October 4, 2021
Daily Market Commentary
- Sun Life Financial Inc., Canada’s largest group-benefits company, agreed to buy U.S. dental-benefits provider DentaQuest for about $2.48 billion, bolstering its business south of the border. Private equity firm Centerbridge Partners LP will sell its minority stake in DentaQuest as part of the transaction, Toronto-based Sun Life said Sunday. DentaQuest is majority owned by the non-profit CareQuest Institute for Oral Health, which plans to use the proceeds on programs to improve dental care for underserved communities. The acquisition gives Sun Life the second-largest provider of dental benefits in the U.S., more than doubling its employee-benefits revenue there and adding to its portfolio of health and group benefits in the country. Boston-based DentaQuest, founded in 2001, has more than 33 million customers in 36 states and about 2,400 employees.
- The Canadian dollar has become the best performing G10 currency in the year to date. It is up 0.64% against the U.S. dollar, trading at 1.26 to the U.S. currency. The Canadian dollar has underperformed the Bloomberg Dollar Spot Index by 3.01 percentage points. Bond spreads on Canadian provincial debt narrowed, led by Ontario. Spreads on 10-year notes tightened for all 10 provinces on Friday from the previous session, according to data compiled by Bloomberg. 10-year notes of Ontario, with the most debt among leading spread movers, tightened 1 bp to 56 bps
- European stocks steadied as investors assessed risks to the region’s earnings outlook from higher inflation and as supply chain disruptions weighed on sentiment. The Stoxx Europe 600 index was little changed by 10:38 a.m. in London, erasing losses of as much as 0.6%. Gains in sectors like health care and miners offset weakness in banks and automotive shares.
- Asia stocks declined, with Hong Kong shares a drag, as investors sold health care-related names and appeared wary heading into the final quarter of 2021. The MSCI Asia Pacific Index slipped as much as 0.8%. Vaccine maker CanSino Biologics and Shanghai Fosun Pharmaceutical Group were the biggest decliners on the measure as Merck & Co. said its experimental Covid-19 antiviral pill cuts the risk of hospitalization and death in half.
- U.S. equity-index futures declined as concerns about slowing growth and persistently high inflation kept investors on the edge. Contracts on the S&P 500 Index fell 0.3% after the underlying gauge posted the biggest weekly loss since February.
- Crude is trading just below $80 a barrel in London, the highest in almost three years, and the cartel’s production policy will be the main factor influencing prices in the coming months, according to oil trader Vitol Group. Saudi Arabia is sitting pretty, with output close to pre-pandemic levels, the highest petroleum revenues since 2018 and its fellow members united behind the plan to collectively revive 400,000 barrels a day of idle production each month. Washington is also satisfied with that pace of supply hikes, according to a U.S. official who asked not to be named.
- European natural gas futures climbed back toward a record, after dropping on Friday, as the region struggled to build up stockpiles for winter. Prices have almost doubled in the past month as rebounding economies boost demand amid restraints on supply. Europe’s gas inventories are at the lowest level for this time of year in more than a decade, suggesting the rally has more room to run. The region’s energy markets are entering “what is likely to be the most challenging winter on record,” Andrew Hill, head of European gas analysis at Bloomberg NEF, said in a note. “A cold winter in Europe could send gas prices into overdrive.”
- Gold slipped after investors slashed their exposure to the precious metal last week, in a sign the haven asset’s appeal is diminishing as Federal Reserve tapering looms. Withdrawals from exchange-traded funds totaled 18 tons, the biggest weekly outflow since March, according to an initial tally by Bloomberg. At the same time, net-long positions from hedge funds trading Comex futures was cut to a seven-month low in the most recent week as shorts were boosted. It’s a bearish signal from the key drivers of bullion prices. On Monday, gold retreated in the face of a rising U.S. bond yields, which make the non-interest bearing asset seem less attractive.
- Treasury yields bear steepened, with the 10-year rate adding three basis points, while the two-year yield was little changed. The dollar was steady, after two days of losses.
- Base metals climbed amid thin trading volumes in London, with China’s efforts to rein in a burgeoning energy crisis continuing to dominate the outlook for both supply and demand. China is grappling with an energy crunch that has roiled the metals markets and saw its factory sector contracting in September for the first time since the pandemic began. While that’s put pressure on metals prices, there are hopes that Beijing’s efforts to secure additional energy supplies at all costs will help to keep manufacturers running. Even so, they face a margin squeeze if power prices continue to rise, creating headwinds for growth.
- Companies that make and are developing vaccines to protect against Covid-19 are on pace to fall for another session after Merck’s antiviral pill cut the risk of hospitalization or death by 50% in an interim analysis of a late-stage trial. The world’s leading Covid-19 vaccine makers fell, led by Moderna -3%, BioNTech -1.7%, Pfizer -0.7%
- President Joe Biden and top Democrats will regroup this week to salvage two pillars of his agenda, after gridlock between the party’s two flanks scuttled passage of an infrastructure bill and threatens to drag on for weeks. House Speaker Nancy Pelosi (D-Calif.) reset the clock on Saturday, giving lawmakers until Halloween to strike a deal on both the bipartisan $550 billion infrastructure deal and a broader, signature package of social spending, climate change, and tax measures they must pass with only Democratic votes.
- The Biden administration will directly engage with Beijing in the coming days to enforce commitments in their trade deal and start a new process to exclude certain products from U.S. tariffs in an effort to help American workers and businesses, senior administration officials said. U.S. Trade Representative Katherine Tai is set to speak to Chinese Vice Premier Liu He soon, in what will be the first meeting where she will mainly stress China’s shortfalls in the agreement struck under former President Donald Trump. Tai is scheduled to lay out the issues Monday morning in remarks at the Center for Strategic and International Studies in Washington.
- It’s the beginning of October, just the start of what the retail world simply calls “peak.” But the industry is already in various forms of panic that usually don’t take hold until the weeks before Christmas. Early in the year, the hope was that the bottlenecks that gummed up the global supply chain in 2020 would be mostly cleared by now. They’ve actually only gotten worse — much worse — and evidence is mounting that the holiday season is at risk
“In the end, it’s not the years in your life that count. It’s the life in your years.” ― Abraham Lincoln
*All sources from Bloomberg unless otherwise specified