March 10, 2023

Daily Market Commentary

Canadian Headlines

  • The Bank of Canada’s No. 2 official said policymakers need time to assess whether they’ve raised borrowing costs enough to curb inflation, reiterating that their path on rates can differ from peers. In the first speech after keeping interest rates unchanged for the first time in nine meetings, Senior Deputy Governor Carolyn Rogers said Thursday that while officials have seen a “mixed picture” of economic data since January, “things are unfolding broadly in line” with the central bank’s forecast.
  • Bank of Montreal has agreed to acquire AIR MILES Reward Program business from a subsidiary of Loyalty Ventures Inc. for an undisclosed sum.
  • The Canadian bank and LoyaltyOne Co. said in a joint statement on Friday that the acquisition of the reward program business has been proposed as part of LoyaltyOne’s proceedings under the Companies’ Creditors Arrangement Act which was begun in Ontario’s Superior Court of Justice.


World Headlines

  • Dow Jones futures fell early Friday, along with S&P 500 futures and Nasdaq futures ahead of February jobs report. SVB Financial kept plunging overnight after triggering a bank stock sell-off that slammed the broad market Thursday.
  • European stocks slumped the most since mid-December on Friday, following a rout in US stocks amid liquidity concerns in the banking sector as investors also braced for payrolls data later today.  The Stoxx Europe 600 Index was down 1.7% by 9:23 a.m. in London, with banking and financial services sectors leading losses.
  • Asian stocks slumped, with financials leading a region-wide selloff, as investors fretted over the risks to broader markets from troubles emanating at a Silicon Valley-based lender. Continued losses in Chinese equities added to the weakness. The MSCI Asia Pacific Index slid as much as 2.1% on Friday, heading for its biggest drop since Oct. 11. Stocks in Japan also declined as markets got little reprieve from the Bank of Japan’s decision to maintain its easing stance at Governor Haruhiko Kuroda’s final meeting..
  • Oil headed for the biggest weekly loss since early February as the prospect of further and potentially faster interest-rate hikes from the Federal Reserve weighed on the outlook for energy demand. West Texas Intermediate futures traded near $75 a barrel, falling for a fourth session and down almost 6% this week.
  • Gold rose from near its lowest this year after a metric of US unemployment came in higher than expected, softening expectations the Federal Reserve will keep aggressively raising rates. Initial unemployment claims increased by 21,000 to 211,000 in the week ended March 4, Labor Department data showed Thursday. The figure surpassed all economists’ forecasts. The dollar and bond yields extended declines following the report, pushing gold up as much as 1.2%.
  • February’s nonfarm payroll report will be closely watched for signs that it supports or undermines market pricing for a 50-basis-point rate hike at the March FOMC meeting. If the print comes in as we expect – a monthly gain of 223k, slightly below consensus – the signal won’t be clear enough for the Fed to decide between 25 bps and 50 bps, and it will wait to see February’s CPI report on March 14. On the other hand, if the change exceeds 300k, that will likely ensure a 50-bp move in March.
  • Government bonds surged and stocks slid as signs of distress at a California lender spurred broader worries over the US banking sector’s debt holdings. US and European bond yields tumbled to their lowest in weeks as traders bet any turmoil at banks could reduce the ability of the Federal Reserve to keep hiking interest rates. The Stoxx Europe 600 Index slumped the most since December, led by banking shares, with the cost of protecting against corporate defaults jumping the most this year.
  • Panic is spreading across the financial world as concerns about the financial stability of Silicon Valley Bank prompt prominent venture capitalists including Peter Thiel’s Founders Fund to advise startups to withdraw their money. The turmoil followed a surprise announcement from Santa Clara, California-based SVB that it was issuing $2.25 billion of shares to bolster its capital position after a significant loss on its investment portfolio. The stock plunged 44% in premarket trading before exchanges opened in New York on Friday, set to extend its 60% decline on Thursday. Bonds had posted record declines, igniting a broad selloff in US bank shares that also spread to Asia and Europe.
  • Oracle Corp. reported quarterly sales in line with analysts’ estimates after its cloud business failed to meet expectations for higher growth. The shares declined in extended trading. Fiscal third-quarter revenue increased 18% to $12.4 billion, just short of analysts’ average estimate of $12.41 billion, according to data compiled by Bloomberg. Profit, excluding some items, was $1.22 a share. Analysts, on average, projected $1.20 a share.
  • China is taking fresh measures to deter hoarding of iron ore in a bid to cool a surge in prices of the key steelmaking material. Beijing authorities are urging trading companies that store iron ore in big volumes at ports to sell some of their material, according to people with knowledge of the issue, who asked not to be named because the information is private. They’re also considering raising port-storage fees for large-volume cargoes, they said.
  • Chinese electric-vehicle manufacturers led declines in Asia’s largest economy as a pricing battle between major automakers intensifies. Automaker Great Wall Motor Co. Ltd and dealership China Meidong Auto Holdings led a slide in the MSCI China Index, while carmakers BYD Co., Li Auto Inc. and Xpeng Inc. were among the worst performers, each dropping at least 5%, as the gauge erased gains for the year. The slump was triggered by a report that BMW AG and Audi dealers were marking down prices by as much as 100,000 yuan ($14,350) for EV models, and that more than 30 brands have participated in the price war by offering deep discounts after Tesla Inc. cut prices earlier this year.
  • New York’s attorney general is taking another swing at the cryptocurrency industry with a lawsuit accusing KuCoin, one of the world’s most popular crypto-exchanges, of operating in the state without a license. KuCoin, based in the island nation of Seychelles, failed to register as a securities and commodities broker-dealer in New York and falsely represents itself as an exchange, the state’s top law enforcement officer, Letitia James, said Thursday in a statement.
  • The fallout from Silicon Valley Bank has spread to Sweden’s largest pension group after the fund more than doubled its holdings in the Californian bank during the past year. Stockholm-based Alecta, which oversees more than $104 billion in assets, was SVB’s fourth-biggest shareholder at the end of last year with a holding worth $605 million, according to data compiled by Bloomberg. Following a 60% plunge in SVB’s stock on Thursday, the value of the stake was worth only $279 million.
  • Vodafone Group Plc and Three UK are putting the final touches on a deal to create Britain’s largest mobile operator and may announce details of the tie-up as soon as this month, people with knowledge of the matter said. London-listed Vodafone and Three UK’s owner, CK Hutchison Holdings Ltd., are working through the last details of the structure of the deal, and ways to address potential antitrust issues surrounding it, the people said.