September 25th, 2020

Daily Market Commentary

Canadian Headlines

  1. Canadian stocks rose Thursday after a weak previous session. The S&P/TSX Composite Index advanced 0.6%. Canada’s materials index jumped, leading nine of eleven sectors higher. Health care remained a laggard, falling for a seventh consecutive session. Gold rebounded from a two-month low after the dollar weakened and the metal approached a technical support level. Meanwhile, oil gained as optimism that Congress may resume talks over another round of economic stimulus provided a glimmer of hope for an otherwise dreary demand outlook.
  2. Ontario is prepared to move back to “stage two” Covid restrictions if the numbers of new cases continue to rise, Premier Doug Ford said Thursday.  Ford is hopeful changes to testing will help contain cases as Ontario will invest more than C$1 billion to expand Covid-19 testing and contact tracing. Province is also changing testing guidelines to prioritize those at greatest risk.
  3. Prime Minister Justin Trudeau appears to have sweetened an ambitious spending plan enough to push it through parliament and avoid an election.  Since his Liberals lack a majority in the legislature, Trudeau needs backing from at least one opposition party for the agenda. The government introduced legislation Thursday morning that maintains income supports for workers affected by Covid-19 at current levels, which was a key demand of the left-leaning New Democratic Party.

World Headlines

  1. European equities fell anew, poised for their worst weekly drop in more than three months, on mounting concern the rise in coronavirus cases will hamper the region’s economic recovery. The Stoxx Europe 600 index was down 1% as of 11:28 a.m. in London, extending its losses after Spain recommended extending restrictions to all of Madrid. Carmakers and travel and leisure shares fell the most, as airlines including Ryanair Holdings Plc, IAG SA and Deutsche Lufthansa AG slid 5% or more.  Europe’s main benchmark is on track for its biggest weekly decline since mid-June as countries including the U.K. and France tighten their virus rules and former hotspots like the Spanish capital of Madrid see rising hospitalizations.
  2. European stocks fell along with U.S. equity-index futures as investors weighed the receding prospects of a new American stimulus package against the global uptick in coronavirus cases. Bonds gained and the dollar advanced.  Treasuries nudged higher along European bonds. West Texas crude oil was steady above $40 a barrel.
  3. The risk-off sentiment on Wall Street fueled the third-worst weekly outflow on record from U.S. equities, with technology shares falling out of favor.  U.S. stock funds bled $25.8 billion in the week through Sept. 23, according to Bank of America Corp. and EPFR Global data, in a reversal from the previous week’s biggest inflow in more than two years. Investors exited the hottest sector of the rebound, pulling the most money out of tech funds since June 2019. Four people were wounded by at least one knife-wielding assailant in Paris on Friday near the site of the former Charlie Hebdo office — the scene of a 2015 terrorist attack targeting the satirical newspaper — the authorities said.  Jean Castex, the French prime minister, cut short a scheduled speech, saying that a “serious event” had just occurred in the capital.  “An attack with a bladed weapon was carried out in the 11th arrondissement in front of the former offices of Charlie Hebdo,” Mr. Castex said, adding that two of the wounded appeared to be in critical condition.
  4. Europe’s biggest economies are struggling to bring the coronavirus back under control as hospitalizations climb following a surge in cases to record levels in some countries.  Spain’s government asked for curbs on movement to extend across the entire city of Madrid, putting pressure on local authorities to act. Poland will announce new restrictions next week.  Some countries in the northern hemisphere are having trouble sourcing additional flu shots as they prepare for potential higher demand amid the pandemic, according to Ann Moen, WHO’s head of Influenza Preparedness and Response.
  5. Oil held steady above $40 in New York, but headed for a weekly decline on signs of increased supply and uneven demand.  November futures fluctuated on Friday. That reflects a patchy outlook for consumption, with the International Energy Agency signaling caution, while traffic-congestion data suggest road-fuel demand in parts of Europe is holding up relatively well.  At the same time, the market is contending with returning supplies. Oil traders have been reporting a sharp increase in Iraqi exports for next month, while output from Libya has shown signs of increasing this week.
  6. Gold headed for the biggest weekly decline since March and silver is on track for its worst week since 2011 as a stronger U.S. dollar weighed on the metals, while investors assessed prospects for further stimulus and the outlook for economic recovery.  Gold declined again on Friday, after touching the lowest since July a day earlier. In the U.S., House Democrats have started drafting a stimulus proposal of roughly $2.4 trillion that they can take into possible negotiations with the White House and Senate Republicans. The bill could get passed by the House next week.
  7. House Democrats have started drafting a stimulus proposal of roughly $2.4 trillion that they can take into possible negotiations with the White House and Senate Republicans, according to House Democratic officials.  The Democrat-only plan also would address demands from swing-state lawmakers in the party for passage of a virus-relief plan before they adjourn for the stretch run of their reelection campaigns — even if it doesn’t result in a deal that gets signed into law.  The bill could get passed by the House next week. While smaller than the $3.4 trillion package the House passed in May, it remains much larger than what Senate Republicans have said they could accept. President Donald Trump has indicated he’d be willing to go as high as $1.5 trillion.
  8. Traders should temper their fears that a delayed U.S. election result could upend markets, according to Goldman Sachs Group Inc.  While a delayed outcome is a “tail risk,” a combination of early results, voter turnout, county-level data and the high correlation of polling errors across states suggests investors will have enough information on election night to determine the likely victor, wrote economists Michael Cahill and Alec Phillips in a note Thursday. A number of states — including some key battlegrounds — allow votes to be processed and counted well before election day, they noted.
  9. Democratic presidential nominee Joe Biden’s search for a Treasury secretary is widely seen as focusing on Lael Brainard of the Federal Reserve, a choice that would keep both Wall Street and progressives in line.  The more provocative choice of Senator Elizabeth Warren hasn’t been ruled out but is far less likely, and other possible names are being discussed for the top finance job if Biden wins November’s election, according to nine people familiar with the candidates and Biden’s thinking.
  10. The Senate Commerce Committee will vote on whether to subpoena the chief executive officers of Alphabet Inc.’s Google, Facebook Inc. and Twitter Inc. because they have declined testify on a legal shield that protects online platforms against lawsuits, a committee spokesperson said.  The vote to issue subpoenas for Sundar Pichai of Google, Mark Zuckerberg of Facebook and Twitter’s Jack Dorsey will take place on Oct. 1, the committee said Thursday afternoon.
  11. President Donald Trump asked a San Francisco judge to stay an injunction blocking a ban on Tencent Holdings Ltd.’s WeChat, arguing the Chinese-owned messaging app jeopardizes national security.  U.S. Magistrate Judge Laurel Beeler issued the preliminary injunction this week at the behest of users who argued those prohibitions trampled the free-speech rights of millions of Chinese-speaking Americans.  The app, which was supposed to disappear from American app stores Sunday, hosted 19 million regular users in the country and more than a billion worldwide.

Palantir Technologies Inc.’s bankers have told investors that its shares could start trading at about $10 each, which would value the data-mining company at almost $22 billion on a fully diluted basis, Dow Jones reports, citing unidentified people familiar with the matter.  Palantir is planning to go public on Sept. 30 through a direct listing, an alternative to a traditional initial public offering in which the company doesn’t issue new shares to raise capital. Rather, current investors can place their shares on the market when trading begins.


*All sources from Bloomberg unless otherwise specified