September 8, 2021

Daily Market Commentary

Canadian Headlines

  • China Accuses Canada Goose Of ‘Misleading’ Consumers in Ads. High-end parka maker Canada Goose Holdings Inc. was fined by China and criticized by its state media for allegedly misleading consumers in some advertisements, becoming the latest foreign brand to be targeted by regulators amid political tensions between Beijing and the west. Shanghai’s market regulator fined the retailer’s local unit 450,000 ($71,000) in June, according to the National Enterprise Credit Information Publicity System, an official corporate information website. The regulator said Canada Goose’s claims of using “the warmest material from Hutterite,” referring to communities that produce some of the world’s most luxurious goose down, deceived shoppers as most of its products are actually made with other material.
  • British Columbia releases details of its COVID-19 vaccine passport. British Columbians flooded a government website on Tuesday to register for digital proof of their COVID-19 vaccination status, which will be required to access a range of non-essential businesses, from dine-in restaurants and pubs to fitness centres and sporting events, starting on Sept. 13. The province’s vaccine passport is based on an individualized QR code, a scannable, square-shaped image made with bar-code technology. It stores the required clinical information, and can be displayed on a smartphone or printed as a paper record.
  • Election Campaign to Keep Bank of Canada Quiet. The Bank of Canada will likely tread carefully this week, mutedly acknowledging a weaker-than-expected economy in the midst of a heated election campaign. Policy makers led by Governor Tiff Macklem are set to leave the Ottawa-based central bank’s benchmark overnight interest rate unchanged at 0.25% in a 10 a.m. policy decision Wednesday, and maintain purchases of government bonds at the current pace of C$2 billion ($1.6 billion) each week. Yet Macklem will be under pressure to address mounting uncertainty about the state of Canada’s recovery on the heels of a shock contraction in output. Gross domestic product dropped 1.1% in the second quarter, the national statistics agency said last week, well below the 2.5% expansion the bank forecast in July.


