September 28, 2021

Daily Market Commentary

Canadian Headlines

• Canadian stocks climbed on Monday, led by health care and energy stocks.  The S&P/TSX Composite rose 0.3% to 20,463.42 in Toronto. The index advanced to the highest closing level since Sept. 17 after the previous session’s decline of 0.3%. Toronto-Dominion Bank contributed the most to the index gain, increasing 1.7%. Enerplus Corp. had the largest increase, rising 10%.
• Agnico Eagle Mines Ltd. agreed to acquire Kirkland Lake Gold Ltd. in an all-stock deal valued at about C$13.4 billion ($10.6 billion) that combines two of Canada’s largest miners of the precious metal. The tie-up is the latest in a string of similar deals that has reshaped the gold-mining industry in recent years. Gold mining reserves and mine lives are shrinking as a result of years of under-investment in exploration and development, while producers of the metal face rising production costs and inflation. Investors will receive 0.7935 of an Agnico share for each Kirkland share held, the companies said Tuesday in a statement, describing the transaction as a merger of equals. That represents a premium of about 1% over Kirkland’s 10-day volume weighted average price in Toronto trading, they said.
• Square Inc.’s operation in Canada is introducing two new features to help small businesses access their cash from sales more quickly as the prolonged pandemic adds turbulence for merchants and service providers. The new Square Card give sellers free, instant access to funds they processed through Square rather than having to wait until the next business day, as was the case before, the San Francisco-based company said in a statement Tuesday. For firms that maintain external bank accounts, Square is offering real-time fund transfers by linking their debit cards to their Square accounts.
• Vale SA, one of the world’s biggest producers of iron ore and nickel, expects all 39 workers trapped in an underground mine since Sunday to be freed later this morning. Nineteen employees at the Totten mine in Sudbury, Ontario, have been rescued and are in good health, and the remainder are on their way, the company said in a statement. The workers were uninjured and began their ascent via a ladder system with the support of a rescue team, the Rio de Janeiro-based company said Monday. The people were trapped after an excavator that was being transported into the mine dislodged, blocking the shaft. They proceeded to refuge stations, have had access to food and water and have been in frequent contact with above-ground staff.
• HSBC Holdings Plc’s Canadian unit is introducing a package of sustainable financing products — including deposits and trade finance — for the small- and medium-sized business customers it focuses on in the country. The “green deposits” will be eligible to finance loans for customers’ green initiatives, and the trade finance product will support environmentally and socially sustainable trade activities, HSBC Canada, which is run from Vancouver and Toronto, said Tuesday. HSBC Canada Chief Executive Officer Linda Seymour said the unit was able to leverage its London-based parent company’s global expertise on sustainable finance to create the products, meeting a need that business customers frequently seek the bank’s help addressing.

