June 22nd, 2020

Daily Market Commentary

Canadian Headlines

  • Sustainable investing is exploding in Canada as the coronavirus and an anti-racism movement highlight long-standing social inequalities. Net inflows into Canadian exchange-traded funds that track companies focusing on environmental, social and governance factors have surged to C$740 million ($544 million). That has already outstripped the C$200 million invested in 2018 and the C$142 million last year, excluding seed capital, according to TD Securities Inc.
  • The Canadian dollar advanced against most of its G-10 peers, fueled by rising commodity prices and improved risk sentiment on trade optimism.
  • The coronavirus crisis is putting a halt to Quebec’s budget discipline. Canada’s second-largest province, which at the beginning of March was counting on a sixth straight year of balanced books, now expects a C$14.9 billion ($11 billion) deficit.

World Headlines

  • European equities dropped at the start of the week on concerns about the spreading of new coronavirus infections. The Stoxx Europe 600 Index fell 0.9% as telecoms, banks and automakers retreated. Carnival Plc slipped 4.2% after major cruise lines agreed to suspend voyages from U.S. ports until Sept. 15.
  • U.S. stocks look poised to extend last week’s advance as investors bet on the strength of the economic recovery, despite rising virus infection rates.
  • Oil held near $42 a barrel in London as investors weighed signs of rebounding demand against a resurgence in new coronavirus cases. A rise in coronavirus cases in Germany and the recent jump in China are underpinning the difficulty for oil consumption to return to levels seen before the pandemic.
  • Gold edged toward the highest since 2012, supported by concerns over a second wave of coronavirus infections and China’s move to tighten oversight of Hong Kong.
  • Credit investors are dodging landmines in Europe’s credit market on Monday, as bonds of German airline Deutsche Lufthansa AG and payments company Wirecard AG tumble. Lufthansa’s 500 million euros ($560 million) of notes due in 2024 plunged more than 5% to a three-month low of about 82 cents as the company faces a make-or-break week in attempting to stave off a collapse.
  • Boris Johnson is preparing to relax social distancing rules in a major boost to the U.K.’s hospitality industry, as the government seeks to re-open more sectors of the economy that have been shut during the lockdown. Johnson will meet officials on Monday to discuss the conclusions of a review into the rule requiring people to keep 2-meters (6 feet 7 inches) apart.
  • Bank of England Governor Andrew Bailey signaled a major shift in the central bank’s strategy for removing emergency stimulus, stressing the need to reduce the institution’s balance sheet before hiking interest rates. Writing for Bloomberg Opinion, Bailey said such a plan would give officials more firepower in future crises. The BOE’s balance sheet has swelled to almost 700 billion pounds ($864 billion) because of its extraordinary measures during the coronavirus pandemic, and is set to grow much larger because of the central bank’s bond-buying program.
  • Deutsche Lufthansa AG faces one of the most momentous weeks in a near 70-year history, with a clash between its biggest investor and the German government threatening to scupper a 9 billion-euro ($10 billion) bailout and push Europe’s biggest airline toward collapse. With Lufthansa fighting for survival after the coronavirus outbreak punctured a decades-long global travel boom, billionaire Heinz-Hermann Thiele is threatening to block the rescue plan — which would dilute his holding and influence — at a virtual shareholder meeting Thursday.
  • China suspended poultry imports from a Tyson Foods Inc. plant where hundreds of employees tested positive for Covid-19, stoking concerns over the broader implications for U.S. and global meat exports. All products from the plant in Springdale, Arkansas, where Tyson is based, that are about to arrive in China or have arrived at the country’s ports will be seized by customs. The suspension announced Sunday is an about face from just a few days ago, when Chinese officials said food was unlikely to be responsible for a fresh virus outbreak in Beijing.
  • The obvious obstacles in America’s food-supply chain — from shuttered meat plants to restocking delays and panic buying — have largely dissipated. But shock waves remain. There are millions of pigs that need to get processed fast, before their weights become too burdensome, or farmers will be forced to euthanize the animals.
  • German Constitutional court judge-designate is optimistic that there will be a solution to the dispute over the European Central Bank’s bond purchasing program, Frankfurter Allgemeine Sonntagszeitung reported. Astrid Wallrabenstein told the newspaper it might not be necessary for the ECB council to issue a new monetary policy decision. “What counts is an improved transparency of the decisions,” she said, noting political efforts to fulfill the request made by Germany’s highest court.
  • President Donald Trump had looked to his first rally in three months as a reset for his campaign. Instead, the sparsely attended event in Tulsa, Oklahoma is stirring fresh questions about both his strategy and the direction of his re-election bid. The most evident shortfall from Saturday’s rally was attendance, far smaller than the overflow crowd that the president and campaign officials had promised.
  • President Donald Trump’s plan to restrict employment-based visas could affect an estimated 240,000 people seeking to work in the U.S. across industries from technology to finance and hospitality.
  • Glencore falls as much as 5.8% in London after news Friday that the company is being investigated by Swiss authorities for its alleged shortcomings in the Democratic Republic of Congo. While some analysts said the probe added to risks around the stock, others said there was little change to the outlook for the trading and mining giant.

*All sources from Bloomberg unless otherwise specified