November 13, 2023
- First Quantum Minerals Ltd. has reduced operations at its flagship copper project in Panama, which is facing a groundswell of local opposition, after a blockade by small boats at its port affected delivery of key supplies. The Canadian miner has found itself at the center of a political storm in the Central American country after thousands of protesters took to the street over an extension to its mining license. Under pressure from those demonstrators, President Laurentino Cortizo turned against the project at the end of last month, saying a referendum would be held on its future. In the two weeks since, the referendum proposal and a push for congress to repeal the contract have both been shelved, as the government waits to see if the Supreme Court will kill the agreement instead. The dispute has called into question the very future of the mine that cost more than $10 billion to build.
- Dye & Durham announced it has begun a strategic review of its non-core assets to significantly expedite its previously announced plan to reduce its leverage ratio. Options include the potential partial or complete sale of non-core assets, such as the financial services business. Dye & Durham has retained Goldman Sachs and Canaccord Genuity as its financial advisers
- Europe’s Stoxx 600 index climbed 0.5%, boosted by a rally in healthcare stocks. Denmark’s Novo Nordisk A/S jumped more than 4% after a study backed the use of Wegovy, its blockbuster weight-loss drug, to cut heart attacks and deaths in obesity patients. The news also benefited US-listed rival Eli Lilly & Co., which has its own weight-loss medications. Market attention is firmly focused on Tuesday’s US consumer price data, which are expected to show inflation easing to a year-on-year rate of 3.3% in October, down from 3.7% in the prior month. Ten-year Treasury yields slipped two basis points to 4.63%, leaving them down about 30 basis points this month.
- US equities were poised to retreat on Monday amid concerns that the recent strong rally may be overdone and that risks of inflation getting entrenched could make the Federal Reserve more hawkish again. S&P 500 futures slid 0.2% as of 5:21 a.m. in New York, after the benchmark jumped 1.6% on Friday to breach 4,400, seen as a key resistance level by technical analysts. The contracts for the tech-heavy Nasdaq 100 Index dropped 0.3%, pointing to a retreat for the gauge from its highest level in more than three months. The market is taking a breather as investors turn their attention to data on consumer prices due on Tuesday for clues on the likely path of interest rates. Last week, Chair Jerome Powell said the Fed wouldn’t hesitate to tighten policy further if needed, and figures showed long-term inflation expectations rising to the highest in 12 years even as the economy starts weakening.
- Asian equities rose, helped by a rally in regional technology shares after a positive sales update by heavyweight TSMC. Chinese internet firms also gained amid sales growth during the Singles’ Day shopping festival. The MSCI Asia Pacific Index rose as much as 0.5%, with TSMC, Tencent and Alibaba providing the biggest boost. Chinese stocks listed in Hong Kong led gains in the region. TSMC, the most heavily weighted stock in the Asian benchmark at 4.1%, climbed after posting its first monthly sales gain since February. Risk appetite for regional equities remains fragile, with expectations of a peak in global interest rates tempered by concerns over China’s economic health. Goldman Sachs downgraded offshore Chinese stocks due to modest earnings growth, while Morgan Stanley said debt and deflation challenges will persist for the nation’s shares.
- Oil held near $81 after three weeks of declines as traders wait for industry reports to confirm whether the recent run lower has been overdone. Brent crude erased an earlier decline to trade little changed, after losing about 12% over the past three weeks. Analysts at Goldman Sachs Group Inc. said renewed demand concerns have driven the selloff, but that consumption has remained robust all year and will likely continue to do so in 2024. The bank also trimmed its price forecast for next year to $92. Oil rebounded slightly at the end of last week after Wednesday slipping below $80 for the first time since July, with bearish consumption signals from China, the US and Europe prevailing. Supply from the Middle East — the source of about a third of the world’s crude — has remained unaffected by the conflict between Israel and Hamas, while shipments from Russia and the US are increasing.
