September 14, 2021

Daily Market Commentary

Canadian Headlines

• Canadian shares climbed on Monday with natural resources companies outperforming. The S&P/TSX Composite rose 0.2% in Toronto. The move was the biggest since rising 0.5% on Sept. 2 and follows the prior session’s decrease of 0.4%. Energy and materials stocks outperformed with as the prices for oil and gold rose. TC Energy contributed the most to the index’s gain, climbing 2.8%. Crescent Point Energy posted the largest percentage increase, rising 14%.
• Manulife Financial Corp. will require employees in Canada to provide proof of their vaccination status by the end of October and will force unvaccinated staff to undergo regular Covid-19 testing before they work in its offices. Employees who can’t be vaccinated for medical reasons must provide a note from a licensed health care professional, Manulife Canada Chief Executive Officer Mike Doughty said in a memo Monday. Those refusing the shots for religious reasons must make a written attestation. The life insurer’s move follows similar policies announced last month by top Canadian banks to make vaccines mandatory, with limited exceptions.

World Headlines

• European stocks dipped on Tuesday as investors turned cautious ahead of closely watched U.S. inflation data, which could offer more clarity on the Federal Reserve’s timing for stimulus reduction. The Stoxx 600 was 0.2% lower as of 9:24 a.m. in London, mainly weighed down by mining and luxury stocks. LVMH and Gucci-owner Kering slid after a slew of downgrades for the sector from broker Alphavalue, citing China worries. Miners were hurt by falling iron ore futures as China’s production curbs dented demand. The European benchmark has been trending lower in September, on track to break a seven-month winning streak, with rising inflation sparking worries about a dial back in central bank stimulus, despite new variants of Covid-19 threatening the pace of economic recovery.
• Stocks and U.S. futures were little changed ahead of inflation data that could influence expectations about the Federal Reserve’s likely timing for paring stimulus. Treasury yields and the dollar were steady. Apple Inc. shares rose in pre-market trading as the company patched a security flaw in its Messages app and prepares a highly anticipated product launch on Tuesday. The focus is firmly on price pressures, with a gauge of commodities around a decade-high and a report later Tuesday expected to show a fourth month of U.S. inflation at 5% or more. The global stock-market rally is facing headwinds amid concerns about the delta virus strain and risks from elevated inflation, which is being stoked by Covid-19 related supply disruptions.
• Asia’s stock benchmark traded little changed as a rally in Japanese and Korean shares was offset by losses in Chinese tech names. The MSCI Asia Pacific Index gained much as 0.4%, with energy and industrial shares outperforming. The Nikkei 225 Stock Average rose as much as 1.1%, surpassing this year’s peak seen in February and closing at the highest level since August 1990. Korea’s Kospi Index climbed for a third consecutive session, led by KakaoBank Corp. and Samsung Electronics Co. The Hang Seng Tech Index swung between gains and losses.
• Oil rose for a third day as another storm menaced a key U.S. energy hub just weeks after Hurricane Ida hammered local output. Crude futures gained 0.7% in New York after closing at the highest since early August on Monday. The latest system, Nicholas, made landfall in Texas, posing a threat to coastal refineries and petrochemical facilities. Global oil supplies fell by 540,000 barrels a day in August amid unexpected disruptions and will be flat this month, according to the International Energy Agency. The world will have to wait until October for extra supply as output losses from Ida wipe out increases from OPEC+, the IEA said in a report.
• Germany may increase restrictions on people who aren’t vaccinated against Covid-19 if contagion rates climb and health-care facilities get stretched, according to Chancellor Angela Merkel’s chief of staff. A U.K. panel recommended giving booster shots to people aged 50 and over and other vulnerable groups, with Pfizer Inc.-BioNTech SE the preferred brand. Prime Minister Boris Johnson is due to confirm the rollout on Tuesday, as a debate over the need for boosters continues worldwide. Meanwhile, data from Google show that more people are back at their desks in London’s main financial quarter than at any time since March 2020. Russian President Vladimir Putin will go into self-isolation after people around him fell sick with Covid-19. China locked down a coastal city of 4.5 million people to halt an outbreak of the delta variant as the country sticks to its strict zero-tolerance approach to infections. China’s aviation regulator also advised against international travel during upcoming national holidays.
