots. And while the record spot premiums should typically start attracting metal back into the warehouse network, there’s little sign of that happening so far. The flash squeeze that’s emerged on the LME is an extreme example of the supply shortages that are cropping up across commodities markets as surging power costs imperil production and Covid-19 snarls up global supply chains. Following similar squeezes in the tin and lead markets, fears over critical shortfalls have now reached buyers in the biggest base-metals market by value.
- Britain will allow London Heathrow airport to lift its charges by as much as 56%, stoking a clash with airlines which say the resulting higher fares risk stifling a recovery from the coronavirus. The announcement Tuesday from the U.K.’s Civil Aviation Authority sets up months of high-stakes lobbying before a final decision early next year, with a more modest hike also possible depending on how fast traffic rebounds. Heathrow has been at loggerheads with airlines after seeking to raise 2020 charges by as much as 95% to fund costs and investment. Willie Walsh, head of the International Air Transport Association and a former chief of British Airways owner IAG SA, has branded the airport a “greedy monopoly” and said its owners must accept “some of the pain.”
- Bitcoin continued its climb toward all-time highs, bolstered by optimism over the upcoming launch of the first Bitcoin futures exchange-traded fund in the U.S. by asset manager ProShares. The largest cryptocurrency pared gains to trade 1.5% higher as of 11:14 a.m. in London, near $62,250. It’s more than doubled this year in volatile trading. The April record is just under $64,870. ProShares plans to start the fund on the New York Stock Exchange Tuesday, its chief executive Michael Sapir said in an interview. The move is the latest sign of how cryptocurrency-related investments are becoming more mainstream.
- Johnson & Johnson raised its 2021 profit forecast as strong performance across the health-care giant’s main divisions helped drive quarterly results. Adjusted earnings for the year will be $9.77 to $9.82 a share, J&J said Tuesday in a statement, up from the previous guidance of $9.60 to $9.70. Third-quarter adjusted earnings per share were $2.60, J&J said, beating Wall Street’s average estimate of $2.36. Health-care company results have been improving across the board this year as pandemic restrictions abate and patients return to hospitals and clinics. J&J benefited from gains in its medical-device unit, as well as in its pharma and consumer divisions.
- Travelers Cos. beat analysts’ profit estimates for the sixth consecutive quarter as higher investment income and record underwriting revenue helped the insurer shrug off sizable catastrophe losses brought on by Hurricane Ida and other natural disasters. Pretax catastrophe losses climbed in the third quarter to $501 million from $397 million a year earlier, according to a statement Tuesday. Net premiums written clocked in at a record $8.3 billion, rising 7% from the same quarter last year. Retention was also higher. “Our strong top- and bottom-line results this quarter and year to date reflect the continued successful execution of our innovation strategy to develop and deploy capabilities designed to position Travelers for growth at attractive returns,” Chief Executive Officer Alan Schnitzer said in the statement.
- North Korea appears to have fired a submarine-launched ballistic missile for the first time in two years, adding to a series of tests demonstrating Kim Jong Un’s pursuit of nuclear-capable weapons that can evade U.S. interceptors. The regime is suspected of launching an SLBM Tuesday from the eastern port of Sinpo into waters between the Korean Peninsula and Japan, South Korea’s military said. While authorities in Seoul didn’t say whether the missile was fired from a vessel or underwater platform, the Yonhap News Agency cited a person familiar with the matter as saying it might have been launched from a submarine. Japanese Prime Minister Fumio Kishida condemned the launch, noting that ballistic missile tests violated United Nations resolutions against North Korea’s weapons program. South Korea’s National Security Council expressed “strong regret” over the action while the U.S. Indo-Pacific Command urged North Korea to “refrain from any further destabilizing acts.”
- Shortages of staff and materials across the country are weighing on construction volumes even as demand for homes remain strong, one of the U.K.’s biggest homebuilders said on Tuesday. Bellway Plc’s output in the first half of the financial year in 2022 will be little changed from the same period a year earlier because of supply chain issues, labor shortages and disruption to fuel supplies, the company said alongside its full-year results on Tuesday. Issues across supply chains have hit the construction sector hard, with the U.K.’s exit from the European Union worsening a shortage of builders and drivers, and energy price inflation contributing to spiraling materials costs. That’s putting pressure on a sector where demand has boomed during the pandemic, with asking prices for homes reaching record highs in every part of the country in October.
- Russia is signaling that it won’t go out of its way to offer European consumers extra gas to ease the current energy crisis unless it gets something in return: regulatory approval to start shipments through the controversial Nord Stream 2 pipeline. In exchange for upping supplies, Russia wants to get German and European Union approval to begin using the pipeline to Europe, according to people close to state-run gas giant Gazprom and the Kremlin. “We cannot ride to the rescue just to compensate for mistakes that we didn’t commit,” Konstantin Kosachyov, a top pro-Kremlin legislator in the upper house of parliament, said in an interview, without specifying what Russia is seeking. “We’re fulfilling all our contracts, all our obligations. Everything on top of that should be a subject for additional voluntary and mutually beneficial agreements.”
- Procter & Gamble Co.’s brisk sales in its latest quarter weren’t enough to overcome rising commodity and freight costs that are eroding profitability. The maker of Downy fabric softener and Puffs facial tissues announced Wednesday that it expects $2.3 billion in after-tax expenses this fiscal year from elevated commodity and freight costs — an increase from the prior expectation of $1.9 billion. Gross margin in the company’s fiscal first quarter also fell short of expectations, outweighing organic sales and profit that beat estimates from Wall Street. P&G shares fell as much as 1.5% in premarket trading. The stock is up 2.3% this year through Monday, trailing behind the roughly 20% gain of the S&P 500 index.
- El Salvador’s first-of-its-kind adoption of Bitcoin won’t be an obstacle for the government to reach a $1.3 billion loan agreement with the International Monetary Fund, according to the country’s central bank president. The cryptocurrency will lose its reputation as a speculative asset and prove its use as a legitimate payment system, central bank President Douglas Rodriguez said in an interview Monday. He even expects Bitcoin’s notorious price volatility to help the economy expand more than the 9% the bank forecasts it will this year.
- Credit Suisse Group AG is nearing an agreement with the U.S. government that would resolve a criminal probe regarding its role in a $2 billion Mozambique bond scandal, according to people familiar with the matter. The discussions with the U.S. Justice Department involve a deferred prosecution agreement that would include a fine, according to the people, who asked not to be identified because the talks are confidential. An agreement is expected to be announced Tuesday. Any deal with U.S. prosecutors would be the latest action in a multi-year, international legal saga arising out of the 2013-14 deals that were supposed to fund a new coastal patrol force and tuna fishing fleet in Mozambique, one of the world’s poorest countries. In a 2018 indictment, the U.S. Justice Department alleged the contracts were a front for government officials and bankers to enrich themselves. Three former Credit Suisse bankers have pleaded guilty to U.S. charges stemming from the scheme.
- Democrats struggled to fill the void created by Senator Joe Manchin’s opposition to a key climate program, with hopes fading that Congress will reach agreement on climate legislation before world leaders gather in Scotland for a summit on global warming. The Clean Electricity Payment Program has been a major priority for the White House and President Joe Biden’s goal of de-carbonizing the nation’s electric grid by 2035. The program, which would pay utilities for using clean energy and penalize those that don’t, is on life support after Manchin, a West Virginia Democrat who holds a swing vote in the evenly divided Senate, recently told the White House he wouldn’t support it.
“Life is 10% what happens to you and 90% how you react to it.” – Charles R. Swindoll
*All sources from Bloomberg unless otherwise specified