February 21, 2023

Daily Market Commentary

Canadian Headlines

  • Teck Resources Ltd. will spin off its steelmaking coal business to shareholders as it shifts focus to industrial metals, and plans to wind down the dual-class share structure through which Canada’s Keevil family controls the company. Teck will separate into two independent, publicly-listed companies: Teck Metals Corp. and Elk Valley Resources Ltd., the Vancouver-based company said in a statement on Tuesday. It will still benefit from the coal business’s profits though: Teck Metals will own a royalty on revenue, as well as preferred shares in the new company, which will pay out about 90% of EVR’s quarterly free cash flow, it said. The structure is for a transitionary period, which Teck said could last about 11 years.
  • Suncor Energy Inc. named Rich Kruger as its new chief executive officer, ending a seven-month search that started after a string of worker deaths and pressure from activist investor Elliott Investment Management LP drove out the previous leader. The appointment of Kruger, a former CEO of Exxon Mobil Corp.’s Canadian unit Imperial Oil Ltd., is effective April 3, Suncor said Tuesday in a statement.
  • HSBC Holdings Plc will consider a special payout after the sale of its Canadian unit as the bank attempts to face down a campaign from its top shareholder to pursue a wider break-up of the business.  Reporting fourth-quarter results that beat analyst estimates, HSBC said it may pay a special $0.21 dividend next year after the completion of the transaction amid an ongoing tussle with Ping An Insurance Group Co of China. The bank announced the all-cash sale of HSBC Canada in November as it seeks to convince investors its plan to refocus on Asia is a better bet than Ping An’s call to consider spinning out its business in the region.


World Headlines

  • European stocks were steady as investors assessed a slew of earnings and economic data while considering the hawkish path of monetary policy. The Stoxx Europe 600 Index was down less than 0.1% at 11:28 a.m. in London. Technology and automotive stocks lagged behind while utilities and health care advanced.
  • Asian stocks fell as investors awaited earnings from China’s major tech companies and minutes from the US Federal Reserve later this week.  The MSCI Asia Pacific Index slid as much as 0.9%, with China’s tech shares among the biggest laggards. JD.com led declines following a report that the e-commerce firm is planning a subsidy campaign as it ratchets up a price war against rivals.
  • U.S. equity-index futures fell as investors worried about the prospects of interest rates staying higher for longer and a deepening of geopolitical tensions. The dollar rebounded on haven appeal. Contracts on the S&P 500 and Nasdaq 100 indexes dropped at least 0.7% each as US traders returned from a holiday.
  • Gold declined as the dollar strengthened ahead of Federal Reserve minutes that may provide further indicators of the future path for interest rates. The metal has slumped this month, wiping out gains made at the start of the year as Fed officials advocated larger rate hikes after hot US inflation data. Minutes from the central bank’s last meeting will be released on Wednesday, which will be scanned for clues on the monetary policy outlook.
  • Oil pared an earlier drop as investors weighed the prospect for further US monetary tightening against signs of improving demand from China following the end of Covid Zero. Brent futures traded near $84 a barrel, after being down as much as 1.7% at one point. Prices have bounced within a relatively tight range this year, and a measure of volatility remains near the lowest level in 13 months.
  • Copper declined from a three-week high as the dollar gained, while investors also focused on European economic data and the reopening of US markets. The metal rallied in the previous session during a US holiday, before coming under pressure from the greenback Tuesday amid muted risk appetite across markets. European data showing the manufacturing sector stagnating also weighed on industrial metals.
  • Europe’s biggest economies beat expectations as business activity returned to growth, boosting the chances they can stave off recessions. Gauges of private output in Germany and France both signaled expansion in February after pullbacks in January, while the UK’s purchasing managers’ index showed the first positive reading in six months — jumping to 53 from 48.5. In the 20-nation euro zone, activity rose at the fastest pace since May 2022.
  • UK Chancellor of the Exchequer Jeremy Hunt has as much as £30 billion ($36 billion) for short-term giveaways in next month’s budget after the public finances came in far better than expected in January. Borrowing since the fiscal year that began in April is running £22 billion below the level forecast by the Office for Budget Responsibility in November, the Office for National Statistics reported Tuesday. The undershoot is £30.6 billion when differences over student loans are excluded.
  • Russian exports of discounted crude and fuel oil to China have jumped to record levels as the re-opening of the world’s biggest energy importer gathers pace after the dismantling of Covid Zero. Overall flows last month were at the highest at any point since the invasion of Ukraine a year ago and surpassed a record set in April 2020, according to data intelligence firm Kpler. Exports of fuel oil surged to an all-time high.
  • President Vladimir Putin said Russia will suspend its observation of the New START treaty with the US, dealing a blow to the last accord limiting their nuclear arsenals, as he vowed to press on with his faltering invasion of Ukraine. Russia is fighting for its “historic lands” in Ukraine and “will fulfill the tasks set step-by-step, carefully and consistently,” Putin told the Russian parliament and top officials in Moscow on Tuesday. Russia won’t be the first to resume testing of nuclear weapons as a result of its suspension of New START, though it will do so in response to any US test, he said.
  • Walmart Inc.’s profit forecast for this year fell short of analyst estimates, signaling a cautious outlook for the world’s largest retailer after a 2022 performance that was marred by an inventory surge. Adjusted earnings will decline by as much as 6.2% in the current fiscal year, to a range of $5.90 to $6.05 a share, Walmart said in a statement Tuesday as it reported financial results. The outlook includes an accounting impact of 14 cents a share from last-in, first-out accounting provisions. Wall Street had estimated a gain of about 3.8% to $6.53… Walmart shares fell 3.9% ahead of regular trading in New York.
  • Credit Suisse Group AG fell to an intraday record low on a report that the chairman is facing a probe over comments he made that the firm had put a stop to huge client outflows after a run of share declines. Swiss financial markets regulator Finma is seeking to establish whether the comments from bank representatives including Chairman Axel Lehmann were misleading, according to a Reuters report. In a Bloomberg TV interview in early December, Lehmann had said that outflows had “basically stopped” after it had disclosed the loss of 84 billion francs of client assets in November. By the end of the quarter, that figure had risen to 110.5 billion francs.
  • Microsoft Corp. headed into a showdown with European Union antitrust watchdogs by insisting its $69 billion takeover of Activision Blizzard Inc. will “bring more competition” for gamers but pledging to show willingness to address antitrust concerns. “I think we’ll make clear that our acquisition of Activision Blizzard will bring more games to more people on more devices and platforms than ever before,” Microsoft President Brad Smith told reporters ahead a closed-door hearing in Brussels.
  • Physical attacks on the U.S. power grid rose 71% last year compared with 2021 and will likely increase this year, according to a confidential industry analysis viewed by The Wall Street Journal. A division of the grid oversight body known as the North American Electric Reliability Corporation found that ballistic damage, intrusion and vandalism largely drove the increase. The analysis also determined that physical security incidents involving power outages have increased 20% since 2020, attributed to people frustrated by the onset of the pandemic, social tensions and economic challenges.
  • The largest-ever trial of the four-day work week found that most UK companies participating are not returning to the five-day standard, and a third are ready to make that change permanent. The study involved 61 organizations and about 2,900 workers who voluntarily adopted truncated work weeks from June to December 2022. Only three organizations decided to pause the experiment, and two are still considering shorter hours, data released Tuesday showed. The rest were convinced by revenue gains, drops in turnover and lower levels of worker burnout that four is the new five when it comes to work days.













*All sources from Bloomberg unless otherwise specified