September 16, 2021
Daily Market Commentary
- The S&P/TSX Composite rose 0.7% at 20,693.79 in Toronto. The move was the biggest daily gain since Aug. 27 and follows the previous session’s decrease of 0.5%. Shopify Inc. contributed the most to the index gain, increasing 1.2%. Denison Mines Corp. had the largest increase, rising 8.8%. Today, 138 of 229 shares rose, while 86 fell; 6 of 11 sectors were higher, led by energy stocks. Oil jumped to the highest in six weeks amid signs of a rapidly tightening market after a U.S. government report showed a bigger-than-expected decline in crude stockpiles.
- Conglomerate Grupo Mexico SAB and Canada’s Hudbay Minerals Inc. are among final bidders competing to acquire a Spanish copper miner from Trafigura Group, people with knowledge of the matter said. The parties made binding offers last week for Minas de Aguas Tenidas, which is known as Matsa and could fetch about $2 billion, according to the people, who asked not to be identified because the information is private. Grupo Mexico, which could make the purchase through its listed mining unit Southern Copper Corp., is seen as a strong contender for the business, the people said.
- European stocks advanced on Thursday, rebounding from a seven-week low, as investors monitored the impact of rising energy prices on utilities and oil companies, and as corporate updates reassured that growth can continue. The Stoxx Europe 600 Index was 0.7% higher by 11:55 a.m. in London, with the travel and leisure sector rallying the most as Ryanair Holdings Plc jumped 6.7% after lifting its growth target to 50% over the next five years. Basic resources was the the worst sector, with miners weighed down by declines for iron ore and most base metals, while utilities dropped again, dragged down by Spain’s Iberdrola SA, which fell to its lowest level since May 2020.
- U.S. futures steadied as traders await data on August retail sales and initial jobless claims for cues on the Federal Reserve’s plans to taper stimulus. Stocks rose in Europe, while the dollar and Treasuries ticked higher. Contracts on the S&P 500 fluctuated after posting the biggest jump since August on Wednesday. Casino stocks with operations in Macau extended declines in premarket trading amid the government’s tightening grip on the gambling hub. Miners were weighed down by declines in iron ore and most base metals. Investors continue to assess the outlook for economic reopening amid the delta virus strain outbreak and rising costs fueled by higher commodity prices and pandemic-related supply snarls. The United Nations said the global economy is expected to undergo its fastest recovery in almost five decades this year, but warned about deepening inequities between advanced and developing nations.
- Asian stocks dropped, as a sell-off in technology shares across the region more than offset gains in energy names with oil prices hovering near a six-week high. The MSCI Asia Pacific Index dropped as much as 0.8%, with TSMC, Alibaba Group and Keyence being the biggest contributors to the declines. Hong Kong’s Hang Seng Index led losses among the region’s stock gauges, while Japanese equities extended their drop from a peak of more than three decades into a second day. Fear that China Evergrande Group’s debt woes may spill over into Chinese property sector, combined with Beijing’s move to tighten grips on Macau casino operators, has pulled down Asian stocks this week. The real estate sector was the second-worst performer in the region on Thursday as Evergrande’s onshore property unit suspended bond trading for a day.
- Oil steadied above $72 a barrel after U.S. crude stockpiles tumbled again and investors tracked a broader rally in energy prices. West Texas Intermediate edged up after hitting the highest intraday level since early August on Wednesday. U.S. crude inventories dropped by more than 6 million barrels last week to a two-year low, according to government figures. Meanwhile, gas and power prices are surging, adding to expectations for a lift in consumption as winter draws closer in the northern hemisphere. Citigroup Inc. says there could be a temporary boost of as much as 2 million barrels a day in diesel demand as high gas prices force consumers to switch.
- Gold prices drifted lower on Thursday, with a firmer dollar and U.S bond yields diminishing its appeal, as investors turned their attention to next week’s U.S. Federal Reserve meeting for clues on when it would begin tapering its stimulus. Spot gold was 0.5% down at $1,784.35 per ounce by 0859 GMT, while U.S. gold futures also fell 0.5% to $1,785.10.
- Nickel led base metals lower as concerns mount over demand from China’s property sector amid a debt crisis at one of the country’s top developers. Chinese equity markets have come under pressure as investors weigh growing signs of stress at China Evergrande Group, a cash-strapped real estate firm with more than $300 billion in liabilities. Possible scenarios include everything from a government bailout to a disorderly collapse that deepens the sector’s woes and hammers an already faltering economy. The crisis clouds the outlook for metals by throwing up the possibility of wider upheaval in a sector vital to commodities demand.
