December 22, 2022

Daily Market Commentary

Canadian Headlines

  • Superior Plus Corp. said Thursday it agreed to buy fuel-distributor Certarus Ltd. in a deal valued at 1.05 billion Canadian dollars ($771.3 million), bolstering its portfolio with the addition of complementary fuels including compressed natural gas, renewable gas and hydrogen. Superior said it will acquire Certarus for C$12.15 a share, or an equity value of C$853 million, and take on C$196 million of Certarus’s outstanding senior bank credit and leases. The distributor and marketer of propane and distillates in the U.S. and Canada said it plans to finance the deal and related expenses with a combination of about 48.8 million of its shares issued directly to Certarus, valued at C$500 million, and incremental drawings on senior credit facilities that will be expanded by C$550 million to C$1.3 billion.
  • Crypto investment fund manager 3iQ is adding a voice of support to Fir Tree Capital Management’s lawsuit centered on Grayscale Investments’ Bitcoin trust, becoming the latest firm to publicly express concern over the assailed product.  The Toronto-based company’s move follows early-December news that Fir Tree is suing Grayscale Investments for information to investigate potential mismanagement and conflicts of interest at its $10.6 billion Bitcoin investment product known as GBTC. The trust is trading at a near 50% discount to its underlying holdings, which 3iQ says it’s looking to remedy in the hope of restoring investor value and confidence at a time when both are “sorely needed.” GBTC was widely used by investors as a way to bet on Bitcoin, making it a key facet of the market and for a time representing a profitable trade when it was priced at a premium to the tokens it held. But unlike an exchange-traded fund, the trust can’t redeem shares to keep pace with cooling demand. So now, with the market reversing course, among other factors, it is trading at a discount to its underlying holdings, one that has widened to record levels in recent weeks as it sells off to a greater degree than the token itself.

