October 4, 2022

Daily Market Commentary

Canadian Headlines

  • HSBC Holdings Plc is exploring a sale of its operations in Canada, the latest move to streamline the lender that is seeking to head off a call by its largest shareholder to split up. A potential sale of HSBC’s 100% equity stake in HSBC Bank Canada is among the options being explored, the lender said in a statement. The review is at an early stage and no decisions have been made, the bank said
  • Premier Francois Legault won another term in Quebec, strengthening his grip on power with promises to reduce income taxes, send checks to millions of residents coping with high inflation and protect the French language.  Legault’s Coalition Avenir Quebec party won 90 of 125 seats in the National Assembly in Monday’s election. The Liberal Party of Quebec will form the official opposition, with 21 seats.

 

World Headlines

  • US equities were poised to extend their advance as yields retreated amid expectations that softening economic indicators could persuade the Federal Reserve to take a less aggressive path to monetary tightening. Contracts on the S&P 500 rose 1.5% at 6 a.m. in New York while Nasdaq 100 futures climbed 1.9% after the underlying indexes jumped on Monday. The yield on the 10-year Treasury slipped for a second day to 3.58%. In premarket trading, electric vehicle stocks rallied after Rivian Automotive Inc. reported an increase in production and Cathie Wood bought Tesla Inc. shares as they plunged due to a miss in deliveries.
  • European stocks jumped by the most in more than three months as bond yields dipped on optimism that weaker-than-expected economic data will keep the Federal Reserve from being overly hawkish. The Stoxx 600 was up 2.3% at 11:07 a.m. in London, its biggest intraday gain since June 24. Travel and leisure, technology and consumer products were among the biggest advancers, while more defensive sectors like food and personal care lagged.
  • Asia stocks were poised for their biggest daily advance since March, after weak US manufacturing data trimmed bets on the Federal Reserve’s hawkishness and revived appetite for risk.  The MSCI Asia Pacific Index gained as much as 2.4% with all sectors rising. A regional tech sub-gauge jumped more than 3% after Treasury yields slipped and the dollar weakened. Taiwanese chip firms serving Chinese customers got a further boost from a report that the US plans to announce fresh curbs on semiconductor exports to China.
  • Oil rose after its biggest one-day gain since May as the market looked to OPEC+ to deliver a substantial cut in supply. West Texas Intermediate climbed above $84 a barrel after rallying by more than 5% on Monday.
  • Gold extended an advance past $1,700 as weak US data drove a significant sentiment shift in the precious metals markets. The metal is now closing in on its 50-day moving average after surging Monday when a US manufacturing gauge slumped more than expected. The price has traded mostly below the technical marker since April, a sign of poor sentiment that saw bullion slump into a bear market.
  • Copper and aluminum jumped after weak US manufacturing data eased concern that the Federal Reserve will tighten monetary policy too rapidly. The Institute for Supply Management’s gauge of US factory activity dropped to the lowest in more than two years in September, in data released Monday, causing the dollar to retreat. The US currency extended its decline Tuesday, helping copper rise as much as 2.4%.
  • Global bonds and stocks are rallying on hopes that the latest signs of weakness in the US economy will push the Federal Reserve to rethink the aggressive monetary policy tightening that some fear will trigger a recession. While the so-called Fed pivot has long been hoped for, it got another jolt this week with the release of weaker-than-expected manufacturing data in the US. The dollar extended losses Tuesday, and European equities jumped, following a similar rally in the US on Monday.
  • Two top European Union officials called for the use of common spending to tackle the energy crisis as member states ratcheted up criticism of German plans for a giant borrowing program to cap power prices. EU internal market chief Thierry Breton and Paolo Gentiloni, the bloc’s economy czar, said the current situation requires solidarity among member states, including the issuance of joint-guaranteed debt similar to what was done during the Covid pandemic.
  • A pickup in Tokyo’s core inflation in September underlines a crunch on consumer spending power — a strong headwind for household expenditure in the third quarter. Pressures were broad, with price gains spreading beyond food and energy and inflation excluding fresh food and energy rising more than the consensus forecast. All this will put pressure on Prime Minister Fumio Kishida to deliver a bigger fiscal stimulus package to support households and small businesses.
  • Rivian Automotive Inc. shares rose in early trading after the automaker reported progress in ramping up production and reaffirmed its goal to build 25,000 electric vehicles this year. The maker of the R1T pickup and R1S sport utility vehicle produced 7,363 vehicles in the third quarter and delivered 6,584 to customers, according to a statement. That’s up from 4,401 vehicles built in the prior quarter and 4,467 handed over to owners.
  • Cathie Wood bought Tesla Inc. shares as they plunged the most in four months after the electric carmaker’s third-quarter deliveries missed expectations. Funds backed by Wood’s Ark Investment Management LLC bought 132,213 shares in Elon Musk’s company on Monday, marking the firm’s first purchase of Tesla since mid-June, according to data compiled by Bloomberg.
  • D.E. Shaw & Co. is hiking fees for its three biggest hedge funds to as high as 40% — making them among the most expensive in the industry.  The firm, with about $60 billion under management, is raising performance fees — its cut of investor profits — for the Oculus, Composite and Valence funds by 5 percentage points starting in July, according to a person familiar with the matter. Investors will pay 30%, 35% and 40% of profits for the funds, respectively, while the fee on managed assets remains unchanged.
  • Asset managers including Blackrock Inc. and Schroders Plc are limiting institutional investors’ withdrawals from some UK property funds after a wave of requests to move money. Schroders’ UK Real Estate fund has deferred redemptions due at the start of October to as late as July 2023, which will give the £2.8 billion ($3.2 billion) fund more time to ensure it has enough cash to cover the payments, according to a statement on its website.
  • The Supreme Court’s decision to hear a case challenging a legal shield for social media platforms puts the justices in the middle of a politically fraught debate over whether some of the world’s most powerful companies should be protected as neutral forums for speech or held accountable for the content.  At stake is the very business model that has allowed companies like Alphabet Inc.’s Google, Meta Platforms Inc. and Twitter Inc. to reap enormous profits while shaping civic discourse…. In announcing Monday that it was taking up Gonzalez v. Google, the Supreme Court agreed to hear a challenge to Section 230 of the 1996 Communications Decency Act, which protects online platforms from liability for user-generated content.
  • Bed Bath and Beyond’s shares rise as much as 3.3% in premarket trading. WSJ reported late Monday that some of the home furnishings retailer’s bondholders are working with Perella Weinberg Partners ahead of debt talks expected to be held with the company. Poshmark jumped as much as 14% in US premarket trading on Tuesday, after South Korea’s Naver agreed to buy the firm in a deal worth $1.2 billion.

 

 

*All sources from Bloomberg unless otherwise specified