April 7, 2021
Daily Market Commentary
- Canadian equities rose Tuesday for a third straight session, aided by rising commodity prices. The S&P/TSX Composite Index rose 0.4%, with 7 of 11 sectors advancing. Tech also climbed, while health care fell. Oil rose as a brighter economic growth outlook and calls for a summer travel pickup eased concerns around the impact of a resurgent coronavirus. Copper rallied to the highest in two weeks in London as the market reopened after the Easter break, rising alongside growing euphoria about a post-pandemic U.S. recovery.
- European stocks held near a record level reached yesterday as investors weighed prospects for recovery and stimulus support ahead of minutes from the Federal Reserve’s last meeting. The Stoxx Europe 600 Index was down less than 0.1% as of 9:21 a.m. in London, with technology shares falling the most and real estate shares gaining. The FTSE 250 Index rose 0.8% toward a record close, while the FTSE 100 Index climbed 0.8%, after Barclays Plc upgraded U.K. equities to overweight, citing an “attractive mix of value and defensive exposure.” European stocks hit an all-time high on Tuesday, advancing past the previous peak set in February 2020 and erasing losses from the pandemic. After this week’s gains spurred by positive U.S. economic data, investors are awaiting Fed minutes due later today for clues on policy.
- Markets settled into a holding pattern on Wednesday, with global stocks hovering around all-time highs as investors awaited details of the Federal Reserve’s most recent meeting. Futures on the S&P 500 and Nasdaq 100 struggled for direction, while the 10-year Treasury yield was steady. The dollar halted a four-day slide. Expectations for continued central-bank support and the strongest world expansion in at least four decades have driven stock benchmarks to unprecedented heights. Concerns about higher borrowing costs destabilizing the market have eased, with bond yields subsiding as traders pull their more-aggressive positioning for Fed policy tightening. Minutes of the last Fed rates meeting later Wednesday may provide more clues on the outlook.
- Asian stocks were little changed overall as Thailand and Hong Kong led declines while most major equity benchmarks advanced. Thailand’s key SET Index posted its biggest drop since Feb. 22 amid a domestic surge in coronavirus infections. Hotel and restaurant shares led the decline, with Prime Minister Prayuth Chan-Ocha hinting that tougher restrictions on entertainment venues were likely in an effort to fight the virus spread. The Hang Seng China Enterprises Index in Hong Kong dropped, with heavyweights including China Pacific Insurance and Tencent Holdings among those contributing most to the fall. Equity markets in India, the Philippines and New Zealand advanced, among others, with some global stock benchmarks hovering around all-time highs. Indian stocks climbed after central bank policy makers pledged to maintain an accommodative stance for as long as necessary, amid a new wave of coronavirus infections.
- Oil traded near $63 a barrel in London as traders awaited weekly U.S. inventory data for the latest steer on the demand recovery. Brent futures climbed 1%, swinging between gains and losses. Attention will shift later to U.S. inventories, after an industry report showed a decline in crude stockpiles but a gain in gasoline holdings. Wednesday’s government data will offer clues on the health of American consumption after the world’s largest economy posted a string of positive economic figures. While crude has been volatile in recent weeks, it has also been largely stuck between $60 and $65. Sharp intraday swings have followed reports of increased demand but also fresh lockdowns, especially in Europe. On the supply side, the Organization of Petroleum Exporting Countries and its allies last week agreed to ease their cuts, betting that the market can absorb the extra output.
- Gold slipped from the highest level in more than a week as the dollar and bond yields steadied, with investors focused on details from the Federal Reserve’s most recent meeting. Minutes from last month’s gathering — due to be released Wednesday — will be parsed for further guidance on the U.S. central bank’s policy decision. Chair Jerome Powell and his colleagues continued to project near-zero interest rates at least through 2023 despite upgrading their economic outlook. There’s more optimism over the recovery from the pandemic, although concerns remain about flare-ups in Covid-19 infections in some parts of the world. The International Monetary Fund upgraded its global economic growth forecast for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies.