World Headlines

  • European stocks were subdued on Thursday after jumping the most in six weeks as investors weighed the outlook for central bank policy amid signs of stronger US economic data. The Stoxx 600 Index was down less than 0.1% by 10:23 a.m. in London, a day after posting its biggest one-day gain since Nov. 10 on the back of stronger-than-expected corporate earnings in the US and a pickup in consumer confidence. Energy and banks outperformed, while autos and consumer products lagged among sectors. The European benchmark index has seen sharp swings since last week as investors reacted to staunchly hawkish comments from central banks around the world. In the latest such remarks, European Central Bank Vice President Luis de Guindos said interest-rate hikes like the half-point move seen at this month’s meeting may become the standard as officials maintain their fight against soaring inflation.
  • US equity futures faltered, struggling to hold the momentum that propelled the S&P 500 to its best daily gain in three weeks, as investors assessed whether the world’s biggest economy can skirt worst-case recession scenarios. Futures contracts on the S&P 500 and the Nasdaq 100 index retreated as a gloomy outlook from chipmaker Micron Technology Inc. knocked its shares in US premarket trading and weighed on other semiconductor shares, dragging on Europe’s Stoxx 600 gauge. The warning counteracted some of the optimism fueled on Wednesday by data showing US consumer confidence at an eight-month high and a further decline in inflation expectations.
  • Equities in the Asia Pacific region rose, headed for their first gain in six sessions, as investors returned to Chinese stocks on positive policy signals. The MSCI Asia Pacific Index climbed as much as 1.3%, with benchmarks in Hong Kong jumping more than 2.7%. Investors cheered as Chinese officials urged the implementation of policies that will support the economy. Japanese shares also rebounded, snapping losses following the Bank of Japan’s decision to raise a cap on bond yields. India stocks fell, as minutes of the central bank’s latest policy meeting indicated more rate hikes.
  • Oil prices climbed, fortified by a weaker dollar and decreasing stockpiles in the US, while China is pressing on with its easing of Covid-19 restrictions. West Texas Intermediate moved toward $80 a barrel, extending a more than 5% rally in the week’s first three sessions. The Energy Information Administration reported a 5.9-million-barrel draw in US commercial stockpiles last week, with nationwide holdings at the lowest level for this time of year since 2014. The US currency weakened on Thursday, making commodities more attractive for overseas buyers.
  • Gold climbed as the dollar ticked lower ahead of fresh economic data from the US, including the Federal Reserve’s favored gauge of inflation, as traders await clues on the rate-hike trajectory in 2023. A slew of US economic data is due over the next two days, including GDP, initial jobless claims, new home sales and durable goods. Market moves may be exacerbated by declining liquidity as the holiday season approaches. Aggressive monetary tightening by the Fed this year has lifted Treasury yields and the dollar, which has weighed down on gold this year. A partial reversal in those moves has seen bullion wipe out some of the declines in recent weeks, driven by cooler-than-expected US inflation data.
  • Toshiba Corp. surged after a report the company’s preferred bidder is poised to secure letters of commitment from lenders as early as this week to finance a potential buyout deal. Shares jumped as much as 7.6% in Tokyo on Thursday after the Yomiuri newspaper reported that major Japanese banks will provide a total of 1.4 trillion yen ($10.6 billion) in financing to a consortium led by Japan Industrial Partners Inc. The report, which cited a person familiar with the matter, said Sumitomo Mitsui Financial Group Inc. will provide about 500 billion yen, while Mizuho Financial Group Inc. will contribute 450 billion yen. Sumitomo Mitsui’s banking unit plans to send an executive to serve on Toshiba’s board, according to the report. Other lenders involved include Mitsubishi UFJ Financial Group Inc., Aozora Bank Ltd. and Sumitomo Mitsui Trust Holdings Inc., it said. Toshiba plans to hold a special committee meeting in early January to discuss whether to accept JIP’s offer, the report said.
  • FTX co-founder Sam Bankman-Fried landed in the US late Wednesday to face a range of criminal charges just as two of his long-time associates said they were cooperating with prosecutors. The revelation that Caroline Ellison and Gary Wang had pleaded guilty to fraud and were working with federal officials probing the collapse of the crypto exchange is an ominous sign for Bankman-Fried. The 30-year-old is facing an eight-count indictment in New York. US authorities are conducting a sprawling investigation into the spectacular collapse last month of FTX, which was once one of the world’s biggest crypto exchanges, and the tightly-connected trading firm Alameda Research. The announcement that Ellison and Wang had pleaded guilty ratchets up pressure on Bankman-Fried and other executives who haven’t yet been charged.
  • Tesla Inc. is offering US consumers $7,500 to take delivery of its two cheapest models before year-end, a move likely to foment more debate over the extent of the carmaker’s struggle with demand. The discount Tesla is dangling on new Model 3 sedans and Model Y sport utility vehicles is double what the company was offering earlier this month, and likely has to do with changes to US tax credits that take effect in 2023. Teslas were expected to be eligible for $3,750 credits starting in January as part of changes to federal electric vehicle incentives made by the Inflation Reduction Act. That changed this week when the US Treasury Department announced it was delaying guidance on how to meet new battery content requirements, which may make certain consumers eligible for a full $7,500 credit early next year.
