May 3, 2023
- Toronto’s housing market hummed back to life last month as the traditional spring selling season brought a surge in both sales and prices following last year’s record rout. The number of homes trading hands in Canada’s largest city jumped 27% in April from March on seasonally adjusted basis, the Toronto Regional Real Estate Board said Wednesday. That’s the biggest monthly increase over the past two decades, other than during the rebound from the Covid lockdowns of 2020. The benchmark price of a Toronto home rose 2.4% to C$1.11 million ($815,000) in April on a seasonally adjusted basis. The gain fully erased declines from earlier this year; prices are now up 0.5% year-to-date, the data show. The increase comes after last year’s record price decline, which was driven by the Bank of Canada’s aggressive rake hikes. With the central bank now on pause, buyers have come out in force and refocused attention on the shortage of housing stock that had made Canada’s market one of the world’s hottest before last year.
- A consortium backed by buyout firm Apax Partners is considering a potential bid to take US-listed technology consultancy Thoughtworks Holding Inc. private, people familiar with the matter said. Apax has teamed up with Canada Pension Plan Investment Board, according to the people, who asked not to be identified because the information is private. They are working with advisers to explore a possible joint offer for the shares they don’t already own in Chicago-based Thoughtworks, the people said. Shares of Thoughtworks jumped as much as 25% in Tuesday morning trading, the biggest intraday gain since September 2021. They were up 18% at the close in New York, giving the company a market value of $2.3 billion.
- European stocks rebounded from their steepest decline in five weeks as investors assessed a slate of corporate earnings while awaiting the Federal Reserve’s policy decision later in the day. The Stoxx 600 Index was up 0.4% by 10 a.m. in London after falling 1.2% on Tuesday as glum US data sparked concerns about a recession and US regional lenders slumped. European consumer products and food and beverage shares outperformed, while energy slid with oil prices. Autos were laggards, weighed down by declines in Stellantis NV and Porsche AG after first-quarter reports. BNP Paribas SA was subdued after the French lender’s results. In contrast, UniCredit SpA gained as it raised its target for full-year profit and said it would distribute more money to shareholders.
- Across markets, trading was mixed as investors awaited clues from policymakers on the path of US rates. S&P 500 futures rebounded slightly after Tuesday’s heavy losses, while the dollar weakened. Ten-year Treasuries extended gains from Tuesday amid demand for haven assets. Traders expect the Fed to raise borrowing costs by 25 basis points at today’s meeting, before signaling a pause in its aggressive hiking cycle. Fed officials are caught between stubbornly high inflation and data pointing to an economic downturn, while concerns remain about financial strains stemming from the banking turmoil. Multiple volatility halts in US regional lenders PacWest Bancorp and Western Alliance Bancorp unsettled Wall Street on Tuesday, just a day after JPMorgan Chase & Co.’s acquisition of First Republic Bank had seemed to bolster confidence in the sector.
- Asia’s stock benchmark headed for its first decline in five sessions, with Hong Kong-listed Chinese shares leading losses ahead of the Federal Reserve’s policy decision. The MSCI Asia Pacific Index dropped as much as 0.6% in broad-based declines, following the selloff on Wall Street as worries about the financial sector amplified risk aversion ahead of the Fed. Energy stocks were among the biggest losers in the region after oil prices collapsed on Tuesday following softening US employment data that added to recession concerns. As the results season in Asia continues, investors will closely watch the Federal Reserve’s commentary and interest-rate move to assess any further impact to corporate profits. Traders are pricing in a 25-basis-point hike this week, followed by a pause in its aggressive hiking campaign.
- Oil plunged for a second day, dropping below $70 a barrel in New York as the prospect of a US recession threatened to curb fuel demand. Just days after OPEC+ began cutting production in an effort to stabilize crude markets, there was little indication that the group was having any success, and also questions about whether Russia was really joining the curbs. Oil futures fell to the lowest since March amid renewed anxiety over the financial stability of regional US lenders as well as signs of a cooling labor market. Crude has had a rough ride in 2023 despite China’s reemergence from its restrictive Covid Zero policy and sizable reductions in supply by the Organization of Petroleum Exporting Countries and its allies. Those surprise cutbacks, announced just a month ago, were supposed to seize back control of the market from bearish speculators. Instead, a brief rally in April has fizzled.
- Gold steadied after surging the most in almost a month as downbeat US economic data spurred bets on Federal Reserve rate cuts this year. The precious metal is now trading firmly above the $2,000 an ounce threshold after climbing more than 10% since the end of February. US job vacancies fell by more than forecast in March and layoffs jumped, a sign the labor market is softening which may cool inflationary pressures. Gold rallied nearly 2% after traders raised bets that an economic slowdown would force the Fed into multiple rate cuts this year — a boon for non-interest bearing assets. A sharp sell-off in regional bank stocks also added to the haven metal’s appeal.
- Morgan Stanley said it’s in talks with US prosecutors and regulators to resolve a probe into its block trading practices. “The firm is currently engaged in discussions regarding potential resolution of the investigations by the enforcement division of the U.S. Securities and Exchange Commission and the US Attorney’s Office for the Southern District of New York into various aspects of the firm’s blocks business,” the bank said Tuesday in a regulatory filing. The firm has previously said inquiries focus on whether employees shared or used information regarding impending block transactions in violation of securities regulations. The company has discharged two bankers who had been put on leave in relation to the issue and said the move was tied to allegations about their communications about impending block trades and client activity.
