February 4th, 2020
Daily Market Commentary
- Canadian stocks rebounded from Friday’s rout after China took steps to protect its economy and markets from the impact of the coronavirus. The S&P/TSX Composite Index added 0.4% to 17,379.76 Monday, partially recovering from the previous session’s 1% drop. Technology and health-care stocks led the gains. The only sector that closed lower was materials, which took a hit from falling gold prices. Enbridge Inc. contributed the most to the index gain, increasing 1.5%. Ballard Power Systems Inc. had the largest increase, rising 6.9%. Today, 144 of 233 shares rose, while 84 fell.
- Canada has kicked off 2020 with a slew of new products aimed at investors who want to incorporate environmental, social and governance factors into their investment portfolios. Seven ESG-focused exchange traded funds began trading in January, the biggest month for launches of those funds since March 2019, when eight ESG products were created, according to National Bank Financial. The new funds are being launched after two years of strong net flows for Canadian-listed ESG ETFs — more than C$300 million ($226 million) in 2018 and almost C$150 million last year. The availability of such products in Canada has ballooned as asset managers try to capitalize on rising demand for funds that screen out companies that don’t meet certain environmental and governance criteria. Canada now has more 30 pure-play ESG ETFs. The U.S. has more than 80, though none have been launched this year, said Daniel Straus, vice president of ETFs and financial products research at National Bank Financial.
- Add record corporate debt to Canada’s list of worrisome borrowing trends, according to Toronto-Dominion Bank. Corporate debt outside the financial sector reached a record 118.7% of gross domestic product at the end of the second quarter, TD economists James Orlando and Brett Saldarelli said in a note Monday. That’s the third-highest among G-20 countries after China and France, according to the report, which cited data from the Bank of International Settlements.
- European shares advanced on Tuesday after Asian markets bounced back as efforts to contain the spread of the coronavirus continue. The Stoxx 600 Index rose 0.8%, led by miners and energy shares as oil traded back above $50. BP Plc jumped 4% after its fourth-quarter earnings beat estimates and the British company slightly increased its dividend. Italian lender Intesa Sanpaolo SpA reports earnings later in the day. Investors are assessing efforts to contain the virus and its impact on global economic growth, as concern over the disease looms over the earnings season. Hong Kong confirmed its first coronavirus death, the second fatality outside mainland China, while the number of cases exceeds 20,000.
- U.S. stock-index futures rose as China’s equity market rebounded following a $720 billion plunge Monday that was its worst since the country’s bubble burst in 2015. Contracts on the S&P 500 Index expiring in March climbed 1.1% as of 9:42 a.m. in London after falling 0.3% earlier. E-mini futures on the Nasdaq 100 Index and on the Dow Jones Industrial Average both advanced as much as 1.2%.
- China’s CSI 300 Index of equities climbed 2.7%, after plunging almost 8% on Monday. In Europe, an index tracking shares across the region rose 1%, with mining and energy shares leading gains.
- Oil climbed to near $51 a barrel in New York as officials from OPEC+ gathered on Tuesday for an urgent meeting to assess the impact of the coronavirus on global demand, and how the group should respond. Under increasing pressure after crude prices sunk below $50 a barrel for the first time in more than a year on Monday, technical experts from the Organization of Petroleum Exporting Countries and its allies will meet at the group’s Vienna headquarters to evaluate the disease’s impact, where they will also be joined by China’s ambassador to the United Nations. The outcome of the discussions may determine whether the group convenes an emergency meeting to consider new output cuts later this month.
- After reporting lackluster fourth-quarter sales last month, Ford Motor Co. and General Motors Co. are poised to report their latest earnings, with analysts most eager to find out about the carmakers’ outlooks for 2020. Analysts’ average estimates for both companies’ quarterly profit have come down significantly over the past six months, though the decline is more stark for GM. Ford is estimated to report earnings of 17 cents a share, down from 28 cents six months back. GM is estimated to break even on a per share basis, compared to the $1.88 that was expected earlier.
- Google faces one more probe in the European Union over concerns the company’s processing of user location data could violate the bloc’s tough privacy rules. Armed with the power to levy hefty fines, Ireland’s data protection commission on Tuesday also opened a separate investigation into Match Group Inc. and the “ongoing processing of users’ personal data” on its popular dating app Tinder. The probes add to more than 20 investigations by the Irish authority into big tech companies, including Facebook Inc., Twitter Inc. and Apple Inc.The two most advanced cases concern WhatsApp’s transparency around data sharing with Facebook and its wider group of companies, and a probe into Twitter, Helen Dixon, the Irish privacy chief, said in a recent interview.
- Hong Kong reported a death from the coronavirus, confirming the second fatality outside mainland China. More than 20,600 cases have now been reported, an increase from about 17,000 the previous day. Chinese stocks rose after a steep sell-off. Economists cut China’s growth forecasts as the impact on businesses grew. Macau asked casinos to shut for half a month and BP Plc predicted a slump in oil demand this year. Hong Kong has agreed to allow companies to delay earnings reports, while Credit Suisse scrapped its annual Asia investment conference.
- The Iowa caucuses that were to give shape to the Democratic presidential race devolved into political embarrassment for the party that left candidates and voters hanging with no results and no springboard into the next round of contests. An attempt to modernize the arcane Iowa caucus system and make it more transparent melted down with the introduction of new technology and more complex rules. The Iowa Democratic Party was unable to release results from Monday’s caucuses after discovering “inconsistencies” in reporting from some precincts.
