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Msg  69231 of 69453  at  3/4/2021 11:28:22 AM  by

carswell


The Launch Pad

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Daily market commentary
The Launch Pad
March 4, 2021
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Today

Futures are bouncing back and forth, but there is some stability in the bond market, with a slight bid for government bonds. The rise in inflation expectations and long-term borrowing costs is stoking volatility and raising concern that a prolonged rally in equity markets may be in jeopardy. For all the apparent nervousness in the market, it’s a sobering reminder that the S&P 500 is just 3.5% off record highs. Chairman Powell will be making an appearance at a Wall Street Journal webinar later today, Powell is expected to push back on bond-market concerns, saying the central bank will be ultra-patient in withdrawing its support for the economy after the pandemic has ended.

Global markets are trading lower, led by absolute carnage in Asia with Japan down by over 2% and Chines equities lower by over 3%. The Shanghai Shenzhen CSI 300 Index is CSI 300 Index is now in a full correction, down over 10% since February 18th. This brings it all the way back to level not seen since….. the beginning of the year. After years of underperforming the TSX is doing quite well so far this year up over 5% YTD, which contrasts sharply with the NASDAQ witch is barely positive.

Tech-sector multiples remain vulnerable as the reopening trade drives earnings rebounds and valuation upside for other groups. The valuation premium for tech -- especially the S&P 500's biggest stocks, FAANG -- developed during the "risk-off" period that began with trade turmoil in 2018 and only got bigger with the Covid-19 crisis. The group became a “defensive” go to sector in a way and is now selling of alongside Staples and Utilities.

Euros are weaker, which is driving the DXY index higher for the day, however the Canadian dollar really isn’t losing any ground, maintaining a rather delicate dance below $0.80/USD. Crude markets are stable, and even gold has found a small bid. Elsewhere in the commodity space, the biggest movers are Copper and Nickel, which are down -4% and -7%. While typically closely tied to growth expectations, copper and Nickel prices have attracted investor interest in recent months, amid hopes for a boom in prices driven by the rise of electric vehicles and other moves to electrify the world’s biggest economies. It’s a strange world when copper miners get caught up in the clean-tech play. See also The Metal That Worries Tesla Most Is Getting Much Cheaper.

Here’s a link to Evan Siddall’s Twitter thread basically eating crow for his doomsday predictions last year about a housing crash when the pandemic first hit. To be honest, we were just as concerned as he was, but we’re just real estate observers, not the head of the CMHC that could influence buying behaviour. Given the crazy bidding wars that are going on again in the GTA and Vancouver primarily, first time home buyers who waited on the sidelines are still waiting for that crash. Here’s also the latest Housing Market Insights report from the CMHC. RBC thinks the housing market is getting a little hot, especially in Toronto. The average selling price for all homes jumped above $1 million for the first time ever. Supply is certainly not keeping up with demand and making it much more difficult for the new generation to purchase property in Toronto.

Interesting blog put together discussing some unique ways of measuring if we are in a bubble or not. Ultimately, they suggest focusing on risks within your own portfolio rather than getting caught up in all the 'bubble talk'.


Diversion: A doctor had to attend a Court Mandated Zoom Call, the one difference is he was MID SURGERY.
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Company news

Laurentian Bank Financial Group reported almost $45 million in earnings, up from a $32.2 million profit from last year. Shares of Sleep Country surged this week after exceeding market expectations with higher-than-expected earnings per share. The company reported a 26.6 million net income and $0.74 in earnings per share. Dollarama’s dividend payment increased 2% to 19.1 Canadian cents, more than Bloomberg Dividend Forecasts estimated. Altria Group, the maker of the well-known Marlboro cigarettes, has just offered the FDA a $100 million advertising campaign that will help promote the idea that cigarettes are not as harmful as three fourths of the American population believe they are. Marriott Hotels is offering employees a financial incentive to take a covid-19 vaccine. They are going to pay them an equivalent of four hours pay.

Commodities

Crude prices edged higher this morning today while the broader commodities complex traded mixed; at the time of writing, NYM WTI Crude futures were up +0.40% to US$61.50/bbl while ICE Brent Crude futures were up +0.30% to US$64.27/bbl. With yields rising and OPEC+ poised to bring more supply to the market, traders may cash in on oil’s rally this year. CFTC net speculative futures positions tapering down and recent capital flows out of energy ETFs corroborate this view. Inventories climbed in the U.S. last week by a record +21.6mn bbl to 484.6mn bbl, according to the EIA. Elsewhere, Bloomberg is forecasting growth in natural gas demand in China of ~6.4% m/m in March.

Gold prices edged higher this morning; at the time of writing, the spot price for the yellow metal was up +0.50% to US$1,720.14/oz. India is taking advantage of low gold prices in an effort to fuel its pent-up demand. Imports climbed to the highest since November 2019. In other commodities news, global food costs extended increases over last month. The U.N. Food & Agriculture World Food Price Index rose +2.47% last month to 116 points – the highest level seen since 2014.

Fixed income and economics

Bad news is good news again? Or is bad news still bad news? The release of U.S. jobless claims this morning saw filings ending February 27 clock in at 745K and above the 736K tally from prior. Yes, it did beat the consensus on the margin, but markets took the increase as further evidence that we’ll get a reiteration of continued easy money policy from Fed Governor Powell during this midday talk today. That has been the formula for the better part of 2021 thus far, any worries about the economy slipping through the fissures is immediately calmed by the pledge of further stimulus from officials. On the positive (or perhaps negative for markets (were continuing jobless claims that dropped sharply from 4.419MM to 4.295MM Americans and the lowest since prior to the pandemic. Treasury yields are falling on the expectation for more bond buying and aided by the belief from the FOMC that some are starting to fear an upheaval in rates. Federal Reserve Governor Lael Brainard fired the first warning shot earlier this week saying that she would be concerned if she saw disorderly (or a persistent tightening of) financial conditions. Her jawboning was enough to send yields lower on Tuesday.

Chart of the day


Markets

Quote of the day

The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.

-Stephen Hawking.



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