September 26, 2022
Daily Market Commentary
Canadian Headlines
- Bank of Nova Scotia Chief Executive Officer Brian Porter is stepping down in January and handing the reins to Finning International Inc. CEO Scott Thomson, a rare selection of an outside executive to run one of Canada’s largest banks. Thomson will become Scotiabank’s president on Dec. 1 before taking the helm on Feb. 1, the Toronto-based bank said Monday. Thomson has been a Scotiabank board member since 2016.
- Canadian Prime Minister Justin Trudeau canceled his trip to Japan for the state funeral of Shinzo Abe after Fiona battered the Atlantic region, knocking out power to more than half a million people and forcing residents to take shelter from the storm. Speaking at a press conference in Ottawa on Saturday, Trudeau told reporters that the government has pledged federal aid to the affected provinces, including Nova Scotia. The premier also said the military will be deployed to assist in the cleanup.
World Headlines
- The benchmark US stock measures were pointing lower on Monday, with futures down pre-bell to carry on Friday’s sharp decreases as traders continue to weigh prospects for rising interest rates and slowing economic growth. Standard & Poor’s 500 futures were down 0.9%, the Nasdaq was also pointing 0.8% lower and the Dow Jones Industrial Average also shed 0.8% before the start of trading.
- European shares dropped 1% on Monday, extending losses as investors priced a major economic downturn. The Stoxx 600 Index was down 1% by 10:50am in London, touching its lowest since December 2020, with real estate and banks among the worst performing sectors, while technology shares outperformed.
- A rout in Asian stocks extended into Monday as rising concerns about a global recession and weak demand hit the region’s exporters and materials producers. The MSCI Asia Pacific Index declined as much as 2.3% to the lowest since April 2020, dragged lower by TSMC, BHP and Toyota Motor. All but one sector traded lower with materials leading the slump.
- Oil prices slipped to the weakest levels since January following a week of central bank interest-rate hikes that refreshed worries about the strength of the world economy. Brent crude, the international benchmark, slid 1.4% to $84.91 a barrel. West Texas Intermediate, the U.S. standard, also fell 1.4% to $77.70. Both contracts looked set to finish the quarter with losses.
- Industrial metals dropped, while gold fluctuated after earlier tumbling on the back of a rallying dollar and concerns over a global recession. The greenback extended gains to a record in a tumultuous start to the week that also saw the pound hit a record low and China’s currency neared its weakest since 2008. Investors are turning to dollar as a haven as monetary tightening clouds growth prospects, putting pressure on commodities that are priced in it.
- The selloff in UK assets went into overdrive on Monday, sending the pound to an all-time low, slamming government bonds and sparking talk of emergency action by the Bank of England. The market mayhem extended the damage seen on Friday in the wake of the government’s new fiscal measures, which sent investors into a panic. The plunge in UK gilts sent 10-year yields above 4% for the first time since 2010. Sterling dropped to as low as $1.0350, taking it closer to parity with the dollar, though it subsequently pared its loss to $1.07. The latest tumble — fueled by Chancellor Kwasi Kwarteng’s comment on Sunday that there’s “more to come” on tax cuts — prompted calls for aggressive rate hikes from the Bank of England, with some urging emergency action as soon as this week.
- European natural gas prices dropped again as increasing winter stockpiles and strong inflows of LNG counter concerns about Russia’s future supplies to the continent. Benchmark futures fell as much as 9.2% to the lowest since July 25 after a fourth weekly loss. Prices are also under pressure as exports from Norway recover after seasonal works at major facilities. Together with rebounding wind generation and milder weather forecasts for early October — after the current cold snap — that means more of the vital fuel could be added to inventories for the heating season.
- It’s supposed to be the peak season for seaborne trade — just before the Golden Week holiday in China where shipments need to leave ports for US and Europe, filling warehouses so retailers are stocked up heading into the fourth quarter. Instead, global demand for Chinese goods is waning as consumers from the US to Europe cut back on spending because of inflation and the post-pandemic shift away from goods toward services. That’s causing the container shipping industry to trim capacity by canceling sailings. Otherwise, spot rates will continue to tumble.
- Pfizer Inc. and BioNTech SE asked US regulators to clear their booster shot that targets fast-spreading variants of omicron for children ages 5 to 11, which would bring the latest preventive technology to a younger population. The vaccine partners applied to the Food and Drug Administration for emergency use authorization of a 10-microgram booster dose aimed specifically at the omicron BA.4 and BA.5 strains, according to a statement Monday. An application will be submitted to European regulators in the coming days, they said.
- Global financial firms, still smarting from multi-billion dollar losses in Russia, are now reassessing the risks of doing business in Greater China after an escalation of tensions over Taiwan. Lenders including Societe Generale SA, JPMorgan Chase & Co., UBS Group AG have asked their staff to review contingency plans in the past few months to manage exposures, according to people familiar with the matter. Global insurers, meanwhile, are backing away from writing new policies to cover firms investing in China and Taiwan, and costs for political risk coverage have soared more than 60% since Russia’s invasion of Ukraine.
*All sources from Bloomberg unless otherwise specified