World Headlines

  • With the outlook for growth coming under increasing pressure, global equity investors are busy taking some risk off the table. Overnight the MSCI Asia Pacific Index slipped 0.1% while Japan’s Topix index closed 0.8% higher, with the rally driven by Japanese Prime Minister Yoshihide Suga’s decision to effectively step down. In Europe, the Stoxx 600 Index had dropped 0.9% by 5:50 a.m. as traders remained cautious ahead of tomorrow’s ECB decision. S&P 500 futures pointed to a move lower at the open, the 10-year Treasury yield was at 1.355%, oil rose and gold was slightly higher.
  • Morgan Stanley, Citigroup Inc. and Credit Suisse Group AG are all cautioning investors on the outlook for U.S. equities. Citing “outsize risks” to growth through October, Morgan Stanley slashed American stocks to underweight and global equites to equal-weight. With the Delta variant continuing to slow the return to normal, and policy debates in Washington getting bogged down, the bull case is getting harder to make. Citigroup said that bullish positions in U.S. stocks currently outnumber bearish ones by 10 to 1, meaning that any correction could quickly become amplified.
  • U.S. job openings probably hovered around a historically high 10 million in July as companies struggled to hire enough workers. The Fed’s Beige Book may assess activity slowed because of increased risks from the delta variant. North of the border, the BOC may stand pat on rates and guidance after a second-quarter GDP drop and a soft start to this quarter with still-rising Covid counts
  • Cryptocurrencies remained under some pressure after yesterday’s El Salvador-fueled tumble. Overall crypto market value fell about $300 billion in 24 hours, CoinGecko said. Crypto-related shares slipped as Coinbase was warned by the SEC against launching a product that would allow consumers to earn interest on their crypto holdings. Bitcoin traded around $46,000
  • The confirmed death toll topped 650,000 in the U.S. The number of American workers back in offices fell almost a third in the week ended Sept. 1. Japan may extend emergency orders to the end of September, Asahi reported. J&J is in talks to run a booster trial in South Africa
  • Ray Dalio is sticking with China amid a brewing debate among Wall Street investors about the long-term viability of investing in the country, as it cracks down on sectors from tech to online education and property. And BlackRock is plowing ahead in China. It raised $1 billion for its first local mutual fund, attracting more than 111,000 investors
  • Intel Tabs $95 Billion for New Chip Plants.  Intel Corp. plans to build new chip-making facilities in Europe valued at up to $95 billion, responding to a cross-border race to add manufacturing capacity at a time of a global chip-supply crunch. Intel Chief Executive Officer Pat Gelsinger on Tuesday said the company was planning two chip factories at a new site in Europe and could potentially expand it further, with the increases raising the total investment over about a decade to the equivalent of as much as 80 billion euros, the equivalent of about $95 billion. The facilities would cater to meteoric demand for semiconductors as computers, cars and gadgets become more chip-hungry
  • GameStop Fans Face Off Against Earnings Day History of Defeat. Earnings day hasn’t been kind to GameStop Corp. investors  and analysts, options trading and recent history suggest Wednesday evening’s  won’t likely be any different. Shares of the video-game retailer have tumbled 18% on average the day after earnings since June 2019 and gained on such reports only twice since the start of 2018. Add on that the options market implies the stock will swing 15% by the end of Thursday’s session and it suggests it could be a choppy few days ahead for the company that helped set off the meme-stock trend.
  • The Fed should press ahead with its tapering plan even after weak jobs growth, St. Louis regional head James Bullard told the FT. The big picture is that the taper will start this year and end by the first half of 2022
  • U.K. lawmakers vote on new taxes to trim pandemic budget deficits today. If approved, Chancellor Rishi Sunak will preside over some of the highest levels of taxation in U.K. history
  • Angela Merkel’s potential successors are delaying discussion on how they’ll reconcile spending ambitions with budget prudence. Social Democrats and Merkel’s conservatives are both calling for the constitutional limit on adding too much debt to be reinstated, but are quietly exploring ways to loosen or sidestep such rules
  • JPMorgan to Take Majority Stake in Volkswagen Payments Platform. JPMorgan Chase & Co. is buying a majority stake in Volkswagen AG’s payments platform, extending its services further into the auto industry. The U.S. bank said it will acquire close to 75% of Volkswagen Payments SA in a statement Wednesday. It plans to work with the car manufacturer to develop the platform for new markets that could use internet-connected vehicles as a way to pay.
  • Travel Stocks Up on Report U.K. May End Traffic-Light System. Airline and travel stocks were a bright spot in a largely negative Stoxx 600 after the Telegraph reported the U.K. may scrap its Green and Amber warning lists for foreign travel next month. Red, the highest warning, is set to to stay in place, the paper reported, citing a source familiar with the proposals.
  • New IPO models such as those using SPACs need the support of a complete regulatory framework and investor protection measures, the China Securities Journal reported. SPACs are like a “blind-box game” for ordinary investors and have relatively large hidden risks, it said.
  • Gold edged higher after falling the most in a month. Aluminum climbed toward $2,800 a ton, while copper dipped. U.S. natural gas advanced as forecasts for hotter weather continued to boost demand, while production in the Gulf of Mexico was slow to return after Hurricane Ida. Oil climbed as more motorists get back behind the wheel
  • Oil Gains Near $69 With Ida Impact Still Hitting U.S. Output. Oil edged higher as investors considered a demand outlook clouded by the comeback of Covid-19 in many regions and the continued impact of Hurricane Ida on U.S. output. Futures climbed toward $69 a barrel in New York. Almost 80% of U.S. Gulf of Mexico oil production remained shut in on Tuesday. The resulting disruption has seen the value of regional oil grades like Mars Blend jump to their highest level since January, according to data compiled by Bloomberg.
  • Aluminum Nears 13-Year High as Supply Woes Build, Demand Booms. Aluminum inched toward the highest in 13 years after turmoil in Guinea added to an uncertain supply outlook just as global demand booms. The metal used in cans to cars rallied to a 10-year high in London on Wednesday and prices were less than 1% away from the highest since 2008. Political unrest in Guinea has helped spur aluminum to fresh peaks on concerns about the possibility of disruptions to bauxite operations, though coup leaders have urged mining companies to keep operating and reassured them that their existing agreements with the state will be honored.

“Life is like riding a bicycle. To keep your balance, you must keep moving.”- Albert Einstein

*All sources from Bloomberg unless otherwise specified