January 21, 2021

Daily Market Commentary

Canadian Headlines


  1. President Joe Biden’s cancellation of the Keystone XL project has put Justin Trudeau in a no-win situation. He has no good options to retaliate. But a failure to fight back could fracture the unity of his own country. Biden revoked the permit for TC Energy Corp.’s oil pipeline via executive order hours after his inauguration on Wednesday. The cross-border project would have transported more than 800,000 barrels a day from the western province of Alberta to Nebraska, and from there to U.S. refineries. Trudeau immediately came under pressure from Alberta Premier Jason Kenney, who called on the prime minister to consider trade sanctions against the U.S. It’s unlikely Trudeau is willing to go that far. The confrontation scrambles Trudeau’s plans for a full reset in Canada’s relationship with the U.S. — by far its most important foreign ally — after four years of bruising trade battles with Donald Trump. In western Canada, a failure to push back on Biden will only sow greater mistrust over Trudeau’s handling of the nation’s vast oil riches.

World Headlines

    1. European stocks rose as cyclical sectors were boosted by bets on further spending after Joe Biden was sworn in as U.S. president, while a European Central Bank meeting is also in focus. The Stoxx 600 Index was up 0.7% by 8:03 a.m. London time, led higher by travel stocks, construction firms and miners. Among individual movers, Bankinter SA shares rose 1.2% after the Spanish lender’s results beat estimates, while peer Banco Bilbao Vizcaya Argentaria SA also gained after agreeing to sell a portfolio of bad loans. European renewable energy stocks like wind power firm Vestas Wind Systems A/S and solar power company Scatec ASA rallied after Biden signed a series of executive orders to combat climate change.
    2. Global stocks climbed to an all-time high on Thursday on optimism that fiscal spending will revive economic growth and bolster corporate earnings. The dollar weakened. S&P 500 futures edged higher after the gauge posted its best first-day reaction to a presidential inauguration since at least 1937. Nasdaq 100 contracts outperformed following a 2% jump on Wednesday. Meanwhile, fresh tensions surfaced between U.S. companies and Beijing. China’s three biggest telecommunications firms said they requested a review of the New York Stock Exchange’s decision to delist their shares. Separately, Twitter Inc. locked the official account of the Chinese embassy to the U.S., citing a violation of its “dehumanization” policy.
    3. Asia’s stock benchmark headed for another record close amid a global rally on optimism that U.S. fiscal spending will revive economic growth and boost corporate profits. Tech giants TSMC, Samsung Electronics and SoftBank were the biggest boosts to the MSCI Asia Pacific Index, which saw broad gains among its industry groups. The regional benchmark is already up more than 7% this year. Taiwan’s key equity gauge was among the top gainers in the region after data showed the country’s export orders climbed 10.1% last year to $533.7 billion, an all-time high.
    4. Oil dipped below $53 a barrel in New York as the demand outlook in some of the world’s largest economies remained fragile. Futures slipped 0.6% after JPMorgan Chase & Co. cut demand estimates for China as lockdowns spread ahead of the Lunar New Year travel rush. Meanwhile the U.K. suffered its worst day of the pandemic on Wednesday, with more than 1,800 deaths recorded in 24 hours. On the supply side, the American Petroleum Institute said U.S. crude inventories swelled by 2.56 million barrels last week and gasoline and distillates stockpiles also increased, according to people familiar with the data.
    5. Gold held gains after surging on Wednesday as the dollar extended declines and Joe Biden was sworn in as U.S. president. Silver rose after global exchange-traded fund holdings hit an all-time high. Gold’s surge Wednesday lifted it above its 50-day moving average, which could alleviate some technical pressure. Still, the precious metal remains down this year after rising Treasury yields diminished its appeal as a haven.
    6. U.S. President Joe Biden plans to issue a sweeping set of executive orders to tackle the Covid-19 pandemic, which will rapidly reverse or refashion many of his predecessor’s most heavily criticized policies. U.S. infectious-disease chief Anthony Fauci said the country will join Covax, the 92-nation collaboration seeking to deploy vaccines around the world. Germany’s coronavirus fatalities passed 50,000 while the U.K. suffered its worst day in the pandemic. The British prime minister’s chief scientific adviser warned that some hospitals look “like a war zone.” Hong Kong is set to grant emergency approval for the Pfizer-BioNTech coronavirus vaccine, the South China Morning Post reported, citing an unidentified government source. The move would mark the first approval for any Covid-19 vaccine in the Asian financial hub. Hungary became the first European Union nation to approve the Russian vaccine.