- The European Central Bank will look at the trading operations of major lenders as part of climate stress tests next year, after judging that an assessment of loan books alone won’t give enough insight into the fallout they face from global warming. The ECB, which has yet to publicly disclose the parameters of its tests, will also study the reputational and operational risks banks face, Alvarez & Marsal, a consultancy firm that’s involved in the process, told Bloomberg. Reaching into banks’ trading operations represents an additional challenge for an industry that’s already warned it’s not ready for next year’s landmark tests. The ECB is seeking more details than other central banks and, behind the scenes, has stepped up pressure on the industry to meet the moment.
- Booster shots are in the spotlight, as a highly anticipated studyin Israel showed a third Pfizer Inc. dose can dramatically reduce rates of virus-related illness in people 60 and older. The analysis comes as Pfizer and Moderna Inc. said the immunity offered by their vaccines may wane over time. China has fully vaccinated more than 1 billion people — more than 70% of its eligible population — powering ahead of the U.S. and Europe despite having no immediate plans to ease some of the strictest pandemic measures in the world. The nation will start inoculating key population groups with booster shots this month, Henan Daily reported. A Covid outbreak inside the Kremlin has sickened dozens of people working close to Vladimir Putin, the Russian president said, highlighting the scale of the outbreak in one of the country’s most carefully guarded areas.
- Cathie Wood’s exchange-traded funds sold more Tesla Inc. shares, taking the total value of the electric vehicle maker’s stock they’ve offloaded this month to about $266 million. The ARK Innovation and ARK Next Generation Internet ETFs sold over 81,600 shares in Tesla on Wednesday, according to ARK Investment’s daily trading update. At closing prices, that puts the value at about $62 million. Ark funds have sold more than 350,000 Tesla shares in September so far. Still, the Elon Musk-led company is their biggest holding, according to data compiled by Bloomberg. Tesla shares have been rebounding since mid-May, gaining about 34% in the period.
- Online education giant Byju’s is paying about $200 million to acquire the coding platform Tynker, people familiar with the matter said, as India’s most valuable startup accelerates its expansion ahead of an initial public offering expected next year. Byju’s is paying for the purchase in cash and stock, the people said, asking not to be named because the details are private. The companies didn’t disclose the value in their statement announcing the deal on Thursday. Byju’s has made nine acquisitions this year as it seeks to expand the education options it can offer online. Tynker’s service, launched in 2013, offers classes and camps on coding, with some curriculum offered for free and premium content sold to schools for an average of $5,000 a year. Co-founders Krishna Vedati, Srinivas Mandyam and Kelvin Chong will remain in their roles after the acquisition.
- President Joe Biden’s economic agenda risks getting delayed by weeks or months in Congress with tax, health care and other issues still unresolved and continued squabbling between the Democratic Party’s progressive and moderate wings. House committees on Wednesday wrapped up work on significant portions of the package, including $2.1 trillion in tax increases to help pay for the biggest expansion of social welfare programs in decades. That technically meets the Democrats’ self-imposed deadline, but the action belies the obstacles still ahead that threaten to diminish Biden’s ambitious proposals and put off votes on them in the House and Senate.
- The world is facing high energy prices for the foreseeable future as oil and natural gas producers resist the urge to drill again, according to Chevron Corp.’s top executive. “There are things that are interfering with market signals right now that we haven’t seen before. Eventually things work out, but eventually can be a long time,” Chief Executive Officer Mike Wirth said Wednesday in an interview at Bloomberg News headquarters in New York. He expects strong prices for gas, liquefied natural gas and oil, at least “for a while,” without specifying a timeframe. Even though oil and gas prices have surged this year as the world recovers from the Covid-19 pandemic, major producers have been reluctant to invest their cash in new projects, a shift in behavior from previous upswings. That’s leading to concerns of shortages. Already, Europe is facing its worst natural gas crunch in decades, with prices rising to record levels even before winter when demand is typically at its strongest.
- Four ex-Volkswagen AG managers stood trial in Germany accused of fraud for their part in the diesel-rigging scandal that cost the company billions and tarnished its reputation. The trial — starting six years after the scandal broke — is the first criminal case criminal case to target executives at VW’s German headquarters who allegedly backed the idea of dodging emission tests with a software trick. The managers were charged in 2019 with having vehicles equipped with a so-called defeat device in that case that covers 9 million cars sold in Europe and the U.S.
- Europe’s energy crunch has forced a major fertilizer maker to shut down two U.K. plants, the first sign that a record rally in gas and power prices is threatening to slow the region’s economic recovery. CF Industries Holdings Inc. said Wednesday it’s halting operations at its Billingham and Ince manufacturing complexes due to high natural gas prices, with no estimate for when production will resume. European gas and power futures tumbled Thursday on signs energy-intensive industries are curbing consumption. The move comes as Europe is facing an extreme squeeze for energy supplies, with gas and power prices breaking records day after day. The continent is running out of time to refill storage facilities before the start of the winter as flows from top suppliers Russia and Norway remain limited. There’s also a fight for shipments of liquefied natural gas, with Asia buying up cargoes to meet its own demand.
