June 24, 2021

Daily Market Commentary

Canadian Headlines

  • Canadian equities closed lower Wednesday in a session lacking direction. The S&P/TSX Composite Index fell 0.2% with ten of eleven sectors lagging. Empire Co. led the market lower after reducing same-store sales for the full year. Enbridge Inc.’s embattled plan to build a tunnel under the Straits of Mackinac for its Line 5 oil pipeline will need a more thorough review from the U.S. Army Corps of Engineers, the latest setback for the project opposed by Michigan Governor Gretchen Whitmer. BlackBerry Ltd. shareholders voted to keep Prem Watsa as lead director, despite complaints from a proxy advisory firm and a prominent investor that he failed to ensure the company’s executive pay is aligned with its performance.
  • Canada’s accelerating vaccination effort has put the country on track to reach key benchmarks for reopening the U.S. border as early as next month. Prime Minister Justin Trudeau’s government has begun citing a 75% two-dose vaccination rate as the threshold to lift border restrictions. That number is about 20% now. As wide as that gap is, the latest vaccine delivery schedule suggests it could close considerably within the next month, raising the prospect that Canada could move ahead with a comprehensive reopening before the end of the critical summer tourism season.

World Headlines

  • European stocks rose as investors waited for U.S. jobless claims data and a Bank of England meeting for cues on the inflation outlook. The Stoxx 600 Index gained 0.5% as of 8:08 a.m. London time, with industrial, health care and consumer-products stocks contributing the most to the advance. With the market hovering just below the record set last week, investors will be watching the claims data and the BOE meeting, where limiting inflation will be balanced against a need to keep the economy recovering.
  • Stocks rose with U.S. futures Thursday as traders weighed the outlook for recovery and policy support ahead of a slew of economic reports. The pound fell. U.S. contracts signaled the S&P 500 Index may regain some momentum after a lull. Eli Lilly & Co. jumped in premarket trading after speeding up its plan to file an application for its Alzheimer’s disease therapy and Accenture Plc rose after boosting its earnings forecast. Equities have come off the record levels seen earlier this month after a hawkish Federal Reserve meeting injected caution into markets. While markets steadied this week after reassuring remarks from Chair Jerome Powell, investors are paying close attention to economic data and commentary from Fed officials.
  • Asian stocks posted modest gains, led by India, as investors assessed the latest remarks by Fed officials about the outlook for tapering measures. The MSCI Asia Pacific Index rose 0.1%, after dropping as much as 0.1%. Dallas Fed President Robert Kaplan on Wednesday said the economy will likely meet the Fed’s threshold for tapering asset purchases sooner than people think, while his Atlanta peer Raphael Bostic said the central bank could decide to slow such purchases in the next few months. India’s key stock gauges advanced to hold near recent record highs, with the country’s faster vaccination campaign continuing to boost investor sentiment. China’s CSI 300 Index also climbed. The country’s central bank increased its injection of short-term cash into the financial system for the first time since March amid rising demand for liquidity.
  • Oil edged higher above $73 a barrel in New York as falling stockpiles in the U.S. and China added to bullish sentiment around the global demand recovery. Gasoline inventories in the U.S. unexpectedly fell last week, while nationwide crude supplies dropped for a fifth week, the longest run since January. Chinese stockpiles have also shrunk to the lowest this year, according to data provider Kayrros, with the market tightening as key consumers rebound from Covid-19. Oil could be facing some near-term turbulence, however, with one technical indicator signaling that prices may have climbed too far, too fast. Crude is flirting with overbought territory on the 14-day relative strength index.
  • Gold steadied as investors weighed relatively hawkish comments by Federal Reserve officials on monetary policy and stimulus. The U.S. economy will likely meet the central bank’s threshold for tapering its asset purchases sooner than people think, said Dallas Fed President Robert Kaplan, who has penciled in an interest-rate increase next year. His Atlanta counterpart, President Raphael Bostic, said the Fed could decide to slow such purchases in the next few months and that he favored lifting rates in 2022 in response to a faster-than expected recovery from Covid-19 pandemic. Both spoke on Wednesday.
  • Coronavirus cases in Tokyo are edging up with less than a month to go to the Olympic games. The Japanese capital has emerged from a state of emergency, but still has some restrictions in place, mainly on restaurants and bars. Israel, one of the early pioneers in vaccination, is delaying its reopening for tourists and is poised to reverse an easing of mask rules after a surge in cases. Hungary, also among the initial front runners in inoculations, is still embracing a return toward normalcy. The government in Budapest is further relaxing regulations on the wearing of masks and the use of vaccine certificates. Singapore said it plans to give a first Covid-19 vaccine shot to most of its population by July after securing more supplies, flagging the prospect of looser travel and social-distancing rules for inoculated residents.
