Market News & Analysis: November 14th, 2024
Global Markets
Canada’s Main Stock Index:
Canada’s TSX rose moderately on Thursday, largely driven by gains in mining and financial stocks. Data released showed the continued weaking of the Canadian economy as seasonal job postings were down 15% from last year ahead of the holiday period. Data also showed that Canada’s worsening economic gap with the USA is going to increase into 2025.
American Markets:
American markets saw a decline amid growing concerns about inflation. Strong inflation data prompted fears that the Federal Reserve might continue its aggressive monetary tightening path, which could stifle economic growth and put further pressure on corporate profits. Technology stocks were hit hard as rising interest rates reduce the present value of future earnings, particularly impacting high-growth sectors like tech. The broader market also reacted negatively to the threat of prolonged high inflation, adding to the downward pressure on equities.
European Markets
\European stocks gained, primarily driven by strong performances in energy and technology sectors. The energy sector benefited from a initial rising oil prices as supply concerns persisted, while technology stocks advanced on the back of solid earnings reports, particularly from semiconductor companies and software firms. In general, European corporate earnings have been relatively upbeat across most sectors, supporting investor sentiment and helping to drive stock prices higher.
Japanese Markets
Japan’s Nikkei index closed lower for the third consecutive day, despite the yen weakening to fresh lows against the U.S. dollar. The yen’s decline was a sign of increasing concerns over Japan’s economic outlook and its struggle with inflation. Major technology stocks, many of which are key components of the Nikkei, tracked their U.S. peers lower due to similar pressures from rising U.S. Treasury yields and the potential for tighter global financial conditions. The Nikkei‘s losses were compounded by a more cautious outlook on global demand, particularly in tech, which has been a key growth driver for Japan.
Chinese Markets
Stocks in China slumped after Beijing’s latest measures to revive the ailing property sector failed to inspire confidence in investors. Despite a series of policy adjustments aimed at bolstering the sector, including easing restrictions and offering financial support, there was little evidence that the measures would reverse the ongoing downturn in the property market. Meanwhile, geopolitical tensions, particularly between the U.S. and China, continued to weigh heavily on investor sentiment, exacerbating the bearish mood in the region. These concerns were heightened by rising trade disputes, restrictions on technology transfers, and other friction points that threaten the broader economic relationship between the two largest economies in the world.
Currencies
U.S. Dollar and Global Currency Markets: The U.S. dollar reached a one-year high against most major currencies, extending its upward momentum for a fifth consecutive day. This surge in the dollar was largely driven by higher U.S. Treasury yields, as investors priced in the possibility of continued tightening from the Federal Reserve. The dollar’s strength also reflects broader global economic uncertainties, making the U.S. currency an attractive safe haven for investors. Additionally, the rise in the dollar was somewhat linked to the prospect of Donald Trump securing a second term as U.S. president, with markets anticipating that his policies could lead to stronger economic growth and, consequently, higher interest rates.
Gold Prices
Gold prices continued their downward trajectory, despite being seen as a safe haven during times of uncertainty, gold has struggled in the face of rising U.S. Treasury yields and a stronger U.S. dollar, which reduce its appeal. The precious metal has been under pressure as investors shift into assets that benefit from higher interest rates, such as bonds, while the broader market’s focus on inflation and monetary policy has created a challenging environment for gold.
Corporate Stock News
Apple Inc: British consumer group Which? is suing Apple for allegedly breaching competition laws by locking users into its iCloud service. The lawsuit claims that Apple made it difficult for users to switch to alternative providers, resulting in overcharging for iCloud subscriptions.
BHP Group Ltd: BHP is expected to announce plans next week to invest at least $7 billion to enhance copper recovery at the Escondida mine in Chile, the world’s largest copper mine. The investment will be part of the company’s broader $10-11 billion capital spending plan.
Blackstone Inc: Blackstone has shifted from plans to acquire a majority stake in India’s Haldiram’s snacks business, opting instead to purchase a 20% stake, though a valuation dispute remains with Haldiram’s asking for $12 billion, while Blackstone is proposing $8 billion.
B. Riley Financial Inc: B. Riley warned of a third-quarter loss, expected between $130-$135 million, mainly due to a $120 million drop in the valuation of its investment in a retailer. The company’s debt is expected to be about $2.06 billion by September’s end.
