October 8th, 2020
Daily Market Commentary
- Canadian equity markets climbed with broader markets on renewed optimism that U.S. lawmakers could still reach an agreement on additional stimulus. The S&P/TSX Composite index rose 1.2% in Toronto. All eleven sectors rallied, led by health care and consumer discretionary stocks. Pot stock Canopy Growth was the best performing stock, while Maple Leaf Foods posted the biggest drop within the index. Meanwhile, Barrick Gold Corp.’s Chief Executive Officer Mark Bristow said the gold industry needs more consolidation so it can increase exploration to boost depleting reserves, lure more generalist investors and improve efficiencies. In real estate, Montreal, like Toronto, is seeing a flurry of condos being put up for sale, suggesting the city’s housing boom may be fading as the effects of the pandemic start to bite.
- Barrick Gold Corp.’s top executive says the gold industry needs more consolidation so it can increase exploration to boost depleting reserves, lure more generalist investors and improve efficiencies. The flurry of deals that characterized the sector in the past two years will likely continue, with miners in Australia already “stamping their mark” on the industry, Chief Executive Officer Mark Bristow said in a virtual South African mining conference. Mergers and acquisitions are likely to dominate the sector in Africa, and are needed in Canada, where the world’s second-largest gold miner is based.
- European equities advanced on Thursday after Asian stocks reached the highest level in three weeks and as investors remain hopeful about U.S. stimulus talks. The Stoxx 600 Index gained 0.6% in early trading, with investors leaning on signals from Nancy Pelosi that she is open toward an airline-relief bill after President Donald Trump scuttled broader negotiations earlier this week. Meanwhile a poll showed that Democtatic opponent Joe Biden is widening his lead in crucial states. The broad European benchmark is heading for a second consecutive week of gains, while still struggling to find clear direction. “The overarching sideways trend remains in place for the moment, yet there is a chance for renewed upside momentum,” writes Donner & Reuschel AG technical analyst Martin Utschneider. “Market participants remain nervous and any unexpected message could quickly turn into selling panic. Hence all hedges should remain in place.”
- U.S. futures rose alongside European stocks as global markets extended a rally fueled by optimism that American lawmakers will reach a stimulus deal. Contracts on the S&P 500 Index pointed to a strong open following Wednesday’s 1.7% surge, after President Donald Trump advocated a piecemeal approach in barrage of overnight tweets, and House Speaker Nancy Pelosi signaled openness to a standalone airline-relief bill. Regeneron shares rose 4.9% in pre-market trading after Trump said its antibody cocktail was the “key” to his quick recovery. The president said he would authorize its emergency use.
- Japanese stocks climbed, tracking an advance in U.S. futures, with the Nikkei 225 Stock Average ending just short of erasing losses for the year. Futures on the S&P 500 index rose as investors focused on a debate between U.S. Vice President Mike Pence and Senator Kamala Harris. That saw the Topix and Nikkei indexes adding to early gains spurred by prospects of additional U.S. stimulus and the possibility of Democratic challenger Joe Biden becoming the next American president. “Shorts are getting covered as Nikkei 225 punches above recent highs,” said Takeo Kamai, head of execution services at CLSA Securities Japan Co.
- Oil rose near $40 a barrel in New York with the market turning its attention to a hurricane that’s caused widespread shut-ins to Gulf of Mexico output. Energy operators in the Gulf of Mexico have shut 80% of oil output in preparation for Hurricane Delta, which barreled across the Yucatan Peninsula and is poised to hit the Louisiana coast on Friday. Stock markets also edged higher on Thursday on hopes that American lawmakers will reach a stimulus deal.
- Gold edged higher as the dollar weakened, driven by hopes congress will provide aid for struggling airlines before the U.S. election. House Speaker Nancy Pelosi signaled openness to an airline-relief bill in talks with Treasury Secretary Steven Mnuchin, days after President Donald Trump scuttled negotiations for broader stimulus. That’s helping gold continue its recovery from a slump on Tuesday, the biggest in almost two weeks, while also pressuring the dollar. Longer term, markets are beginning to price in a Democrat win in the November election, as a fresh round of state polls released Wednesday showed Joe Biden is widening his lead against Trump in a slew of crucial battleground states. That should mean a larger economic stimulus to follow, increasing expectations for inflation and boosting gold.
- Mexico’s inflation stayed above the ceiling of its target range for a second month in September, cramping the central bank’s space for more interest rate cuts. Consumer prices rose 4.01% from a year earlier as food inflation remained stubbornly high at 7.38% compared to last year, the national statistics institute said on its website Thursday. That was just slightly lower that the median estimate of 4.05% in a Bloomberg survey. In August, prices rose 4.05%.
