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Msg  67729 of 67939  at  7/13/2020 9:18:02 AM  by

carswell


The Launch Pad


Daily market commentary
The Launch Pad
July 13, 2020
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Today

Pfizer has not one but two vaccine’s that are on the FDA’s fast track program. Not surprisingly, their shares are up pre-market, but the news is also boosting sentiment across the board, despite record setting virus numbers over the weekend. Stock futures are trading around 1% higher, but much of the focus remains on the tech heavy NASDAQ which has a tough act to follow following back-to-back weeks of 4% gains.

Florida set a one day record for new cases for any state, with 15k new cases over the same weekend that saw the Magic Kingdom and other Disney parks open their now sanitized gates for the first time since March. If you haven’t seen this video announcing the re-opening its worth a look. We’re not sure how the company that specialized is childhood fantasy could release something that seems so eerie and almost out of a horror movie.

Earnings week is kicking off this week with banks such as JPMorgan and Wells Fargo reporting. What’s different this time is that many companies pulled guidance last quarter leading to analysts flying blind with their projections. This has caused the dispersion of earnings estimates to widen by a significant margin. When the results roll in don’t be surprised to see an increase in volatility. Downside risks remain abundant including earnings, further virus outbreaks, higher savings and changed consumer behaviours until a vaccine is found.

Across the pond, European markets are trading higher ahead of Thursday’s ECB meeting and a gathering on Friday of EU leaders to discuss a regional recovery fund. The approval of joint fiscal stimulus in the EU may very well act as a positive catalyst for European equities.

Bond yields are higher and the U.S. dollar is weaker to start the week. Typical risk-on activity with stocks trading with a bullish bias. For now traders and Robinhood day traders alike are eager to buy on dips with 3000 S&P providing strong support.

Statistics Canada figures released Friday reveal an increase of nearly one million jobs in June (+953,000; +5.8%), which builds on an initial recovery of 290,000 new jobs in May. The two-month total represents just over 40% of the 3 million jobs lost in March and April. Despite this strong uptick, optimism surrounding the Canadian economy is limited as employment remains 9.2% below February levels. Ontario is set to detail Stage 3 of its reopening plan later today (1 p.m. ET) which will help shed light on job growth prospects in the interim.


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Cakes that look like real objects. Can’t say that all of these look all that appetizing, especially the one that looks like a human arm, but to each their own.

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Company news

Analog Devices has put up an offer to buy Maxim Integrated Products for US$20.9 billion in an all-stock deal. Maxim shareholders will receive 0.630 of a share of Analog stock for each Maxim common share they hold. Chatham Asset Management won a bid to buy bankrupt newspaper publisher McClatchy. The hedge fund was in competition with Alden Global Capital. The bid, though not fully disclosed, is said to be somewhere around US$300 million, much of which will be paid in the form of debt forgiveness. On Saturday, Nordstar Capital LP raised its offer by 17.5% to C$60 million to purchase Torstar Corp. After securing key shareholder the support, the bidding war is over. On the earnings front, PepsiCo beat EPS estimates, fueled by a slower than expected decline in organic revenue; shares are up premarket.

Commodities

Oil prices are trending down this morning. At the time of writing, NYM WTI futures were down -1.92% to US$39.77/bbl. ICE Brent Crude futures were just behind; down -1.55% to US$42.57/bbl. With big spikes continuing in the USA over the weekend oil prices have continued to lower. In Florida alone, they reported an increase in 24 hours of 15,000 cases of coronavirus. The economic world is waiting patiently for the upcoming OPEC meeting where they are expected to ease supply cuts to by 2 million barrels per day to 7.7 million bpd. Meanwhile in Libya, the force majeure has been reinstated only two days after their first crude shipment in six months.

Gold Spot is trending upwards this morning, for the exact same reasons oil is not. At the time of writing, the yellow metal was up +0.56% to US$10.01/bbl. Gold is anticipating the impact of the surging Covid-19. A record was set on Sunday as the World Health Organization reported a global increase in 24 hours of approximately 230,000 cases. Global uncertainty was also accelerated when President Trump stated that they are not thinking about negotiating a “Phase 2” deal with China. The more uncertainty we continue to have, the better for those long positions in Gold. In other commodity news, on July 15 workers at a Copper mine in Chile are potentially going on strike. If government mediation cannot solve the issues this will put further pressure on supply.


Fixed income and economics

The EUR is building on last week’s gains and trading higher to 1.1330 versus the greenback this morning ahead of busy mid-July calendar that an ECB policy update and the EU summit. The former is not expected to ruffle any feathers as consensus is calling for no change to record low interest rates nor to asset purchase levels. Expect instead for ECB President Lagarde to urge EU leaders to agree on a new recovery fund program at their summit meeting scheduled for this Friday. If leaders successfully establish and pass a plan that focuses on awarding grants rather than one based on loans, we could see the EUR strengthen even further As a side note to the currency movement, Bulgaria and Croatia officially entered into the ECB’s exchange rate mechanism last week in hopes of becoming the 20th and 21st countries to be able to adopt the EUE as their national currency. The agreement puts both countries on a probation period of no less than 2 years before they could join the European Monetary Union. It also puts all Bulgarian and Croatian banks under ECB supervision and the first nations to join since Lithuania was entered the party in 2015.

Just when you think you’ve seen it all, another unicorn manages to surprise us all. Privately held clothing retailer Brooks Brothers Group Inc. filed for bankruptcy early last week, felled by the pandemic’s impact and a debt burden of over $500 million. But the 200 year old company has done something not seen yet in these parts --- secure a bankruptcy loan with an interest rate of 0%. That’s right, the company has managed to borrow $80 million at no cost and with no closing fees, as per court filings. The generous terms reflect competition between WHP Global (part of debt giant Oaktree Capital Management LP) and a partnership between Authentic Brands Group LLC and mall landlord Simon Property Group whom both are seeking to acquire an interest ahead of DIP financiers. With $60 million initially drawn, Brooks Brothers will return to court in the coming weeks to get permission to receive the balance of the funds which will be used to fund operations while they seek a buyers. Apparently there will be no shortage of interest as a court-supervised auction in the coming weeks is projected a lot of competition. This comes despite the company closing 51 stores and furloughing 4,025 workers.

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Be as bold as the first man or woman to eat an oyster.

- Shirley Chrisholm

 


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