- The Biden administration has officially distributed more than 150 million stimulus checks as of Wednesday from the $1.9 trillion coronavirus relief bill, one of the key benchmarks the president had hoped to hit during his first 100 days in office. The Treasury Department and the Internal Revenue Service have sent out roughly 156 million payments to people, totaling roughly $372 billion, according to the Treasury Department. The majority of these latest payments went to Social Security recipients and beneficiaries, providing a cash infusion more than a year into the pandemic. During the transition, Biden aides said the president’s chief goals for his first 100 days in office included distributing relief checks, re-opening schools and heightening the pace of vaccinations. On Tuesday, the White House announced it had surpassed its goal of delivering 150 million shots to Americans since he first took office. Originally, the White House had set a goal of delivering 100 million inoculations during the first 100 days.
- Morgan Stanley sold $5 billion of shares owned by Archegos Capital Management a day before a deluge of block trades sent shockwaves across capital markets. The sale of the basket of shares on March 25 was completed at a fixed discount, according to a person with knowledge of the matter, who asked not to be identified discussing private transactions. The Wall Street bank sold shares held by Bill Hwang’s family office in about 10 companies after the market close, mainly to hedge funds, the person said. CNBC reported earlier Tuesday on the size of the stock sale. Morgan Stanley’s early bid for the exits helped the firm emerge largely unscathed from a fund flameout that’s inflicted billions in losses at other banks. Credit Suisse Group AG on Tuesday announced a $4.7 billionwritedown tied to its exposure to Archegos, and Nomura Holdings Inc. has said it could take a hit of as much as $2 billion.
- Jamie Dimon said he’s optimistic the pandemic will end with a U.S. economic rebound that could last at least two years. “I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” the JPMorgan Chase & Co. chief executive officer said Wednesday in his annual letter to shareholders. “This boom could easily run into 2023.” Unprecedented federal rescue programs have blunted unemployment and averted further economic deterioration, according to Dimon, who said banks entered the crisis strong and able to help communities weather the storm. While lenders also benefited from U.S. stimulus, they built up buffers against future loan losses and performed well in stress tests, he said.
- The European Medicines Agency plans to give its assessment of the safety of AstraZeneca Plc’s Covid-19 vaccine after investigating cases of a rare blood-clotting disorder in adults who received the shot. A study of the vaccine in children has been paused. The U.K. began rolling out Moderna Inc.’s vaccine, bolstering Britain’s immunization program amid concerns over the Astra shot and a shortfall of doses this month. A study found that antibodies persist for at least six months after patients receive the second dose of Moderna’s vaccine. Virus-related deaths hit a record in Hungary on the same day the country started easing curbs, fueling worries the relaxation of constraints came too early. In Turkey, where the government eased social distancing rules on March 1, new cases reached a record.
- France signaled a sharp acceleration in international talks with the U.S. to overhaul global corporate tax rules and resolve the thorny issue of how to levy the profits of tech companies like Facebook Inc. and Alphabet Inc.’s Google. Finance Minister Bruno Le Maire said on Wednesday his country is open to agree to raise its suggested minimum tax from 12.5% after U.S. Treasury Secretary Janet Yellen outlined plans for a 21% levy. He also said France is weighing long-awaited proposals from the U.S. on how to tax the profits of tech giants. Both elements are key to negotiations among nearly 140 countries at the Organization for Economic Cooperation and Development that had been hobbled by disputes during Donald Trump’s presidency. A speedy resolution would send shock waves across the world, bolstering incomes for governments trying to rebuild their economies after the pandemic.
- Prosus NV plans to raise as much as $14.6 billion from the sale of shares in Chinese internet giant Tencent Holdings Ltd., further growing its war chest for new e-commerce deals. The Amsterdam-listed firm will sell a 2% stake in Tencent, reducing its holding to just under 29% while remaining the biggest shareholder, according to a statement on Wednesday. The price range was set at HK$575.00 to HK$595.00, a discount to the last trading price of HK$629.50. The sale helps to boost Prosus’s coffers at a time when e-commerce is booming, with the coronavirus pandemic increasing online demand for everything from shopping and food delivery to education. The company already has assets in those sectors alongside the likes of payment services, and has long been on the hunt for further acquisitions.
