September 20, 2023

Daily Market Commentary


Canadian Headlines

  • Workers at Ford Motor Co.’s Canadian unit avoided a strike, reaching a tentative agreement late Tuesday after extending negotiations by 24 hours from a previous deadline. Unifor, the Canadian autoworkers’ union, pushed for improved pension benefits, higher wages and support for workers during the electric-vehicle transition. “When faced with the prospect of an all-out strike by 5,600 Unifor members at every single one of Ford’s facilities in Canada, the company made a significant offer to the union,” the union said in a statement. Ford said in a statement that a tentative agreement had been reached on a three-year national labor contract covering unionized workers in Canada.
  • Prime Minister Justin Trudeau’s allegation that India orchestrated the murder of a Sikh leader in Canada came as a shock to many on the world stage. But behind the scenes, the claims were circulating among allies and Prime Minister Narendra Modi’s government for weeks. Trudeau’s team had been working closely with the US and UK over the summer on the investigation, eventually expanding to other European and NATO allies, according to a person with knowledge of the matter. Canadian officials raised the issue through security and diplomatic channels with India’s government throughout August and September, said the person, who asked not to be named speaking about private matters. Their findings led Trudeau to confront Modi at the Group of 20 summit in New Dehli last week, followed by an explosive speech to Canada’s parliament Monday in which he accused Indian agents of being involved in the June slaying of Hardeep Singh Nijjar, an activist in the movement calling for an independent Sikh homeland in India.

