October 6, 2022

Daily Market Commentary

Canadian Headlines

  • Brookfield Asset Management Inc. is joining with independent publisher Primary Wave Music in a $2 billion deal to invest in music copyrights, the companies said. The asset manager, which hasn’t previously invested in music catalogs, will take a significant minority interest in Primary Wave, and commit $1.7 billion to fund a permanent capital vehicle focused on acquiring music rights from top acts.
  • Suncor Energy Inc. agreed to sell its solar and wind projects to ATCO Ltd., the latest divestiture by the company as it grapples with an investor-led shakeup. The sale between the Canadian companies for C$730 million ($542 million) will allow Suncor to focus on complementary energy projects, the company said in a release Wednesday. The transaction, which is expected to close in the first quarter of next year, includes interest in Magrath, Chin Chute and Adelaide wind farms, as well as the Forty Mile Wind Farm Project that’s forecast to be operational this year, the company said. It also includes development-stage renewable power assets.
  • Copper Mountain Mining Corp. agreed to sell its wholly-owned Eva Copper project and its exploration land package in Queensland, Australia, to South Africa’s Harmony Gold for total consideration of as much as $230 million, according to a statement.


World Headlines

  • US equity-index futures fell as the OPEC+ alliance’s plan to cut oil supply stoked inflation fears and as traders awaited labor-market data to gauge the risk of recession. Futures on the S&P 500 and Nasdaq 100 each dropped 0.6%, while Europe’s Stoxx 600 erased an advance. US crude futures held on to weekly gains of about 11% after the oil cartel said it would cut daily output by 2 million barrels.
  • European shares erased earlier gains and fell on Thursday as energy shares slumped after an underwhelming trading update from Shell Plc. The Stoxx Europe 600 Index retreated 0.3% by 11:10 a.m. in London, after having risen as much as 0.8% earlier, with investors weighing cheaper equity valuations against hawkish central-bank policies to curb inflation.
  • Asian stocks rose for a third day as hardware technology stocks in South Korea and Japan advanced on views they may have reached a bottom.   The MSCI Asia Pacific Index climbed as much as 0.9%, lifted by TSMC, SoftBank and Sony. The benchmark trimmed gains later in the day, but remains on track to advance for the week, following a seven-week losing streak that was the longest since 2015.
  • Oil held onto three days of gains after the OPEC+ alliance agreed to the biggest production cut since 2020 and Russia warned that a proposed oil price cap could lead to an output hit in Russia.  West Texas Intermediate traded near $88 a barrel after jumping 10% over the previous three sessions. The Organization of Petroleum Exporting Countries and its allies plans to slash daily output by 2 million barrels — though in reality supplies will be cut by a smaller amount — a move that drew a swift rebuke from the US. The Biden administration has previously sought more oil from producers as it battles energy-driven inflation.
  • Gold steadied as US data continued to paint a mixed picture of the economy, clouding the outlook for the Federal Reserve’s monetary policy.
  • Zinc and copper climbed after the London Metal Exchange said it will restrict new deliveries of the metals from Russia’s Ural Mining & Metallurgical Co. and one of its subsidiaries. Starting immediately, metal from UMMC or its Chelyabinsk Zinc unit can only be delivered to LME warehouses if the owner can prove to the exchange that it won’t constitute a breach of recent sanctions on the firm’s co-founder, Iskandar Makhmudov. The move is by far the most significant restriction on Russian supplies by the world’s main metals market since the invasion of Ukraine.
  • Natural gas prices fluctuated as traders took stock of a European Union proposal to rein in rising energy costs that could push the region into recession. Benchmark futures dropped as much as 3.9% after rising in earlier trading. The European Commission is considering a plan that includes a temporary limit to the price on the Dutch hub, though the details still have to be ironed out.
  • The European Union will examine whether Germany’s massive move to shelter companies and households from surging power costs breaches the bloc’s rules on public subsidies. “Germany unveiled an absolutely gigantic plan of 200 billion euros ($198 billion),” EU Internal Market Commissioner Thierry Breton said in an interview on BFM TV on Thursday. “We need to verify that this is compatible with state aid.”
  • German factory orders dropped in August after the previous month was revised to show an increase, hinting at a lack of momentum as the economy stands on the brink of a recession. Demand fell 2.4% from the previous month. Data for July now show a 1.9% gain, compared with an initially reported drop of 1.1%. The volatility was accounted for by late reporting of large-scale aerospace orders..
  • The Swedish Security Service stated that the detonations caused the damage to the Nord Stream pipeline system in the country’s exclusive economic zone. The completed investigation has “strengthened the suspicions of serious sabotage,” the Security Service said in a statement.
  • Executives at bankrupt crypto lender Celsius withdrew more than $56 million of cryptocurrencies before suspending customer withdrawals from the platform, CoinDesk reported, citing court documents.
  • Credit Suisse Group AG is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses, as the firm’s leaders aim to put the finishing touches on their planned overhaul. Businesses being targeted for a boutique-style future include the advisory and dealmaking teams alongside the leveraged finance unit, people with knowledge of the deliberations said. The bank is interested in an outside investor to take a partial stake in order to provide capital and help fund the costs of hiring and keeping talent, the people said.
  • Peloton Interactive Inc. is laying off a significant amount of employees for the fourth time this year as part of an effort to save the struggling business, Chief Executive Officer Barry McCarthy told staff on Thursday.  The fitness technology company is cutting its workforce by roughly 500 globally, or 12%, leaving it with about 3,825 employees. McCarthy said the company is making the move, along with other reductions in operating expenses, in order to reach the break-even point on cash flow by the end of fiscal 2023.
  • Amazon.com Inc. plans to hire 150,000 seasonal workers, about the same as last year despite slowing sales and predictions of a lackluster holiday shopping season. The world’s largest online retailer typically hires legions of temporary workers this time of year to help store, pack and ship items from its warehouses. Employees can earn more than $19 an hour, on average, based on their position and location in the US, Amazon said in a statement. The announcement follows Walmart Inc.’s decision to hire some 40,000 seasonal workers this year, down from 150,000 in 2021.
  • The latest bout of global financial volatility has heightened concerns about regulators’ continuing failure to resolve liquidity problems with US Treasuries — the debt that serves as a benchmark for the world. It’s getting harder and harder to buy and sell Treasuries in large quantities without those trades moving the market. Market depth, as the measure is known, last Thursday hit the worst level since the throes of the Covid-19 crisis in the spring of 2020, when the Federal Reserve was forced into massive intervention.
  • Shell Plc shares dropped after the company pointed to a weaker third quarter performance, potentially ending a run of record earnings as several parts of its sprawling business fared worse.  In particular the company’s chemical unit — often seen as an indicator of the strength of the wider economy — had a negative margin of $27 per metric ton in the period, Shell said in a statement on Thursday. That could be a worrying sign for Europe’s economy, where major industries are buckling under the pressure of soaring natural gas prices.
  • Malaysia will curb liquefied natural gas shipments to Japan this winter after a pipeline leak disrupted exports, another hit to already strained global supplies of the power-station fuel. Petroliam Nasional Bhd. has made a request to reduce contracted deliveries to several Japanese customers through the year-end, according to traders with knowledge of the matter. Petronas said Wednesday that it declared force majeure on supply to its LNG export facility due to a leak on Sabah-Sarawak Gas Pipeline on Sept. 21.



*All sources from Bloomberg unless otherwise specified