October 3, 2022

Daily Market Commentary

Canadian Headlines

  • Quebecers are heading to the polls today after a five-week provincial election campaign dominated by issues such as immigration, the environment and the rising cost of living. Polls have suggested Coalition Avenir Québec Leader François Legault is poised to cruise to a second majority, with support more than 20 percentage points higher than that of his closest rival.
  • Algonquin Power & Utilities Corp. said it agreed to sell ownership interests in a portfolio of operating wind projects in Canada and the U.S. to international infrastructure investment manager InfraRed Capital Partners. The Canadian renewable energy and regulated utility conglomerate said Monday that it will sell a 49% ownership interest in three operating wind facilities in the U.S. with a total of 551 megawatt of installed capacity and sell an 80% ownership stake in a 175 megawatt operating wind facility in Canada.
  • About 22,000 Maritime Electric customers were still without power Sunday evening, more than a week after post-tropical storm Fiona hit P.E.I., according to the utility’s outage map. The storm slammed the Island with a vengeance in the early morning hours of Sept. 24, leaving widespread damage across the province — decades-old trees snapped in half, beaches and sand dunes decimated, many properties damaged beyond repair and 82,000 Maritime Electric customers without power immediately following the storm. While many streets have been cleared, aid packages have been announced and schools are set to reopen Monday, the recovery from Fiona is far from over.

World Headlines

  • Global stocks fell to a two-year low, while US index futures struggled for direction, amid concern hawkish policies by global central banks will spark a recession and earnings contraction. December contracts on the S&P 500 Index were little changed, while similar futures on the Nasdaq 100 slid 0.3%. Carmaker Tesla tumbled 4% in premarket New York trading after deliveries in the third quarter fell short of expectations.
  • European stocks fell as the region’s energy crisis escalated further and investors worried about the economic impact of hawkish central bank policies while monitoring news about the UK government’s tax proposal. The Stoxx 600 was down 1.4% by 9:01 a.m. in London after earlier hitting its lowest since November 2020.
  • Asian stocks slid after capping their worst month since 2008, as cautious sentiment prevailed amid worries about global recession and higher interest rates. The MSCI Asia Pacific Index fell 0.5%, with consumer staples and utilities leading losses. A jump in oil prices also kept traders on edge due to its impact on inflation. Thin trading volumes heightened price moves as China, South Korea and Sydney were closed for a holiday.
  • Oil surged near $83 a barrel on indications the OPEC+ alliance is considering slashing production by more than 1 million barrels a day to revive plunging prices when it meets this week. A reduction of that magnitude would be the biggest since the pandemic, although OPEC+ delegates said a final decision on the size of the cuts won’t be made until ministers gather in Vienna on Wednesday. West Texas Intermediate rose almost 5%, putting prices on track for the first gain in three sessions.
  • Gold edged higher after capping its best week since mid-August as weakness in the dollar provided some relief to the precious metal. Bullion extended its first weekly gain in three, with an easing in Treasury yields also helping boost the allure of the non-interest bearing asset. Gold had plummeted to a two-year low earlier last week on the back of a surge in the dollar and bond yields.
  • Base metals slid as further stimulus pledges by China failed to quell anxiety over the country’s fragile economy. Copper slid as much as 2%, tracking similar moves in the iron ore market. China’s financial regulators told the nation’s biggest state-owned banks to extend at least 600 billion yuan ($85 billion) of net financing to the real-estate sector, according to a report on Friday, in their latest attempt to address the deepening crisis.
  • Natural gas prices in Europe fell amid signs the continent will be able to navigate this winter with sufficient inventories, an influx of LNG and measures planned by the European Union. Benchmark futures declined as much as 7%. European demand is likely to fall by a record 10% this year, and another 4% next year due to the high prices, according to the International Energy Agency. Gas saving measures will be crucial to help stretch inventories to the end of winter even with dwindling Russia supply, it said.
  • China has curbed exports of corn starch in a signal that the world’s biggest corn importer is likely worried about local supplies.  The government has asked companies to suspend shipments to stabilize corn prices and contain inflation risks, according to Ma Wenfeng, a senior analyst at the Beijing Orient Agribusiness Consultant Co. Corn starch is commonly used as an ingredient to thicken soups and sauces or for paper products and adhesives.
  • Brazilians have four weeks to wait to find out who’ll be their next president after a surprisingly strong showing by incumbent Jair Bolsonaro prevented a first-round win by the leftist Luiz Inacio Lula da Silva. While Lula beat Bolsonaro by more than 6 million votes in yesterday’s ballot, he fell short of the 50% mark needed for victory. That’s even as some pollsters had predicted he’d get over the line, and indeed that the margin over Bolsonaro would be large. Instead, the split was 48% to 43%.
  • Prime Minister Liz Truss dropped a plan to cut taxes for the UK’s highest earners just 10 days after announcing it, a humiliating reversal designed to fend off a mounting rebellion within her own Conservative Party. Chancellor of the Exchequer Kwasi Kwarteng announced the decision in a tweet early Monday, saying “we get it, and we have listened.” He said the decision to scrap the 45% rate of income tax had become a “distraction.”
  • Prosus NV has canceled a $4.7 billion deal to buy Indian payments firm BillDesk after a collapse in valuations for major tech startups.  The deal, set to be the largest acquisition by Prosus, was canceled after “certain conditions precedent” weren’t met by the end of September, Prosus said in a statement on Monday. The company didn’t elaborate on the conditions.
  • Credit Suisse Group AG was plunged into fresh market turmoil after Chief Executive Officer Ulrich Koerner’s attempts to reassure employees and investors backfired, adding to uncertainty surrounding the bank. The stock, which had already more than halved this year before Monday’s sell-off, fell as much as 12% in Zurich trading to a record low. That was accompanied by a spike in the cost to insure the bank’s debt against default, which jumped to its highest ever.
  • Tesla Inc. shares dropped in early trading after the carmaker blamed a disappointing deliveries report on shipment issues that increased the number of vehicles that were on their way to customers as the quarter came to a close. The maker of Model 3 sedans and Model Y crossovers handed over 343,830 vehicles to customers in the last three months, short of the almost 358,000 total that analysts expected. The stock traded down as much as 6.5% to $248 before the start of regular trading Monday.
  • Home prices in the US have taken a turn and are now posting the biggest monthly declines since 2009.  Median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July, Black Knight Inc. said in a report Monday. The two periods mark the largest monthly declines since January 2009.

 

 

*All sources from Bloomberg unless otherwise specified