- The global stash of gold in exchange-traded funds has risen to a record after a long run of accumulation that’s been given added impetus in recent weeks by the fall-out from the widening coronavirus crisis. Worldwide holdings in bullion-backed ETFs climbed to 2,573.9 tons on Monday, topping the previous peak set in 2012, according to an initial Bloomberg tally. The latest additions follow four straight years of inflows, and come as prices of the traditional haven trade near the highest level since 2013.
- For a few tumultuous years, Tesla Inc. gave the bulls reason to believe and bears reason to doubt. Sure, Elon Musk was pulling off what legacy automakers tried and failed to do — make electric cars cool — but he was presiding over an inexperienced enterprise, and the old guard would catch up. As Tesla observers try to understand how and why the stock has tripled in a little more than three months, analysts and Musk’s own rivals are second-guessing the notion that the Model 3 maker will be caught anytime soon.
- The biggest mystery left in Donald Trump’s inevitable impeachment acquittal is whether any Democrats will join Senate Republicans to give him a bipartisan vote to clear him of the House’s charges. Democratic senators who represent Trump-leaning states have to decide whether they will buck their party on what could be the most important vote before the November elections and risk alienating voters who like the president. The most vulnerable is Senator Doug Jones, who is up for re-election this year in Alabama. Jones said he won’t announce how he’ll vote ahead of time, even though the Senate floor will be open until the final vote at 4 p.m. Wednesday for senators to explain their thoughts about the trial debate over the past two weeks.
- International Business Machines Corp. is kickstarting a potential run of jumbo U.S. company bond sales in Europe, as marketwide activity picks up following coronavirus-induced global volatility. IBM’s trio of euro bonds may be followed by a five-part Comcast Corp.deal in euros and sterling as soon as Wednesday. Dow Chemical Co. has mandated a roadshow for as many as three euro bonds next week, following a record 2019 for U.S. companies selling notes in the single currency.
- The pound reversed losses, and money markets were no longer fully pricing in a U.K. interest-rate cut this year after data showed the beleaguered construction industry saw some relief last month. The Australian dollar rose after the nation’s central bank kept its policy rate unchanged.
- Prime Minister Boris Johnson will seek to position the U.K. as a leader on climate change on Tuesday, just days after firing the president of the next global climate talks. Claire O’Neill said she was sacked by Johnson’s top adviser Dominic Cummings on Friday with no clear reason. In a letter to Johnson published on Tuesday, she accused the government of playing politics over climate change and failing to prioritize the issue, leaving the country “miles off track” in its preparations. “Our efforts right now are somewhere around the middle of League One,” O’Neill told BBC radio on Tuesday, a reference to the third tier of English soccer. The U.K. must perform at Premier League level “if we are going to actually do what the world needs us to do, which is to break out of this incrementalism and start us moving forward on where we need to be which is a really rapid decarbonization.”
- Central banks in Asia face increasing calls to cut interest rates as they jump into action against a spiraling coronavirus crisis that’s hammering tourism, travel and confidence across the region. The People’s Bank of China trimmed some interest rates Monday and injected massive liquidity into the financial system to shore up slumping markets. Indonesia’s central bank said it was taking “bold” steps to bolster the nation’s currency and bonds. Bank of Japan Governor Haruhiko Kuroda said Tuesday the bank won’t hesitate to take action to cope with the virus’s economic impact if it becomes necessary.
- India’s steel industry is set to more than triple its carbon footprint by 2050 as demand for the metal in the world’s second-biggest producer soars. Carbon dioxide emissions from the steel industry are projected to jump to 837 million tons over the next three decades from 242 million tons now as India’s demand for steel more than quadruples to about 490 million tons, The Energy and Resources Institute said in a report. It will also contribute more than a third of the nation’s total fossil fuel combustion emissions from 12% currently.
- Visa Inc. is planning the biggest changes in a decade to the rates U.S. merchants pay to accept its cards, hoping to persuade more people to abandon checks and adjusting its fees for new businesses such as ride-hailing services. The company’s interchange rates — fees charged every time a consumer uses a card — will go up or down depending on the merchant and the way a consumer pays for their purchases, according to a document Visa sent to banks that outlines the changes. Higher rates are looming for transactions on e-commerce sites, while retailers in certain services categories, such as real estate and education, will see fees decline.
- The private investment arm of Koch Industries Inc., run by billionaire Charles Koch, has acquired the remaining equity in cloud-software maker Infor Inc., the companies said. The deal values Infor at $11 billion, according to a person familiar with the matter who asked not to be identified discussing private information. Koch Industries, the Wichita, Kansas-based conglomerate, already owned about 70% of Infor, the company said. Its subsidiary Koch Equity Development LLC purchased the remaining Infor equity it didn’t already own from Golden Gate Capital.
- Smiths Group Plc has asked for final bids this week for its medical-equipment business, which could fetch about $3 billion, people familiar with the matter said. Private equity firms Cinven, Platinum Equity and GTCR are among parties considering making binding offers for the unit, according to the people, who asked not to be identified as the matter is private. U.S.-listed rival ICU Medical Inc., which was pursuing the business last year, is also in the race, the people said.
*All sources from Bloomberg unless otherwise specified