September 1st, 2020
Daily Market Commentary
- Canadian stocks retreated for a third day, with information technology among the few gainers. The S&P/TSX Composite Index fell 1.2%, the most since June 26. Nine of 11 sectors declined, with tech and materials higher. Silver rounded out the longest run of monthly gains since 2010 as investors sought a haven in precious metals. Canada’s summer rebound may fizzle out this fall as months of high unemployment and uncertain business take their toll, according to the global chief economist of Manulife Investment Management. On the deal front, Whitecap Resources Inc. gained 1.6% after buying NAL Resources Limited, a deal that analysts viewed positively, saying it added scale. Canada has agreed to buy more than 100 million Covid-19 vaccinations from Novavax Inc. and Johnson & Johnson, Prime Minister Justin Trudeau said Monday.
- European equities swung between gains and losses on the news of a large-scale coronavirus vaccine trial, while travel stocks slumped over concerns for the sector amid reduced consumer demand. The Stoxx Europe 600 Index was up 0.3% by 10:40 a.m. in London after having risen as much as 0.8%. Novartis AG and Roche Holding AG climbed. Investors are keenly watching the news about the race to produce a Covid-19 vaccine, with AstraZeneca Plc starting a large-scale human trial of its inoculation in the U.S. Travel shares were led lower by Trainline Plc, which fell the most in a month after its Chief Executive Officer sold stock, and British Airways parent International Consolidated Airlines Group S.A. retreated after being cut to neutral at JPMorgan Chase & Co.
- The dollar dropped to a two-year low, while U.S. futures and European stocks climbed after Chinese manufacturing data indicated that exports are underpinning a recovery. U.S. stock index futures advance alongside shares in Europe while the dollar drops to a two-year low after Chinese manufacturing data indicated that exports are underpinning a recovery. Oil also advanced.
- Japanese stocks ended the day lower, after swinging between gains and losses as the ruling Liberal Democratic Party discussed the path for selecting the replacement for Prime Minister Shinzo Abe. Telecommunications providers were the biggest drag on the Topix index, while trading companies extended Monday’s rally on Warren Buffett’s new investments in five major players. The Nikkei 225 Stock Average closed little changed, holding above the 23,000 level. Both major gauges pared early losses after LDP Secretary-General Toshihiro Nikai said party lawmakers should act quickly to avoid any political vacuum, which could work in favor of Chief Cabinet Secretary Yoshihide Suga in the succession race. Public opinion polls have favored former defense minister Shigeru Ishiba, who has backed economic policies seen as more populist than Abe’s.
- Oil rose to trade near $43 a barrel in New York, with support from a weaker dollar and expectations of a further decline in U.S. stockpiles. Futures added 1.1% after the dollar extended losses to the lowest level since May 2018, making commodities priced in the currency more appealing. American crude inventories may have shrunk by 2 million barrels last week, according to a Bloomberg survey. Meanwhile, healthier manufacturing data in China suggested a renewed pick-up in demand. Oil capped a fourth monthly gain in August but has struggled to hold above $43 as increasing coronavirus infections raise concerns about the sustainability of the demand recovery. Yet on the supply side, U.S. government figures due Wednesday are expected to show crude stockpiles fell for a sixth week, the longest run of declines this year. In China, a private gauge of factory activity grew at the fastest pace in August since January 2011.
- Gold is rebounding, with Comex futures climbing back to $2,000 an ounce as the dollar weakened and investors bet U.S. interest rates would stay lower for longer. The dollar dropped to the lowest in over two years, fueling a broad advance in commodities. Spot gold gained more than 3% over the past three sessions, following its first monthly loss since March, as the Federal Reserve’s new approach on inflation added support. That came after a slowdown in buying from gold-backed exchange-traded funds raised concern that a key driver of the metal’s record rally may be losing momentum.
- Zoom Video Communications Inc. reported the second-largest sales surge among Nasdaq 100 companies last quarter, providing an emphatic demonstration that businesses and consumers have continued to flock to the video-meeting service in even larger numbers than expected. Shares soared more than 32% in early trading Tuesday. Revenue jumped more than four times to $663.5 million in the fiscal second quarter from a year earlier, the San Jose, California-based company said Monday in a statement. Analysts, on average, projected $500 million. Biotech firm Moderna Inc. is the only Nasdaq 100 company to have reported a larger sales gain in a similar period, according to data compiled by Bloomberg. Earnings, excluding some items, were 92 cents a share in the period ended July 31, compared with analysts’ estimates of 45 cents.
