June 18th, 2020
Daily Market Commentary
- Canadian equity markets fell, halting a three-day rally, led by energy and health care stocks. The S&P/TSX Composite index fell 0.6% in Toronto. Energy suffered as oil prices fell on supply glut. Tech was the best performing sector, with Shopify Inc. contributing the greatest number of index points. Ovintiv Inc., the oil and gas producer that moved its headquarters out of Canada earlier this year, is laying off staff across North America as it reduces drilling activity. Canada’s largest oil-producing province will study whether to create an independent Alberta Pension Plan and let residents vote on the idea in a referendum, Premier Jason Kenney said at a press conference.
- European stocks retreated after two days of gains as investors mulled the risks of a second wave of coronavirus infections. The Stoxx Europe 600 Index was down 0.3% as of 11:17 a.m. in London, after briefly reversing a slide when a top virus expert in China said the coronavirus outbreak in Beijing has been contained. Cyclical sectors, such as oil, miners and healthcare, led the declines.
- U.S. stock index futures traded modestly down as rising virus cases in Beijing and some states in America weighed on sentiment. September contracts on the S&P 500 trimmed an earlier drop of as much as 1.4% to trade 0.2% lower as of 9:23am in London, while futures on the Dow Jones Industrial Average fell a similar amount and those on the Nasdaq 100 Index were little changed. The Bloomberg Dollar Spot Index was steady.
- The oil market showed signs of tighter supply as key gauges of its health rallied, although concerns remain over a resurgence in coronavirus cases in China and the U.S. Futures in London and New York gained, while Brent for August was trading above the September contract, a sign of scarcer supply in Europe’s physical market. Oil prices in the North Sea and Russia has soared in recent days, while the amount of crude stored on ships is falling.
- Gold erased earlier gains as investors weighed reports of progress in containing a coronavirus outbreak in Beijing against a flood of stimulus measures. More Covid-19 cases will be confirmed in the coming days, but that should reflect only people who are already infected, the senior epidemiology expert at the Chinese Center for Disease Control and Prevention said Thursday. China pledged faster credit growth as part of efforts to push the economy out of its virus-induced slump. The European Central Bank’s offer of ultra-cheap long-term loans was taken up by 742 banks for a total of 1.31 trillion euros ($1.5 trillion) as part of its efforts to bolster economies. The Bank of England expanded its bond-buying program as it battles to lift the U.K. economy out of the worst recession in centuries.
- The peak of Beijing’s new coronavirus outbreak has already passed and further infections should be “sporadic,” the country’s chief epidemiologist said. Israel will pause any further reopening of the economy after a rise in cases, while Japan is set to lift domestic travel curbs on Friday. German Chancellor Angela Merkel called for a swift deal to pull the European Union out of its worst recession since World War II. Sweden raised its economic outlook following a softer lockdown, while the Bank of England intensified its response to the virus by expanding its bond-buying program. The World Health Organization hopes two billion doses of effective vaccines will be available by the end of 2021, Chief Scientist Soumya Swaminathan said on Thursday. The organization halted tests of hydroxychloroquine in a trial of potential Covid-19 treatments.
- Wirecard AG delayed the publication of its annual financial results for the fourth time after auditors were unable to find about 1.9 billion euros ($2.1 billion) in cash, causing analysts to question liquidity at the German payments firm. The shares collapsed. Ernst & Young was unable to confirm the location of the cash balances in certain trust accounts, and there was evidence that “spurious balance confirmations” had been provided, Wirecard said in a statement on Thursday. That’s about a quarter of the consolidated balance sheet total, Wirecard said.
- The Bank of England intensified its response to the fallout from the coronavirus by expanding its bond-buying program, taking another step in the uphill battle to lift the economy out of the worst recession in centuries. Policy makers led by Governor Andrew Bailey voted 8-1 to boost purchases by 100 billion pounds ($125 billion) while keeping the benchmark interest rate kept on hold at a record-low 0.1%. Chief Economist Andy Haldane dissented on the additional quantitative easing, favoring no change.
- Former National Security Advisor John Bolton writes in a new book that President Donald Trump asked Chinese leader Xi Jinping to help him win re-election by buying more U.S. farm products, according to an excerpt published by the Wall Street Journal. The disclosure is part of a devastating portrayal of Trump’s conduct of foreign policy by Bolton, the most senior official in this White House so far to publish an account of his experience. The book is poised to further burden Trump’s already struggling effort to secure a second term. In the book, which is scheduled to be released next week, Bolton describes a discussion between Trump and Xi at last year’s Group of 20 summit in Osaka, Japan. Bolton writes that Trump was “pleading with Xi to ensure he’d win” but said he could not print the president’s exact words because of the government’s pre-publication review process for classified material forbade it, according to the excerpt.
- Exchange-traded funds added 27,739 troy ounces of gold to their holdings in the last trading session, bringing this year’s net purchases to 18 million ounces, according to data compiled by Bloomberg. This was the sixth straight day of growth. The purchases were equivalent to $47.9 million at yesterday’s spot price. Total gold held by ETFs rose 22 percent this year to 100.9 million ounces, the highest level in at least 12 months. Gold advanced 14 percent this year to $1,726.95 an ounce and remained little changed in the latest session. State Street’s SPDR Gold Shares, the biggest precious-metals ETF, maintained its holdings in the last session. The fund’s total of 36.5 million ounces has a market value of $63.1 billion.
