October 2, 2023
- Laurentian Bank of Canada said Chief Executive Officer Rania Llewellyn will leave immediately, to be replaced by personal and commercial banking chief Eric Provost. The bank’s chairman resigned. The announcement brings a sudden and surprising end to the tenure of Llewellyn, the first woman to lead a major domestic bank in Canada. It comes weeks after the Montreal-based lender concluded a review of strategic options without finding a buyer. The bank said at the time it will try to ramp up its current strategy, which includes growth in commercial lending and technology upgrades. Provost’s priority will be to “rebuild trust” with customers and address the impact of a mainframe outage that occurred last week, according to a statement from the bank. The IT failure, which affected customer deposits, bill payments and other services, occurred during a planned technology maintenance update, the bank said, adding that customer data and financial information remained secure at all times.
- European equities gave up earlier gains, trading slightly lower as higher bond yields outweighed signs of stabilization in China’s economy. The Stoxx Europe 600 fell 0.2% by 10:34 a.m. in London after rising as much as 0.5%, as Treasury yields rose. Among individual movers, Vivendi SE gained after Barclays Plc analysts upgraded their rating and said it was one of their favorite media stocks. The European benchmark just posted its first quarterly drop since September 2022 as investors fretted over the likelihood of higher-for-longer rates, slower economic growth and concerns about China’s recovery. The focus will soon turn to earnings as traders assess how companies have navigated these headwinds, though seasonality shows that European equities’ perform best over the last three months of the year.
- The global bond selloff resumed on Monday, with 10-year Treasury yields back to the highest since 2007, as investors waited for a speech by Federal Reserve chief Jerome Powell to provide clues on the direction of interest rates. Powell is due to speak at a roundtable discussion alongside Philadelphia Fed President Patrick Harker. Their views will be of particular interest after New York Fed boss John Williams suggested Friday interest rates should stay high for some time. Stocks got a boost earlier in the session, with investors feeling optimistic after US lawmakers reached a deal over the weekend to avoid a government shutdown. However, the focus in markets is quickly shifting back to interest rates, especially as rising oil threaten to fan inflation.
- Asian stocks edged lower as muted manufacturing activity raised concerns over the region’s growth outlook, erasing an initial boost from a temporary resolution to the US government shutdown. The MSCI Asia Pacific Index fell as much as 0.3%, led by health-care shares. Many regional markets including China, Hong Kong and South Korea were closed for holidays. Japanese equities reversed earlier gains to close lower, dragging on the regional benchmark, as the nation’s factory activity fell further in September. Meanwhile, a private gauge of China’s activity in the sector also underperformed, suggesting there’s still room for caution despite green shoots in the economy.
- Oil edged higher on Monday, buoyed by widespread bets that global demand will continue to run ahead of supply. West Texas Intermediate traded above $91 a barrel after gaining almost 30% in the previous quarter. Money managers boosted bullish wagers on the US crude benchmark to the highest since late 2021 last week, as speculators continue to anticipate tightening in the global crude market. There were mixed signals Monday around the restart of a key oil pipeline that runs from Iraq to Turkey. While a Turkish minister said the pipe was ready to operate, a senior Iraqi official said it can’t start until commercial issues between the two countries have been resolved. The pipe carries almost half a million barrels a day of crude and a restart would help ease some of the market’s ongoing tightness.
- Gold fell for a sixth straight day to the lowest in almost seven months, as the metal continued to test lower levels following hawkish signaling by the Federal Reserve. Treasury yields climbed on Monday after a US government shutdown was averted over the weekend, pushing gold down to the lowest since March. The metal fell 4% last week as a drop below $1,900 an ounce triggered outflows from exchange-traded funds, while hedge funds trading Comex futures cut bullish gold bets to a five-week low. Spot gold dipped 0.8% to $1,833.25 an ounce as of 10:49 a.m. in London. The Bloomberg Dollar Spot Index climbed 0.2%. Silver, palladium and platinum all fell.
- UK house prices held up better than forecast in September as the surge in mortgage rates showed signs of easing. The average price of a home was unchanged at £257,808 ($314,060) after two months of falls, mortgage lender Nationwide Building Society said in a statement Monday. Economists in a Bloomberg survey had predicted a drop of 0.4%. Prices fell 5.3% from a year earlier, the same pace as in August. “Investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing,” said Robert Gardner, Nationwide’s chief economist. “If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home.”
- Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week. This was the fourth straight week of outflows. Outflows from U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $612.4 million in the week ended Sept. 29, compared with losses of $226.7 million in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $9.97 billion.
- Republican party divisions are intensifying in the aftermath of a last-ditch deal to avert a US government shutdown as a drive to overthrow House Speaker Kevin McCarthy threatens to shake the balance of power in the Capitol. The alliances that emerge from this fight, which hardline Representative Matt Gaetz announced Sunday, will have far-reaching ramifications for the Republican-controlled House’s ideological fervor and hunger for brinkmanship. The rare rebellion against a House speaker and unprecedented possibility members of the opposition party may rescue him unfolds as Washington is struggling to work out annual funding for the government. Aid to Ukraine hangs in the balance, along with contentious battles over immigration and asylum policy, abortion rights and support for the poor.
