December 21, 2021

Daily Market Commentary

Canadian Headlines

  • Canadian equities declined for a third straight day as industrial, information technology and real estate stocks weighed down the market. The S&P/TSX Composite dropped 1%, or 200.97, to 20,538.22 in Toronto, the biggest move since Nov. 30. Industrials stocks led the market lower, as 9 of 11 sectors lost; 170 of 241 shares fell, while 64 rose. Canadian National Railway Co. contributed the most to the index decline, decreasing 5.9%. Lundin Mining Corp. had the largest drop, falling 16.9%.  In the past year, the index had a similar or greater loss 12 times. The next day, it advanced eight times for an average 1.1% and declined four times for an average 0.8%.
  • Quebec is closing schools, gyms and bars and making work-from-home arrangements mandatory to stem a wave of coronavirus infections that has reached record levels. The province recorded 4,571 new infections in 24 hours, far above the levels of last winter, when the provincial government imposed a curfew and closed all restaurants. Nearly 400 people are in the hospital with Covid-19, an increase of 76% in two weeks.  The neighboring province of Ontario, which has nearly 40% of Canada’s population, reported 3,784 new cases in a day. That’s a fourfold increase from two weeks earlier. The province has imposed 50% capacity limits on restaurants, gyms, stores and other venues and restricted indoor gatherings to 10 people.

World Headlines

  • Signs President Biden’s economic agenda can be salvaged sent U.S. futures and global stocks higher. Chinese property developers rallied in Asia. Treasury yields and the dollar were steady and WTI oil was in the green. Turkish assets continued to be whipsawed. European gas and power prices soared as Russian gas flows via a key route were halted, worsening the supply crunch.
  • European equities bounced back from the worst drop in three weeks amid optimism that growth can overcome risks from the omicron variant. The Stoxx Europe 600 Index rose 0.8% as of 10:15 a.m. in London, with miners and energy pacing gains as commodities recovered. The technology sector got a boost from Micron Technology Inc.’s upbeat forecast.
  • Stocks rose with U.S. equity futures Tuesday on wagers that vaccines can help tame the omicron virus outbreak and signs that U.S. President Joe Biden could yet revive his $2 trillion economic agenda. Contracts on S&P 500 and Nasdaq 100 futures were in the green, signaling stabilization after a global equity index dropped the most this month on Monday.
  • The Bloomberg Dollar Spot Index inched lower as it continued to pare Friday’s gain and the greenback weakened against all of its Group-of-10 peers apart from the franc and the yen; the Treasury curve steepened a second day and yields rose across all tenors. The euro pared gains after rising beyond $1.13 and European bonds underperformed Treasuries. The pound rose, erasing Monday’s losses against the dollar, as risk appetite improved. Domestic focus remains on the likelihood of stricter coronavirus restrictions amid the rapid spread of omicron.
  • Oil flipped between gains and losses following Monday’s broader market selloff as investors assessed the outlook for demand amid the rapid spread of omicron. Futures in London traded below $72 a barrel on Tuesday after falling about 5% over the past two days.
  • European Gas Jumps to Record as Russian Flows Reverse Direction. European gas prices jumped to a record high after Russian flows via a key route reversed direction. Futures surged as much as 11% as Russian gas was flowing eastward from Germany to Poland, according to network operator Gascade. The change in flows probably reflects lower orders from German buyers due to the holiday season, said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.
  • Gold Edges Higher as Traders Weigh Vaccine Efficacy, U.S. Agenda. Gold crept higher as investors weighed the efficacy of vaccines against the omicron virus variant and the dollar edged lower. A third dose of Moderna Inc.’s Covid-19 shot increased antibody levels against the new strain, results the company described as reassuring. Meanwhile, omicron continues to spread, accounting for 73% of all sequenced Covid-19 cases in the U.S., according to Centers for Disease Control and Prevention data.
  • Copper Rises as China’s Monetary Easing Buoys Metals Markets. Copper and other industrial metals climbed as investors prepared for further monetary easing in China that could bolster demand in the world’s top commodities consumer. Copper rose as much as 1.2%, tracking gains seen in Asian stock markets, as Chinese media reported that domestic banks are expected to further lowertheir loan prime rates next year following a cut on Monday for the first time in 20 months. Expectations for further monetary support are growing as Beijing looks to bolster an economy under strain from a property slump, weak private consumption and sporadic virus outbreaks. A recent rally in the yuan has also boosted buying power for commodities importers in China, although the central bank’s daily fixing for the currency on Tuesday signaled that policy makers are looking to cool the rally.
  • Electricity prices surged to a fresh record as Europe scrambles to keep the lights on in France, the region’s second-biggest market. France, usually an exporter of power, is boosting electricity imports and even burning fuel oil. The crunch comes after Electricite de France SA said it would halt four reactors accounting for 10% of the nation’s nuclear capacity, straining power grids already coping with cold weather. A total of six oil-fired units where turned on in France on Tuesday morning, according to filing with Entsoe.
  • President Joe Biden will send 500 million free coronavirus tests to Americans’ homes beginning next month and dispatch the military to shore up overwhelmed hospitals as the U.S. confronts a resurgent pandemic. Biden will announce new measures to try to curb the virus on Tuesday, the day after the CDC said the omicron variant first identified in southern Africa now accounts for most new U.S. cases. He aims to boost testing, hospital care and vaccinations without any new lockdowns or closings.
  • Russian President Vladimir Putin warned he’s ready to use his military to counter what he called the threat from NATO as he heaped blame on the U.S. for rising tensions in Europe. Russia is “seriously concerned” about the presence of North Atlantic Treaty Organization forces near its border and can’t allow NATO to deploy missiles in Ukraine that would put Moscow within a few minutes’ strike distance, Putin told senior officers Tuesday at the Russian Defense Ministry. “If the aggressive line of our Western colleagues continues, we will take adequate military-technical response measures and react harshly to unfriendly steps,” Putin said. “I want to stress that we have every right to do so. We have every right to take actions intended to ensure the security and sovereignty of Russia.”
  • Astra Booster Shot Needed to Shore Up Protection, Study Finds. Protection from severe illness following two shots of AstraZeneca Plc’s Covid-19 vaccine starts declining about three months after the second dose, according to a study that reinforces the need for boosters. The researchers analyzed data for 2 million people in Scotland and 42 million people in Brazil and assessed the risk of severe Covid outcomes, including hospitalizations and deaths, three months after the second dose. They didn’t analyze Astra’s shot against the fast-spreading omicron variant, which wasn’t circulating at the time.
  • Elliott, Vista Said to Weigh Joint Bid for Citrix Systems. Elliott Investment Management and Vista Equity Partners are considering a joint bid for software-maker Citrix Systems Inc., according to people familiar with the matter. Vista is considering using its portfolio company Tibco as part of the          transaction, the people said, asking not to be identified because the matter is private. The discussions are in the early stages and Elliott and Vista could still decide not to pursue a bid, the people said.

Happy Holidays

*All sources from Bloomberg unless otherwise specified