October 5, 2022

Daily Market Commentary

Canadian Headlines

  • Brookfield Asset Management Inc. is in advanced talks to acquire Hong Kong-based clothing label maker Trimco Group from buyout firm Affinity Equity Partners, according to people familiar with the matter. The investment firms are hammering out the details of a transaction that could value Trimco at as much as $1 billion, the people said, asking not to be identified because the matter is private. Brookfield has been sounding out potential financing banks for the deal, and an agreement could be reached in the next few weeks, the people said..
  • The world sorely needs more grains, and Canada has a bin-busting harvest this year. Unfortunately, there aren’t enough rail cars to transport it all. There were almost 2,400 outstanding grain-car orders for the nation’s two major carriers, Canadian National Railway Co. and Canadian Pacific Railway Ltd. in the latest data from Ag Transport Coalition. … Shippers are worried about the railways’ ability to haul grain as Canadian farmers are harvesting the nation’s third biggest wheat crop on record and 42% more canola than a year ago.
  • Gatik AI Inc., a California-based autonomous driving startup focused on middle-mile deliveries, said today that it is taking the humans out of a 7-mile truck delivery route it runs for grocery giant Loblaw Companies Ltd., Canada’s largest retailer. Five-year-old Gatik has been operating driverless trucks in Arkansas for more than a year as part of a partnership with Walmart, but this is its first fully autonomous foray north of the border. The Canadian leg runs from a Loblaw fulfillment center northwest of downtown Toronto to one of the company’s nearby Real Canadian Superstores.
  • Canadian Imperial Bank of Commerce and Dollarama Inc. raised cash in the country’s bond market during a brief window of calm after volatility in global markets pushed borrowing costs to the highest in more than 13 years last week. CIBC issued C$1.75 billion ($1.29 billion) of 5-year senior bail-in bonds while discount retailer Dollarama priced C$700 million of bonds after it held a call with fixed-income investors earlier Tuesday, according to people with knowledge of the matter.


World Headlines

  • US stock futures fell on Wednesday after the biggest two-day rally since April 2020 amid reduced optimism that the Federal Reserve will pivot to a more dovish policy. Contracts on the Nasdaq 100 and the S&P 500 were both down 0.7% by 5:21 a.m. in New York. The recovery earlier this week had added $1.8 trillion to the value of S&P 500 firms.
  • European equities slipped after posting the best three-day gain since November 2020 on waning optimism that central banks will be less hawkish amid slowing economic growth.  The Stoxx Europe 600 fell 1% by 9:27 a.m. in London after the index surged the most since March on Tuesday as bond yields declined. Automakers, retail and telecom sectors were among the biggest decliners. Tesco Plc fell after slightly cutting the top end of its profit guidance for this fiscal year.
  • Asia stocks rallied for a second day, boosted by Hong Kong’s catch-up gains amid optimism that the global monetary policy tightening cycle will ease. The MSCI Asia Pacific Index climbed as much as 2.1% on Wednesday, led by a surge in consumer discretionary and tech stocks such as TSMC and Alibaba. That brings the measure’s two-day rally to about 4.6%, the best since March.
  • Oil held a two-day surge before an OPEC+ meeting at which the alliance is considering the biggest supply cut since 2020 to revive prices. West Texas Intermediate futures traded near $86 a barrel after jumping almost 9% over the previous two sessions. The producer group is set to discuss reducing output by as much as 2 million barrels a day, delegates said before the group meets in Vienna later Wednesday. That’s double the volume previously flagged.
  • Gold declined — after surging past $1,700 an ounce on Tuesday — as traders weighed whether the US central bank may moderate its hawkish stance after the release of weak US data. The metal ticked lower Wednesday as the dollar and Treasury yields rose, after gaining almost 4% in the previous two sessions. A worse-than-expected US manufacturing gauge and a decline in US job openings have helped push bullion up through a key technical level, marking a shift in market sentiment.
  • The squeeze on finances for thousands of British homeowners is set to intensify after a key rate on mortgage borrowing costs climbed to its highest level in almost 14 years. The average two-year fixed-rate mortgage on a home rose to 6.07% on Wednesday, the highest since November 2008, according to Moneyfacts Group Plc. The average five-year fixed rate deal also closed in on 6%, a level not seen since February 2010.
  • US mortgage rates jumped to a 16-year high of 6.75%, marking the seventh-straight weekly increase and spurring the worst slump in home loan applications since the depths of the pandemic.
  • The Bank of Spain slashed the country’s growth forecast for next year in half as naggingly high inflation hits consumption and investment in the euro zone’s fourth-largest economy. The central bank now expects a 1.4% expansion in gross domestic product in 2023, down from the 2.8% it predicted in June and well below the government’s estimate, which was cut to 2.1% this week.
  • Malaysia’s Petroliam Nasional Bhd declared force majeure on supply to its liquefied natural gas export facility due to a pipeline leak, threatening to exacerbate a global fuel crunch right before winter. The state-owned company triggered the legal clause due to a leak at the Sabah-Sarawak Gas Pipeline on Sept. 21, Petronas said in response to Bloomberg queries. The pipeline feeds the Petronas LNG complex, which exports gas to customers across Asia.
  • Global merchandise trade will grow next year at a much more subdued pace than previously expected, with “strong headwinds” battering the world’s major economies while poorer nations face food insecurity and debt problems. Those are among the key points in a report released Wednesday by the World Trade Organization, which revised its forecasts for global commerce for this year and next.
  • United Airlines Holdings Inc. is planning to restart Hong Kong flights as soon as January, according to people familiar to the matter, becoming one of a handful of major airlines to resume passenger flights to the city, which has largely been cut off to the outside world since the start of the pandemic.  The Chicago-based carrier is evaluating plans to relaunch services from San Francisco in the new year, the people said, declining to be identified because the discussions are private.
  • Elon Musk’s decision to revive his $44 billion buyout of Twitter Inc. is shockingly good news for investors including billionaire Carl Icahn who continued to bet on the outcome of the deal through months of uncertainty. After Musk and Twitter agreed to proceed with the deal at the original offer price at $54.20 a share on Tuesday, the social media company’s stock rallied as much as 23%, pushing the spread to its narrowest level since the pair entered a merger pact back in April. Shares of the company slipped 0.4% in premarket trading on Wednesday.
  • Taiwan pledged to work closely with the US and other allies to prevent China’s military from acquiring state-of-the-art technology, as Washington steps up efforts to contain the world’s No. 2 economy. Taiwan, home to the world’s largest semiconductor foundry, will keep its advanced chip development at home, while adopting measures to stop its tech from being used by the People’s Liberation Army, C.C. Chen, deputy minister of economic affairs, said on Wednesday.



*All sources from Bloomberg unless otherwise specified