November 10, 2023
- Prime Minister Justin Trudeau’s government is likely to sell more short-term debt in the next couple of years as it grapples with growing deficits at a time of higher rates, according to Desjardins Group. The Canadian government has historically tapped the market by issuing more short-duration bonds and bills to finance deficits that are driven by slow economic growth and weak employment, Randall Bartlett, the financial co-operative’s senior director of Canadian economics, said in a report to investors. Long-term debt is less appealing at times of elevated rates, Bartlett wrote — and a cooling economy usually means rates will fall in the near future, so it’s advantageous to issue debt that rolls over sooner.
- Canada’s federal housing agency is preparing a sale of as much as C$8.5 billion ($6.2 billion) in bonds as soon as next week, according to people familiar with the matter. Canada Mortgage and Housing Corp. will likely take orders for its planned transaction — consisting of floating-rate and fixed-rate Canada mortgage bonds, or CMBs — during the week of Nov. 13 after debt dealers sounded out investors, said the people, who asked not to be named ahead of a public announcement. Commercial lenders can sell pools of mortgages through the program, allowing them to fund more loans via the housing market. Canada mortgage bonds effectively carry a government guarantee.
- Roots Corporation launches its 20th design collaboration in partnership with streetwear brand CLOT, which includes two exclusive collections that combine the heritage and aesthetics of Canada and Hong Kong. The collaboration serves as a continuation of Roots milestone 50th anniversary as well as CLOT’s 20th anniversary. The first collection, named “Go Outside: You’ll Be Glad” will launch on November 10th in Canada and November 11th in Asia with a second following on January 13th, in alignment with the Lunar New Year.
- European bonds and stocks are both in the red, tracking losses in their US counterparts on Thursday after hawkish comments by Fed Chair Powell and a soft 30-year bond auction. German 10-year yields rise 8bps while the UK equivalent adds 7bps. The Stoxx 600 is down 1% and set for its largest one-day drop in three weeks. Consumer product, food/beverage and mining shares are leading declines. S&P futures fall 0.1%. The Bloomberg Dollar Spot Index is little changed.
- US stocks were set to be steady after posting their first negative session this month due to a rebound in yields as the Federal Reserve opened the door to further tightening, cooling investors’ appetite. S&P 500 futures were unchanged while tech-heavy Nasdaq 100 futures fell 0.2% as of 5:30 am in New York after Federal Reserve Chair Jerome Powell said the US central bank will continue to move carefully but won’t hesitate to tighten policy further if needed to contain inflation. Thursday’s losses marked the first negative session for stocks this month and a missed opportunity for the S&P to notch a rare ninth-straight session of gains, which would have been the longest run since November 2004.
- Asian equities declined, as disappointing earnings hit Chinese stocks while cautious comments by Federal Reserve Chair Jerome Powell sapped risk sentiment. The MSCI Asia Pacific Index fell as much as 1.1%, with Chinese internet giants Alibaba and Tencent among the biggest drags. Japan’s SoftBank and Sony also weighed on the gauge after their results missed expectations. Most major markets in the region were in the red Friday. The Asian benchmark was down about 0.5% for the week. Hong Kong benchmarks fell the most in the region following weak earnings from chipmaker SMIC and casino operator Wynn Macau. A cyberattack on China’s largest lender ICBC also weighed on sentiment. A report this week showed the Chinese economy has tipped back into deflation, exacerbating concerns over the fragility of the recovery.
- Oil headed for a third straight weekly drop on growing concerns over global demand and the unwinding of the war-risk premium, while Saudi Arabia blamed speculators for the decline. Global benchmark Brent crude was back above $80 a barrel on Friday, but fell to a three-month low earlier this week. Saudi Arabia’s Energy Minister blamed speculators for the drop, but others see higher supply as the driver. In a potential further drag on prices, Federal Reserve Chair Jerome Powell warned that interest rates may have to climb further. Brent has plunged around 13% over the past three weeks on bearish demand signals from China, the US and Europe. Meanwhile, flows from the Middle East remained unaffected by the Israel-Hamas war.
- Gold was on track for its second weekly decline as fears the conflict in the Middle East may broaden into a region-wide war have eased, reducing haven demand. In the wake of the attacks by Hamas on Israel almost five weeks ago, gold surged to more than $2,000 an ounce for the first time since May. The precious metal edged lower on Friday and is down 2% this week amid lingering doubts over whether the Federal Reserve’s monetary tightening has ended. Spot gold declined 0.3% to $1,953.29 an ounce as of 10:49 a.m. in London. The Bloomberg Dollar Spot Index was flat. Silver and platinum also edged lower, while palladium extend losses after dropping below $1,000 an ounce on Thursday for the first time in five years.
