September 28, 2022

Daily Market Commentary

Canadian Headlines

  • Canadian theater chain Cineplex Inc. has weighed a merger with Cineworld Group Plc’s US arm, and has discussed a potential deal with the UK company’s lenders, the Wall Street Journal reported. Cineplex has proposed taking over Regal Entertainment Group, and would give Cineworld’s lenders debt and stock backed by the combined entity, the newspaper said Wednesday, citing people with knowledge of the talks who it didn’t identify.
  • Canadian insurers Sun Life Financial Inc. and Manulife Financial Corp. are among companies considering bids for an insurance partnership with Hong Kong banking group Dah Sing Financial Holdings Ltd., according to people familiar with the matter. Other firms weighing an offer include closely-held FTLife Insurance Co., the people said, asking not to be identified because the matter is private. The insurer is owned by an arm of Hong Kong’s New World Development Co., the billionaire Cheng family’s conglomerate.
  • A group of indigenous communities in Western Canada raised cash in the bond market to buy a stake in a group of ancillary pipelines owned by Enbridge Inc., according to people with knowledge of the matter. Athabasca Indigenous Midstream LP raised about C$865.2 million ($630.2 million) by selling bonds. Bank of Montreal arranged the transaction, which priced at 270 basis points over the Canadian yield curve.

 

World Headlines

  • US stocks were set to extend declines after the S&P 500 hit its lowest since November 2020 on worries that a staunchly hawkish Federal Reserve would tip the economy into a recession. Contracts on the S&P 500 were down 0.3%, setting up the benchmark index to decline for a seventh straight session in its longest losing streak since February 2020.
  • European equities were down, but off earlier lows, as Bank of England steps to calm markets countered concerns brought about by a slew of hawkish Federal Reserve speakers. The Stoxx Europe 600 fell 0.9% as of midday in London, after earlier declining as much as 1.9%. Banks and insurance stocks led declines, while health care outperformed, supported by Roche Holding AG, which rose after Eisai Co. and partner Biogen Inc. said their drug significantly slowed Alzheimer’s disease.
  • The rout in Asian stocks resumed on Wednesday as hawkish comments from Federal Reserve officials dented risk appetite already weakened by mounting odds of a global recession. The MSCI Asia Pacific Index dropped as much as 2.1% following a small gain on Tuesday, with equity gauges in Hong Kong, Korea and Taiwan falling even more. The dollar soared to a record after the White House talked down the prospect of weakening the currency, while Treasury yields climbed as St. Louis Fed chief James Bullard led officials underscoring the need to keep raising interest rates to fight inflation.
  • Commodity prices slumped as a deteriorating economic outlook and surging US dollar weigh on the value of the world’s raw materials. On Wednesday, everything from copper to gold and cotton were trading lower amid a renewed resurgence in the greenback as traders price in a darkening global economic outlook.
  • Natural gas prices in Europe surged after Russia said it may cut off supplies via Ukraine, the last route still delivering the fuel to western Europe. Benchmark futures rose as much as 14%, jumping for a second day. The warning ratchets up the energy conflict with Europe, coming just after major leaks were reported on the Nord Stream pipelines that European authorities are calling an act of sabotage. The situation heightens concerns over shortages with the heating season just days ahead, and counters efforts by nations to steadily fill up storages and curb consumption.
  • The Bank of England said it would buy long-dated UK government bonds in whatever quantities were needed to restore order to the market, sending gilts surging as the central bank launched its biggest response yet to the fallout from Prime Minister Liz Truss’s historic tax-cutting plan.
  • Yields on 10-year U.S. Treasury notes reversed sharply lower after touching the highest since October 2008 as the Bank of England said it would carry out temporary purchases of long-dated UK bonds to help restore order to the market. The benchmark US 10-year yield was little changed at 3.945% after earlier climbing to 4.015%. But Treasuries remain headed for their biggest annual loss since least 1973, with a Bloomberg gauge of the debt slumping 14% this year. UK 30-year borrowing costs slumped as much as 72 basis points to 4.26%, having surged to the highest since 1998 before the BOE signaled its intention.
  • US home loan costs continue to soar as the average contract rate on a 30-year fixed mortgage pushed north of 6.5% last week for the first time since 2008, risking a more pronounced downturn in the housing market. The 30-year rate has climbed by about half a percentage point in just the last two weeks and more than a full point in the last six, highlighting the speed at which borrowing costs have increased as the Federal Reserve intensifies its inflation fight.
  • European Central Bank President Christine Lagarde said borrowing costs will be raised at the next “several meetings” to ensure inflation expectations remain anchored and price gains return to the target. Addressing an event Wednesday in Frankfurt, Lagarde said bringing inflation back to the 2% medium-term goal is the ECB’s main mission — despite increasing concerns about recessions in Germany and the 19-nation euro zone.
  • Roche Holding AG shares surged the most in more than two years, buoyed by rival drugmakers’ promising results in the challenging field of Alzheimer’s disease. The stock rose as much as 6.5% to 333 Swiss francs in early Zurich trading. Eisai Co. and partner Biogen Inc. said an experimental medicine they are developing significantly slowed Alzheimer’s disease, making it the first drug to blunt progression of the most common dementia in a large definitive trial.
  • Apple Inc. is backing off plans to increase production of its new iPhones this year after an anticipated surge in demand failed to materialize, according to people familiar with the matter. The Cupertino, California-based electronics maker has told suppliers to pull back from efforts to increase assembly of the iPhone 14 product family by as many as 6 million units in the second half of this year, said the people, asking not to be named as the plans are not public. Instead, the company will aim to produce 90 million handsets for the period, roughly the same level as the prior year and in line with Apple’s original forecast this summer, the people said.
  • Micron Technology Inc. shocked investors last month by warning that rapidly slipping demand for computers would curb sales of its memory chips. On the eve of the holiday shopping season, analysts fear that business has only worsened. Thursday’s earnings from Micron will show how bad the damage is from inflation eating into consumer budgets and cooling sales of consumer gadgets as the year’s biggest quarter kicks off.
  • GrubMarket, which offers software and operates an e-commerce platform connecting farmers and other food suppliers with customers, said it’s valued at more than $2 billion after raising $120 million in equity from new backers including General Mills Inc.’s venture arm. Squarepoint Capital, Portfolia and Grosvenor Food & AgTech are among new investors, GrubMarket Chief Executive Officer Mike Xu said.
  • The 700-meter wide pool of bubbling water in the Baltic Sea caused by the rupture of the Nord Stream gas pipelines points to a climate disaster. It’s the most visible of three major gas leaks emanating from the pipelines connecting Russia to Germany. Scientists are scrambling to work out just how much methane, one of the most powerful greenhouse gases, has escaped into the atmosphere. The fear is that it could be one of the worst releases ever.
  • North Korea fired two short-range ballistic missiles into waters off its east coast ramping up tensions a day before US Vice President Kamala Harris is set to visit the demilitarized zone that divides the two Koreas. The launches took place from the Sunan area near Pyongyang’s international airport at around 6:10 p.m. and 6:20 p.m. respectively Wednesday, South Korea’s Joint Chiefs of Staff said in a statement. “The ROK and the US are closely cooperating and maintaining our fully prepared posture,” it added, referring to South Korea by its formal name.

 

 

*All sources from Bloomberg unless otherwise specified