- Credit Suisse Group AG reorganized its investment banking team in Asia-Pacific, promoting senior bankers as key veterans step aside or leave amid an effort to build its presence in the region. Joe Gallagher, who headed the mergers and acquisitions team in the region for 13 years, will relinquish that role to Christian Deiss, a 23-year Credit Suisse veteran, according to an internal memo at the firm. The bank reorganized the upper levels of its Southeast Asia and frontier markets investment banking and its industrial and energies teams in Asia, according to memo, which was confirmed by a Hong Kong-based spokeswoman. The changes comes as Chairman Antonio Horta-Osorio is working to rebuild the global management ranks after the bank was hit hard by the collapse of Archegos Capital Management and its ties to supply chain financier Greensill Capital. Its business in Asia was relatively shielded from the turmoil. The bank was on a hiring spree in the first of half this year, recruiting a net 200 employees across different functions, including 50 relationship managers across North and South Asia. That excludes back-office hires in India, the spokeswoman said.
- Thailand plans to borrow a total of 2.3 trillion baht ($70 billion) in the fiscal year starting October, about 12% less than its target this year, according to people familiar with the matter. The debt-raising will include 1.1 trillion baht of fresh borrowing to meet fiscal deficit and Covid relief spending and 1.2 trillion baht for refinancing existing debt, the people said, declining to be identified before a public announcement. The targets were discussed by the Public Debt Management Office with the primary dealers on Thursday, they said.
- Intensifying concern over the impact of a China Evergrande Group default is rippling through the nation’s financial markets. Developers led declines on the Hang Seng China Enterprises Index, with Country Garden Holdings Co. — the nation’s largest developer by sales — losing 7.2% and Sunac China Holdings Ltd. sinking 11%. This week alone the two stocks have fallen more than 21%. China’s high-yield dollar bonds fell as much as 4 cents on the dollar Thursday, according to credit traders, with those issued by Fantasia Holdings Group Co. — a weaker-rated developer — down about 10 cents.
- Senate Minority Leader Mitch McConnell rejected an appeal by Treasury Secretary Janet Yellen, made in a phone call, for Republicans to join with Democrats in raising the federal debt ceiling, leaving the two sides at odds with potentially weeks to go until the limit is breached. “The leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree,” McConnell spokesman Doug Andres said Thursday. “They will have to raise the debt ceiling on their own and they have the tools to do it.” Yellen has urged Congress to increase the debt limit as soon as possible, warning that the Treasury’s extraordinary measures to avoid breaching the ceiling could run out as soon as October.
- France’s top diplomat unleashed a stream of invective against President Joe Biden after the U.S. and the U.K. announced a new security alliance for the Pacific region which will cost the French defense industry some A$90 billion (56 billion euros). Foreign Minister Jean-Yves Le Drian told France Info Thursday that he felt “stabbed in the back” over the “unacceptable” deal that will hurt French business and shuts the French military out of a key initiative in Western efforts to build a bulwark against China.
- As a young rapper, Jay-Z once teamed up with Damon Dash to sell CDs of his music out of a car in the Brooklyn projects. Today, the co-founders of Roc-A-Fella Records are embroiled in a legal fight involving one of the most cutting-edge investments: non-fungible tokens. The lawsuit is among a flurry involving NFTs as U.S. courts begin to grapple with the novel legal issues surrounding ownership and regulation of the assets, which have recently exploded in value. More than half a dozen suits citing NFTs have been filed in federal courts alone since the start of 2020, as monthly trading volume in the world’s biggest NFT marketplace, OpenSea, soared from $8 million six months ago to more than $1 billion in August. The dispute began in June, when Roc-A-Fella sued Dash, seeking to stop him from auctioning off the copyright to Jay-Z’s debut album, Reasonable Doubt, as an NFT, which represents ownership of a digital object on a blockchain. Roc-A-Fella says that while Dash holds a one-third stake in the company, it owns the album itself, and he has no legal right to sell the NFT.
- Zurich Insurance Group AG is considering a sale of some of its general insurance assets in Australia as the Swiss firm seeks to streamline its portfolio, according to people familiar with the matter. The insurer is working with an adviser on the potential divestment of non-core commercial assets in the country, the people said, asking not to be identified because the matter is private. A sale could fetch a few hundred million dollars, and may draw interest from other insurers and investment funds, the people said. Sale considerations are still preliminary and no final decision has been made, the people said. A representative for Zurich declined to comment.
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*All sources from Bloomberg unless otherwise specified