September 3, 2021

Daily Market Commentary

Canadian Headlines

  • Canadian shares extended their gains into second day on Thursday, led by energy and technology stocks. The S&P/TSX Composite opened rose about 1% in last two days, most since Aug. 24. Energy stocks were the best performers, as oil price climbed. Shopify contributed the most to the index gain, increasing as much as 2.5% in Toronto. Lithium Americas Corp. had the largest increase, rising as much as 11%. Meanwhile, Canadian Imperial Bank of Commerce is taking over Capital One Financial Corp.’s Costco Wholesale Corp. credit card business in Canada, helping diversify its portfolio away from travel rewards.
  • Erin O’Toole is the one person standing in the way of a third Justin Trudeau term as Canada’s prime minister. As the Sept. 20 election approaches, the Conservative Party leader is pitching himself as the safest alternative, with a low-key style and no-nonsense plan to rev up economic growth. His platform notably includes left-leaning flourishes like increased spending on social programs and a promise to reduce harmful emissions, though not as aggressively as Trudeau would. O’Toole, 48, is a former corporate lawyer and retired military officer who’s playing up his middle class roots on the campaign trail. From a dog rescue farm to suburban wedding halls, his rallies have been informal, pandemic-minded affairs with small groups of local supporters.
  • Buying a home in Canada’s biggest city got even harder and more expensive this summer, just as voters make affordable housing one of the top themes of an imminent federal election. Toronto’s real-estate inventories were down 43% from a year ago in August and the number of homes sold dropped 20%, while prices jumped 13% to C$1.07 million ($852,000), according to data released Friday by the Toronto Regional Real Estate Board. Prices were up 2.4% over July on a seasonally-adjusted basis. That was the biggest month-on-month increase since March.