- The caution that pervaded stock markets in the past three months has now switched to “year-end greed” on expectations of a decline in US bond yields, according to Bank of America Corp.’s Michael Hartnett. The “fear” among investors last month about a surge in Treasury supply as well as the worries around fiscal deficit had caused yields to “overshoot,” Hartnett wrote in a note. That has now flipped as the 10-year yield is seen closer to 4.5% rather than 5.5%, the strategist said. That optimism has been reflected in fund flows, with global stocks recording inflows of $8.8 billion in the week through Nov. 8, according to the note citing EPFR Global data. Still, cash remains the asset class of choice, Hartnett said. About $77.7 billion went into money market funds in the week, setting them up for record annual inflows of $1.4 trillion.
- Dozens were killed and wounded in an Israeli strike on outpatient clinics of Al-Shifa Hospital, the largest medical complex in Gaza, Palestine Authority radio reported. The Israeli military has said that Hamas’s main military headquarters is located underground near Al-Shifa and has told the hospital to evacuate patients. Israel is providing “quick humanitarian windows” to allow people to flee northern Gaza while the military fights Hamas militants, IDF spokesperson Jonathan Conricus said. The IDF estimates between 50,000 and 100,000 people have exited northern Gaza in the last few days and a total of 850,000-900,000 have fled the area, Conricus said. More than a million people lived in northern Gaza at the outbreak of the war.
- The US and European Union are leading a global push for the United Nations’ climate talks to endorse the tripling of renewables and doubling of energy savings by the end of the decade. Nearly 60 countries are backing the targets to be included in the outcome of the UN’s upcoming COP28 talks in Dubai, according to people with knowledge of the matter. Leaders from those nations are planning to join a call for action at a Dec. 2 meeting during the conference, they said. Such an objective would help keep global warming from rising by 1.5C, a critical threshold, according to the International Energy Agency and the International Renewable Energy Agency. COP28, which runs from Nov. 30-Dec. 12, is due to set the direction for how to fight climate change over the rest of the decade, but there’s still a deep divide between developing and developed countries over how to cut greenhouse gas emissions and, more importantly, who should pay for the transition to greener energy.
- Three Las Vegas casino companies have reached labor deals with the city’s most powerful hospitality workers union, ending the threat of a strike in one of the nation’s hottest tourist destinations. Culinary Workers Union Local 226 said it reached a “tentative agreement” for a new five-year contract with Wynn Resorts Ltd. ahead of a Friday strike deadline, according to a post by the union on X. The deal means 5,000 workers won’t walk off the job, joining another 30,000 workers for Caesars Entertainment Inc. and MGM Resorts International, which also reached labor pacts with the union this week. The union didn’t immediately comment on the Wynn agreement, but was expected to set demands similar to the two earlier contracts, including big wage increases, restoration of daily room cleaning to create jobs, and safeguards against artificial intelligence and other emerging technology.
- Governor Tim Walz of Minnesota, a state Democrats are counting on carrying in the 2024 presidential election, says President Joe Biden can’t rely on touting Bidenomics alone as inflation-plagued Americans sour on the economy. Walz, a Democrat who supports Biden in the expected rematch with Donald Trump next year, said higher prices for goods and services are coloring many voters’ view of the economy and that Biden needs to challenge the notion that voters were better off under Trump. While the middle class is getting pinched with higher inflation and interest rates, there’s a disconnect with voters saying the economy is bad while they’re personally faring better, Walz said. And there’s a significant portion of the population that won’t give credit to someone of a different political party, he said.
- The race is now on in Portugal to replace outgoing Prime Minister Antonio Costa following his unexpected resignation this week amid a probe into possible government corruption. The Socialists still have no clear successor to Costa, though Finance Minister Fernando Medina and former infrastructure minister Pedro Nuno Santos have been seen as possible candidates. Home Affairs Minister Jose Luis Carneiro told reporters late Thursday that he’ll be a candidate. Costa, who had been premier since 2015, led a Socialist government backed by an absolute majority in parliament. The challenge for the party now will be to hold onto votes amid the corruption allegations, anger over housing and a previous pay controversy at state airline TAP SA. For the opposition parties, the focus will be on how to capitalize on those troubles.
