January 23rd, 2020

Daily Market Commentary

Canadian Headlines

  • Bank of Canada Needs Strong Communicator, Morneau Says. Whoever replaces Stephen Poloz as Bank of Canada Governor will need to continue to invoke confidence in markets, Canadian finance minister Bill Morneau said. He said not to expect any announcement in the coming weeks, but that the decision will be made in advance of June, when Poloz is set to leave. The Bank of Canada has a relatively high policy rate among major economies, but the downturn in domestic data since the end of last year has prompted concern among officials.
  • Scotiabank CEO Sees ‘Significant’ Prospects for Scaled-Back Bank. Highlighting a “considerably more focused” bank pared back by exits from more than 20 countries, Bank of Nova Scotia Chief Executive Officer Brian Porter said he has positioned the bank to expand once more.
  • Manulife Agrees to Buy Montreal Condo Complex for $80 Million. The two buildings stand at 16 stories and include 300 rental units. “Infrastructure investments, a tightening labor market and government support for technology have all contributed to economic advancement, and ultimately, a market we’re looking to expand in,” Michael McNamara, head of real estate investments said in statement
  • Hudbay’s CEO Open to Takeovers But Focused on Internal Projects. Kukielski says he’s often asked if he feels “vulnerable” given the decline in Hudbay’s stock price, but he’s focused on “sweating our assets” and “low capital intensity expansion” in Canada and Peru.
  • Dream Industrial REIT Announces European Expansion in Germany and the Netherlands, Strategy to Reduce Cost of Debt. The fundamentals of the industrial and logistics markets across Europe continue to remain attractive driven by the continued development and growth in e-commerce fueling demand from logistics operators coupled with low supply of high-quality and suitable product. We believe the healthy rental growth potential paired with limited new supply under construction provides tailwind for strong performance in this sector over the next five to ten years.


World Headlines

  • Stocks Slip, Bonds Gain on Virus Fears; Oil Slides. U.S. equity futures fluctuated while European stocks edged lower and Asian shares slumped on Thursday amid lingering concerns that a virus spreading from China to other countries could become a drag on global growth. Treasuries climbed and crude oil fell.
  • Index Fund Giants Draw Antitrust Scrutiny in U.S. Merger Reviews. U.S. antitrust officials have begun asking companies about communications with their biggest shareholders as part of merger investigations, according to people familiar with the matter, adding to the growing scrutiny of the power of giant index funds.
  • S&P Global. Assets Worth $18 Trillion Face Climate-Related Risks. About 60% of companies in the S&P 500 Index — with a market capitalization of $18 trillion — hold assets at a “high risk of at least one type of climate-related physical event,” according to S&P Global Ratings.
  • Real estate investment trusts (REITs), materials sector companies operating mines and processing plants and utilities are among sectors facing heightened risks, the report says
  • Trump’s Trade Deal Hastens China’s Retreat From U.S. Farmers. Donald Trump’s trade truce with Beijing included a pledge to buy billions of dollars of U.S. foodstuffs over the next two years, reopening one of the most important export markets for America’s farm belt. “The farmers are really happy with the new China Trade Deal,” the president tweeted the day after a signing ceremony in the White House.
  • China’s Trying to Break Its Addiction to Corporate Bank Loans. China is strengthening efforts to encourage direct financing of companies in a financial system that’s long been dominated by banks, as the private sector struggles with access to credit. Regulators in recent months relaxed rules for companies seeking listings on China’s stock markets, moving toward a registration-based system that in theory automatically green-lights applicants provided they meet set criteria. While regulators still demand case-by-case reviews for bond sales, a legal amendment to be rolled out March 1 calls for “sharply simplifying” the requirements.
  • Biden, Sanders Overstate Tax-Hike Revenue, Estimates Find. Democratic presidential candidates Joe Biden and Bernie Sanders have overestimated the amount of revenue their tax proposals would generate by hundreds of billions, or even trillions, of dollars, according to a new study.
  • Wells Fargo Regulator Aims to Punish Slate of Former Executives. Wells Fargo & Co.’s main regulator is preparing civil charges against former managers related to their roles in its retail banking scandals, people familiar with the matter said. The Office of the Comptroller of the Currency has been readying so-called notices of charges against as many as 10 individuals, and may reach settlements with some, the people said, asking not to be identified because the discussions aren’t public. Carrie Tolstedt, who ran Wells Fargo’s sprawling community bank, former chief administrative officer Hope   Hardison and onetime chief auditor David Julian may be among those facing the charges, the people said.
  • China Expands Travel Restrictions as Virus Deaths Climb. Health officials expanded travel restrictions beyond the epicenter of a SARS-like virus outbreak that’s killed at least 17 and infected hundreds in China while spreading around the world. After travel from the central city of Wuhan was halted, nearby Huanggang suspended bus services and closed public sites including movie theaters, the local government said Thursday. Another city, Ezhou, also imposed restrictions, according to municipal officials.
  • Mnuchin Tells Thunberg to Go Study Economics…The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems they helped create, above all climate change. Germany’s Angela Merkel will speak this afternoon as the Group of Seven’s longest-serving leader runs out of time to reset Europe’s biggest economy before her era as chancellor draws to a close.
  • Japan’s Exports of Chip-Making Gear Point to Tech Sector Pickup. A sharp jump in Japan’s exports of semiconductor-making equipment fits in with recent signs of an improvement in global tech demand. While overall Japanese shipments continued a dismal downward trend in December, exports of chip gear surged 26% in value in December from a year earlier. Those shipments have improved for four straight months since a 25% slide in August.
  • Oil Falls to Seven-Week Low as Asia Virus Eclipses Supply Loss. Oil fell further after hitting a seven-week low on speculation that China’s coronavirus outbreak may dent demand, just as the market already contends with plentiful supplies. Futures lost 1.6% in New York to trade below $56 a barrel as the world’s biggest oil importer effectively quarantined a major city to contain the SARS-like virus, which Goldman Sachs Group Inc. has warned could trim global demand. The alert has overshadowed any concern over the suspension of exports from Libya, where a militia leader has ordered ports to close.
  • Gold Steadies as Investors Weigh Impact of China Virus but May Rally 15% More if Technical Indicators Prove Prescient. Gold may increase a further 15% to $1,800 per troy ounce before the current rally fizzles out, according to technical indicators.

*All sources from Bloomberg unless otherwise specified