• Amazon.com Inc. is planning to hire 125,000 jobs in fulfillment and transportation despite the U.S. facing a major labor shortage. The U.S. logistics giant will focus its latest hiring spree on local employment roles, with an average starting wage of more than $18 per hour, with sign-on bonuses up to $3,000 in select locations. The announcement comes following a pledge earlier in September to hire 40,000 people to fill corporate and tech roles. A nationwide labor shortage has left employers from city government to leisure without the workers they need to meet demand now that the economy is reopening. A shortage of truck drivers in the U.S. has become so severe that companies are scrambling to bring in candidates from abroad.
• Boeing Co. expects global jetliner sales to bounce back from the Covid-19 pandemic later this decade, contributing to a potential $9 trillion market for aerospace and defense products and services. That’s 5.9% larger than the $8.5 trillion addressable market that the Chicago-based manufacturer forecast last year, when the coronavirus outbreak sapped demand for travel and new planes. Boeing expects global planemakers to deliver 19,000 aircraft worth $3.2 trillion through 2030, a more bullish outlook than the 18,350 planes worth $2.9 trillion that it predicted a year ago.   The prospects for aerospace should be bolstered by global economic growth, rising demand for cargo-hauling jets and a shift by airlines to newer, greener aircraft, according to Marc Allen, Boeing’s chief strategy officer. But the recovery could come in fits and starts, depending on the pace at which vaccines are distributed and border restrictions lifted, he cautioned. Defense sales, which helped bolster Boeing’s finances during the crisis, aren’t likely to see similar growth.
• Joe Biden’s push to ramp up taxes on the wealthy is getting diluted by his Democratic allies in Congress, undermining the president’s chances of fully delivering on his 2020 campaign pledge to curb America’s widening inequality. A blueprint that the House Ways and Means Committee will begin voting on Tuesday, prepared by Democratic members and staff of the panel, scaled back some of the most ambitious elements of the Biden administration’s pitch released in May. The changes reflect the political reality of a Senate that requires moderate Democrats to vote en masse for the final package, given the razor thin margins of the party’s control of the chamber. The cost: support from progressives needed to fire up the electoral base in 2022, and a more concerted effort to address inequality that evidence shows is damaging the U.S. economy.
• The market faces a peculiar anomaly: fund managers are quickly souring on global growth and earnings amid a flurry of risks, but they refuse to give up on stocks, according to the latest Bank of America Corp. survey.  “Rare fund manager survey disconnect between asset prices and fundamentals is growing,” BofA strategists led by Michael Hartnett said in a note on Tuesday. “Growth expectations are saying equity allocations should fall, but risk taking is telling the story that investors are ignoring the macro.” The outlook for global growth and profits in September slumped to the lowest in more than a year, according to the survey conducted Sept. 3 to Sept. 9. However, investor allocation to equities dropped only slightly to a net 50% overweight and the share of respondents taking higher-than-normal risks rose to 9%. Bonds remained unpopular with a net 69% underweight, BofA said.
• Specialty-chemicals and food-ingredient distributor Azelis SA and its holders are seeking 1.44 billion euros ($1.7 billion) in an initial public offering on Euronext Brussels in the largest Belgian listing in 14 years amid a share sale frenzy. The company is seeking 880 million euros from a sale of new shares, while shareholders including Swedish private equity firm EQT AB and Canada’s PSP Investments will offload some of their stakes, according to a statement Tuesday. The offering is set to be the biggest initial share sale in Brussels since metals supplier Nyrstar NV’s listing in 2007, according to data compiled by Bloomberg. Antwerp, Belgium-based Azelis, which distributes specialty chemicals used in everything from animal nutrition to industrial cleaning, plans to use proceeds to fund acquisitions and pay down debt.
• Gulf Islamic Investments LLC, a financial services firm that oversees nearly $2 billion, is preparing for what could be its biggest deal yet as it looks to grow investments in Saudi Arabia and India and considers a listing in the next three years. GII, as the firm is known, plans to buy a stake in a Saudi health-care company for around $600 million, co-founder Mohammed Alhassan said in an interview, declining to give specific details. The goal is plow around $1 billion into the kingdom over the next year to 18 months, with investments also targeted at logistics and cloud kitchens. Investor interest in medical care has been rising as the world’s population ages, and as the health-care sector prepares to address a backlog of procedures delayed by the coronavirus pandemic. The industry has also emerged as something of a safe haven for dealmakers during the global outbreak.
