February 5th, 2020
Daily Market Commentary
- Trudeau Pipeline Wins in Court, Boosting Canadian Oil Sector. The Canadian government’s plan to expand a major oil pipeline cleared a key legal hurdle, providing optimism the project will proceed and sending a lifeline to the country’s ailing energy industry. The Federal Court of Appeals ruled Tuesday in Ottawa that Prime Minister Justin Trudeau’s government adequately consulted with indigenous communities along the line’s route and that the regulatory review of the project included all necessary elements.
- A Lacrosse Pro Turned Top Hedge Fund Manager Goes All-In on Tech. A top hedge fund manager and former professional lacrosse player is betting that the roaring technology industry will continue to produce some of Canada’s top performing stocks. In Constellation Software Inc., Donville Kent Asset Management Inc. may have made its best bet yet. More than 10 years ago, the Toronto-based hedge fund began buying shares of the upstart software company. It paid off as Constellation grew to become one of Canada’s largest software sellers, with a market value of about C$31 billion ($23-billion).
- Pipelines Are About to Join the ESG Trend, National Bank Says. Pipeline and midstream energy companies may be about to join the sustainable investment trend. The sector has often been a target of environmental opposition, but their “impressive” safety track records and relatively low environmental footprints could make them a focus for investors who favor environmental, social and governance factors, according to National Bank of Canada.
- Couche-Tard – On Jan. 30, director Louis Têtu invested over $1-million in shares of the company. He acquired 22,514 shares at a cost per share of $44.42 for an account in which he has indirect ownership (LT Management Inc.), initiating a position in this particular account.
- G&M: New Caisse boss Charles Émond is François Legault’s man. From the moment Mr. Émond joined the Caisse in early 2019 as the provincial pension fund manager’s de facto second-in-command, the former Bank of Nova Scotia senior executive was seen as the favourite to succeed to Mr. Sabia when his term expired in 2021. Speculation shifted, however, after Mr. Sabia’s political bosses began vetting potential candidates for the top Caisse job last summer, almost 20 months before Mr. Sabia’s scheduled departure. Rumours circulated that Coalition Avenir Québec Premier François Legault was already preparing to replace Mr. Sabia, who had been appointed by Liberal Jean Charest in 2009, with an external candidate in sync with his interventionist leanings.
- U.S. futures rose with European shares as a breakthrough in the race for a vaccine was reported by Sky News. Asian equities notched the first back-to-back daily gain in two weeks. Treasuries reversed earlier gains. The dollar was steady and oil climbed. Gold fell.
- Donald Trump gave a stump speech disguised as the State of the Union to talk up the economy and his achievements in an event book-ended by two striking images — the president turned his back on Nancy Pelosi’s outstretched hand as he started; she ripped up her copy of his speech when he finished. He didn’t mention impeachment, for which he’s set to be acquitted today.
- WSJ: Buttigieg, Sanders Take Lead in Iowa. After a day of confusion and recriminations over a technical mishap that snarled the vote count, the first wave of delayed results from Iowa’s presidential caucuses showed Pete Buttigieg and Sen. Bernie Sanders at the top of the Democratic pack.
- Bernie Sanders and Joe Biden are tied for first place in New Hampshire, the latest poll from the New Hampshire Institute of Politics at Saint Anselm College shows. That’s a jump of 10 percentage points for Sanders since the November poll.
- The early numbers, representing nearly three-quarters of precincts, suggested a possible split verdict that could have one candidate winning the popular vote and another securing the most delegates, the measure state and national party officials have said should determine the victor.
- The coronavirus death toll climbed toward 500 as confirmed cases worldwide neared 25,000. Thousands were quarantined on cruise ships in Japan and Hong Kong. The H.K. government imposed new curbs on border crossings with mainland China, saying the city has 21 cases and the “virus may already be spreading.” Nike, Airbus and Hon Hai issued downbeat announcements.
- OPEC+ officials gathered a second day to discuss deeper cutbacks. The Saudis are pushing for fresh cuts, but Russia is resisting. Without further curbs, prices will remain under pressure, Wood Mackenzie said. At current reductions, there’d be a surplus of 600,000 barrels a day in the first quarter and 1 million in the second.
- U.S. crude stockpiles increased 4.18 million barrels last week, the API is said to have reported. Gasoline rose 1.96 million barrels, while distillates fell 1.78 million barrels. The crude inventory gain would be the largest since November if confirmed by the more official EIA data. The consensus shows a buildup of 3 million barrels.
- Nike closed about half its stores in China and expects the outbreak to have a material impact on its operations there. Shares fell in after-hours trading.
- Macy’s will shut 125 of its least productive stores over the next three years, including 30 already in the process of closing, and axe about 2,000 jobs. It’s a good enough number to show the company is working to solve its overstored problem in the U.S., BI said. The retailer expects annual cost savings of $1.5 billion by 2022.
- European Mining Stocks Nearing Pivot Point After Sell-Off. European mining stocks are approaching levels that in the past have signaled a turnaround. After a slump amid concerns about the coronavirus outbreak, the Stoxx 600 Basic Resources Index is approaching parity with the broader European benchmark. The most recent bottom of the ratio between the two was
- The euro-area composite PMI was revised up to 51.3 in January, the highest level since August and above the initial estimate of 50.9. The services gauge also increased, rising to 52.5 from 52.2.
- Indonesia’s economy grew 4.97% in the fourth quarter versus estimates for 5%, even after an aggressive run of central bank easing aimed at countering the global slowdown. The economy contracted 1.74% quarter on quarter, versus an estimated 1.67% decline.
- The Caixin services PMI for China fell to 51.8 in January from 52.5. Consensus was for 52. The composite gauge fell to 51.9 from 52.6.
- China scooped up about 10 soybean cargoes from Brazil and Argentina this week, easing concerns it will cancel purchases due to the virus crisis, people familiar said. The Brazilian cargoes purchased were for next month, while Argentine supplies were for April.
- Global Iron Ore Market Hits Fresh Crisis After Year of Turmoil. The global iron ore market is facing a crisis of demand right after emerging from a crisis of supply. The virus outbreak in China is driving concerns that consumption will take a hit, pummeling prices that had been lifted last year by interruptions at mines, including a fatal dam burst. As the disease spreads, there’s been a slew of early-but-significant signals: some mills in China have begun curtailing steel output; construction projects and manufacturing including auto production have slowed; and a vast swathe of Asia’s top economy remains offline.
- Sprott Sees Gold at Record as Debt Levels Spur Rate Cuts. The world’s growing debt pile is set to propel gold to fresh records over the next two years, while the metal will get a short-term boost from concerns the coronavirus outbreak will weigh on economic growth, according to Sprott Inc.’s Chief Executive Officer Peter Grosskopf. “It’s got a very good chance of taking out the old highs,” he said in an interview last week. “The main driver is continued financial repression in an environment where other financial markets are correcting. These conditions that we’re seeing now are nirvana for gold, it’s a perfect scenario.”
- Goldman was lining up buyers for an overnight sale of Charter Communications shares, people familiar said last night. The bank offered 2.7 million shares on behalf of an unknown holder at $526.50 each, a 1% discount to yesterday’s closing price. Shares slipped in extended trading.
- Casper Sleep plans to cut its target price for its IPO today, people familiar said. It’s not clear how low the new price range will be. The company’s value had already sunk to about $744 million based on its filings, from a $1.1 billion valuation less than a year ago.
*All sources from Bloomberg unless otherwise specified