  • The Kremlin criticized the outcome of Ukrainian President Volodymyr Zelenskiy’s visit to Washington and warned that Russia would continue to target weaponry supplied to Ukraine by the US and its allies. Moscow followed Zelenskiy’s meeting with President Joe Biden and speech to the US Congress and saw no sign of a “willingness to listen to Russia’s concerns,” Kremlin spokesman Dmitry Peskov told reporters on a conference call Thursday, in answer to a question on the visit. Russia will “of course” target the Patriot air-defense system that the US has pledged to send to Ukraine, he said. The US and its allies are “constantly expanding the range and raising the technical level” of weapons supplied to Ukraine, though this won’t prevent the Russian military from achieving its goals, he said.
  • UK household incomes fell for a fourth straight quarter, leaving Britons on course for the worst period for living standards in memory as officials estimated the economy was weaker than previously thought. Adjusted for inflation, disposable income per person declined 0.5% in the third quarter, the Office for National Statistics said Thursday. Gross domestic product fell 0.3%, more than the 0.2% drop estimated a month ago. The figures underscore the cost-of-living crisis that is fueling the worst industrial unrest in decades. Workers from train drivers to nurses are on strike this month to press their demands for pay raises that match inflation.
  • China is likely experiencing 1 million Covid infections and 5,000 virus deaths every day as it grapples with what is expected to be the biggest outbreak the world has ever seen, according to a new analysis. The situation could get even worse for the country of 1.4 billion people. This current wave may see the daily case rate rise to 3.7 million in January, according to Airfinity Ltd., a London-based research firm that focuses on predictive health analytics and has been tracking the pandemic since it first emerged. There’ll likely then be another surge of infections that will push the daily peak to 4.2 million in March, the group estimated. Officially, China reported 2,966 new cases for Wednesday and there have been fewer than 10 Covid deaths since the beginning of December. But that contrasts with a growing chorus of reports that hospitals are being overwhelmed with patients and crematoriums are being pushed well beyond their capacity.
  • Executives at BlackRock Inc. discussed buying Carlyle Group Inc. earlier this year after the private equity giant pushed out its chief executive, the Financial Times reported, citing three people with knowledge of the discussions that it didn’t identify. The world’s biggest asset manager ultimately decided against a takeover, the newspaper reported. The size of the deal and the turmoil at the buyout firm were two reasons that put it off, the FT reported. Carlyle is searching for CEO after the board lost confidence in then-CEO Kewsong Lee in August. Co-founder Bill Conway, 73, has been running the business since then and the search is expected to extend into next year.
  • JPMorgan Chase & Co. is upping its climate ambitions, announcing a slew of new emissions reductions targets for its financing to carbon-intensive businesses, including airlines and cement manufacturers. The largest US bank said in this year’s climate report published Thursday that it plans to reduce the carbon intensity of its aviation financing portfolio by 36% by 2030 from a 2021 baseline. In the same period, JPMorgan said it aims to cut the carbon intensity of funding to iron ore and steel companies by 31%, and by 29% for cement sector financings. The latest targets follow on from the bank’s first set of emissions-reduction goals, which were announced last year and cover oil and gas, electric power and auto manufacturing. JPMorgan has been regularly criticized by environmental activists for continuing to provide vast amounts of financing to the fossil-fuel industry and for lagging behind rival banks such as HSBC Holdings Plc, which announced last week that it will no longer support new oil and gas projects.
  • Former President Donald Trump’s personal and business financial losses have shielded him from paying much income tax since 2015, according to documents made public by the House Ways and Means Committee. The Democratic-controlled House panel voted on party lines to release six years’ worth of Trump’s personal and business tax forms late Tuesday. Those documents will be released in the coming days, but a summary report gives an initial look into the income, or lack thereof, he reported and the taxes he paid. The documents raise questions about whether all the deductions and tax breaks claimed are legitimate, but the Internal Revenue Service hasn’t looked into the returns, because it didn’t conduct the mandatory presidential audits that are part of agency policy — a key finding of the House Ways and Means Committee.
  • Mexico’s inflation accelerated in line with expectations in early December after the effects of a shopping holiday the previous two weeks wore off, putting an end to a run of slowing biweekly prints. Consumer prices rose 7.77% in the first two weeks of December from the same period a year earlier, up from 7.46% in late November, the national statistics institute reported Thursday. The reading was in line with the 7.76% median estimate of economists surveyed by Bloomberg. Until this month, biweekly inflation had slowed over six straight readings since early September, but the streak was halted by the end of discounts from late November’s Buen Fin shopping holiday. Processed food and drinks led the acceleration, climbing 14.13% compared to a year earlier.









*All sources from Bloomberg unless otherwise specified