April 21, 2023

Daily Market Commentary

Canadian Headlines

  • Brookfield Asset Management Ltd. has submitted a £2.1 billion ($2.6 billion) takeover proposal for Middle Eastern credit card processor Network International Holdings Plc, topping a rival buyout consortium. The Canadian investment giant made a “highly preliminary,” non-binding proposal of 400 pence per share, Network said in a statement Friday, confirming an earlier Bloomberg News report. The potential offer is 11% above Network’s Thursday closing price in London and represents a 64% premium to its last close before Bloomberg News first revealed takeover interest in the company.
  • Canada’s national police force is investigating a heist at the country’s busiest airport that may have netted thieves millions of dollars in gold and other valuables. Peel Regional Police said a container with more than C$20 million ($14.8 million) in gold and other items was taken from a cargo holding area at Pearson International Airport, just outside Toronto. The plane carrying the cargo landed there Monday, police said. Earlier, the Royal Canadian Mounted Police confirmed to Bloomberg that they were looking into a gold robbery. Gold mined in Canada often transits through Pearson.
  • Rogers Communications Inc. hired Navdeep Bains, a former cabinet minister turned banker, to an executive role as the wireless and cable firm begins to absorb the assets of Shaw Communications Inc. Bains, who served as Prime Minister Justin Trudeau’s first minister of industry, will be Rogers’ chief corporate affairs officer. He’s joining Rogers from Canadian Imperial Bank of Commerce, where he took an investment banking role after leaving politics in 2021.