- Hyperice, a maker of performance recovery products, is valued at $700 million after raising $48 million from the National Basketball Association, the NFL’s investment arm 32 Equity and a group of professional athletes including tennis star Naomi Osaka, golfer Rickie Fowler, the Houston Texans’ J.J. Watt and Houston Rockets’ Russell Westbrook. “We’re looking forward to working with these athletes and organizations who have had an authentic connection to the company for years,” Chief Executive Officer Jim Huether said in an interview. Irvine, California-based Hyperice, best known for a massage therapy device known as Hypervolt, will use the funding to accelerate growth, improve artificial intelligence capabilities and develop its connected fitness effort, known as HyperSmart. The latter syncs with Apple Health and Strava to develop curated recovery routines for users based on their workouts.
- Just as the U.K.’s trade negotiations with the European Union look like they’re heading off a cliff, there’s reason to suspect things might not be as bleak as they seem. On the surface, the brinkmanship is clear: On Tuesday, the EU dared Boris Johnson to walk away from the talks by his Oct. 15 deadline if he views a deal as impossible. The very next day, Johnson’s government said it fully intends to do just that, if that’s what it concludes. That followed weeks in which statements from both sides have barely gone beyond reiterating the need to keep trying because the gulf between them remains huge. On Wednesday, EU Council President Charles Michel urged the U.K. to “put its cards on the table.”
- Dollar General Corp., the rapidly growing discount chain with over 16,300 stores dotting the rural American landscape, wants to attract more high-income shoppers looking to splurge. The company plans to open a new brand of stores called Popshelf that mostly sells things shoppers don’t need but might want, such as party supplies, home decor or beauty products. Stores will be in the suburbs of larger cities, with two planned for the Nashville, Tenn., area in the next few weeks and 30 by the end of next year. Items will be priced low, mostly under $5, but designed to appeal to women from households that earn as much as $125,000 a year. A record number of stores closed in the first half of the year and 18 retailers filed for chapter 11 protection, putting this year on a pace for new highs for bankruptcies and liquidations. While many pandemic lockdowns and temporary closures have been lifted, bricks-and-mortar chains are bracing for much of the spending that moved online to stay there.
- Domino’s Pizza Inc. reported third-quarter sales that surpassed Wall Street’s expectations, even as operating margins narrowed. The shares slipped in early trading. System-wide U.S. same-store sales during the third quarter grew 17.5%, beating the estimate of 14.6% from Consensus Metrix. Internationally, same-store sales rose 6.2% after excluding currency variations.
- Senator Kamala Harris condemned the Trump administration’s handling of the pandemic as the worst failure in U.S. government history, but evaded answers on the Democrats’ positions on the environment and the Supreme Court. “The American people have witnessed what is the greatest failure of any presidential administration in the history of our country,” the California Democrat said of Trump’s response to the coronavirus outbreak.
- A court in Madrid blocked the regional government from applying new restrictions on movement in and around the Spanish capital, calling into question efforts to contain a surge in Covid-19 infections. The U.K. government has drawn up rescue measures for companies struggling to cope in areas forced into local lockdowns, as ministers prepare to impose tighter rules within days. Nations across Europe posted record increases in infections, underscoring growing alarm across the continent as it loses control of the pandemic. Regeneron Pharmaceuticals Inc. shares rose after the company asked U.S. regulators to authorize its antibody treatment for emergency use. President Donald Trump returned to work at the Oval Office and aims to get back on the campaign trail as early as Monday. Vice President Mike Pence and Senator Kamala Harris faced off in their election debate behind plexiglass screens as a precaution.
- The debate next week between President Donald Trump and Democratic nominee Joe Biden will be virtual as a precaution against the spread of the coronavirus, the Commission on Presidential Debates said Thursday. The commission said the forum Oct. 15 in Miami, the second of three presidential debates, will be a town hall with the participants appearing from remote locations. The decision was made “in order to protect the health and safety of all involved,” the commission said. It comes after Trump was hospitalized with Covid-19 over the weekend and the White House has reported that a dozen staffers have become infected with the virus, which has killed more than 210,000 people in the U.S.
- SCG Packaging Pcl, Thailand’s biggest packaging company, has raised 39.5 billion baht ($1.3 billion) from its initial public offering after pricing shares at the top end of their range. The unit of Siam Cement Pcl, one of the nation’s biggest industrial conglomerate, priced its shares at 35 baht, according to an exchange filing by Siam Cement on Thursday. The company was marketing 1.13 billion shares in a range of 33.5 baht to 35 baht. SCG Packaging’s initial share sale is Thailand’s second largest this year after Central Retail Corp.’s $2.5 billion offering in February. King Maha Vajiralongkorn is the biggest shareholder of its parent Siam Cement with 33.64% stake, according to the company’s website.