Capri Holdings Ltd & Tapestry Inc: Tapestry abandoned its $8.5 billion bid to acquire Michael Kors owner Capri after the deal was blocked by a U.S. judge. Tapestry plans no immediate acquisitions and agreed to reimburse Capri $45 million for expenses incurred during the transaction attempt.
Cisco Systems Inc: Cisco raised its second-quarter revenue and profit forecasts above analyst expectations, with strong demand for its networking products driven by the AI boom. However, its shares fell in after-hours trading despite these positive results.
Dlocal Ltd: Uruguayan fintech dLocal reported a 13% rise in third-quarter revenues to $185.8 million, surpassing analyst expectations. However, its adjusted EBITDA fell 6%, though it posted gains in Latin American markets, particularly in Mexico and Argentina.
Ecopetrol SA: Colombian oil company Ecopetrol reported a 28% drop in third-quarter profits due to a fall in the Colombian peso. Despite a slight increase in oil output, total sales decreased 1.5% compared to the same period last year.
Eli Lilly and Co: Eli Lilly’s weight-loss drug, Mounjaro, showed impressive results in a trial, with nearly 99% of patients remaining diabetes-free after three years. The drug reduced the risk of type 2 diabetes by 94%, with patients losing up to 22.9% of their weight.
General Motors Co: GM is recalling 77,824 vehicles due to faulty software in the transmission control module, which could cause unintended vehicle movement, increasing the risk of a crash. The recall affects certain 2022-2023 Chevrolet Express and GMC Savana models.
Grupo Aval Acciones y Valores SA: Colombian financial group Grupo Aval reported a six-fold increase in third-quarter profits, reaching 415.7 billion pesos, thanks to higher income from investments, though interest income fell by 6.3%.
Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group Inc & Sumitomo Mitsui Financial Group Inc: Japanese banks saw strong second-quarter profits: Mitsubishi UFJ reported a 90% profit increase and raised its annual profit forecast to 1.75 trillion yen, Mizuho’s income rose 60%, and Sumitomo Mitsui raised its profit guidance to 1.16 trillion yen.
Nu Holdings Ltd: Brazilian digital bank Nubank reported a more than double increase in third-quarter profits, driven by strong credit portfolio growth. Its non-adjusted return on equity hit a record 30%, though the 90-day default ratio slightly rose.
Novo Nordisk A/S: Novo Nordisk is phasing out production of human insulin pens, shifting focus to its GLP-1 agonist drugs for obesity and diabetes, including Ozempic and Wegovy, which are driving the company’s growth.
Ovintiv Inc: Ovintiv announced the acquisition of oil assets from Paramount Resources in a $2.38 billion deal, strengthening its position in Canada’s Montney shale. The company will also sell its Uinta Basin assets for $2 billion.
PTC Therapeutics Inc: PTC Therapeutics received FDA approval for its gene therapy, Kebilidi, to treat a rare enzyme deficiency disorder. The therapy is expected to generate $273.4 million in peak revenue by 2026.
Smith & Nephew Plc: Smith & Nephew is under pressure from major investors to consider spinning off its orthopaedics division, which accounts for the largest portion of its revenue, amid declining performance.
Telefonica SA: Telefonica won an arbitration case against the Colombian government, which was ordered to pay the company $380 million in damages. The dispute, dating back to 2018, involved measures that violated a treaty protecting foreign investments.
TotalEnergies SE: TotalEnergies awarded $3 billion in engineering contracts for the development of Suriname’s first offshore oil project. The contracts include a $1.9 billion deal with Saipem and a €1 billion deal with TechnipEnergies.
Unilever Plc: Unilever is considering selling its Dutch food brands, including Unox soups and Conimex seasonings, as part of a strategy to focus on its core brands. The company is also facing legal action from Ben & Jerry’s over its stance on Palestinian refugees.
Visa Inc: Visa is under investigation by the European Commission over fees charged to retailers. The company is cooperating with the investigation and also noted that a separate inquiry into its incentive agreements has been closed.
Walt Disney Co: Disney reported stronger-than-expected earnings in its fiscal fourth quarter, driven by Marvel’s “Deadpool & Wolverine” ticket sales. It forecasted high single-digit EPS growth for fiscal 2025 and announced a $3 billion share buyback.
Zeekr Intelligent Technology Holding Ltd: Geely’s Zeekr plans to take control of Lynk & Co as part of a restructuring move to create a new energy vehicle manufacturing group. Zeekr will acquire a 51% stake in Lynk, valued at 18 billion yuan.
