September 22nd, 2020

Daily Market Commentary

Canadian Headlines

  1. Canadian stocks dropped Monday as investors assess a clouded economic outlook amid rising coronavirus cases. The S&P/TSX Composite Index fell 1.3% to its lowest level since July 14. Nine of 11 sectors retreated, while information technology and consumer staples gained. Oil dropped as U.S. equities slid to a two-month low on mounting concerns over prolonged coronavirus restrictions while Libya signaled the resumption of some crude exports. Russ Girling, the man who spent a decade battling to build the controversial Keystone XL crude oil pipeline, is stepping down as TC Energy Corp.’s chief executive officer with the project still uncompleted. Meanwhile, Prime Minister Justin Trudeau is set to unveil a new plan to try to contain the spread of Covid-19 and recharge Canada’s pandemic-battered economy, according to a senior government official.
  2. Unifor’s master bargaining committee decided to continue bargaining with Ford past the strike deadline of 11:59 p.m. “Our master bargaining committee is willing to negotiate throughout the night to provide Ford with every opportunity to do right and reach a fair settlement to avoid a work stoppage at its Canadian plants,” says Jerry Dias, president of the Unifor labor union

World Headlines

  1. European stocks rose on Tuesday, clawing back some of the territory lost in Monday’s slump as market participants watched for clues about the severity of the region’s response to the resurgent pandemic. The Stoxx Europe 600 Index rose 0.5% as of 8:20 a.m. in London, with tech stocks, banks and retailers leading gains. With volumes returning from a summer lull, equities in the region slumped the most since June 11 on Monday amid mounting signs that Europe’s coronavirus outbreak is once again reaching a scale that would require disruptive lockdown measures. Stocks that stand to gain from a slowdown in public life, such as meal-kit maker HelloFresh SE and video game makers Ubisoft Entertainment SA and CD Projekt SA bucked the trend on Monday and continued rising at Tuesday’s open.
  2. U.S. equity futures climbed alongside European stocks as tech shares once again showed resilience. The dollar faltered after its biggest daily gain in three months. Facebook Inc. and Amazon.com Inc. advanced in premarket trading as contracts on the S&P 500 and Nasdaq gauges rose, signaling that fears about a market correction were fading after Wall Street’s late afternoon comeback on Monday. Treasuries held steady before Federal Reserve Chair Jerome Powell and U.S. Treasury Secretary Steven Mnuchin speak later in the day at a Congressional panel.
  3. Elsewhere, the decline in financial shares continued in Asia, following a reportabout suspicious worldwide banking transactions. Crude oil edged higher in New York after its biggest decline in almost two weeks on mounting worries over prolonged coronavirus restrictions and supply concerns.
  4. Oil edged higher, recovering from its biggest loss in almost two weeks even as a resurgent coronavirus looms over the demand outlook. Futures in London were up 1.3% near $42 a barrel, snapping a sharp decline Monday alongside European markets. Brent also recovered from technical support, moving away from their 100-day moving average on Tuesday. That’s despite tightened restrictions in the U.K., to prevent the spread of coronavirus, and a warning the U.S. could experience another outbreak cycle dampening sentiment. The expected reopening of Libya’s battered oil industry has also weighed on the market in recent days.
  5. Gold fell again after suffering the biggest drop in a month as the dollar rose, with investors weighing comments from Federal Reserve Chair Jerome Powell and prospects for further stimulus in the U.S. The declines came despite large inflows into bullion-backed exchange-traded funds. Powell said the U.S. economy is improving but has a long way to go before fully recovering from the pandemic, according to the text of testimony he’s set to deliver to the House Financial Services Committee Tuesday. Yet prospects for another round of U.S. government spending have retreated amid a partisan battle over replacing Supreme Court Justice Ruth Bader Ginsburg. Meanwhile, U.S.-China tensions continued to simmer. Doubts emerged about Oracle Corp.’s deal to take over TikTok as President Donald Trump said he may renege on his approval and the Chinese government signaled its reluctance.
  6. Tiffany & Co. persuaded a court to fast-track a lawsuit claiming that LVMH is relying on faulty legal pretexts to try to cancel a $16 billion buyout, with the judge urging both sides to seek a settlement. Delaware Chancery Court Judge Joseph Slights III on Monday rejected a request by the maker of Louis Vuitton bags and Moet & Chandon Champagne that he put off the case until well into next year. But the judge also denied the jewelry chain’s bid to have the matter decided before the deal’s Nov. 24 closing date, setting a trial for Jan. 5.
  7. The Covid-19 vaccine trial designed by Pfizer Inc. and its German partner BioNTech SE may allow them to find whether their shot works before their fastest-moving rivals. The companies plan a first look after a mere 32 coronavirus infections have accumulated in their massive 44,000-person trial. That case total could be reached as soon as Sept. 27, according to Airfinity Ltd., a London-based analytics firms tracking vaccine trials. Pfizer has also given itself four chances to get a preliminary result, before reaching the final goal of 164. Some trial experts say the company appears to be looking for a leg up in a race against frontrunners such as Moderna Inc. and AstraZeneca Plc to be first with a vaccine.