    7. The parent company of online luxury retailer Mytheresa and an existing shareholder raised $407 million in a U.S. initial public offering after pricing the shares at the top of the marketed range. When Mytheresa starts trading on the New York Stock Exchange later on Thursday, it’s expected to have a market value of about $2.23 billion based on the outstanding shares listed in its filings with the U.S. Securities and Exchange Commission. The pandemic has been a mixed blessing to internet retailers, Mytheresa Chief Executive Officer Michael Kliger said in an interview. While the outbreak has disrupted supply chains, the lockdowns imposed across Europe have encouraged more people to shop online.
    8. Ant Group Co.’s valuation may be cut further under new measures proposed by China to curb market concentration in its online payments market, according to new estimates from Bloomberg Intelligence. Jack Ma’s fintech giant may be worth less than 700 billion yuan ($108 billion) under the draft proposals, which could reduce the value of Ant’s Alipay service by half, according to senior analyst Francis Chan. Earlier this month, Chan lowered his Ant valuation to less than 1 trillion yuan, from about 1.44 trillion yuan. The revised estimate for Ant is a far cry from valuations that ran as high as $320 billion before the company was forced to scrap its record initial public offering in November. China’s crackdown forced Ma’s firm to withdraw the $35 billion IPO just days before its planned listing in Hong Kong and Shanghai.
    9. Brookfield Asset Management Inc. and KKR & Co. are among top infrastructure investors weighing bids for a stake in Saudi Aramco’s oil pipelines, people familiar with the matter said. Apollo Global Management Inc. and China’s state-backed Silk Road Fund Co.have also been studying whether to make offers, the people said, asking not to be identified as the matter is private. The stake sale could fetch Aramco around $10 billion, the people said. The world’s top oil producer has asked for expressions of interest and aims to receive non-binding offers next month, according to the people. Aramco’s advisers are also gauging interest from other potential bidders including sovereign wealth fund China Investment Corp., the people said. Some bidders may team up given the size of the transaction, they said.
    10. InPost SA shareholders are seeking to raise as much as 3.2 billion euros ($3.9 billion) in an initial public offering in Amsterdam, as the Polish postal locker provider’s business is bolstered by an online shopping boom set off by coronavirus-induced lockdowns. InPost is marketing 175 million existing shares at 14 euros to 16 euros apiece, the company said in a statement Thursday. The sale would value the company, which isn’t raising any money in the offering, at 7 billion euros to 8 billion euros. This IPO shows that companies that straddle e-commerce and technology are hot for investors during the pandemic, Rafal Janczyk, a fund manager at Aviva Investors TFI SA, said by phone.
    11. Britain’s IG Group Holdings Plc agreed to buy online brokerage Tastytrade Inc. for $1 billion, predicting retail stock traders in the U.S. are about to embrace derivatives. “We see a secular shift in the market for self-directed investing and trading,” IG Chief Executive Officer June Felix said in an interview on Thursday. “Individuals will be taking more control of their financial outcomes and financial wealth, and this fits perfectly into that,” she said. “Derivatives is the next step.” The deal comprises $300 million in cash and the issuance of 61 million IG shares to Chicago-based Tastytrade’s shareholders, according to a statement. The combination would add Tastytrade’s more than 105,000 active accounts to IG’s platform, whose core markets include the U.K., European Union, Australia and Singapore. IG shares rose as much as 1.7% at the open in London before reversing the gains to trade 0.9% lower at 9:53 a.m.
    12. Joe Biden is seeking to wipe away Donald Trump’s fingerprints from U.S. policy, but his predecessor left lasting partisan divisions in Washington that pose a risk to getting the new president’s agenda through Congress. While Biden pleaded for unity in his inaugural address — “the most elusive of all things in a democracy,” he allowed — his top policy priorities including coronavirus relief were already running into headwinds. Several GOP senators led by Mitt Romney of Utah expressed misgivings about his $1.9 trillion plan for addressing the pandemic’s damage to the economy. Representative Liz Cheney, the Wyoming Republican who voted for Trump’s impeachment last week, faulted Biden’s first-day flurry of executive actions. More Republicans dismissed his proposed immigration overhaul as an “amnesty” for people who unlawfully entered the country.
