December 10th, 2020

Daily Market Commentary

Canadian Headlines

  1. Canadian shares fell on Wednesday, along with broader market, as a selloff in tech stocks put a stop to its six-day advance. The S&P/TSX Composite index fell -0.5% in Toronto. The underperformance in tech and health care stocks weighed on the benchmark. Meanwhile, consumer discretionary and staples stocks outperformed.
  2. The Bank of Canada stood pat on interest rates and reiterated its commitment to keep them at historic lows to support an economy buffeted by a second wave of Covid-19 cases. In a decision Wednesday from Ottawa, policy makers led by Governor Tiff Macklem held the bank’s overnight rate at 0.25% and reiterated a pledge to keep it there, probably until 2023. They said the bank would continue to buy Canadian government bonds worth at least C$4 billion ($3.1 billion) a week.
  3. China’s Foreign Ministry said Thursday that two Canadians who have been held for two years in a case linked to a Huawei executive have been indicted and put on trial, but gave no details. Former diplomat Michael Kovrig and businessman Michael Spavor have been confined since December 10, 2018, just days after Canada detained Huawei executive Meng Wanzhou, who is also the daughter of the founder of the Chinese telecommunications equipment giant.

World Headlines

  1. European shares were steady on Thursday, as investors await the possibility of fresh central bank measures and a landmark stimulus package. The Stoxx 600 Europe Index was up less than 0.1%, with chemicals and utilities among the top gainers. Tech stocks fell the most, tracking their U.S. peers after Facebook Inc. was sued by U.S. antitrust officials and analysts at JPMorgan Chase & Co. called Tesla Inc. “dramatically” overvalued.
  2. Asia stocks are back in the red after touching record highs on Wednesday, led by tech shares taking their cues from overnight trading on Wall Street. Taiwan’s tech-dominated stock benchmark led losses in the region, falling 1%. Regional tech heavyweights Taiwan Semiconductor Manufacturing Company, Samsung Electronics and SK Hynix were among the biggest draggers on the MSCI Asia Pacific IT index, which was down 1.5%.
  3. U.S. stock futures fluctuated with European equities as investors assessed the outlook for fiscal stimulus and for tech stocks after Wednesday’s tumble. Nasdaq 100 contracts turned modestly lower, signaling the gauge may fall further after its biggest drop in a month on news that Facebook Inc. was being sued by U.S. antitrust officials. The social media giant slipped further in pre-market trading on Thursday.
  4. Oil rose as more countries approved Covid-19 vaccines, boosting the demand outlook and shrugging off a bumper increase in U.S. crude inventories. There are continuing signs of robust demand in Asia with Chinese refiners moving early to buy oil from as far afield as the North Sea. Indian Oil Corp., which has been seeking to buy spot crude cargoes in recent days, said the nation’s petroleum products consumption is almost back to normal.
  5. Gold extended its fall past $1,850 an ounce as talks for fresh stimulus in the U.S. remain deadlocked. Traders await a European Central Bank meeting later Thursday.
  6. The European Central Bank is poised to deliver another blast of monetary stimulus on Thursday to carry the euro area out of the pandemic crisis. With new lockdowns hammering the economy, vaccines only just arriving, and Brexit talks on a knife-edge, policy makers are expected to add 500 billion euros ($605 billion) to their emergency bond-buying program and extend it until at least the end of 2021. Banks will likely be offered more ultra-cheap long-term loans.
  7. The U.K. recovery slowed sharply in October, setting the course for a turbulent end to the year. The economy grew just 0.4% in the month, down from 1.1% in September, as new measures to control the pandemic kicked in, shuttering businesses in some areas and curbing household mixing in others. While the reading was better than the stagnation predicted by economists, worse could be to come in November, when the whole of England was placed into a second lockdown.
  8. Negotiations between the EU and the U.K. are on course to end without a trade deal barring a dramatic last-minute intervention, according to officials with knowledge of the discussions. Wednesday night’s dinner between Prime Minister Boris Johnson and Ursula von der Leyen left officials on both sides expressing concern that it may be impossible to reconcile their differences.
  9. Senate Majority Leader Mitch McConnell and House Speaker Nancy Pelosi have given no sign yet that they’re ready to directly engage in negotiations to sort through competing pandemic relief proposals — a step that many lawmakers say will be necessary to complete a deal this month. The Senate GOP leader is now on board with a $916 billion proposal released Tuesday by Treasury Secretary Steven Mnuchin, while the House speaker sees a rival $908 billion plan still being drafted by a bipartisan group of lawmakers as the best path to a deal to aid the struggling U.S. economy.
  10. BlackRock plans to push companies next year for greater ethnic and gender diversity for their boards and workforces, and says it will vote against directors who fail to act. The money manager, which oversees more than $7.8 trillion of assets, is asking U.S. companies to disclose the racial, ethnic and gender makeup of their employees, as well as measures they’re taking to advance diversity and inclusion, according to a stewardship report released Thursday.
  11. The trend of Americans working from home during the Covid-19 pandemic is increasing risks for U.S. companies as employees may be lax with their computer security, according to the executive selected to be President-elect Joe Biden’s top economist.
  12. The U.S. Federal Trade Commission took a major step toward the possible breakup of Facebook Inc. by formally filing an antitrust lawsuit against the technology giant, accusing it of abusing its monopoly powers in social networking to stifle competition. The FTC and a coalition of states also suing the company zeroed in on Facebook’s acquisition of photo-sharing app Instagram for $715 million in 2012, and the $22 billion deal for messaging service WhatsApp two years later.
  13. Investors are increasingly betting that Covid-19 vaccinations will make life normal again for Americans next year by buying into some hard-hit travel and entertainment stocks ahead of what they expect will be surge in pent-up demand. Some are worried they might be too optimistic. Shares of companies that suffered catastrophic revenue losses — like Live Nation Entertainment Inc. and Hilton Worldwide Holdings Inc. — are trading around where they started the year. Some, like Expedia Group Inc., are even on track to close out 2020 with double-digit gains, despite projections for it to take years to recover lost sales.
  14. Airbnb Inc. priced its long-awaited initial public offering above a marketed range to raise about $3.5 billion, seizing on investor demand for a home-rental business roaring back from a pandemic-fueled slump. The company’s IPO came just hours after DoorDash Inc. almost doubled from its listing price in its debut trading session, adding to a flurry of consumer-facing web-based companies going public this month.


*All sources from Bloomberg unless otherwise specified