World Headlines

  • US futures and European stocks wavered amid mixed corporate  earnings and as traders parsed the latest data for clues on the outlook for inflation, economic growth and the Federal Reserve’s Policy path. Futures on the S&P 500 and Nasdaq 100 edged lower after yesterday’s losses  on Wall Street, with investors awaiting purchasing managers’ index data for the world’s biggest economy later Friday.  Recurring claims for US unemployment benefits jumped to the highest level since November 2021, a report showed Thursday, adding to signs the labor market is beginning to cool.
  • European equities were little changed on another busy earnings day as investors weighed uneven purchasing managers’ index data. The Stoxx 600 Index was up 0.1% as of 10:01 a.m. in London. Among sectors, basic resources stocks slumped with iron ore trading at its lowest since December. Defensive healthcare and utilities stocks gained. Big individual movers included EssilorLuxottica SA, the French-Italian owner of Ray-Ban, which soared after its sales jumped. Meanwhile, miners including Glencore Plc. and Rio Tinto Group fell with iron ore. Salvatore Ferragamo SpA also slid after first-quarter sales disappointed.
  • Asian stocks fell, heading for their worst week since early March, as the latest news flow on geopolitics sapped risk appetite across the region and saw investors take profit in Chinese shares. The MSCI Asia Pacific Index dropped as much as 1% on Friday, led by material and consumer discretionary shares. Geopolitical concerns resurfaced as US President Biden made plans to limit investments in key parts of China’s economy, dealing another blow to worsening ties between the two superpowers. Most Asian markets were down. A gauge of Chinese tech shares in Hong Kong slid more than 3%, led by artificial intelligence and chip names after a recent rally.
  • Oil’s slump slowed on Friday, hovering just above the level at which key producers in the OPEC+ alliance surprised traders with shock production cuts. Brent fluctuated around $81 a barrel with West Texas Intermediate almost $4 lower than that. Prices were pressured by a stronger dollar, making commodities priced in the currency less attractive, as well as recent weak economic signals in the US and Europe. Equities were mixed. Oil has given up most of the gains that ensued after Saudi Arabia and other countries in the Organization of Petroleum Exporting Countries and its allies blindsided markets with a surprise pledge to cut production. First-month Brent settled at $79.77 on March 31, before the reductions were announced and futures spiked higher.
  • Gold slid, pressured by a stronger dollar, following hawkish commentary from Federal Reserve officials that could foreshadow further interest rate increases. Fed officials backed another hike as they monitor the economic fallout from bank strains, after lenders increased emergency borrowings from the central bank for the first time in five weeks. The data add to concerns about the health of the economy, with significantly tighter credit conditions likely to further stymie growth.
  • The Federal Reserve may close a loophole that allows some midsize banks to effectively mask losses on securities they hold, a contributing factor in the collapse of Silicon Valley Bank. Led by vice chair for supervision Michael Barr, the Fed is considering ending an exemption that allows some banks to boost the amount of capital they report for regulatory purposes, according to people familiar with the matter. Capital is the buffer banks are required to hold to absorb potential losses. Regulators are weighing the change after the sudden collapses last month of SVB and Signature Bank rattled the financial system. If adopted, it would reverse a loosening of rules by the Fed in 2019 and heighten oversight of midsize banks by extending restrictions that currently only apply to the largest, most complex firms.
  • The euro area’s economic rebound gained further momentum in April thanks to resurgent service-sector activity, while the business outlook remains resilient to recent banking-sector stress. Growth accelerated to an 11-month high, driven by greater demand and leading to a significant increase in employment, according to business surveys by S&P Global. Price pressures moderated again.
  • Federal Reserve officials backed another interest-rate increase as they monitor economic fallout from bank strains, while fresh emergency loan data showed financial stress continues to linger. Cleveland Fed President Loretta Mester, typically among the more hawkish of policymakers, said she favored getting rates above 5% because inflation was still too high.
  • The biggest new hedge funds are raising more money, at levels not seen since before the pandemic, and the 2024 crop could include one of the largest startups in years. At least four new firms are poised to eclipse $1 billion by year-end, collectively bringing in at least $6.5 billion from investors, according to people with knowledge of the fundraising activities. Next year is shaping up to be even bigger. Former Millennium Management executive Bobby Jain is considering opening a multi-manager, multi-strategy fund in the second half of 2024. If he makes the leap, the launch could rival that of ExodusPoint Capital Management, which debuted in 2018 with $8 billion and is led by another Millennium alumnus, Michael Gelband.
  • Rakuten Bank Ltd. surged 38% in its debut in Tokyo on Friday following Japan’s largest initial public offering since 2018.  Shares closed at 1,930 yen apiece. The banking unit of billionaire Hiroshi Mikitani’s Rakuten Group Inc. raised about 83.3 billion yen ($623 million) selling the shares. They were priced at 1,400 yen each, the top of a target range that was lowered earlier in the offering process.
  • LVMH is shifting resources out of Hong Kong, reflecting waning interest in what used to be Asia’s premium shopping hub as mainland Chinese consumers switch to shopping at home. The top global luxury conglomerate wants to focus more of its investment in burgeoning metropolises such as Shanghai, Chengdu, Guangzhou and Shenzhen as Hong Kong loses its relevance in the Greater China region, according to people familiar with the matter, who asked not to be identified discussing private deliberations.
  • Mercedes-Benz AG reported better-than-expected preliminary earnings in the first quarter as the automaker’s push further upmarket helped it overcome higher raw-material costs. Mercedes’s adjusted return on sales came in at 14.8% on healthy net pricing and robust demand for its vans and luxury cars, topping analyst estimates. The shares gained in Frankfurt.
  • Tesla Inc. increased prices of its Model S and X vehicles in the US after steep markdowns early this year took a toll on profitability and the carmaker’s shares. Tesla bumped up each variant of its high-end models by $2,500, raising the cost of the sedan and sport utility vehicle by 2% to 3%, according to the company’s website. The Model S and X now start at $87,490 and $97,490, respectively.
  • Japan investors bought about 140 billion yen ($1 billion) of Credit Suisse Group AG’s bonds that were written off when the Swiss bank was suddenly sold last month, Finance Minister Shunichi Suzuki said. It’s “regrettable” that the fallout from Credit Suisse’s woes affected investors in Japan, Suzuki said at a news briefing in Tokyo on Friday. Securities firms must make every effort to deal carefully with their customers, he added.  Investors around the globe are on the hook for losses on the 16 billion Swiss francs ($18 billion) in risky bonds, known as Additional Tier 1 notes, that were wiped out when the Swiss government brokered an emergency takeover of Credit Suisse by UBS Group AG.
  • President Joe Biden will create a new environmental justice office at the White House as part of a government-wide campaign to use federal programs to address disproportionate pollution and environmental risks faced by underprivileged communities. The new office will be unveiled at an event on Friday, the day before Earth Day, in the Rose Garden, with Biden signing an executive order to establish its creation, according to the White House.  The environmental unit will operate in addition to the Council on Environmental Quality, which already coordinates the US government’s efforts to protect the environment and public health. The new office is intended to put a greater focus on communities that are disadvantaged because of racial discrimination or poverty, and where risks for diseases like asthma and cancer can be greater because of poor environmental standards.