World Headlines

• European stocks fell on Tuesday as a spike in bond yields on concerns over Federal Reserve tapering fueled a rotation out of frothier technology shares. The Stoxx Europe 600 Index dropped 1.2% as of 10:31 a.m. in London, with tech leading the slump as U.S. Treasury yield traded above 1.5%, the highest since June. Energy stocks outperformed as oil continued its ascent. Markets in the region have been hit by rising yields, which have added to fears over the strength of the economic recovery, a power crunch, China’s regulatory crackdown and the China Evergrande Group crisis. It’s left the Stoxx 600 about 4% away from its highest level reached in August.
• A technology-led equity selloff deepened, and government bonds from the U.S. to Germany tumbled, as investors braced for the Federal Reserve to start tapering. The dollar gained haven allure amid a supply crunch from oil to semiconductors. Contracts on the Nasdaq 100 Index plunged 1.6%, signaling the digital-driven gauge will extend Monday’s losses. The 10-year Treasury yield rose above 1.5% while shorter-dated rates surged toward pre-pandemic levels. Oil headed for multiyear highs. Applied Materials Inc. led a slump in chip stocks in New York premarket trading.
• Asian stocks fell for the first time in four days as declines in technology names overshadowed a rally in energy shares. The MSCI Asia Pacific Index dropped as much as 0.7%, with a jump in U.S. Treasury yields weighing on richly-valued tech stocks. That’s even as the region’s oil and gas shares climbed amid signs of a global energy crunch. Chipmakers Taiwan Semiconductor Manufacturing and Samsung Electronics were the biggest drags on the Asian benchmark. Asian equities have been recovering after being whipsawed by concerns over any fallout from China Evergrande Group’s debt troubles. As worries over the distressed property developer abate, the pace of rise in Treasury yields and global inflation data are being closely watched for clues on the U.S. Federal Reserve’s policy stance.
• Brent oil roared above $80 a barrel, the latest milestone in a global energy crisis, on signs that demand is running ahead of supply and depleting inventories. The international crude benchmark extended a recent run of gains to hit the highest since October 2018, while West Texas Intermediate also climbed. Oil’s latest upswing has come with a flurry of bullish price predictions from banks and traders, forecasts for surging demand this winter, and speculation the industry isn’t investing enough to maintain supplies. The jump to $80 also is adding inflationary pressure to the global economy at a time when prices of energy commodities are soaring. European natural gas, carbon permits and power rose to fresh records Tuesday, with little sign of the rally slowing.
• Gold slid to a 1-1/2-month low on Tuesday, as a stronger dollar and U.S. Treasury yields curbed demand for non-interest-bearing bullion, while investors also waited for policy cues from a speech by Federal Reserve chair Jerome Powell. Spot gold hit its lowest level since Aug. 11 at $1,735.40 per ounce and was down 0.5% at $1,741.90 per ounce by 0855 GMT.
• Sanofi decided to end development of a messenger RNA vaccine against Covid-19 after the French drugmaker lagged behind rivals in deploying the technology. European nations dominate the top rungs of Bloomberg’s Covid Resilience Ranking for a third month, and Ireland takes the lead after using a strategy against the virus that’s emerging as a global model of success. Japan will lift a state of emergency this week as new infections recede. Meanwhile, the U.S. Centers for Disease Control and Prevention raised its travel advisories for Hong Kong and Singapore. New York City may begin to bar thousands of unvaccinated school personnel from their jobs after a court ruling.
• The Japanese government may kick off the process to sell about 950 billion yen ($8.5 billion) shares in Japan Post Holdings Co. as early as this week, marking the state’s ongoing privatization of the postal and financial-services giant six years after its initial public offering. Government officials are due to hold a meeting with bankers on Wednesday to start work on the company’s third share sale that it aims to complete by the end of the year, according to people with knowledge of the matter who asked not to identified because the matter is private.
• EasyJet Plc raised 1.2 billion pounds ($1.7 billion) in a stock sale, cash that will help the low-cost U.K. carrier weather the slow winter and prepare for a rebound in leisure travel. Existing investors purchased 93% of the 301 million shares available in a rights offering at a discounted price of 410 pence each, EasyJet said Tuesday in a statement. Underwriters were working to place rest. EasyJet said earlier this month it would raise the cash to go it alonerather than sell itself at a depressed price to suitor Wizz Air Holdings Plc. At the time, the U.K. airline said it was undervalued in the wake of the coronavirus pandemic and U.K. travel rules hindered a recovery.
