September 17, 2021

Daily Market Commentary

Canadian Headlines

  • Royal Bank of Canada Says Nadine Ahn to Become CFO. Ahn takes over from Rod Bolger, who will be leaving RBC after 10 years. Ahn joined RBC in 1999 and has held progressively senior Finance roles, including in Corporate Treasury and in RBC Capital Markets Finance. Bank also appoints Executive Vice-President and General Counsel. Maria Douvas as chief legal officer, effective immediately.  RBC Ventures and Corporate Development Group Head Mike Dobbins has decided to leave the bank on Nov. 1
  • Moderna Vaccine Gets Full Canada Approval for People Aged 12+.  “Health Canada’s approval of our COVID-19 vaccine is an important milestone as it is our first full approval for Spikevax. I would like to thank Health Canada for their hard work throughout the process,” said Stéphane Bancel, Chief Executive Officer of Moderna. “I would also like to thank the Government of Canada for the partnership they have built with us and for their confidence in our mRNA platform in addressing the COVID-19 pandemic.”
  • Keystone Permit Suit by GOP Gets Backing From Alberta, Canada. Alberta, Canada, supported Republican-led states challenging the Biden administration’s decision to cancel the Keystone XL pipeline, telling a Texas federal court Thursday that the decision cost the province more than $1 billion Canadian dollars—about $790 million. President Joe Biden’s executive order revoked a Trump administration permit that allowed TransCanada Keystone Pipeline LP to build and operate pipeline facilities at the border. Texas, Florida, Alaska, and 20 other states say they face “millions of dollars” in lost tax revenue, and they urged the U.S. District Court for the Southern District of Texas to block the decision.
  • CN  today announced the details of its strategic and financial value creation plan, “Full Speed Ahead – Redefining Railroading,” which will allow CN to continue delivering high-quality service to customers while generating profitable groin with and enhanced returns to shareholders. The plan announced today builds upon CN’s January 2021 strategic plan to lead on safety, customer value, operational excellence, sustainability and social inclusion, while also delivering industry-leading shareholder returns.