  8. A federal vaccine advisory committee will put off a vote on recommending who should get initial limited doses of any Covid-19 vaccine in the U.S., until committee members learn more about the vaccines that could become available first, according to people familiar with the matter. The Advisory Committee on Immunization Practices, a group of external medical experts that advises the Centers for Disease Control and Prevention, was initially expected to vote at a meeting Tuesday on a plan to give priority to initial doses of any Covid-19 vaccine that passes muster in clinical trials. The ACIP may wait until government officials authorize a specific vaccine or vaccines for use before voting on how to give priority to initial doses, one of the people familiar with the matter said. Some information, like how effective a vaccine is, may not become available for several weeks. Typically, the committee votes only on recommendations for the use of vaccines after they have been cleared by regulators. The next scheduled committee meeting is in late October.
  9. Senate Republicans are moving quickly to set their strategy for confirming President Donald Trump’s Supreme Court nominee, with the senators focusing on whether they can move fast enough to get it done before Election Day in six weeks. GOP leaders contacted individual lawmakers over the weekend after the death of Justice Ruth Bader Ginsburg and likely will decide during a lunch meeting Tuesday on timing for a confirmation vote, according to Senator John Thune of South Dakota, the chamber’s second-ranking Republican.
  10. Britain recommended people work from home if possible, with the government set to announce new restrictions on bars and restaurants. The number of deaths linked to Covid-19 in England and Wales rose for the first time since April, the latest evidence of the pandemic’s resurgence among the population. Elsewhere, the situation was more mixed. Iran reported its biggest spike in cases since the pandemic began. India, meanwhile, had its lowest increase in two weeks, and South Korea’s infections rose by less than 100 for a third day. Hong Kong extended social distancing measures by a week. The U.S. is approaching 200,000 deaths from Covid-19 and Apple Inc. predicted a permanent change with remote work.
  11. Chinese electric-vehicle maker WM Motor Technology Co. boosted its coffers by 10 billion yuan ($1.5 billion), raising funds for car development as it works toward a potential initial public offering. The so-called Series D round was led by Shanghai Automotive Industry Corporation (Group), the parent of China’s biggest automaker SAIC Motor Corp., and a state-owned investment platform. Other investors include Baidu Inc., SIG China, and several local government-led funds, WM Motor said Tuesday in a statement. China’s electric-vehicle upstarts are capitalizing on increasing investor interest in clean-energy companies. Shares of global EV market leader Tesla Inc. and Chinese contender NIO Inc. have surged this year. Li Auto Inc., another Chinese EV maker, raised $1.1 billion in late July, while XPeng Inc. had a strong debutlast month.
  12. Polish e-commerce platform Allegro plans to raise as much as 8.1 billion zloty ($2.1 billion) in an initial public offering in Warsaw that’s expected to be one of the country’s biggest-ever listings. Besides the 1 billion zloty of new stock that the company already said it will sell, the group’s private-equity owners Cinven, Permira and Mid Europa Partners are offering another 163.6 million existing shares, according to a prospectus filed in Luxembourg Tuesday. In all, about 187.8 million shares are being marketed in the IPO at 35 zloty to 43 zloty each, with 18.3% of the total share capital expected to be available for trading. There is an additional 15% over-allotment option of existing shares, which could lift the total proceeds to 9.3 billion zloty.
  13. Peloton shares fell 2% premarket after NBC News and other media outlets reported that PTON competitor Echelon developed a new connected fitness bike in collaboration with Amazon.com, the Prime Bike. “The Prime Bike was developed in collaboration with Amazon, who wanted to create their first-ever connected fitness product, that retailed for less than $500,” an Echelon spokesperson told NBC News Shopping
  14. Tesla shares dropped 3.7% premarket Tuesday after CEO Elon Musk tweeted that any new technology unveiled at the company’s “Battery Day” event may not reach serious, high-volume production until 2022. Musk also said that the company intends to increase battery cell purchases from partners like Panasonic, LG and CATL; “However, even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 & beyond unless we also take action ourselves,” Musk added
  15. Donald Trump is moving toward nominating Amy Coney Barrettto replace the late Justice Ruth Bader Ginsburg on the Supreme Court, according to people familiar with the matter, despite the president saying Monday he’s considering as many as five candidates. Barrett met with Trump and separately with White House Counsel Pat Cipolloneon Monday, said people familiar with the discussions. She is a favorite of anti-abortion rights advocates, who are heavily lobbying the White House and Trump personally to nominate her. She’s preferred by Senate Majority Leader Mitch McConnell, according to people close to him. And her supporters have pointed out to the White House that as a Midwestern Catholic, Barrett may help the president secure votes for his re-election in vital Rust Belt and Great Lakes states where he currently trails Democratic candidate Joe Biden.