- Russia became the fourth nation to pass one million confirmed coronavirus cases, on the day when schools across the country reopened for the new academic year. European nations are facing a second wave with active cases rising in Spain and Italy. Germany’s government predicted that the economic damage from the pandemic will be less severe than feared. In Asia, Hong Kong’s chief executive urged residents to participate in a controversial mass testing program amid suspicion that the effort would be used to harvest people’s DNA for monitoring purposes. India’s gross domestic product shrank by almost 24% last quarter as the nation becomes the new epicenter of the virus. Experts predict India soon will pass Brazil and, ultimately, the U.S. as the worst affected country.
- Consumer prices in the 19-nation euro area are falling for the first time in four years, highlighting that a recent rebound in economic activity hasn’t managed to offset the pandemic’s profound impact on demand. The inflation rate came in at -0.2%, missing economists’ median estimate for a reading of +0.2%. Core inflation hit a record low, in part dragged lower by discounting during summer sales. The European Central Bank had warned that inflation would weaken, but the negative reading will still sound the alarm for policy makers who have tried to soften the shock unleashed by the coronavirus.
- Geely Automobile Holdings Ltd., the Chinese carmaker controlled by Volvo Cars owner Li Shufu, may raise as much as 20 billion yuan ($2.9 billion) via a listing on Shanghai’s Star board. The debut would represent the first for any automaker on the bourse, a forum for high-tech and innovative companies that started last year. Hangzhou-based Geely, which is already listed in Hong Kong, plans to use the money to help develop new technologies and vehicle models, as well as finance mergers and acquisitions and replenish working capital, according to a sales document filed Tuesday. Car manufacturers around the world are weathering an industry slump caused by the coronavirus outbreak. Geely last month reported a 43% drop in first-half profit after the pandemic shuttered factories and decimated demand. With the outbreak receding in China, sales have started to revive and automakers are betting the world’s largest market can help them return to growth.
- Renewable power fund Greencoat U.K. Wind Plc will buy a stake in a wind farm off the west coast of England from SSE Plc for 350 million pounds ($470 million). The sale is part of SSE’s plan to sell assets over the next year to support 7.5 billion pounds of spending in the next five years to cut greenhouse gas emissions. Pending the deal’s completion, Greencoat will buy 25.1% of the wind farm. Denmark’s Orsted A/S developed the wind farm and still owns 50.1% of it, while Dutch pension fund PGGM owns the remaining share.
- BinDawood Holding Co., one of Saudi Arabia’s largest grocery chains, is set to be valued at about $3 billion in its initial public offering this month. Underwriters have valued the 20% stake BinDawood seeks to sell at 2.3 billion riyals ($615 million), according to the offering document. That would imply an offer price of about 100 riyals a share. BinDawood plans to sell 22.86 million shares through a book-building process. The final pricing and valuation could still change based on demand.
- Apple Inc. has asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year’s launch, in a sign that demand for the company’s most important product is holding up in the midst of the global pandemic and recession. The Cupertino, California-based technology giant anticipates shipments of these next-generation iPhones may reach as high as 80 million units in 2020, according to people familiar with the situation. Apple plans to launch four new models in October with fifth-generation wireless speeds, a different design and a wider choice of screen sizes, said the people, who asked not to be identified discussing unannounced products. Among a comprehensive product refresh in the fall, Apple is also preparing a new iPad Air with an edge-to-edge iPad Pro-like screen, two new Apple Watch versions and its first over-ear headphones outside the Beats brand. A smaller HomePod speaker is in the works, too. An Apple spokeswoman declined to comment.
- Walmart Inc.’s answer to Amazon Prime finally has a launch date. The new subscription program, dubbed Walmart+, will be available on Sept. 15, the world’s largest retailer said in a statement. The program costs $98 a year, a discount to rival Amazon’s $119 annual Prime membership, and includes unlimited free delivery — including on groceries — plus gasoline discounts. The roll-out heightens Walmart’s competition with Amazon as retailers of all types try to capitalize on soaring consumer interest in e-commerce during the pandemic. Walmart has picked up millions of new customers in recent months thanks to its low prices on food and essentials, a ubiquitous brick-and-mortar store network with 4,700 locations, and improvements to its online division, which nearly doubled its U.S. revenue last quarter.
- President Donald Trump will continue his effort to make unrest in U.S. cities a central issue in his re-election campaign with a trip Tuesday to Kenosha, Wisconsin, gripped by violence since the shooting of a Black man by police late last month. Ahead of his visit, Trump escalated his blame of Democrats for nationwide protests and riots, warning voters on Monday it’s a preview of what’s to come if his opponent, Joe Biden, is elected to replace him. But Biden had already begun to fire back at the president, reminding voters on Monday in his first campaign appearance since accepting the Democratic Party’s nomination, that the unrest has unfolded under Trump’s watch, and charging that he has failed to calm tensions and is encouraging violence for his political benefit.