• A U.K. panel recommended giving Covid-19 booster shots to people aged 50 and over and other vulnerable groups as the government aims to bolster the immunity of its population and avert a potential winter virus surge. An extra dose of the Pfizer Inc.-BioNTech SE vaccine is the preferred option, regardless of which brand of shot a person received previously, the Joint Committee on Vaccination and Immunisation said in a statement on Tuesday. It should be administered no earlier than six months after the second vaccine, and the panel recommended that the rollout begin this month. A half dose of the Moderna Inc. shot may be offered as an alternative, the panel said. In cases where people can’t have a messenger RNA vaccine because of allergies or other reasons, the AstraZeneca Plc shot may be considered for those who received it previously.
• The European Union will aim to agree on a framework for working with the U.S. to screen potentially hostile foreign investments when officials meet in Pittsburgh later this month, according to a person familiar with the preparations for the talks. The two sides are working toward a statement of principles that would see them share information and data relating to foreign takeovers and cooperate on assessing investments in strategic assets, the person said. The inaugural Trade and Technology Council on Sept. 29 will also aim to deliver similar statements to shape cooperation on export controls, artificial intelligence and critical supply chains of goods like semiconductors, said the person, who asked not to be identified discussing sensitive matters.
• South Korea fined Alphabet Inc.’s Google $177 million for hampering the development of rivals to its Android operating system, sustaining a campaign targeting the U.S. search giant’s dominance in smartphone software. Regulators accuse Google, whose mobile operating system powers more than 80% of smartphones around the world, of using its immense bargaining power to squeeze out the competition. The Korea Fair Trade Commission said Google’s anti-fragmentation agreements (AFA) with manufacturers like Samsung Electronics Co.and LG Electronics Inc. prevented gadget makers from developing or using modified versions of the Android OS. The watchdog banned Google from forcing manufacturers to sign AFA contracts and ordered that it modify existing ones.
• The number of workers on U.K. company payrolls climbed above its pre-pandemic level as vacancies hit a record high with companies battling staff shortages created by Brexit and lockdowns. The figures from the Office for National Statistics included a 35% surge in job openings in the quarter to 1.03 million, the first time they’ve risen above 1 million. That shows the labor market remained buoyant over the summer even as a resurgence in virus cases and supply disruptions weighed heavily on overall economic growth.
• China’s government is assembling a group of accounting and legal experts to examine the finances of China Evergrande Group, a potential precursor to a restructuring of the world’s most indebted developer. Regulators in Evergrande’s home province of Guangdong dispatched a team last month from King & Wood Mallesons, a law firm whose specialties include restructuring, two people familiar with the matter said, asking not to be identified discussing private information. At the urging of Beijing, provincial officials are also sending additional financial advisers and accountants to assess the developer, one of the people said. The move adds to signs that Chinese authorities are laying the groundwork for what could be one of the country’s biggest debt restructurings. While senior leaders in Beijing have yet to indicate whether they would allow Evergrande creditors to suffer major losses, bondholders are pricing in slim odds of a rescue. Guangdong officials have turned down at least one bailout request from billionaire Evergrande founder Hui Ka Yan, who owns a controlling stake, one person familiar with the matter said.
• Storm Nicholas made landfall in Texas, bringing torrential rainfall that threatens to unleash flooding in Houston and parts of Louisiana still recovering from Hurricane Ida two weeks ago. Nicholas, downgraded to a tropical storm after briefly being rated a hurricane, roared ashore at about 12:30 a.m. local time near the Matagorda Peninsula. It has top winds of 70 miles (110 kilometers) per hour, the National Hurricane Center said in its latest advisory on Tuesday. It’s the eighth tropical cyclone to hit the U.S. this year.
• More people are back at their desks in the City of London than at any time since the pandemic forced the government to impose a lockdown 18 month ago. In the financial district, more than half of staff were back in their offices on Thursday, according to data compiled by Google, which tracks the locations of its users. The number of people returning has gradually ticked up in recent months, but the start of the school term is now accelerating the process. Many employers are pushing staff to come into work for at least a few days a week.
