Stock Market Update & Analysis: Aug 19th, 2024

Global Markets

Canada

Despite a drop in oil prices by almost 3%, the TSX saw an increase, while gold also notched higher. The moved higher was mainly based on American market sentiment overflow. Oil’s decline, typically a negative signal for energy stocks and the Canadian economy—which is heavily reliant on oil exports—was offset by strength in the financial and mining sectors of the market.

American Markets and Federal Reserve Anticipation:

U.S. stock markets experienced significant gains as investors eagerly awaited Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Symposium. The anticipation centered around potential hints about a September interest rate cut. Investors were hopeful that Powell’s remarks would indicate a dovish stance, leading to lower interest rates which could stimulate economic growth and provide a boost to equities.

European Markets:

European shares edged up slightly as investors braced for a week packed with economic data releases.  UK markets also rose, even though economists expect growth to slow for the second half of the year.

Asian Equities:

• Japan: Japan’s Nikkei index declined. This drop occurred amid a strengthening yen, which can negatively impact Japanese exporters by making their goods more expensive abroad. A stronger yen can dampen earnings for companies with significant overseas revenue.
• China: Chinese markets rose half a percent, even though recent data  showed  new home prices falling at the fastest pace in nine years.

Currency Movements:

• Euro: The euro reached its highest level of the year, reflecting confidence in the European economy or perhaps expectations of more aggressive monetary policy from the European Central Bank. A stronger euro can also be indicative of reduced demand for the U.S. dollar.
• U.S. Dollar: The U.S. dollar broadly retreated as traders anticipated dovish signals from the Fed. A weaker dollar can result from expectations that the Fed will adopt a more accommodative monetary policy, which can erode the currency’s value.

Gold Prices:

Gold hovered around historic highs, driven by safe-haven demand. Investors often flock to gold during times of economic uncertainty or when they expect potential market volatility. The metal’s strong performance reflects ongoing concerns about global economic conditions and the desire for security amidst market fluctuations.

Oil Prices:

Oil prices saw a dip due to concerns about Chinese demand. China is a major global consumer of oil, and any signs of weakening demand from this key player can negatively impact oil prices. This drop underscores the sensitivity of oil markets to global economic signals and consumption patterns.

Corporate News

• Alimentation Couche-Tard Inc: Canada’s Alimentation Couche-Tard made a preliminary takeover offer for Japan’s Seven & i, the owner of 7-Eleven. This would be the largest Japanese company ever targeted by a foreign acquisition. The proposal led to a surge in Seven & i’s stock, though no decision has been made yet.
• Advanced Micro Devices Inc (AMD): AMD announced plans to acquire server maker ZT Systems for $4.9 billion to expand its AI hardware capabilities. The acquisition will be funded largely with cash, and AMD aims to enhance its AI graphics processing units.
• Asbury Automotive Group: The U.S. Federal Trade Commission sued Asbury Automotive Group for alleged discriminatory pricing practices and unauthorized charges at its Texas dealerships, affecting Black and Latino customers disproportionately.
• B. Riley Financial Inc: Shares of B. Riley fell in premarket trading after co-founder Bryant Riley made an unsolicited $7 per share buyout offer, below the offer price of $7. The stock had previously surged 16% to $5.85.
• Bavarian Nordic: Danish biotech firm Bavarian Nordic plans to increase production of its mpox vaccine and work with global health organizations to ensure equitable access as the disease is declared a global public health emergency.
• BioNTech SE: The FDA lifted a partial clinical hold on BioNTech’s early-stage cancer drug study, allowing the company to proceed with additional risk mitigation measures.
• BHP Group Ltd: BHP’s Escondida copper mine in Chile avoided a further strike after the union reached a deal with the company, preventing potential disruptions to global copper supplies.
• Canadian National Railway Co and Canadian Pacific Kansas City Ltd: Canada’s two largest rail operators issued lockout notices to their union, potentially halting freight operations and impacting various sectors if a resolution isn’t reached.
• Comcast Corp: Comcast’s Universal is negotiating with British officials for incentives to build a multi-billion-pound resort in Bedford, potentially creating about 8,000 jobs. The final decision is expected by year-end.
• Diageo PLC: Diageo’s Indian unit submitted documents to New Delhi police for an investigation into billing and discount practices with city agencies, amid allegations of corruption.
• Estee Lauder Companies Inc: Estee Lauder’s CEO Fabrizio Freda announced his retirement at the end of fiscal 2025, prompting a search for a successor while the company continues its turnaround efforts.
• Fox Corp, Fubotv Inc, Walt Disney & Warner Bros Discovery Inc: A U.S. judge temporarily blocked the launch of a new sports streaming service backed by major media companies, following an antitrust lawsuit by FuboTV.
• Liquidia Corp: Liquidia’s shares fell after the FDA granted only tentative approval for its lung disorder drug, pending the expiration of a competitor’s exclusivity period.
• Royal Bank of Canada (RBC): RBC filed a countersuit against former CFO Nadine Ahn, alleging breaches of conduct related to her personal relationship with another executive that resulted in preferential treatment.
• Shell Plc: Shell shut a crude distillation unit at its Bukom refinery for scheduled maintenance, with the overhaul expected to finish by early October.
• Southwest Airlines Co: Southwest Airlines is preparing to contest Elliott Investment Management’s activist proposals for leadership changes, with CEO Bob Jordan rallying investor and employee support.
• Varta AG: German battery maker Varta reached a restructuring agreement with creditors and Porsche to rescue its struggling business.