- Gold held last week’s loss and copper advanced as investors looked ahead to Tuesday’s crucial US inflation figures, which will offer clues on the path forward for interest rates. The consumer price index excluding food and fuel, a measure favored by economists as a better indicator of underlying inflation, is seen increasing 0.3% for a third month, which could support a hawkish stance from Federal Reserve officials. Higher rates are typically negative for non-interest bearing gold. Bullion surged to more than $2,000 an ounce in the wake of last month’s attacks by Hamas on Israel. Fears over a wider escalation in the conflict have subsided in the past two weeks, easing demand for safe-haven assets such as gold.
- Boeing Co. may finally see a sales breakthrough for its 737 Max aircraft in China when presidents Joe Biden and Xi Jinping meet this week, ending a long commercial freeze in a critical overseas market for the US planemaker. The Chinese government is considering unveiling a commitment for Boeing’s 737 jetliner during the APEC Summit in San Francisco, as a signal of a recent thaw between the two nations, said people familiar with the matter who aren’t authorized to speak publicly. Terms of a potential agreement are still under discussion, and could change or fall apart before the heads of state meet on Wednesday, they cautioned. Boeing shares jumped nearly 4% in premarket trading on Monday on rising prospects for a deal with China, along with confirmation of a major widebody sale to Gulf carrier Emirates. Spirit AeroSystems Holdings Inc., the planemaker’s top supplier, gained more than 5%.
- Investors are overly concerned about the weakening outlook for US corporate earnings, which so far merely track a historical pattern, according to Goldman Sachs Group Inc. strategists. Estimates for fourth quarter profits have dropped by 4% since the start of October and are setting a low bar for S&P 500 companies, David Kostin and his colleagues wrote. Expectations for 2024 are also following a typical pattern and only dipped 0.4% once health care — the significant drag — is excluded, they said. Since 2004, quarterly earnings per share estimates typically decline by 6% in the months leading up to the start of earnings season, the strategists wrote, adding that investors have communicated anxiety about the negative consensus earnings revisions.
- Elevated mortgage rates and record-high home prices are poised to put an end to the home-improvement spending boom that drove growth at Home Depot Inc. and Lowe’s Cos. over the pandemic period. Between 2020 and 2022, both companies benefited from locked-down consumers that took on renovations. Historically low borrowing costs also fueled new home purchases. Now, with mortgage rates near their highest level in two decades and a steep drop in home sales, the retailers are on track to report their first simultaneous declines in full-year revenue growth since fiscal 2010. Third-quarter results from Home Depot, which will be released on Tuesday, and Lowe’s, scheduled for a week later, are expected to show a fourth consecutive drop in comparable sales and a third straight decline in overall revenue. Analysts expect Lowe’s to post a same-store sales decline of nearly 5% in the period, which would be the largest since 2009.
- Amazon will source energy from Maryland’s largest solar farm planned at a former coal mine, the company announced Monday, highlighting appetite for developing former industrial lands for clean energy projects. The tech giant, the world’s largest corporate buyer of renewable energy, signed a power purchase agreement for the output of the CPV Backbone Solar project, a 170-megawatt of direct current project in Garrett County, Md. The project is expected to be fully operational by the second quarter of 2025, according to the Silver Spring, Md.-based developer, Competitive Power Ventures (CPV). Reclaimed former coal mine lands and brownfield sites are increasingly attractive for developers as they hunt for places that are optimal to connect to the power grid. Federal incentives to develop clean energy on such sites could spur more development.
- TotalEnergies SE agreed to buy three natural gas-fired power plants in Texas from TexGen Power LLC for $635 million as it looks to expand in the US market. The three plants will serve the “fast-growing energy demand” of Dallas and Houston, offsetting the intermittency of renewable power production, the French energy giant said in a statement Monday, confirming an earlier Bloomberg News report. They have a joint capacity of 1.5 gigawatts. TotalEnergies has pursued gas plants to complement its growing fleet of wind and solar farms that provide more sporadic generation. Chief Executive Officer Patrick Pouyanne said last month that the company might make such an acquisition in Texas. In the Lone Star State, the French oil major currently has 2 gigawatts of gross installed renewable capacity, another 2 gigawatts under construction and more than 3 gigawatts under development.
