February 5, 2021

Daily Market Commentary

Canadian Headlines

  • The oil-rich Canadian province that was hit hard by Joe Biden’s move to kill the Keystone XL pipeline is considering seeking compensation from the U.S. through an old free-trade rule that’s still in place. Alberta, which spent C$1.5 billion ($1.2 billion) to help jump start construction of the project, may resort to a North American Free Trade Agreement provision allowing compensation claims for lost investments, Alberta Premier Jason Kenney said. While Nafta was replaced by the United States-Mexico-Canada Agreement during the Trump administration, the rule remains in place during a phase-out period.
  • Canada is extending its ban on cruise ships through February 2022 because of Covid-19, effectively shutting down popular summer trips to Alaska for another year. The prohibition will allow authorities to focus on the rollout of the coronavirus vaccine and limit the spread of new variants, the government said in a statement Thursday.
  • Big cities in Canada will come back to life once the pandemic is over and so will demand for homes in them, according to a new paper by economists at Canadian Imperial Bank of Commerce. Covid-19 has caused buyers to shun high-rise units in city centers in favor of single-family homes with more space in the suburbs or outlying regions. That’s resulted in a divergence in prices for detached houses versus condos — but economists Benjamin Tal and Royce Mendes don’t think it will last. “Should Covid fade into the background, as is expected, the vibrancy of cities will return and so will the demand for housing within them,” Tal and Mendes wrote in the report published Thursday.
  • A unit of Hong Kong billionaire Li Ka-Shing’s empire has purchased two wind power facilities in the Okanagan region of British Columbia, Canada. CK Group’s Canadian Power Holdings Inc. will acquire 100% of Okanagan Wind, which generates 30 megawatts of power from the two wind farms, according to a statement. The C$53.3 million ($41.7 million) deal includes the assumption of debt. All of the electricity generated by Okanagan Wind is sold under an inflation-linked deal with the province’s hydro and power authority.
  • Micro-cap Nabis Holdings Inc. surged from a penny to nearly a dollar over the course of a week before the stock was halted. Now a Canadian regulator says it will nix all those trades. The Investment Industry Regulatory Organization of Canada said all trades between Jan. 27 and Feb. 2 would be canceled. Short-selling was also ruled ineligible. “IIROC has made this designation in the interest of maintaining a fair and orderly market based on the fails relative to the number of shares outstanding,” according to a separate statement on short selling.