- Former Vice President Mike Pence on Wednesday launched an advocacy group to promote his agenda and defend the Trump administration’s record, a signal that he’s moving toward a 2024 presidential bid. The group, Advancing American Freedom, will “build on the success of the last four years by promoting traditional Conservative values and promoting the successful policies of the Trump Administration,” Pence said in a statement announcing the launch. “Conservatives will not stand idly by as the radical Left and the new administration attempt to threaten America’s standing as the greatest Nation in the world with their destructive policies,” he said. The group will give Pence a platform to outline his policy agenda and solidify support among key Republicans without officially stepping into the presidential race. Former President Donald Trump has not ruled out another bid for the White House, making it difficult for potential rivals like Pence to organize without alienating him.
- Toshiba Corp. is poised to surge after confirming it received an initial buyout offer from CVC Capital Partners, setting the stage for potentially the largest private equity-led acquisition in years. The Japanese conglomerate said it’s seeking more information while it weighs the proposal. Its board plans to meet Wednesday to discuss the potential deal, a person familiar with the matter said. Shares of Toshiba were set to surge by the 18% limit in Tokyo Wednesday, with a glut of bids outweighing offers to sell. Toshiba had gained 33% in Japanese trading this year through Tuesday, giving the company a market value of more than 1.74 trillion yen ($15.9 billion). The bid comes as Toshiba faces scrutiny from activists following a series of scandals, including a record fine for faulty accounting, billions of dollars in writedowns and a bungled foray into U.S. nuclear power. The company brought in Chief Executive Officer Nobuaki Kurumatani — a former senior CVC executive — to repair investor confidence. The Japanese conglomerate today remains a major player in defense and energy at home and owns a major slice of Kioxia Holdings Corp., which is said to be focused on pursuing an initial public offering as soon as this summer.
- Beijing MissFresh Ecommerce Co., an online grocery delivery startup, is considering a U.S. initial public offering that could raise at least $500 million, according to people familiar with the matter. The Tencent Holdings Ltd.-backed company is working with advisers on the preparations for the offering, which could take place as soon as this year, the people said. MissFresh could look to raise as much as $1 billion in the share sale though deliberations are still at an early stage, said the people, who asked not to be identified as the discussions are private. No final decisions have been made on the IPO details including size and timeline, the people said. A representative for MissFresh had no immediate comment.
- LumiraDx Ltd., a diagnostic company that produces Covid-19 tests, is going public through a reverse merger with a blank-check company. The U.K.-based firm will combine with CA Healthcare Acquisition Corp. in a deal that values LumiraDx’s equity at $5 billion, the companies said in a statement. While there is no equity placement attached to the transaction, LumiraDx has secured a $300 million loan from BioPharma Credit Plc and an additional $100 million asset-based revolving credit facility from Capital One Financial Corp., according to the statement.
- Over the past month, diplomats in Beijing have been talking more about the pros and cons of boycotting the 2022 Winter Olympics in Beijing — particularly as leading global brands came under attack for statements on human rights abuses in the far west region of Xinjiang. While most doubted there would be an outright boycott, they noted that a lot can change before the opening ceremony 10 months from now. The diplomats, who asked not to be named, also raised the possibility that top dignitaries would stay away from Beijing even while athletes compete and sponsors take part.
- President Joe Biden is ramping up pressure on Republicans to support his $2.25 trillion infrastructure plan, appealing directly to GOP voters while lawmakers are in their home districts during the current congressional recess. Biden will deliver his second major sales pitch in a week for the “American jobs plan” with a White House speech Wednesday, as he and his team reach out to governors, mayors and the broader public through phone calls, briefings and local TV appearances to make their case. “I’m going to push as hard as I can to change the circumstances so we can compete with the rest of the world,” Biden said Monday when asked about negotiations with Republicans over the proposal. “Everybody around the world is investing billions and billions of dollars in infrastructure. And we’re going to do it here.”