• Saudi Industrial Investment Group offered to take over all of National Petrochemical Co. and create one of the largest manufacturers of chemicals in the Middle East, just as prices soar. The all-share deal will merge two companies with a combined market capitalization of $11.2 billion and comes amid increasing consolidation among Saudi Arabia’s industrial firms as they seek to build scale and improve profitability. Saudi Industrial Investment Group, known as SIIG, wants to swap 1.27 of its shares of each of National Petrochem’s, according to a statement. The transaction will value National Petrochem at 24 billion riyals ($6.4 billion).
• Pressure on Democrats to increase the federal debt limit and avert a crippling default escalated on Monday, with the party facing a cumbersome legislative procedure that could complicate efforts to deliver on Joe Biden’s economic agenda. Senate Republicans blocked a bill late Monday to suspend the debt ceiling until December 2022 and keep the government operating past the end of the fiscal year on Sept. 30. That’s left Democrats no clear alternative to overcome the filibuster except using a budget procedure that could take nearly two weeks. The GOP maneuver sets the stage for a protracted debate over debt that Republican lawmakers hope will help them portray Biden’s expanded child tax credits, paid family leave and new benefits for Medicare recipients as out-of-control government spending. An eventual Democrat-only vote to raise the debt limit would provide fodder for election attack ads.
• Boeing Co. forecasts that commercial aviation should be back to 2019 levels in two to three years, buoyed by a strong domestic recovery in China and parts of Europe, the U.S. planemaker’s China head said. Various countries’ vaccination rates and differing quarantine requirements will pose some hurdles but “we’re anticipating in the next two to three years that the aviation market will fully recover to 2019 levels,” Boeing China President Sherry Carbary said on the sidelines of Airshow China 2021 in the southern city of Zhuhai on Tuesday.
• An obscure provision tucked into the bipartisan infrastructure bill could steer billions of dollars for broadband expansion to companies with large union workforces, presenting an opportunity for organized labor to expand and creating logistical hurdles for the nation’s largest telecom providers. The part of the bill dedicated to distributing $42.5 billion in broadband funds would give preference to companies with a record of following labor and employment laws—a requirement that, practically speaking, could give an advantage to professionalized union workforces over the constellation of subcontractors that power the telecom industry. Yet telecom’s decentralized workforce and executives’ lack of familiarity with these types of labor-focused federal requirements—not to mention ambiguity in how they could be implemented—make it hard to predict how the industry would respond if the $550 billion infrastructure bill is signed into law.
• Lego A/S said it expects to be able to deliver toys for Christmas in all markets after securing its supply chains amid constraints in global container shipping. The world’s largest toymaker has production facilities on three continents, reducing its dependency on container shipping, Chief Executive Officer Niels B. Christiansen said. Rising demand for its iconic blocks offsets higher costs from transportation and raw materials. “We are comfortable with serving the market up until Christmas,” the CEO said at a press briefing after the Danish company on Tuesday reported a 140% jump in net income.
• Robotics firm AutoStore seeks to raise $315 million on the Oslo Stock Exchange in an initial public offering amid a rush of Nordic listings. Alongside a sale of new shares, holders will also offer existing stock, according to a statement on Tuesday. AutoStore, which is owned by private equity firm Thomas H. Lee Partners, SoftBank Group Corp. and EQT AB, could be valued at more than $10 billion in an IPO, Bloomberg News reported in June. The offering adds to a rush of Nordic companies going public this autumn, including investment company Storskogen Group, car-glass repair business Cary Group and scam-call blocker Truecaller. Depending on the size of the stakes to be sold in the offering, AutoStore could rank among Oslo’s biggest-ever IPOs.
• Private equity firm Vista Equity Partners is to acquire automation software developer Blue Prism Group Plc for about 1.1 billion pounds ($1.5 billion), in yet another takeover of a U.K. tech company by a foreign buyer.  Blue Prism recommended Vista’s bid of 1,125 pence a share in a statement Tuesday. The offer represents a premium of about 35% to Blue Prism’s closing price of 832 pence on Aug. 27, the last full trading day before takeover interest became public. The deal barely claws back the value lost this year as Blue Prism’s shares fell by around a third, pulled lower by concerns over gaps in its portfolio and the cost of developing the products needed to keep the company competitive.