World Headlines

  • European stocks remained rangebound near all-time highs Friday, ahead of U.S. jobs report that investors will analyze for clues on the direction of the Federal Reserve’s monetary policy. The Stoxx Europe 600 Index eased 0.2% as of 8:14 a.m. in London, with consumer-products and tech stocks showing the biggest declines. Miners and autos advanced the most. The benchmark has been stuck in a tight range for the past two weeks, with equities in the region close to record levels. The Stoxx 600 is up 19% this year, driven by optimism over an economic recovery, as market participants await central banks steps toward tapering.
  • U.S. equity futures advanced ahead of a U.S. jobs report that could be a determining factor for Federal Reserve policy makers deciding when to begin withdrawing pandemic-era stimulus. Contracts on the S&P 500 posted a slight gain after energy shares drove the gauge to an all-time high Thursday. A global stock index was also at an unprecedented level. The U.S. 10-year Treasury yield rose to 1.3% and the dollar was steady near a four-week low. The payroll report and its insights into the health of the labor market will come a week after Fed Chair Jerome Powell said the central bank could begin tapering its asset purchases this year. The data will help traders pinpoint at which of the three remaining 2021 policy meetings the Fed might be confident enough to unveil its plans. The U.S. probably added 725,000 jobs in August — a more moderate pace versus the prior two months, but stronger than early 2021.
  • Asian stocks advanced for a sixth day bolstered by a rally in Japanese equities and a rebound in chipmakers. The MSCI Asia Pacific index rose as much as 0.8%, getting a lift from the Topix which climbed to a three-decade high. Prime Minister Yoshihide Suga’s decision to resign spurred hopes that his eventual successor in Japan will increase stimulus spending and be more adept in handling the pandemic. Chipmakers including TSMC and Samsung Electronics continued to recoup recent losses. Asian stocks are set to complete a second straight weekly advance of more than 3% ahead of a U.S. jobs report on Friday that will provide the latest read on the health of the labor market. Sentiment in Asia has improved since late August amid expectations that any tapering by the Federal Reserve will be done gradually and amid abating worry over the virus outbreak.
  • Oil headed for a back-to-back weekly gain as traders weighed the impact of Hurricane Ida on U.S. oil infrastructure, and ahead of key American jobs data. West Texas Intermediate futures were little changed on Friday, but 1.8% higher for the week. Exxon Mobil Corp. is tapping the U.S. Strategic Petroleum Reserve with more than 90% of the Gulf of Mexico’s oil production still shut after the hurricane, while Louisiana’s refineries are still reeling from the impact of the storm.
  • Gold headed for the first weekly drop in four as investors counted down to U.S. jobs data for the latest read on the health of the labor market, figures that could hint at the outlook for Federal Reserve policy. The U.S. probably added 725,000 jobs in August, a more moderate pace compared with the prior two months but stronger than gains seen early this year, according to the median forecast of economists surveyed by Bloomberg. Meanwhile, data Thursday showed applications for U.S. state unemployment benefits fell last week to a fresh pandemic low amid a recovering economy.
  • Japanese Prime Minister Yoshihide Suga said he plans to resignso he can devote the rest of his time in office to fighting the Covid-19 pandemic rather than campaigning for re-election. The U.K. will send four million Pfizer doses in a vaccine swap deal to Australia, where its most populous state expects daily cases to peak within two weeks. Three doses of vaccine may become the standard regimen for most people, White House Chief Medical Adviser Anthony Fauci said. His comments came as medical experts who advise U.S. regulators on vaccines chafe at what they perceive as political interference by the Biden administration in the review process of booster shots.
  • A subsidiary of Inc. agreed to buy a controlling stake in China Logistics Property Holdings Co. in a deal valuing the firm at about HK$16.4 billion ($2.1 billion). JD Property, the Chinese e-commerce giant’s infrastructure management unit, will pay HK$4.35 per share to buy China Logistics Chairman Li Shifa’s stake of about 26% in the company, according to a statement to the Hong Kong stock exchange Friday. RRJ Capital, Joy Orient Investments Ltd. and Anbang Investment Holdings Co. have given irrevocable offerings for their own shares and convertible bonds. The buyer will be required to launch a mandatory tender offer for China Logistics as the combined equity holding will cross the threshold. Assuming that all the bonds are converted and the offer is accepted in full, the maximum price of the acquisition is about HK$16.4 billion, the statement shows.
  • Semiconductor Manufacturing International Corp. aims to spend $8.87 billion building a new plant on the outskirts of Shanghai, a major expansion in capacity at a time China’s trying to build a world-class chip industry. SMIC has signed an agreement to establish a 100,000 per-month wafer plant in the Lin-Gang Special Area, a free trade zone run by the city. The facility will focus on more mature technology of 28 nanometers or older, the company said in a filing. It plans to set up a joint venture with registered capital of $5.5 billion with Shanghai’s government to oversee the project, of which the company will own at least 51%. SMIC’s shares jumped as much as 2.7% in Hong Kong and 4.8% in Shanghai.