- Morgan Stanley economists forecast the Federal Reserve to make deep interest-rate cuts over the next two years as inflation cools, while Goldman Sachs Group Inc. analysts expect fewer reductions and a later start. The central bank will start cutting rates in June 2024, then again in September and every meeting from the fourth quarter onward, each in 25-basis point increments, Morgan Stanley researchers led by chief US economist Ellen Zentner said in their 2024 outlook on Sunday. That’ll take the policy rate down to 2.375% by the end of 2025, they said. Goldman Sachs, meanwhile, sees the first 25-basis-point reduction in the fourth quarter of 2024, followed by one cut per quarter through mid-2026 — a total of 175 basis points, with rates settling at a 3.5%-3.75% target range. That’s according to a 2024 outlook from economist David Mericle, also published Sunday.
- Novo Nordisk A/S gained another $14.5 billion of market value after a key study backed the use of Wegovy, its blockbuster weight-loss drug, to cut heart attacks and deaths in people with obesity and a history of cardiac disease. The stock rose as much as 4.3% in Copenhagen after people taking the highest dose of Wegovy in the study saw a drop in blood sugar and inflammation, two harbingers of heart disease, alongside weight loss. That brought the shares’ gain to about 52% this year, extending Novo’s run as Europe’s most valuable company with a total market capitalization of more than $490 billion.
- A change in how the government estimates health insurance costs is expected to give a slight boost to a popular US inflation measure, reversing a trend that had been providing some relief in recent months. Beginning with Tuesday’s release of the October consumer price index, the Bureau of Labor Statistics will roll out a few changes to how it tabulates the category. In addition to a routine change in source data, the new methodology will aim to smooth some of the volatility and reduce time lags in the index. After being a reliable drag on overall inflation for the past year, the new computation is widely anticipated to put upward pressure on the headline CPI, at least in the near term. It’ll also boost a narrower subset of services inflation that excludes energy and housing.
- The government of Prime Minister Giorgia Meloni will likely have trouble accessing about half of Italy’s share of recovery funds from the European Union as bureaucracy, inflation and technical difficulties slow projects down. Rome will probably obtain the next, fourth installment worth €16.5 billion ($17.7 billion), though there may be some delays in meeting project targets, according to people familiar with the matter. Beyond that however, targets have become increasingly difficult to meet and the pace of needed reforms is also slowing. That means Italy may not access further money for some time and risks missing funds before a 2026 deadline for EU payments, said the people who asked not to be named on confidential talks. Rome still has to access about €92 billion.
- Walmart Inc. and Target Corp. will provide insights into how much consumers have reined in discretionary spending when they report earnings this week, including a glimpse into shopping patterns ahead of the vital holiday season. Off-price retailers like TJX Cos. and Ross Stores Inc. are expected to benefit as consumers seek out deals, and their sales are set to recover compared with last year. In Asia, where the annual Singles’ Day shopping blitz kicked off Saturday, e-commerce companies including JD.com Inc. and Sea Ltd. are projected to carve out low-single-digit revenue gains. Alibaba Group Holding and JD.com said they boosted sales during the shopping blitz after they offered steep discounts to lure shoppers.
- The 2023 Dubai Air Show kicked off on Monday with a major deal from local champion Emirates, continuing the prevailing theme of this year that’s seen airlines commit to huge orders. The agreement for 90 of Boeing Co.’s biggest aircraft, the coming 777X, confirms an earlier Bloomberg report and has a list value of $52 billion including the purchase of an additional five 787s. Airbus SE separately confirmed it reached agreement in principle on a major order from Turkish Airlines. The show’s main action plays out on Monday and Tuesday at the Dubai Al Maktoum Airport, halfway between Dubai city and Abu Dhabi. Participants in the event will also be looking out for any signs that the political tensions in the region following the attack on Israel by Hamas in October and the following counter-offensive in Gaza will affect deal appetite. Military kit on display has traditionally been a major element of the Dubai Air Show, and weapons manufacturers will be seeking to find buyers at the event.