- London Stock Exchange Group Plc is nearing the sale of Borsa Italiana to Euronext NV and two Italian institutions for about 4.5 billion euros ($5.3 billion) including debt, according to people familiar with the transaction. LSE, which is selling Borsa Italiana to get approval for its $27 billion Refinitiv deal, may announce the sale as early as Friday, said the people, who asked not to be named as the matter is confidential. LSE and Euronext declined to comment. Adding Borsa Italiana would give Euronext about a quarter of all equity trading in Europe and mean that 28 of the Euro Stoxx 50 companies are listed on its markets.
- Jack Ma’s Ant Group has a narrow window to make its much-anticipated market debut ahead of U.S. election turbulence. Now its bankers must grapple with any potential delays stemming from a debate in Washington over restrictions on the payments behemoth. Discussions over how and whether to restrict Ant — as well as Tencent Holdings Ltd.’s payments systems — have accelerated among senior U.S. officials in recent weeks though a decision isn’t imminent, Bloomberg reported. They come as Ant is expected to raise about $35 billion from simultaneous initial public offerings in Shanghai and Hong Kong as early as this month. China’s biggest payments company already has approval for its mainland listing, but is waiting for a hearing with the Hong Kong stock exchange. That green light would need to come roughly by the middle of October if Ant aims to beat the U.S. presidential vote on Nov. 3.
- Tata Consultancy Services Ltd. surged to a record high after the Indian giant announced a share buyback of as much as 160 billion rupees ($2.2 billion) and said technology spending was recovering faster than anticipated. Asia’s largest software outsourcing provider reported a larger-than-expected 7% fall in net income to 74.7 billion rupees in the September quarter. But Chief Executive Officer Rajesh Gopinathan said IT budgets were bouncing back and growth should accelerate as clients spend on digital services such as cloud migration, security and work tools to trim costs and adjust to a post-pandemic environment.
- International Business Machines Corp. plans to spin off its managed infrastructure services unit into a public company, doubling down on its shift to become a major cloud services provider. The new unit, now part of its global technology services division, serves 4,600 clients and has an order backlog of $60 billion, according to a statement Thursday. The company said it aims to complete the transaction as a tax-free spinoff to IBM shareholders by the end of 2021. IBM’s services business has been struggling, as many of its clients delayed purchases of information technology or software upgrades to focus on short-term stability and cash preservation to survive the pandemic. The computer services company has also cut thousands of jobs this year as it reshapes the business.
- Danske Bank A/S plans to cut 1,600 jobs — more than 7% of its entire workforce — in a cost-saving maneuver that pushed its stock higher but drew dire warnings from staff representatives. Copenhagen-based Danske says the cuts are necessary to save money amid spiraling compliance costs and long-term negative interest rates. “It is never easy to reduce the number of colleagues, and we will do our best to ensure that we do this in the most decent and respectful way,” Chief Executive Officer Chris Vogelzang said. “However, we need to adapt to the structural changes that the financial sector is experiencing.”
- European countries stretching from Spain to Ukraine posted record increases in coronavirus cases as a court struck down new restrictions in Madrid, underscoring the challenges facing the region in controlling the pandemic. Local authorities are being pushed to take the lead in limiting late-night activity, as national politicians fear that more wide-ranging measures could result in another collapse in economic activity. Several cities, including Paris and Berlin, have imposed stricter rules to try to rein in the social activity blamed for helping spread the disease. In a setback for Spain’s efforts to contain the surge in Covid-19 infections, a Madrid court on Thursday blocked the regional government from applying new curbs on movement in one of Europe’s major virus hotspots.
- The Bank of Japan delivered the most wide-ranging upgrade of its regional economic assessment in seven years amid continued signs of improvement in activity from the depths of the Covid-19 slump. The central bank improved its view on eight of Japan’s nine regions in its quarterly Sakura report, the equivalent of the Federal Reserve’s Beige Book survey. The less pessimistic tone of the latest report is likely to be reflected in a quarterly outlook released by the BOJ later this month along with its policy statement. Separate reports Thursday showed the mood among Japanese merchants improved last month to the least pessimistic in almost two and a half years, while bankruptcies in the first half of year dropped to the lowest level in 31 years, as government and central bank support helped prop up struggling firms.
- Otto Group is planning to sell the French operations of its parcel delivery service Hermes Group, potentially adding to a string of deals tied to this year’s online shopping boom, people familiar with the matter said. The German e-commerce company is working with Rothschild & Co. on the divestment of the business, which has attracted bids from private equity firms and logistics companies, the people said. Otto is seeking a valuation of more than 500 million euros ($588 million) for the unit, according to the people, who asked not to be identified because the information is private.
*All sources from Bloomberg unless otherwise specified