World Headlines

  • Asian stocks rose, with the regional benchmark posting its biggest weekly gain since early November, after economic optimism and improving coronavirus trends saw U.S. shares reach record highs. Equity benchmarks in the Philippines and Japan led the broad rally, helping the MSCI Asia Pacific Index rise for a fourth day this week. Philippine stocks advanced, erasing an earlier loss, as the central bank said inflation will settle within its target after data showed consumer price gains in January reached the fastest pace in two years.
  • Risk assets were almost uniformly higher on Friday as the U.S. Senate voted to adopt a budget blueprint for President Joe Biden’s $1.9 trillion stimulus package and investors waited for the monthly U.S. jobs report. Global stocks and S&P 500 futures advanced, while yields on benchmark Treasuries climbed. In U.S. pre-market trading, Pinterest Inc. jumped 11% on better-than-expected sales. Johnson & Johnson advanced after asking U.S. drug regulators to clear its experimental Covid-19 vaccine for emergency use. Snap Inc. shares slumped after saying it can’t yet estimate the potential impact of Apple’s new privacy rules.
  • Oil rose toward $60 a barrel in London as supplies continue to tighten while the demand outlook improves with the roll-out of coronavirus vaccines. Futures in London climbed for a sixth day, also aided by a weaker dollar, as they close in on a level last reached in February 2020, before Covid-19 upended global energy markets. The Organization of Petroleum Exporting Countries and its allies have pledged to keep draining a virus-driven surplus as inventories from China to the U.S. shrink.
  • The US dollar headed for its best weekly gain in three months on Friday, lifted by growing confidence that the U.S. economic recovery will outpace that of its global peers. The dollar index touched a two-month high in Asian trade amid signs of resilience in the labor market, with closely watched U.S. nonfarm payroll figures due later. It retreated in European trading. The dollar also renewed highs versus the euro and yen during Asian trade, although the euro recouped its losses in European trade.
  • Iron ore futures headed for a third straight weekly loss, the worst run in 10 months, as investors grappled with prospects for higher global supply, rising stockpiles in China, and escalating concerns over demand. After a volatile week in Singapore, most-active prices — which hit the lowest level since December in Tuesday’s trading — are on track for the longest run of weekly declines since last April. Australia & New Zealand Banking Group Ltd. has flagged the scope for a slump back to $100 a ton over 12 months, while Citigroup Inc. warned of volatility.
  • China’s government forecaster boosted its outlook for the nation’s corn imports to a fresh record, adding to signs that global food prices could continue to hit multi-year highs. China is set to buy 20 million tons in 2020-21 from 7.6 million in the previous marketing year, according to the China National Grain & Oils Information Center. Sorghum and barley purchases will also increase, the government think tank said on Friday. Crop prices have already jumped more than 50% since a low in August as China scours world supplies to feed its expanding pig population. That’s adding pressure on the global food price index which has risen to the highest since 2014 as producers in Canada and the U.S. struggle to fill their own granaries.
  • German factory orders fell for the first time in eight months after the spread of the coronavirus forced the euro area’s biggest economy and many of its trading partners into lockdowns. Demand dropped 1.9%, damped by investment goods and orders from the euro area. Orders were still up more than 6% from the previous year.
  • The Senate voted 51-50, after Vice President Kamala Harris broke her first tie, to adopt a budget blueprint for President Joe Biden’s $1.9 trillion virus relief package — following nearly 15 hours of wading through amendments from both parties. The House had already adopted its budget resolution but will likely have to vote again Friday to agree on the Senate’s language. Once that’s done, Democrats will be able to craft a relief bill in the coming weeks that can pass without any Republican votes under special budget rules — though the White House, moderates like Democratic Senator Joe Manchin of West Virginia and others still say they want a bipartisan final product.
  • A bipartisan House group called for a quick vote on a $160 billion standalone package funding coronavirus vaccines and testing, adding to pressure on Speaker Nancy Pelosi as she aims to pass President Joe Biden’s broader $1.9 trillion relief plan. The Problem Solvers, a 56-member group composed equally of Democrats and Republicans, made the demand in a statement Friday. The separate Blue Dog group of centrist Democrats wrote Pelosi Thursday urging a vote on a narrow Covid-19 national vaccination program, before other elements of Biden’s relief proposal.
  • Private-equity and hedge funds face an increased risk that the U.S. will close a longstanding money-laundering loophole for assets they manage. All it would take is the Biden administration to quickly revive a rule that was developed during Barack Obama’s term but left unused by Donald Trump. The U.S. has intensified its crackdown on dirty money in recent years, requiring banks, brokerages and mutual funds to monitor clients and report suspicious activity. But investment advisers overseeing trillions of dollars in private equity and hedge funds are exempt from such rules, and the Federal Bureau of Investigation says that’s attracted more cash from Mexican drug lords, countries under U.S. sanctions and companies with suspected Russian mob ties.
  • Rival bidders Blackstone Group Inc. and Global Infrastructure Partners joined together to buy Signature Aviation Plc for $4.7 billion, resolving their tussle over the world’s biggest operator of private-jet bases. The company agreed to a sweetened $5.62-per-share bid from the two major funds and billionaire Bill Gates, currently the largest investor in the company, according to a statement on Friday.
  • Shares in GameStop Corp. and AMC Entertainment Holdings Inc. rebounded slightly in premarket trading after Robinhood Markets Inc. removed limits on buying the two stocks, which have been at the center of the battle between Reddit-empowered retail traders and short-sellers. Robinhood’s move, announced in an update on the trading platform’s support page, comes a day after it increased limits on purchases of the two stocks. GameStop has plunged 84% so far this week while AMC has tumbled 47% as retail traders flocked to other corners of the stock market, such as small drug developers.
  • Speculation that Apple Inc. is seeking a partner to develop its own electric vehicle swept through South Korea and Japan, where shares of major car companies climbed on reports of discussions with the maker of the iPhone. Kia Motors Corp. is talking to potential partners about a plan to assemble an Apple-designed car, the Wall Street Journal reported Friday. Separately, the Nikkei newspaper said Apple was in discussions with at least six automakers. Conjecture around Apple’s secretive project to design and sell its own car re-emerged in December after a hiatus of several years, with Kia’s part-owner Hyundai Motor Co. mentioned as a potential partner.

“The Sea receives ten thousand rivers and still the sea is never full.” – Chinese Proverb

*All sources from Bloomberg unless otherwise specified