- President Joe Biden urged House Speaker Kevin McCarthy to follow up quickly with funding for Ukraine hours after Congress passed a spending bill without it to avoid a US government shutdown. The omission comes at a critical stage for Kyiv as it steps up efforts to repel Russia’s invasion and shows how domestic political debate in Washington is starting to affect support for Ukraine. Less than two weeks ago, Ukrainian President Volodymyr Zelenskiy visited Washington to plead for new weapons systems and urged allies to keep up their financial and military support for Kyiv.
- US technology stocks may be about to turn a corner after the Nasdaq 100’s biggest monthly decline this year, according to strategists at Goldman Sachs Group Inc. They say the selloff has led to historically cheap valuations for the tech stocks at a time when earnings estimates are still rising. In particular, they point to a valuation metric known the PEG ratio, which calculates price relative to earnings and long-term growth. Goldman’s analysis shows that the largest seven tech stocks have a PEG ratio of 1.3, compared with 1.9 for the median S&P 500 stock. That’s the largest discount since January 2017 and a level that has been reached only five times in the last decade, they said.
- Birkenstock Holding Ltd. set terms for an initial public offering that could raise as much as $1.6 billion, pushing ahead with the latest major test of demand for new listings. The German footwear maker is marketing 10.75 million new shares at $44 to $49 apiece, according to a filing Monday. Its controlling shareholder, private equity firm L Catterton, is offering 21.51 million shares at the same price. The Norwegian sovereign fund and T. Rowe Price Group Inc. veteran Henry Ellenbogen’s Durable Capital Partners LP have expressed interest in buying as much as $300 million of stock in aggregate, according to the filing. Billionaire LVMH Chairman Bernard Arnault’s family holding company, which has already invested in Birkenstock, may buy as much as $325 million of shares.
- Rising rates are starting to weigh on US corporate profits and if they stay higher for longer it may upend a historical trend, according to Goldman Sachs Group Inc. strategists. Borrowing costs for S&P 500 companies have ticked up by the largest amount in nearly two decades, on a year-on-year basis, strategists led by David Kostin said. If they remain at high levels for an extended period of time, this may prevent firms from taking on more leverage, hitting long-term profitability. For decades, falling interest costs and greater leverage have accounted for nearly one-fifth of an overall 8.8 percentage points increase in the return on equity (ROE) of S&P 500 firms, according to the strategists.
- Donald Trump will face off against New York Attorney General Letitia James starting Monday in a contentious civil trial that threatens his control over his real estate empire in the state. The former president is accused of corrupting his relationship with banks and insurers for more than a decade by giving them financial statements that inflated the value of his assets by billions of dollars a year, from Trump Tower in Manhattan to his Mar-a-Lago estate in Florida. As penalties James is seeking a quarter of a billion dollars and to bar Trump and his eldest sons from serving as an officer of any New York company. State Supreme Court Justice Arthur Engoron, who will oversee the trial and decide on the verdict, resolved the biggest claim in the case last week by holding Trump liable for fraud. The non-jury trial will now focus on the six remaining claims against Trump and his company, including issuing false financial statements and conspiring to falsify business records. That will determine the penalties.
- US car buyers are headed to showrooms out of sheer necessity, defying high interest rates and fat sticker prices to replace cars that on average have been on the road for more than 12 years. High monthly payments and the early effects of a widespread strike at US carmakers didn’t stop vehicle sales from rising in the third quarter. Dealers have larger inventories than they’ve had for several years, which could attract more buyers for the rest of the year as pent-up demand fuels sales. “You’re seeing the effects of having the oldest fleet we’ve ever had” vying with higher interest rates and inflation, Jack Hollis, Toyota Motor Co.’s US sales chief, said in an interview. “The industry is coming back to more of a normal state.”
- An independent committee evaluating BP Plc and Abu Dhabi National Oil Co.’s roughly $2 billion offer for 50% of NewMed Energy has requested the oil and gas giants substantially increase their bid, people with knowledge of the matter said. BP and Adnoc are now considering whether to improve on their initial proposal for the Israeli gas explorer made in late March or walk away, according to the people, who asked not to be identified discussing confidential information. Deliberations are ongoing and there’s no certainty they’ll respond with a higher offer, they said. Any deal would be one of Adnoc’s first major international acquisitions of a gas- or oil-producing asset. The United Arab Emirates’ state energy producer last year said it would spend billions of dollars expanding its foreign gas, chemicals and clean-energy operations.
- Bitcoin climbed to a six-week high as inflows onto crypto exchanges continued at the start of October, a month that typically sees gains in the biggest token. Smaller peers including Ether, Litecoin and Solana also rallied. The advance came as traders await the trial of Sam Bankman-Fried, founder of bankrupt crypto exchange FTX, which is scheduled to begin Tuesday. The broad crypto gains stood in contrast to the mood in equities, where major benchmarks across Europe slipped on Monday, suggesting technical factors were also at play. “There appears to have been significant buying flows, possibly driven by the start of a new accounting quarter, and the resulting moves were exacerbated by scarce week-end liquidity,” said Caroline Mauron, co-founder of digital-asset derivatives liquidity provider OrBit Markets in Singapore.