- Norway’s $1.3 trillion wealth fund just made its first investment in clean energy infrastructure, more than a year after it was given the go-ahead to move into the asset class. The world’s biggest sovereign investment vehicle has agreed to buy 50% of the 752 megawatt Borssele 1 & 2 offshore wind farm from Orsted A/S of Denmark. The deal is worth just under 1.4 billion euros, or about $1.6 billion, it said. Norway’s wealth fund has been looking for such assets since parliament agreed to give it a mandate to start buying them back in 2019. But as recently as January, Chief Executive Officer Nicolai Tangen said it was proving hard to find reasonably priced targets.
- Royal Dutch Shell Plc said it expects to make the first profit from pumping oil since the start of the pandemic. Shell’s upstream unit, which largely handles the exploration and production of crude, was able to capture “the upside from the current commodity price environment” in the first quarter, according to a statement Wednesday. While earnings from natural gas, refining and chemicals helped Shell post an overall profit last year, its core business reported consistent losses after energy prices plunged due to Covid-19. The return to profit in the upstream is another signal that the industry is recovering from the historic slump.
- The U.K. began giving the Moderna Inc. vaccine on Wednesday, bolstering Britain’s Covid-19 immunization program amid ongoing concerns over potential side effects relating to AstraZeneca Plc’s shot. The Moderna vaccine, which is first being offered in Wales, is the U.K.’s third approved coronavirus shot alongside those from AstraZeneca and partners Pfizer Inc. and BioNTech SE. The U.K. has ordered 17 million doses of Moderna’s two-shot vaccine, enough for 8.5 million people. It comes as investigations continue into a potential link between the Astra shot and rare cases of blood clots in adults. A trial of the Astra vaccine among children has been paused to await the findings of a review by the Medicines and Healthcare Products Regulatory Agency, the U.K.’s drug watchdog.
- The French government pushed back against a suggestion that it would spend 10 billion euros ($11.9 billion) buying out minority shareholders of Electricite de France SA as negotiations with the European Commission continue over plans to shore up the utility’s finances. A spokesman for the French Finance Ministry declined to confirm that figure, while a person familiar with the government’s plans said it was significantly overstated. Sebastien Menesplier, a leader at the CGT union, earlier told Bloomberg the government plans to spend 10 billion euros to buy out minorities as part of broader reforms to buttress EDF’s finances. Menesplier cited a presentation made by Finance Minister Bruno Le Maire to union representatives on Tuesday.
- Deliveroo Holdings Plc, which collapsed in its London debut last week after a 1.5 billion-pound ($2.1 billion) initial public offering, gained as much as 4.2% on Wednesday as retail investors began to trade the company’s shares. The stock traded 2.6% higher at 287.25 pence as of 11:11 a.m. in the U.K., which is well below the IPO price of 390 pence a share. Although the food-delivery startup listed publicly on the standard segment of the London Stock Exchange, trading remained conditional, meaning only institutional investors were allowed to buy and sell the stock. Until now, retail shareholders had been forced to sit on the sidelines as shares slumped 28% since Deliveroo’s March 31 debut.
- For a glimpse of how quickly and unevenly economies are recovering from the pandemic, look no further than the market for shipping raw materials. Rising demand for everything from soybeans to steel has sent the cost of hauling dry goods soaring more than 50% this year. Manufacturing, which first picked up in China, is now accelerating elsewhere, and countries are stepping up commodity purchases to rebuild stockpiles after running them down during lockdowns that slowed port operations and hit economic activity globally. Analysts say the rally isn’t over, with rates to carry unpacked commodities like grains, iron ore and coal — known as dry bulk — expected to remain high this year and possibly into 2022. That’s a stark turnaround for a market that slid to a four-year low less than 12 months ago, and comes amid a tight supply of vessels. It’s also happening as the uneven recovery scrambles movements of ship containers, which carry everything from furniture to packed commodities like coffee and white sugar.
“The soul becomes dyed with the color of its thoughts.” – Marcus Aurelius
*All sources from Bloomberg unless otherwise specified