  • Jefferies Financial Group Inc.’s international arm was sued in the U.K. over allegations it orchestrated a move to poach six employees from an investment bank rival, who took several lucrative clients with them. Stifel Financial Corp.’s European unit accused the U.S. bank of inducing the people, who worked across banking and sales, to leave in October 2019. It said the ex-workers also took three of its clients, causing it “substantial loss and damage,” according to documents prepared for a London court hearing. U.K. courts have played host to several high profile poaching lawsuits. Last year, Cantor Fitzgerald LP lost an attempt to have a suit brought by Jefferies dismissed on jurisdiction grounds. As part of the case, Jefferies accused the brokerage of making a “concerted effort” to stop the ex-employees from repaying bonuses it says it was due.
  • Progressive groups are calling for major lobbying efforts in support of President Joe Biden’s $3.5 trillion spending plan, demanding that Democratic lawmakers avoid compromise as the measure faces a reckoning in Congress. “All eyes are on the reconciliation bill and progressives need to up their game,” a group of 11 organizations wrote in a letter released on Friday. “We are in a powerful, but precarious place — we passed the budget resolution with all our progressive priorities still on the table, but still have a race to the finish line as major corporations invest millions in a major lobbying blitz.” Their quest took on new urgency after Senator Joe Manchin, a moderate Democrat from West Virginia, announced his desire for a “strategic pause” in action on Biden’s economic agenda.
  • Tesla Inc.’s Cybertruck pickup has fallen about a year behind schedule, the blog Electrek reported, citing remarks Chief Executive Officer Elon Musk made on a company-wide call with employees. The truck is expected to start production at the end of 2022 and won’t be made in volume until late 2023, Electrek said, citing unidentified sources who were on the call with Musk. The CEO told employees that ramping up output will be complicated by the amount of new technology the company will put into the pickup. Tesla has dropped several hints that its wedge-shaped pickup will be delayed. In April, Musk said both the Cybertruck and the Semi will run on new, larger battery cells that the carmaker is making on a pilot line in California. The CEO cautioned that volume manufacturing of those cells appeared to be roughly 12 to 18 months away. Tesla also recently updated its online configurator where customers can reserve their pickup to refer to production nearing in 2022 rather than late this year.
  • The U.K. government could announce an additional 60 billion pounds ($83 billion) of spending next month, using an improvement in the public finances to deliver on commitments to balance regional disparities and cut carbon emissions, according to Goldman Sachs Group Inc. The budget deficit in the first four months of the fiscal year was running at little more than half the level a year earlier, leaving full-year borrowing on course to significantly undershoot the 10.3% of GDP forecast by the fiscal watchdog in March. The improvement is largely due to a stronger-than-expected economic recovery boosting tax revenue.
  • Politics is defined by rivalries, but rarely do they come as bitter as the one between the most powerful man in Poland and his nemesis. For ruling party leader Jaroslaw Kaczynski, the summer return of former Prime Minister Donald Tusk to spearhead Poland’s opposition has reignited an enmity that’s deeply personal. It involves not only electoral jousting over the years but the death of his twin brother. How the latest chapter plays out will shape the path of a country that’s clashed repeatedly with its fellow European Union states and now risks upending three decades of harmony with its biggest ally across the Atlantic after Washington slammed a new media law that threatens a U.S.-owned broadcaster.
  • Scientists behind the University of Oxford and AstraZeneca Plc Covid-19 shot are using the same technology to try to develop a therapeutic cancer vaccine, with promising results seen in animal studies. Researchers from Oxford’s Jenner Institute and the Ludwig Institute for Cancer Research have designed a two-dose therapeutic cancer vaccine using technology involved in the Covid-19 inoculation, the scientists said in a study published in the Journal for ImmunoTherapy of Cancer Friday. The vaccine is set to enter human trials this year after studies in mice showed a reduction in tumor size and improved survival rate. Vaccine research has advanced in the wake of the pandemic as scientists and governments worked faster than ever before and with greater resources to try and find vaccines that would help stem the virus. The crisis has seen technologies such as messenger RNA, never before used in a marketed product, demonstrate their success and potential for tackling other diseases such as cancer. The developments come at the same time researchers are looking at other pioneering treatments for cancer using the immune system to fight tumors.
  • Beijing’s municipal government has proposed an investment in Didi Global Inc. that would give state-run firms control of the world’s largest ride-hailing company, according to people familiar with the matter. Under the preliminary proposal, Shouqi Group — part of the influential Beijing Tourism Group — and other firms based in the capital would acquire a stake in Didi, the people said, asking not to be identified discussing private information. Scenarios under consideration include the consortium taking a so-called “golden share” with veto power and a board seat, they added. Didi’s shares spiked 8% before paring gains to about 3% higher in pre-market trading in New York. It’s unclear how large a stake the city is eyeing and whether its proposal will be approved by senior government officials. Didi is currently controlled by the management team of co-founder Cheng Wei and President Jean Liu, which received aggregate voting power of 58% after the company’s U.S. initial public offering. SoftBank Group Corp. and Uber Technologies Inc. are Didi’s biggest minority shareholders.