- Novo Nordisk A/S will invest more than 42 billion kroner ($6 billion) to expand its manufacturing facilities as it fights to maintain dominance of a weight-loss market that’s expected to hit $100 billion by 2030. Work will begin this year on a new 170,000 square-meter factory at the company’s existing facilities in Kalundborg, Denmark, according a statement on Friday. Part of the investment is included in the 25 billion-krone capital expenditure the company already announced for this year; the rest will come over the next six years. Novo said the factory will make products for its serious chronic diseases portfolio, which includes weight-loss and diabetes treatments Wegovy and Ozempic, the drugs that have vaulted Novo into the limelight and made it Europe’s most valuable company.
- Australia’s Ramsay Health Care Ltd. and Malaysian conglomerate Sime Darby Bhd. have agreed to sell their hospital unit to Columbia Asia Healthcare Sdn. for 5.7 billion ringgit ($1.2 billion), according to a stock exchange filing. The companies will sell all their stakes in Ramsay Sime Darby Health Care Sdn., which operates four hospitals in Malaysia and three in Indonesia, a Friday filing to Malaysia’s stock exchange shows, confirming an earlier Bloomberg News report. Sime Darby will get a 2 billion ringgit gain on the disposal. Columbia Asia’s main shareholders, TPG Inc. and conglomerate Hong Leong Group, are providing capital for the acquisition along with co-investors including the Abu Dhabi Investment Authority and Malaysia’s Employees Provident Fund. The transaction is expected to be completed in the quarter ending March 2024.
- Money managers ranging from Boaz Weinstein’s Saba Capital Management to AQR Capital Management are pouncing on historic dislocations in a normally sleepy corner of the investment world. The firms are buying what are known as closed-end funds, which invest in cash-generating assets like junk debt, muni bonds, or even stocks that pay dividends. They’re typically pitched to retirees looking for regular income, but with bond yields jumping, many individual investors have seen the value of their holdings drop, and are looking to bail out. Their mass departures are translating to bargain prices, which are drawing hedge funds. Closed-end funds are publicly listed, and their shares can trade at less than the value of the assets they hold. Those discounts are outsize now: municipal bond closed-end funds, for example, were trading at an average 13.6% below their assets at the end of October, the highest in at least a decade-and-a-half and well above a historical average of 4%, according to data from Matisse Capital.
- The European Union informed member states that the bloc is very unlikely to hit a pledge to provide Ukraine with 1 million rounds of artillery ammunition, complicating Kyiv’s ability to keep pace with Russia’s own production. The EU’s foreign policy arm, the European External Action Service, briefed EU diplomats this week that the bloc would likely miss the March 2024 target, according to people familiar with the matter. Under plans made earlier this year, the EU pledged to provide the artillery ammunition rounds to Ukraine over a 12-month period, first by dipping into existing stocks and then through joint procurement contracts and increasing industrial capacity.
- On Thursday, trades handled by the world’s largest bank in the globe’s biggest market traversed Manhattan on a USB stick. Industrial & Commercial Bank of China Ltd.’s US unit had been hit by a cyberattack, rendering it unable to clear swathes of US Treasury trades after entities responsible for settling the transactions swiftly disconnected from the stricken systems. That forced ICBC to send the required settlement details to those parties by a messenger carrying a thumb drive as the state-owned lender raced to limit the damage. The workaround — described by market participants — followed the attack by suspected perpetrator Lockbit, a prolific criminal gang with ties to Russia that has also been linked to hits on Boeing Co., ION Trading UK and the UK’s Royal Mail. The strike caused immediate disruption as market-makers, brokerages and banks were forced to reroute trades, with many uncertain when access would resume.
- A months-long backlog in processing labor permits is complicating US government efforts to help cities like New York cope with an influx of undocumented immigrants and ease workers shortages. In an effort to alleviate some of those pressures, the Biden administration has recently announced almost 500,000 Venezuelans now qualify for temporary work permits. But a mounting logjam at the cash-strapped agency in charge of immigration now threatens that solution. Beyond that, the slowdown could also derail the recovery in the US labor market. Foreign-born workers, who are more likely to fill positions in sectors where businesses have had the toughest time hiring, helped soften the blow of unprecedented labor shortages during the pandemic recovery while reducing pressure on wages.