    13. Hungary became the first European Union nation to approve Russia’s Covid-19 vaccine as Prime Minister Viktor Orban takes a pre-election risk to accelerate the country’s exit from the coronavirus crisis. Hungary’s drug regulator granted emergency approval for Russia’s Sputnik V and also to the vaccine developed by AstraZeneca Plc, Cabinet Minister Gergely Gulyas said at a briefing on Thursday. The decision followed pressure by Orban to fast-track the process and skirt the EU, which has yet to authorize either one. While Orban is regularly criticized in the EU for his cozy relationship with Russian President Vladimir Putin and the Chinese Communist Party leadership, he may only be the first rather than the sole western leader to secure alternative supplies from the east amid the slow roll-out of western vaccines that has left governments exasperated. The government in Budapest is also considering procuring a Chinese vaccine from Sinopharm.
    14. Thailand approved AstraZeneca Plc’s Covid-19 vaccine for emergency use, paving the way for the country to begin inoculating its 67 million people amid a resurgence in the coronavirus cases. Thailand’s Food and Drug Administration granted the approval for the vaccine on Thursday, Health Minister Anutin Charnvirakul said by phone. AstraZeneca is the first coronavirus vaccine developer to win approval in Thailand, which also has ordered shots developed by China’s Sinovac Biotech Ltd. Thai government has ordered 61 million shots of AstraZeneca vaccine, which has won approvals for emergency use in countries including India, the U.K. and Brazil. The regulatory nod will also open the door for imports by private Thai companies for administering the doses to people who can afford to pay.
    15. Before it launched the world’s biggest public listing, Saudi Arabian Oil Co. promised potential investors a small piece of a trillion-dollar company with access to unrivaled oil reserves. Not just in sheer volume but in climate friendliness, too. Aramco executives emphasized in the run-up to an IPO in 2019 that drilling Saudi oil generates fewer planet-warming emissions than other producers. “Not because our crude is cleaner than other crudes globally. It’s because of our standards,” Chief Executive Officer Amin Nasser said at a roadshow, pledging to do even more to deliver lower-carbon oil. “Even though our numbers are great, climate change is critical for the world.” But Aramco’s accounting for the greenhouse gas fails to provide a complete picture. The Saudi oil giant excludes emissions generated from many of its refineries and petrochemical plants in its overall carbon disclosures, according to a review of public filings by Bloomberg Green. Including all such facilities might nearly double Aramco’s self-reported carbon footprint, adding as much as 55 million metric tons of carbon dioxide equivalent to its annual tally—or about the emissions produced by Portugal.
    16. Bitcoin closed in on the lowest in three weeks as the cryptocurrency’s sizzlying rally gives way to pessimism that prices are too high. Bitcoin tumbled as much as 8.3% in the European morning, sliding below $33,000. The largest digital asset has trended lower ever since breaking through $40,000, and losses have accelerated in the past two days. While soaring crypto prices fueled a speculative mania among the Robinhood crowd, it’s also made professional investors reluctant to buy at the top. Prices are still more than double the levels from early November and some technical analysts have argued that a retracement is overdue.
    17. The U.K. suffered its worst day in the pandemic on Wednesday, with more than 1,800 deaths recorded in 24 hours, as Boris Johnson’s chief scientific adviser warned some hospitals now look “like a war zone.” The record daily toll takes the total number of people who have died within 28 days of a positive test in the U.K. to 93,290. Almost 40,000 patients are now receiving treatment in U.K. hospitals. England is in its third national lockdown and similar measures are in place across the U.K., but while the restrictions have started to bring infection rates down, officials say the death rates and pressures on the National Health Service will continue to grow.
    18. If it wasn’t clear before, Amazon.com’s recent decision to purchase 11 aircraft underscores the company’s long-term commitment to operating a freighter fleet. When the 767-300 passenger jets purchased from Delta Air Lines and WestJet Airlines are converted to freighters and have entered service by the end of next year, Amazon Air will have 85 owned and leased cargo planes. That fleet size raises expectations the e-commerce giant may take the operations in-house, following a pattern of its ground operations where the company first used third-party logistics networks and eventually took over most of those operations. For Amazon, it’s all about customer satisfaction and meeting the one- and two-day delivery promises for its Prime subscribers. A disastrous peak season in 2013 that derailed deliveries and forced Amazon to give refunds to irate shoppers, led the company to build out a massive ground-logistics operation. Amazon now is opening warehouses and shipping hubs in the U.S. at a rate of one a day.


*All sources from Bloomberg unless otherwise specified