• SoftBank Group Corp. is boosting its bet on Latin America’s burgeoning tech industry, adding $3 billion for investments in a region quickly gaining popularity with foreign venture capitalists. The Japanese firm is launching a second private investment fund, bringing its total earmarked for the region to $8 billion, according to a company statement. The fund, which may raise additional capital, plans to invest in technology-related companies from early stage startups to those that have already gone public, SoftBank said. Billionaire Masayoshi Son’s technology conglomerate has found fertile ground in Latin America. In March 2019, it launched a $5 billion dedicated fund, which has invested $3.5 billion in 48 companies as of June and generated a net internal rate of return of 85% in U.S. dollar terms, the company said.
• Square Inc., the mobile payments company, has joined with other tech companies in a cross-licensing platform to reduce patent lawsuits over cryptocurrency and promote the growth of digital currencies. The company says it is joining the Open Invention Network where members pledge royalty-free access to patents for open source technology. Square says it is trying to avoid the sort of runaway litigation that once beset the smartphone industry. A year ago, Square formed the Cryptocurrency Open Patent Alliance, in which members make a similar pledge not to sue each other over patents and provides a shared patent library for access to the underlying technology.
• The Christmas shopping season could see 7% to 9% growth as Americans are poised to spend more on travel and dining out, according to a forecast from Deloitte released on Tuesday. This would put total holiday sales at $1.28 trillion to $1.3 trillion. In 2020, holiday spending grew 5.8%, according to Deloitte, after the firm had forecast well below that amount due to the uncertainty around the Covid-19 pandemic. Deloitte sees spending on goods being consistent with last year, while travel and restaurant dining rebound from the doldrums of last year’s Covid restrictions.
• Chevron Corp. tripled its planned investments in lower-carbon technologies to more than $10 billion through the next seven years as Chief Executive Officer Mike Wirth works to burnish the oil giant’s environmental credentials. The investments include $2 billion to reduce the carbon intensity of its operations, plus plans to grow hydrogen and renewable natural gas production, the San Ramon, California-based company said in a statement Tuesday. U.S. oil drillers are under increasing pressure to reduce their carbon footprints and boost investments in projects that further the transition away from fossil fuels. A shareholder vote to replace a quarter of Exxon Mobil Corp.’s board with more climate-friendly directors sent shockwaves through the industry earlier this year, showing that Wall Street’s biggest investors are willing to shake up boardrooms if they feel companies are failing on the environment.
• Intuit Inc., the maker of TurboTax and QuickBooks software, agreed to buy privately held email marketing firm Mailchimp for $12 billion in cash and stock, uniting two providers of services for small businesses. The deal, announced in a statement Monday that confirmed an earlier Bloomberg News report, will bolster Intuit’s offerings for businesses looking for ways to reach and serve customers online. Intuit has offered QuickBooks accounting software to clients for decades, supplementing it with services such as Credit Karma, which it acquired last year. By adding Mailchimp, Intuit is looking to build on a small-business recovery that has helped fuel sales of QuickBooks and other products. With customers getting operations back on track after Covid-19 disruptions — and many digitizing their books for the first time — Intuit has been able to capitalize. Mailchimp is focused on digital marketing services, including social advertising, so-called shoppable links and automation products.
• The House Judiciary Committee approved legislation to provide legal status to as many as 8 million undocumented immigrants, which Democrats intend to include in their massive tax and spending plan. The panel approved the measure late Monday night, 25-19, after hours of debate and failed amendments from Republican members of the committee. The proposal would modify provisions in the green card process, make more visas available and provide a pathway to legal residency for undocumented immigrants brought to the U.S. as children, people with Temporary Protected Status and essential workers.
• Billionaire Paul Singer’s Elliott Investment Management is pushing for a breakup of SSE Plc after building up a stake in the British power company, people with knowledge of the matter said.  The activist hedge fund sees value in separating SSE’s renewable portfolio from its regulated electricity businesses, the people said, asking not be identified because the information is private. Elliott has been meeting privately with representatives from SSE, which is based in the central Scottish city of Perth, as well as some of its major shareholders, according to the people. Shares of SSE gained as much as 2.4% on Tuesday, giving it a market value of 17.2 billion pounds ($23.9 billion). The company has developed clean energy projects across the U.K. and Ireland, with about 4 gigawatts of wind and hydroelectric power assets, according to its website. It aims to triple its renewable power output from 2019 levels by 2030.

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*All sources from Bloomberg unless otherwise specified