  • Cash is out, stocks and bonds are in. That’s the playbook investors have turned to before crucial U.S. jobs data, according to Bank of America Corp. Equity funds attracted $19.2 billion of inflows, trailed by the $12.7 billion allocated to bonds, according to a BofA note, citing EPFR Global data, for the week through Wednesday. Outflows from cash funds were the biggest in seven weeks, with $23 billion exiting. Market participants piled into risk assets ahead of a payroll report Friday billed as offering clues on the health of the world’s largest economy and the timing of the Federal Reserve’s tapering. The U.S. probably added 725,000 jobs in August, a more moderate pace than each of the prior two months, but stronger than gains seen early this year, according to the median forecast of economists surveyed by Bloomberg.
  • The Securities and Exchange Commission is investigating the startup behind one of the biggest cryptocurrency exchanges, as regulators probe further into parts of the digital-asset market that have resisted oversight, according to people familiar with the matter. Regulators are examining Uniswap Labs, the main developer of the world’s largest decentralized exchange, called Uniswap, the people said. Enforcement attorneys are seeking information about how investors use Uniswap and how it is marketed, the people said. A spokesman for Uniswap Labs said the company is “committed to complying with the laws and regulations governing our industry and to providing information to regulators that will assist them with any inquiry.” An SEC spokeswoman declined to comment, saying the agency doesn’t confirm or deny investigations.
  • Americans overwhelmingly support President Biden’s decision to end the war in Afghanistan, but by a 2-to-1 margin they disapprove of how he handled the chaotic and ultimately deadly withdrawal that included the evacuation of several thousand U.S. citizens and tens of thousands of Afghans, according to a Washington Post-ABC News poll. The Afghanistan withdrawal has contributed to a drop in Biden’s overall approval rating, which for the first time in his presidency is net negative. The poll finds 44 percent saying they approve of how he is handling his job, while 51 percent disapprove. In late June, the numbers were almost reversed, with 50 percent supporting and 42 percent disapproving. Biden has suffered significant erosion among independents in perceptions of how he is handling his job. The poll shows that 57 percent of independents now disapprove of his performance, compared with 43 percent in late June. His approval rating among Democrats also has dipped, from 94 percent in June to 86 percent now. Republicans remain overwhelmingly negative in their judgment of his performance as president (89 percent disapprove, nearly identical to June’s 88 percent).
  • President Joe Biden will survey damage from Hurricane Ida on Friday as he visits Louisiana — where hundreds of thousands of homes and businesses remained without electricity — and meets with Governor John Bel Edwards and local officials. Ida is testing the Biden administration’s ability to provide assistance to those in a path of destruction that stretches from the Gulf Coast to the New York City region, which suffered catastrophic flooding from the storm’s remnants. Biden said Thursday he wants his visit to convey the message that, “We’re all in this together. The nation is here to help.”
  • As Ida’s deadly waters receded from subway stations and roads, playgrounds and apartments, stunned residents of New York and New Jersey confronted their vulnerability as the old norms of weather no longer apply. Early Friday, the Northeast was still recovering from a storm that killed at least 40 people as it tore through the region. The remnants of a hurricane that first hammered distant New Orleans had temporarily paralyzed the nation’s largest and wealthiest city, halted its lifeblood transit system and conjured a future where residents and economy are constrained by recurrent disasters. New York City and its suburbs, which rebuilt power grids, subways and tunnels after 2012’s Hurricane Sandy flooded lower Manhattan, again saw similar scenes. Roads were closed, commuter rail was hobbled and hundreds of flights were canceled. But lasting damage to infrastructure appeared far less this time.
  • Iconiq Motors, a Chinese electric vehicle firm, is considering going public in the U.S. through a merger with a blank-check company, according to people familiar with the matter. The startup is working with an adviser on a potential deal that could value the combined company at about $4 billion, according to one of the people. Iconiq could become publicly traded through the special purpose acquisition company as soon as the end of this year, another person said, asking not to be identified as the details are private.
  • Indian e-commerce retailer Snapdeal Pvt is considering an initial public offering that could raise about $400 million, joining a growing list of startups preparing to tap capital markets as the nation’s digital economy booms. The company, which counts SoftBank Group Corp. among its investors, is speaking with advisers about a potential listing in Mumbai that could value it at as much as $2.5 billion, the people said. An IPO could take place as soon as next year, they said, asking not to be identified because the details aren’t public.  Discussions are still at an early stage, and the firm could decide not to proceed with the plan, the people said. Representatives for Snapdeal and SoftBank declined to comment

“Leadership is a matter of having people look at you and gain confidence. If you’re in control, they’re in control.” – Tom Landry

*All sources from Bloomberg unless otherwise specified