- Facebook Inc. on Tuesday told users it can take down or block any content that could increase regulatory or legal risks for the social media giant around the world — even if the content itself isn’t illegal. The broad language of a global change to its terms of service, which takes effect Oct. 1, gives the U.S. giant room to do whatever it deems necessary to maintain its business objectives in a shifting regulatory environment. Facebook said the change allows it to block people and publishers in Australia from sharing news, pushing back against a proposed law forcing the company to pay media firms for their articles. But a company spokesperson said the tweak applies globally.
- Efforts by banks including HSBC Holdings Plc and ABN Amro Bank NV to recover $3.5 billion from a collapsed oil trader in Singapore have hit a snag over attempts by a court-appointed manager to tap other assets of the family that ran the firm. PricewaterhouseCoopers, judicial managers of Hin Leong (Pte) Ltd., has urged the family to repay creditors with 95% of their assets, estimated to be worth at least S$2 billion ($1.5 billion), according to people familiar with the matter. The family could keep the remaining 5%, said the people, who asked not to be identified because the information is confidential. The Lim family hasn’t agreed to the proposal, stymying talks, the people said.
- As Donald Trump threatened to ban the U.S. operations of the hit app TikTok, Chinese parent ByteDance Ltd.’s choices seemed to be limited to selling the business for $20 billion to $30 billion or leaving empty-handed. But after China signaled it will get involved in any deal’s approval, ByteDance founder Zhang Yiming is reconsidering his options and weighing the implications of Beijing’s involvement, according to people familiar with the matter. The company’s regulatory team and deal negotiators are huddling to discuss whether it’s still possible to craft a sale that can win approval from both governments, an acquirer, venture investors and ByteDance itself, said one of the people, asking not to be named because the matter is private.
- September began true to its billing as typically one of the busiest months of the year in credit markets with a batch of new bond deals. Sports gear firm Adidas AG is marketing a 1 billion-euro ($1.2 billion) dual tranche deal, while car manufacturer BMW AG’s offering is the first sterling-denominated debt transaction since July, according to data compiled by Bloomberg. The U.K. public holiday on Monday didn’t disrupt the positive sentiment that permeated markets last week. The iTraxx Crossover, a gauge of credit risk for junk-rated European companies, remains at the lowest level since the beginning of March.
- German lawmakers plan to start an in-depth investigation into Wirecard AG’s collapse after key officials from Chancellor Angela Merkel’s government and financial watchdogs failed to put an increasingly political issue to bed. The Greens will back other opposition parties to start a full parliamentary probe. The investigation is an early salvo ahead of an election next year that will decide who succeeds Merkel in running Europe’s largest economy. Germany’s biggest corporate fraud in living memory has burned investors and engulfed its establishment by putting on display gaping holes in financial oversight and even raised the prospect of bias in favor of the company at the authorities. The inability of regulators to get to the bottom of the scandal and piecemeal disclosures from the government angered parliamentarians and undermined the country’s reputation as a place to do business.
- On a sweltering summer afternoon in West Texas, a cryptocurrency miner backed by billionaire Peter Thiel powered down its data-processing centers for about 30 minutes. During that short window, the company made money not from Bitcoin, but from selling electricity. On hot days without wind, the company, Layer1, can sell its contracted power supplies back into the grid for a profit. Recently, when power prices in Texas topped $200 a megawatt-hour, Layer1 reaped returns of more than 700%, according to its founder and chief executive officer, Alexander Liegl. At night, as power prices drop to zero or lower due to the oversupply of wind energy, it can throttle up operations as much as the circuit boards can handle.
- Steve Cohen’s bid for the New York Mets values the team at about $2.35 billion, $250 million less than what he had agreed to pay in December, Sportico reports, citing two unidentified people familiar with the matter.
- The Turkish owner of Godiva chocolates and McVitie’s biscuits is placing on hold a plan to sell some of its assets and will instead increase food production to meet rising demand due to the coronavirus pandemic. Yildiz Holding AS suspended efforts to dispose of its frozen-food division Kerevitas Gida Sanayi ve Ticaret AS and its U.K. cracker unit Jacob’s, according to people with direct knowledge of the Istanbul-based company’s plans. It will still exit businesses outside of its core focus of food production, depending on investor interest in the assets, they said.
*All sources from Bloomberg unless otherwise specified