  • President Joe Biden, eager for a bipartisan infrastructure deal, will welcome the Democratic and Republican senators crafting a $559 billion plan to the White House for talks Thursday, a crucial step toward moving his economic agenda through Congress. Members of the group of 10 senators directly involved in the negotiations expressed optimism that they were close to a deal with the president. Although some of the details of the package for roads, bridges and other projects are still to be resolved, White House Press Secretary Jen Psaki said the talks had produced enough progress toward a potential agreement that the “president has invited the group to come to the White House tomorrow to discuss this in person.”
  • Visa Inc. has agreed to buy Swedish open-banking platform Tink AB as the payment giant looks to expand beyond its card network. San Francisco-based Visa said it will pay a total of 1.8 billion euros ($2.15 billion) — including cash and retention incentives — to acquire the fintech firm, according to a statement Thursday. Banks and startups use Tink to access consumer financial data. The startup was founded in Stockholm in 2012 and it has about 400 employees, with technology that connects to more than 3,400 banks that reach over 250 million bank customers across Europe.
  • Hong Kong’s on-demand logistics and delivery firm Lalamove has filed confidentially for a U.S. initial public offering, according to people with knowledge of the matter. The company, also known as Huolala in China, is looking to raise at least $1 billion in the share sale, the people said. Details of the offering including the fundraising amount are still subject to change depending on investor demand, the people said, asking not to be identified as the information is private. Lalamove is among a number of logistics companies going public this year as the coronavirus-induced lockdowns fueled a surge in e-commerce demand. Chinese trucking startup Full Truck Alliance Co. this week raised $1.6 billion in its U.S. IPO and climbed 13% in its debut. E-commerce giant JD.com Inc’s shipping and delivery unit JD Logistics Inc. went public in Hong Kong last month in a $3.6 billion share sale.
  • China Evergrande Group’s stock climbed and dollar bonds pared earlier losses after the company said it’s arranged for funds to be transferred for a $1.5 billion note maturing Monday and $299 million of interest payments on offshore debt. Shares closed 4.2% higher after the developer said in a Hong Kong stock exchange filing midday Thursday it has arranged HK$13.6 billion ($1.75 billion) of its funds to be remitted for the maturing dollar bond and interest on such notes. Evergrande has no domestic or foreign public bonds coming due before March 2022, it said, and that it’s spent $10.6 billion to repay seven separate offshore bonds in the past 15 months.
  • Keppel Corp. and Sembcorp Marine Ltd. agreed to start exclusive talks to combine their oil-rig businesses, a move that could help the Singaporean companies better weather a slowdown in the industry and create the world’s biggest rig builder. Under the non-binding memorandum of understanding, Keppel and Sembcorp Marine could each own 50% of the combined entity, according to a statement Thursday. The two will carry out due diligence and discuss the terms of the potential combination, which may take several months.
  • JPMorgan Chase & Co. has bought a stake in the analytics company that helped make New England Patriots owner Robert Kraft a sports mogul. The unusual partnership signals the growth potential JPMorgan sees in sports ownership for its wealthiest clients. The idea is to use the heaps of data that flows from legal sports betting, mobile ticketing and concession sales, among other things, to advise clients looking to buy and owners trying to wring more profit out of their teams. The Kraft Analytics Group, or KAGR, has more than 20 clients, including the National Football League, teams in all five major American sports leagues, and college athletic programs. JPMorgan is its first strategic investor. The parties declined to discuss the financials of the deal.
  • EBay Inc. will sell just over 80% of its South Korean online marketplace to local retailer E-Mart Inc. for 3.44 trillion won ($3 billion), the latest in a series of asset sales aimed at overhauling the U.S. e-commerce company. E-Mart said in a statement it’s agreed to acquire a business that yields more than a 10th of EBay’s global revenue. The unit of retail giant Shinsegae Group has been in talks with banks to line up a multi-tenor loan of about 3 trillion won to support its acquisition, people familiar matter said last week. E-Mart now plans to invest more than 1 trillion won in fulfillment centers over the next four years, which will — together with its offline stores — be used to deliver goods as part of its cooperation with EBay in areas from grocery to general merchandise.
  • Chancellor Angela Merkel said the European Union must forge a direct line of communication with President Vladimir Putin to address Russia’s “many provocations” against the bloc and its neighbors in eastern Europe. Just over a week after U.S. President Joe Biden met with Putin in Geneva, the German leader said the EU has to shape its own destiny with the Kremlin as Russian interests clash with the bloc’s in Ukraine, Belarus and the Balkan region. “It’s not enough for the American President Joe Biden to speak with the Russian president — which I very much welcome — but the European Union must also establish a format for talks,” Merkel told Germany’s lower house of parliament in what may be one of her last major policy speeches as German leader.
  • Singapore said it plans to give a first Covid-19 vaccine shot to most of its population by the end of July after securing more supplies, flagging the prospect of looser travel and social-distancing rules for inoculated residents. The government will accelerate vaccinations from June 26 as deliveries have been brought forward, according to a statement from the Ministry of Health on Thursday. From July 2, the city-state will open vaccinations to permanent residents and work-permit holders aged 39 years and younger, in addition to Singaporeans in the same age group who currently have priority.