- JD.com Inc. has bagged a record $34 billion of sales during the country’s biggest online shopping gala of the post-pandemic era, suggesting China’s nascent consumer spending recovery has legs. JD and larger rival Alibaba Group Holding Ltd. this month put Chinese consumption to its first major test since Beijing locked down the country in February. China’s largest retailers are hoping the “6.18” summer extravaganza that wraps up Thursday has unleashed pent-up demand, making up for lost sales during a coronavirus-stricken March quarter. JD said it had racked up 239.2 billion yuan ($34 billion) of transactions as of mid-afternoon, up 33% from the same time a year earlier and already surpassing 2019’s total. The retailer’s shares rose 3.5% on their Hong Kong debut, after raising $3.9 billion in a stock sale designed to appeal to Asian investors.
- Saudi Arabia’s sovereign fund will invest $1.5 billion in the telecommunications and digital services business controlled by Indian billionaire Mukesh Ambani, bringing total new investment in Jio Platforms Ltd.to $15.2 billion since April. The Public Investment Fund will hold a 2.32% stake in the arm of Reliance Industries Ltd., the Mumbai-based company said in a statement Thursday. The deal, the 11th into Jio in about two months, adds to the list of high-profile backers betting the company will disrupt India’s massive consumer market with its technology. Reliance Industries has vowed to pay down net debt to zero before March 2021, while using its roughly 400 million wireless phone subscribers as the cornerstone of an e-commerce and digital business.
- Shandong Qingyuan Group Co. has missed a principal installment of a $1 billion loan, according to people familiar with the matter, a sign of deepening stress in China’s oil and gas industry. The Shandong-based oil refiner didn’t pay an installment of $75 million that was due Wednesday, said the people, who are not authorized to speak publicly. It had sounded lenders in April for a one-year extension of the repayment schedule and is still in discussions, they said.
- Polish President Andrzej Duda is hoping to boost his re-election bid by meeting Donald Trump in Washington D.C. next week, just four days before the east European nation’s ballot. Duda has long played up what he calls his “special relationship” with Trump, who gave a major foreign-policy speech in Warsaw in 2017. Additional security guarantees from the U.S. at the June 24 meeting would be a welcome boost to his re-election bid, which has faltered in past weeks amid sleaze scandals and his attacks on the LGBT community. His campaign said the invitation showed that Poland’s relations with the U.S. were “stronger than ever.”
- BP Plc is planning to set up a global business-services center in India, amid a company-wide reorganization that will result in thousands of job losses. The unit, which will support digital innovation across the company, is expected to begin operations in the western city of Pune by January and will employ about 2,000 staff when fully operational, BP said. New Chief Executive Officer Bernard Looney has often backed increased digital services as one of the ways to cut cost of energy operations.
- The Japanese government will lift all domestic travel restrictions Friday as it looks to move into the next phase of reopening, Japanese Prime Minister Shinzo Abe said. “New infections are limited to certain areas,” Abe said at a meeting of his virus task force, adding that the growing number of cases in Tokyo was being dealt with properly. The new guidelines will no longer discourage the movement of people between prefectures, and will allow professional sporting events without spectators. Indoor events of as many as 1,000 people at 50% capacity, will also be permitted. The scale of indoor events is expected to be expanded July 10.
- Reliance Industries Ltd. is closing in on a deal that would see it acquire stakes in some units of Future Group, people familiar with the matter said, a move that would bolster the e-commerce ambitions of the conglomerate and its billionaire Chairman Mukesh Ambani. An agreement between Ambani’s Reliance and Future, which already has a partnership with Amazon.com Inc., could be announced as early as next month, the people said, asking not to be identified as the information isn’t public. Though unit Future Retail Ltd. has attracted suitors, including Amazon, Reliance’s offer to buy into the group’s holding company is likely to sway the outcome in its favor, the people said.
- Cruise titan Carnival Corp. reported a second-quarter loss of $4.4 billion, including $2 billion in impairment charges, and warned that it can’t predict when it will be able to resume operations given the lingering coronavirus shutdown. The world’s largest cruise company said its adjusted net loss for the period ended May 31, excluding the charges, was $3.30 a share. That’s far deeper than analysts’ expectation of a $1.95 loss. Revenue was just $700 million, a plunge from the year-earlier $4.8 billion. Carnival’s shares skidded in early trading.
- U.S. junk bond sales are on track for $22 billion, potentially making this the busiest week on record for issuance, according to data compiled by Bloomberg. Utiity giant PG&E may raise $3.75 billion deal as soon as Thursday, while private equity firms financing buyouts are also hitting the market. Utility giant PG&E has received about $17b in orders from investors on the junk bond portion of its exit financing, according to people familiar with the matter
- Ford Motor Co. plans to install a hands-free driving system on its electric Mustang Mach-E model coming later this year as it attempts to muscle in on the high-tech turf now dominated by Tesla Inc. The carmaker’s system won’t be operational until the second half of 2021, but buyers of the first Mach-E models rolling off the line in Mexico later this year can opt for hardware that will enable it. The software that brings the Active Drive Assist feature to life must be purchased separately when it becomes available late next year, the company said.
*All sources from Bloomberg unless otherwise specified