  16. The World Economic Forum won’t hold its 2021 annual meeting in the ski resort of Davos next summer, according to Swiss media. The Forum last month announced it was postponing its annual high-profile gathering of global business and financial leaders to early summer from January, due to the pandemic. Now it seems the town’s conference center won’t be hosting the meeting in early summer either, media including broadcaster SRF and newspaper Suedostschweiz reported, citing the Davos hotel and restaurant association. The WEF has written to local businesses to inform them of its decision, according to the newspaper’s website. The reports did not say whether the meeting might be moved to a different location. That happened in 2002, when it shifted to New York to show solidarity following the Sept. 11 terror attacks.
  17. KfW, Germany’s third-largest bank by assets, may drop Ernst & Young as auditor as EY continues to be plagued by its role in the country’s Wirecard accounting scandal. The German government is taking a close look at the auditing of state-run KfW, and is considering dropping EY, according to two people familiar with the discussions. No decision has been made, and the tender remains open, the people said. Commerzbank and DWS Group have already moved away from EY, one of the Big Four auditors. The firms, which also include PricewaterhouseCoopers, KPMG, and Deloitte, have been criticized for poor work and conflicts of interest in recent years. The industry is getting the most attention from critics since the collapse of Enron Corp. two decades ago.
  18. The U.K. markets regulator plans to overhaul the way insurers price home and car coverage in a bid to save consumers 3.7 billion pounds ($4.7 billion) over 10 years. The Financial Conduct Authority said it’s concerned these markets are “not working well for consumers,” according to a statement on Tuesday. The proposed rule changes would ensure that when people renew their policies they pay no more than new customers buying coverage for the first time. It would also be easier for clients to stop automatic renewal of their policies. Providers of home and car coverage fell after the FCA issued its proposals, which Morgan Stanley analyst Jonathan Denham said were tougher than expected. AA Plc declined as much as 5.6% in London on Tuesday morning, while Direct Line Insurance Group Plc fell as much as 5.4% and Admiral Group Plc dropped about 2%.
  19. A spike in electricity prices last week in the U.K. is raising questions about how well the network operator is balancing the grid and at what cost to consumers. Electricity prices surged to more than 10 times the average following a market warning from National Grid Plc on Sept. 15. The network manager said calm weather and warm temperatures were set to lower the supply buffer it keeps to ensure there’s enough power in the system. At the same time, the company was paying a nuclear station not to generate. The incident is threatening to elevate the highly technical practices of grid managers into a political issue. Some analysis suggest National Grid made mistakes in the process that could lead to higher bills for consumers.
  20. Italy has asked UniCredit SpA executives if they would be interested in buying the government’s majority stake in Banca Monte dei Paschi di Siena SpA, according to people with knowledge of the matter. Informal contacts have been made and Italy’s Finance Ministry sees a UniCredit deal as a possible way to exit its majority holding in the bailed out lender, the people said, asking not to be identified because the matter is private. The discussions were preliminary and the ministry is weighing a range of options, they said.
  21. A battle for financial talent is intensifying in China, one of the few places worldwide where global banks are firmly in hiring mode. Credit Suisse Group AG this month hired a dozen analysts in China, almost half of whom used to work at UBS Group AG. UBS has scooped up more than 40 people from global and local firms. Morgan Stanley has moved a team to the mainland and hired about 20, but also saw six bankers walk out the door, some to local brokers. Along with Goldman Sachs Group Inc., most foreign firms are seeking to double their headcounts over the next few years. The hiring follows China’s historic opening of its financial sector and stands in contrast to much of the world, with global banks announcing jobs cuts this year exceeding 63,000, on track for the deepest retrenchment since 2015. The industry’s biggest players are betting there’s billions to be made in China on everything from merger advice to stock underwriting and trading — if they can find the right people.
  22. Thailand’s cabinet backed several stimulus measures worth a combined budget of 70 billion baht ($2.2 billion) to boost consumption and jobs to counter the economic downturn from the Covid-19 outbreak. The ministerial meeting also passed a resolution to add three additional holidays this year to encourage domestic travel, as the country’s vital tourism sector has been crushed by the absence of international tourists for months because of the pandemic. The latest stimulus plans include cash incentives for welfare cardholders and funds for members of a co-payment program geared to low-income earners and small retailers, Prime Minister Prayuth Chan-Ocha said after the meeting Tuesday.

*All sources from Bloomberg unless otherwise specified