World Headlines

  • European stocks rose on Wednesday as an unexpected slowdown in UK inflation lifted risk appetite ahead of the Federal Reserve’s policy decision later in the day. The Stoxx 600 was up 0.5% at 9:30 a.m. in London, its first gain in three days. The UK’s FTSE 250 index of domestic stocks jumped 1.3% as data showed Britain’s inflation rate fell unexpectedly despite a surge in fuel prices, easing pressure for further interest-rate hikes from the Bank of England. The export-heavy FTSE 100 also gained as the pound eased. Retail and health care stocks led the gains, while energy dropped with oil. Luxury stocks LVMH and Kering underperformed after analysts at Jefferies cut their ratings on the companies, citing risks from a slowdown in the US and the lack of a recovery in Chinese consumer spending. Commerzbank AG rose after saying it expects net interest income to rise to €8 billion ($8.55 billion) this year, continuing to reap the benefit of higher interest rates.
  • US equity futures edged higher as traders awaited a Federal Reserve interest rate decision that will be scrutinized more for the policy outlook than a widely expected pause in hikes. Contracts on the S&P 500 and the Nasdaq 100 both added about 0.2%. Among individual moves, grocery delivery company Instacart Inc. slipped in premarket, a day after surging following one of the year’s biggest US initial public offerings. The Fed is expected to hold for the second time this year following a slowing in inflation, while leaving the door open for another increase as early as November. Wall Street will be focused on whether Fed officials’ forecasts for interest rates, the so-called dot plot, show whether they seem determined to hike again.
  • Asian stocks fell for a third day as caution prevailed ahead of the Federal Reserve’s policy decision, with surging oil prices driving inflation and raising the possibility of higher-for-longer interest rates. The MSCI Asia Pacific Index dropped as much as 0.8% on Wednesday, led by health-care and energy shares. Japanese, Taiwanese and Australian stocks slipped. Brent stayed close to $94 per barrel, setting the stage for further interest-rate hike by the Fed this year. Chinese equities dipped after the nation’s lenders kept their benchmark lending rates unchanged, following the central bank’s move last week to hold policy rates steady as officials assess the economic impact of existing stimulus. The CSI 300 Index is edging closer to its lowest level this year.
  • Oil fell as the market’s breakneck rally that pushed prices to $95 a barrel on Tuesday took a breather. Brent crude fell about 1% to near $93 a barrel. Crude has been flashing overbought on a technical basis for several days, suggesting the climb to a 10-month high may have been overdone. Crude has roared higher thanks to supply curbs from OPEC+ linchpins Saudi Arabia and Russia, as well as brighter outlooks in the two biggest economies, the US and China. While the upswing has reignited talk of a return to $100 oil, that may be a headache for central bankers, including those at the Fed who decide policy later Wednesday.
  • Gold and copper were steady ahead of a Federal Reserve policy decision amid expectations that US interest rates will stay higher for longer. Higher interest rates tend to curb investor demand for non-yielding assets like commodities. Both gold and copper have largely been rangebound for weeks due to a lack of decisive macroeconomic drivers. Several other developed market central banks will report this week, including the Bank of England, which may impact metals prices through the dollar. Spot gold declined 0.1% to $1,930.16 an ounce at 10:14 a.m. in London. The Bloomberg Dollar Spot Index was flat. Silver, palladium and platinum edged higher.
  • Currency traders preparing for this week’s policy decisions from the Federal Reserve and Bank of Japan got fresh reminders that Japanese officials stand ready to intervene in the currency market with possible US backing if swings in the yen are deemed excessive. Japan’s top currency official Masato Kanda said Wednesday he’s keeping in close contact with his counterparts in the US on a day-to-day basis, and both sides agree that excessive currency moves are unwelcome. Kanda said he won’t rule out any steps to address unruly markets if deemed necessary, and he continues to monitor developments with an extreme sense of urgency. The yen strengthened only a whisker after Kanda’s remarks during morning trading in Asia. It gave up those gains and slid past 148 versus the dollar to the weakest level this year in the afternoon. It was at 148.15 as of 4:49 p.m. in Tokyo.
  • Shares of UK companies whose fortunes are tied to interest rates soared after data showed a softening in British inflation a day before the Bank of England’s latest policy announcement. An index tracking housebuilder stocks jumped more than 5% in early trading as the 5-year sterling overnight indexed swap rate — a benchmark used to price mortgages — headed for its biggest drop in a month, falling 11 basis points. Builders Taylor Wimpey Plc and Persimmon Plc led the charge, alongside gains for highly leveraged real estate investors like Land Securities Group Plc and British Land Co. Domestic-focused lenders Lloyds Banking Group Plc and NatWest Group Plc rose too, with any easing in central-bank rates likely to soothe concern around loan defaults.
  • CVC Capital Partners is gearing up for a potential listing as soon as November, people with knowledge of the matter said, in one of the clearest signs yet that renewed confidence in stock offerings is spreading to Europe. The private equity firm recently informed advisers about the potential timeline and has started ramping up preparations, the people said, asking not to be identified because the information is private. CVC has been considering listing in Amsterdam, Bloomberg News has previously reported. A listing of CVC is set to be one of the largest-ever from the European buyout industry and could encourage other firms to flock to the public markets, which are starting to reopen after a prolonged period in the doldrums.
  • Ford Motor Co. said the transition to electric cars will suffer should the UK follow through on delaying a ban on sales of petrol and diesel cars. “Our business needs three things from the UK government: ambition, commitment and consistency,” Ford’s UK’s Managing Director Lisa Brankin said Wednesday in a statement. “A relaxation of 2030 would undermine all three.” Prime Minister Rishi Sunak is considering rolling back some green-energy policies to help consumers weather a cost-of-living crisis. The potential measures, which could include a five year delay to the planned 2030 ban on petrol and diesel car sales, risk pushing off course Britain’s broader plan to reach net-zero by mid-century. Sunak is scheduled to hold a Cabinet meeting on the government’s green agenda later Wednesday.
  • Goldman Sachs Group Inc. rejoined the $100-a-barrel oil club, raising its forecast for crude back to triple digits as worldwide demand hits unprecedented levels and OPEC+ supply curbs continue to tighten the market. With prices advancing by more than 30% since mid-June to breach $95 a barrel on Tuesday, the Wall Street bank nudged up its 12-month forecast for global benchmark Brent to $100 a barrel from $93. However, most of the rally in the vital commodity “is behind us,” the bank said in a note. Oil has rallied strongly in recent months, hitting a 10-month high, thanks to the significant supply curbs from OPEC+ linchpins Saudi Arabia and Russia. Brighter outlooks in the two biggest economies, the US and China, have also supported the advance, with stockpiles declining at a rapid clip. At present, most major economies remained on track for a soft landing, Goldman Sachs said.
  • Instacart’s debut rally is fizzling out, just a day after it went public in one of this year’s biggest US listings. Shares in the grocery delivery firm fell as much as 5.7% in US premarket trading on Wednesday to $31.79, poised to pare some of the stock’s first-day gains. The company, which is incorporated as Maplebear Inc., also got its first analyst initiation — a lukewarm hold rating from Needham. The stock was already showing signs of fading on Tuesday — closing 12% higher than the $30 per share IPO price after an initial jump of as much as 43%.
  • While United Parcel Services Inc. reels from the fallout of a costly labor fight this summer and a tough parcel market, FedEx Corp. is reaping the benefits. Shares of FedEx have soared 75% from a low point a year ago, as investors eye a $6 billion cost-cutting plan that aims to streamline operations and reduce the number of workers on staff. FedEx’s Wall Street luster has only increased as its main rival confronted a strike threat and eventually agreed to a five-year deal with $30 billion in new money for wage increases, benefits and other perks. As the parcel market prepares for tougher quarters ahead, the question now is whether FedEx Chief Executive Officer Raj Subramaniam can build on its newfound advantages. The company is expected to report quarterly results Wednesday that include an 8% year-over-year gain on adjusted earnings per share. But sales are estimated to drop.
  • Goldman Sachs Asset Management has raised $14.2 billion for a new vehicle to buy stakes in private equity funds. The US investment firm closed the Vintage IX fund with commitments from institutional investors, high-net worth individuals and Goldman Sachs employees, according to a statement Wednesday. While the secondary market is dominated by investors adjusting their exposure to private equity in a stressful macroeconomic environment, it’s also helped by the emergence of so-called continuation vehicles that allow buyout firms to own a business beyond the typical holding period.
  • Home insurance costs that have soared in much of the US may get even higher. Tens of millions of properties around the country are insured at prices that haven’t caught up with the danger of hurricanes, wildfires and floods, according to a new report from the First Street Foundation, a nonprofit that works to define and communicate risks posed by climate change. First Street estimates that 39 million US homes are insured at artificially suppressed prices compared with the risk they actually face. Of those, nearly 6.8 million homes are covered by state-backed “insurer of last resort” policies.
  • Conservative Republicans are already laying the groundwork for Donald Trump’s return to the White House, identifying key cabinet and other possible top officials even months before the first nominating contest next year. The America First Policy Institute, the think tank created to promote Trump’s agenda, and the conservative Heritage Foundation have spearheaded separate initiatives that would help the next Republican president transition into the role. The institute, which will detail their plans publicly at an event Wednesday in Washington, is focused on creating how-to guides for incoming staffers complete with policy recommendations from people who served during the first Trump administration. These playbooks are being created with the input of nine former cabinet members, 20 White House senior aides and 400 other former Trump administration officials, the group said.