- The US regional banking crisis is far from over and the Federal Reserve should pause its rate hike campaign, according to former Federal Reserve Bank of Dallas President Robert Kaplan. “I’d prefer to do what’s called the hawkish pause, not raise but signal that we are in a tightening stance, because I actually think the banking situation may well be more serious than we currently understand,” Kaplan, whose career has also included time as a senior executive at Goldman Sachs Group Inc., said in a Bloomberg Television interview. Kaplan went on to say that bank equities have been marked down solely because of their over-investment in US Treasuries, while the credit phase, which is “normally more serious,” is yet to unfold. Just a day after Wall Street breathed a sigh of relief with the rescue of First Republic Bank, a drop in US regional lenders fueled renewed concern about financial stability. The S&P 500 fell 1.2% Tuesday in New York as US regional lenders PacWest Bancorp and Western Alliance Bancorp both tumbled at least 15%, on the eve of the US central bank’s decision.
- The UK is proposing “significant changes to the listing rulebook” in a bid to make London more attractive as a financial center with its moribund capital markets stoking fears about the city’s ability to compete with New York and Asian hubs. The Financial Conduct Authority wants to replace its premium and standard listing categories with a single offering in a bid to attract more companies, according to a statement Tuesday. The regulator said the changes would make UK listings less complicated and onerous. It would make it easier for companies to have two classes of shares, which is favored by some entrepreneurs who want to keep control of their businesses even after they have gone public, and would remove mandatory shareholder votes, including on acquisitions.
- U.S. House lawmakers are requesting information from Nike Inc., Adidas AG and at least two other companies on whether they are importing products derived from forced labor in China. Republican Representative Mike Gallagher, chair of the House Select Committee on the Chinese Communist Party, and the panel’s top Democrat, Raja Krishnamoorthi, sent letters to the companies Tuesday. They also wrote to the Chinese-owned shopping platforms Shein and Temu. The US has accused China of requiring Uyghurs in the country’s Xinjiang region to work against their will, part of a broader government campaign of genocide. In response, Congress passed the Uyghur Forced Labor Prevention Act in 2021, increasing sanctions and trade restrictions. The law bans goods from Xinjiang from being imported into the US, with the presumption that it is a product of forced labor. China has been accused of widespread human rights abuses against the largely Muslim Uyghurs. China has repeatedly rejected allegations of human rights abuses and genocide.
- The threat of recession is making debt securities a safer bet, while the stock market is yet to price in those risks. That’s the view of some fund managers and strategists from JPMorgan Chase & Co. to UBS Group AG and Morgan Stanley, who now prefer fixed-income instruments to equities. The argument is that bonds, particularly higher-rated ones, will be able to better weather any economic slowdown, whereas stocks would suffer more if the Federal Reserve fails to navigate a soft landing. They have numbers to support their convictions. One is the amount by which yields of high-grade dollar bonds exceed dividend yields of companies in MSCI Inc.’s ACWI Index. That gap has widened almost 90 basis points in the past year and remains near the peak in March that was the highest since 2008 during the global financial crisis. Buying bonds now offers investors extra yield and they can benefit from capital gains if interest rates drop.
- The European Union is setting aside €500 million ($551 million) to boost manufacturing of artillery shells, missiles and gunpowder in an effort to speed up production of ammunition for Ukraine and galvanize the bloc’s defense industry. Among a raft of measures, the European Commission proposed the funds to co-finance projects alongside EU governments. It offered around half of the funding for companies to ramp up output capacity or refit old stocks of ammunition to make them operational again. The EU is looking to jump-start the bloc’s defense industry after years of lower spending following the Cold War, which caused firms to scale back production. Artillery ammunition has become an urgent need in light of the large volumes used every day by both Russia and Ukraine.
- Carmakers from Stellantis NV to Ford Motor Co. posted gains in the first quarter, but investors are signaling that the industry is headed for difficult times. Stellantis dipped to a three-month low Wednesday after reporting disappointing sales in Europe where a downturn is looming as consumers feel the pinch of inflation and higher interest rates. inflation and higher interest rates. The results added to concerns felt at Ford, which said late Tuesday it anticipated more downward pressure on prices, now that supply-chain blockages have eased and more vehicles are being produced. While most luxury-car maker have proven less exposed — Porsche AG plans to boost prices in the US and Europe — manufacturers targeting mid-range buyers are already under pressure from successive price cuts by Tesla Inc.
- Chinese financial data providers have recently stopped providing detailed information on the nation’s companies to overseas clients, underscoring the growing difficulty foreign firms face when trying to obtain data that Beijing may deem sensitive. Wind Information Co. in recent months ended allowing clients using its platform outside mainland China from accessing its corporate registry database, according to multiple people familiar with the matter. The change is due to regulatory requirements, and other parts of their service are continuing as normal, they said, declining to be identified because the matter is sensitive. Investors operating in China are facing a more challenging environment despite Beijing’s push to improve ties globally. US consultancy firms are under the spotlight in particular, with authorities in recent weeks targeting the China offices of Bain & Company, Mintz Group and Capvision, according to media reports. The government last month passed a new counter-espionage law that expanded the list of activities that could be considered spying, intensifying the risks for foreign firms.
- CVS Health Corp. cut its earnings forecast for the year as it looks to pay for two major acquisitions that are central to its strategy of broadening its health-care services. Adjusted profit for 2023 will be $8.50 to $8.70 a share, Woonsocket, Rhode Island-based CVS said Wednesday in a statement, a decrease of 20 cents across the range from its earlier view. The company cited costs for acquiring technology provider Signify Health, along with another deal for Oak Street Health that closed Tuesday. CVS now faces challenges of integrating Oak Street and Signify and determining how they want their care delivery business to operate. As traditional retail pharmacy has become more competitive, giant drug-store and retail chains have looked to other dimensions of health care for alternative revenue streams. Rival Walgreens Boots Alliance Inc. has been adding primary care centers to US locations, and earlier this year, Amazon.com Inc. closed a $3.49 billion deal with virtual primary-care clinic company One Medical.