• Britain plans to legislate as soon as next month for a funding mechanism to spur the construction of new nuclear power plants to replace its aging fleet of reactors. The U.K. is likely to need low-carbon power from nuclear to meet its net-zero targets as well as help avert the kind of energy crisis that’s currently crippling the country. The nation’s existing reactors are scheduled to close by the end of the decade and building replacements has been a struggle, with two major projects shelved because of financing issues. The so-called regulated asset base, or RAB, model is a government-funded mechanism designed to encourage private-sector investment in a project, which is meant to dilute the construction costs shouldered by the taxpayer and developer. It’s the same plan that’s been used to fund airports and water companies.
• Chinese authorities are striving to signal to traders that whatever happens to China Evergrande Group, its debt crisis won’t spiral out of control or derail the economy. Just this week, the People’s Bank of China pledged to ensure a “healthy property market” and protect homebuyers. The central bank also added a net 100 billion yuan ($15.5 billion) of liquidity into the banking system on Tuesday — the eighth day of injections and the longest streak since December — while a local media commentary said China can expand fiscal policy if needed to spur growth. Evergrande shares rose as much as 8.2% Tuesday. Those of smaller developer Sunac China Holdings Ltd. surged by a record after denying it had requested local government help, while its dollar bonds jumped.
• JPMorgan Chase & Co. named Marko Kolanovic and Hussein Malik co-heads of global research after the unit’s former boss, Jeremy Barnum, was named chief financial officer earlier this year. The pair will oversee JPMorgan’s research organization and strategy, according to an internal memo Tuesday from Marc Badrichani, the firm’s head of global sales and research. They’ll report to Badrichani and the changes are effective immediately.  Kolanovic was previously chief global markets strategist and has been at the company for 17 years. Malik was global head of rates, securitized products and public finance research, as well as global head of data, content management and transformation — the bank’s effort to modernize its research arm.
• Wall Street’s biggest technology companies are down more than $130 billion in market value in premarket trading on Tuesday as rising bond yields prompted investors to rotate out of pricey growth stocks. All but one of the members in the $9 trillion-plus NYFANG+ index, which includes 10 highly liquid tech and internet stocks, were in red. Nvidia, Apple and Twitter all fell at least 1.5%. Tech stocks are particularly sensitive to rising rate expectations because their value rests heavily on future earnings, which are discounted more deeply when rates rise. Bond yields from the U.S. to Germany spiked, as investors braced for the Federal Reserve to start tapering.
• Mastercard Inc. will make it easier for banks to offer installment plans as consumers flock to options for paying off purchases over time. Such buy-now, pay-later options have swelled in popularity in recent years, especially among younger consumers. With Mastercard’s new push, lenders will be able to approve consumers for an installment loan before a purchase or offer the option during checkout, the company said in a statement Tuesday. As part of the new program, Mastercard will allow lenders to use consumers’ banking data — information it has access to after purchasing the data aggregation company Finicity last year — in their underwriting decisions, Linda Kirkpatrick, Mastercard’s president of North America, said in an interview.
• Walmart Inc. is looking to sell more sustainable debt amid pressure for the retail industry to reduce its carbon emissions. The world’s biggest retailer made its debut in the green bond market earlier this month with a $2 billion offering, the largest ever from a U.S. corporation. The transaction was part of $7 billion bond sale spread across five parts with the green tranche receiving the most demand from investors, according to Kathleen McLaughlin, executive vice president and chief sustainability officer. McLaughlin said Walmart may sell additional bonds under the environmental, social and governance umbrella later as it focuses on selecting and executing eligible initiatives in the future, but for now the focus is disclosing to credit investors the completion of the projects and their impact on the environment.
• Micron Technology Inc. will give investors the latest read on the health of the market for memory chips when it reports earnings on Tuesday afternoon. Concerns about falling prices have weighed on the shares of Micronand competitor Western Digital Corp., marking a rare segment of weakness in a semiconductor industry that has benefited from soaring demand this year. That has put the focus on what Micron has to say about pricing trends and spending on new production capacity.  The majority of semiconductor stocks have outperformed so far in 2021 as customers’ demand for some types of chips has outstripped supply, a dynamic that has caused shortages and disrupted production for a wide range of companies.

“Open your eyes, look within. Are you satisfied with the life you’re living?” —Bob Marley

*All sources from Bloomberg unless otherwise specified