World Headlines

  • U.S. equity futures fell and European shares erased gains to trade slightly lower Friday after comments by a European Central Bank council member stoked inflation concerns and as triple witching added to volatility. The Stoxx Europe 600 Index was 0.2% lower as of 11:44 a.m. in London, after having gained as much as 0.8%. Miners fell the most, hitting a three-month low as iron ore retreated again. Travel and retail stocks advanced amid expectations that the U.K. government will announce a relaxation of its rules on returning to the country from abroad.
  • The Federal Reserve will probably hint at its meeting next week that it is moving toward scaling back monthly asset purchases and make a formal announcement in November, according a Bloomberg survey of economists.  The survey of 52 economists also predicted the U.S. central bank would hold interest rates near zero through 2022 before delivering two quarter-point increases by the end of the following year.
  • U.K. retail sales unexpectedly fell for a fourth month, the worst stretch of declines since at least 1996. The 0.9% drop in August suggests a Covid resurgence took a toll on confidence. Consensus was for a gain of 0.5% gain.
  • Gold and silver headed for their second straight weekly declines as signs of economic recovery in the U.S. added to speculation that stimulus could be reduced soon. Bullion slumped 2.3% on Thursday and silver fell to the lowest in more than nine months after American retail sales rose unexpectedly in August. That spurred an advance in Treasury yields and the dollar, damping demand for precious metals that don’t earn interest
  • Oil headed for a fourth weekly gain supported by signs of a tighter market and a wider rally in energy prices. West Texas Intermediate, which dipped on Friday, has still climbed about 4% this week. Investors have been tracking strong rallies in other energy commodities, especially natural gas, which has surged by about 45% so far this quarter and spurred the prospect of fuel switching. The U.S. benchmark has also advanced as crude and gasoline stockpiles in the country registered further declines.
  • Energy shortages may deepen in China this winter as it plans to expand pollution curbs to Shandong’s oil towns, where the bulk of the country’s teapot refineries are clustered. The province accounts for more than a third of China’s diesel output. Diesel output has already slipped this year after Beijing’s crackdown on teapots.
  • Biden said his administration is looking into high gasoline prices. U.S. retail gasoline prices rose to $3.19 per gallon Wednesday, the highest since October 2014, according to data from auto club AAA. “There’s lots of evidence that gas prices should be going down — but they haven’t.”
  • Iron ore is on the verge of sinking below $100 a ton as China’s moves to clean up its heavy-polluting industrial sector spurred a swift and brutal collapse. Prices have more than halved since peaking in May as the world’s biggest steelmaker intensifies production curbs to meet a target for lower volumes this year, and a sharp downturn in China’s property sector hurts demand. Iron ore’s slump makes it one of the worst-performing major commodities and a notable outlier in a broader boom that’s seen aluminum soar to a 13-year high, gas prices jump and coal futures surge to unprecedented levels.
  • China Evergrande Group’s distress is sending shockwaves through the market for junk debt from the nation, as worries grow about its impact on other property firms and the broader economy. Average prices for Chinese speculative-grade dollar bonds extended declines Friday below 85 cents, the lowest levels since 2012, according to a Bloomberg index. Some cracks also have started to appear in investment-grade Chinese and Asian dollar debt, where spreads are on course to widen for the first week in seven amid heavy issuance as borrowers rush deals.
  • China injected more cash into its banking system in a sign authorities are seeking to avert a funding squeeze amid a seasonal rise in financing demand and the intensifying debt crisis at China Evergrande. The People’s Bank of China added 90 billion yuan ($14 billion) of funds on a net basis through seven-day and 14-day reverse repurchase agreements on Friday, the most since February. Today was the first time this month it added more than 10 billion yuan short-term liquidity into the banking system on a single day.
  • The price of electricity for the winter in the U.S. soared to a seven-year high in some markets, pushed up by a rally in natural gas that’s been exacerbated by energy-supply shortages gripping Europe. Traders bid up the forward price of power in the biggest U.S. market to about $82 a megawatt-hour for January 2022, a level not seen for that month since 2014, according to data compiled by Bloomberg. The benchmark for 13 states stretching from Chicago to Washington eclipsed even the average price reached during the hot summer months this year, a rarity since U.S. power demand typically peaks when residents crank up air conditioners.
  • Higher gas prices mean more coal and even oil will be burned for power, driving up emissions just as the Biden administration steps up the fight against climate change. The surge also means people will see higher utility bills at a time when prices on a range of consumer goods are already rising.
  • President Joe Biden will host a virtual discussion of climate change with world leaders Friday as he tries to accelerate efforts to slash greenhouse gases amid concerns that commitments are lagging before a pivotal United Nations summit. The leader-level summit is expected to be a sober assessment of global progress – or lack thereof – six weeks ahead of the UN gathering in Glasgow, which climate activists and government officials have described as a make-or-break moment to curb climate change. The discussions take place as the White House concedes its biggest challenge has been persuading nations to bring a sense of urgency and plans for concrete actions to the summit in Scotland, according to a senior U.S. official who requested anonymity to preview the closed-door meeting.
  • The private equity industry is on a spending spree like never before. Buyout barons Blackstone Group Inc., Apollo Global Management Inc., KKR & Co. and others account for a record 30% of global transactions this year, with deal flow and fundraising close to all-time highs.  Investors are flush with cash and looking to put the money to work. In the U.S., a private equity consortium recently announced one of the biggest leveraged buyouts of all time. And in the U.K., PE funds have been at their busiest since the financial crisis, targeting household names including grocery chain Wm Morrison Supermarkets Plc. By mid-2021, the sector had amassed a record $3.3 trillion of unspent capital, including $1 trillion held by buyout funds, giving it significant fire power for fresh acquisitions.
  • U.S. financial firms that for decades used London as a gateway to Europe’s single market are opening offices or bolstering existing operations on the continent to keep their access to the bloc. By the end of this year, Paris will have added 3,000 finance jobs thanks to Brexit, French Finance Minister Bruno Le Maire said in June. Many think that’s just the beginning.  With everyone from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley to Bank of America Corp. and Citadel beefing up operations in the French capital, the city has become one of the hottest job markets in Europe for finance professionals. Wages are rising and placement firms say they’re struggling to find promising candidates.
  • Mitsubishi UFJ Financial Group Inc. is considering selling its U.S. banking arm, as consolidation heats up in the American financial industry, people familiar with the matter said. The Japanese lender is working with an adviser to explore options for MUFG Union Bank NA, said the people, who asked to not be identified because the matter isn’t public. Mitsubishi UFJ has held some informal discussions with select potential buyers of the unit, though it isn’t conducting a formal auction process, they said.
  • French auto parts-maker Valeo SA has given the clearest indication yet it intends to buy out partner Siemens AG from their electric-car components venture to counter a declining combustion-engine business.Siemens “entered this joint venture with the plan to eventually sell and we to buy,” Christophe Perillat, Valeo’s incoming chief executive officer, told Bloomberg News on the sidelines of a Munich car show event this month. “Whether this happens soon or in 2022 or in 2024, it’s not clear.” Valeo and Siemens joined forces on Valeo Siemens eAutomotive GmbH five years ago to make e-motors, axles and powertrain electronics. From next year, Siemens may exercise an option to sell its entire stake.
  • Singapore is looking to set up a S$1.5 billion ($1.1 billion) fund backed by state investment firm Temasek Holdings Pte. to bolster its stock market, which has struggled with tepid listings and poor trading volumes. The fund will invest in high-growth companies and initial public offerings. Separately, the investment arm of the Economic Development Board, a government agency promoting foreign investment in Singapore, will put up to S$500 million into a fund aimed at companies looking to list in two to five years.

No price is too low for a bear or too high for a bull.

*All sources from Bloomberg unless otherwise specified