  • Buying shares trading at 40 times earnings may not sound like a good deal. But that’s exactly what Maneesh Deshpande is telling clients to do. The head of equity derivatives strategy at Barclays Plc just upgraded his recommendation on Apple Inc. and other technology giants, advising investors to own more of these stocks. Often known as Faamg, the group is getting a reprieve after lagging behind the market since October. As stretched as the Faamgs look — a 35% premium over the S&P 500 Index — Deshpande says judging valuations based on an absolute level or comparing them to the rest of the market is flawed because it doesn’t acknowledge the growth advantage that these tech giants offer in the long run. In other words, they deserve a higher multiple because of their superior earnings power.
  • Credit Suisse Group AG investment bankers expecting new Chairman Antonio Horta-Osorio to boost their spirits after an exodus of top talent were left disappointed during a recent meeting in London. The former Lloyds Banking Group Plc chief executive officer, in response to questions, told bankers who’d gathered in person and virtually for the event that the firm had a great wealth management business “with ancillary services,” according to several people who heard the remarks. For some top dealmakers and traders, those words were perceived as a blow, the people said. The investment bank delivers more revenue than any other division at the firm and ranks in the top 10 globally.
  • The global oil market is calling out for a substantial increase in supplies, but OPEC+ is expected to provide only a fraction of what consumers are demanding. International crude prices have soared to a two-year high above $75 a barrel as demand bounces back from the pandemic slump. With talk swirling of a return to $100 oil and fears over inflation mounting, the International Energy Agency is urging the Organization of Petroleum Exporting Countries and its partners to fill a supply shortfall. When it meets next week, the alliance led by Saudi Arabia and Russia is widely expected to revive some more of its halted output, according to a Bloomberg survey, and delegates from the group say discussions are already underway.
  • Billionaire Mukesh Ambani of Reliance Industries Ltd. unveiled the much-awaited JioPhone Next co-developed with Alphabet Inc.’s Google, a handset designed to target India’s hundreds of millions of first-time smartphone users. “An ultra-affordable 4G smartphone is essential,” Ambani told shareholders at Reliance’s annual general meeting on Thursday, outlining the capabilities of the device that will run a re-engineered version of the Android operating system. Alphabet Chief Executive Officer Sundar Pichaijoined remotely to say that the JioPhone was “built for India” and would deliver translation features, a voice assistant and a great camera.
  • The world’s largest asset manager was central to the pandemic crisis response. Emails and calendar records underscore that critical role. As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue. Laurence D. Fink, the chief executive of BlackRock, the world’s largest asset manager, was in frequent touch with Mr. Mnuchin and Mr. Powell in the days before and after many of the Fed’s emergency rescue programs were announced in late March. Emails obtained by The New York Times through a records request, along with public releases, underscore the extent to which Mr. Fink planned alongside the government for parts of a financial rescue that his firm referred to in one message as “the project” that he and the Fed were “working on together.”
  • The record-breaking rise in used-car prices is probably coming to an end — and with it a key driver of the recent spike in U.S. inflation. The bellwether of the industry — the wholesale market where dealers buy and sell in bulk — has already topped out and prices of individual secondhand cars should follow in a matter of weeks, said Zo Rahim, industry analyst at Cox Automotive. Cox owns Manheim, the biggest U.S. auction house selling millions of vehicles every year. Soaring prices for secondhand vehicles have helped push U.S. inflation to the highest in more than a decade. The cost of used cars and trucks climbed 10% in April, and another 7.3% in May when they were responsible for one-third of the overall rise in consumer prices.
  • Gemini Trust, the cryptocurrency exchange run by Cameron and Tyler Winklevoss, purchased about $4 million in credits to help offset the carbon emissions footprint of the Bitcoin it holds in custody. The firm made a donation in that amount to Climate Vault. The nonprofit purchased the permits, which will prevent more than 341,000 metric tons of carbon from entering the atmosphere. Gemini plans to continue to offset its carbon footprint until only renewable energy is used in securing the Bitcoin network, Chief Executive Officer Tyler Winklevoss said in an interview.
  • John McAfee, the creator of the eponymous antivirus software, was found dead Wednesday in prison outside Barcelona. He was 75. Over the past decade, McAfee gained notoriety for his ranting on social media, his involvement in a Central American criminal investigation and accusations from U.S. authorities that he was involved with pumping and dumping cryptocurrencies. McAfee was discovered dead in his prison cell hours after Spain’s National Court approved his extradition to the U.S. over multiple tax fraud charges. He was found by security personnel at the Brians 2 prison in northeast Spain, according to a spokesperson of the Supreme Court of Catalonia.

“Americans no longer look to government for economic security; rather, they look to their portfolios.” – Bill Owens

*All sources from Bloomberg unless otherwise specified