Launch Pad
Daily market commentary


Thursday December 3, 2020
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Markets have been wobbling ahead of the open, but got a slight boost following initial jobless claims that beat expectations. At 712k the numbers are still not great show that the labour market is still under pressure. The market hasn’t really cared about the current situation for some time, but instead is forward looking. Global stocks appear set to head again toward record highs as we wait for updates on the fiscal package. There is still hope of a deal, perhaps over the weekend. The U.S. dollar continues to slide, bonds are rather flat in trading this morning with U.S. 10 year yields resting just below the highs set in early November.
Meanwhile, U.S. Covid cases/hospitalizations/deaths all made single-day records yesterday. LA has the most infections of any county in the U.S. and the Mayor issued an order for residents to stay at home, warning that the city is at a tipping point. Yesterday’s daily new cases nearly eclipsed all of Canada.
The vaccine can’t come soon enough for many, and based on projections from those at the helm of Operation Warp Speed, the U.S. should be able to distribute enough coronavirus vaccines from Pfizer and Moderna to immunize 100M people by the end of February, which would protect the elderly, healthcare workers and people with pre-existing conditions. I guess we’ll wait and see if there are 100m willing people.
Congress has set the stage for delisting Chinese stocks from the U.S. after approving a bill that would remove foreign companies off of U.S. exchanges if they don’t adhere to U.S. Public Accounting. The bill has bipartisan support, and it’s one that Trump will happily sign as a final parting gift to China.

On the home front, Canada just got another Unicorn - and it's based out of Calgary.  Software firm Benevity just raised money in a deal, valuing it at more than US$1bn, according to anonymous sources.  The deal was closed last night, so expect more details to follow.  Benevity is a beacon for the Calgary tech scene and has backed support from the likes of JMI and General Atlantic.

Diversion:  If you like trivia / jeopardy, you're in luck.  Fans archived over +400k jeopardy clues and their answers over its 37 season run, here.
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Company news

Strong mortgage origination helped boost TD earnings last quarter. The company front loaded the loan loss provisions, taking only an additional $917mm in the quarter down from $3.22bb last quarter. They generated $1.8bb in profits over the last three months. CIBC also beat estimates as their focus on the domestic market, aided again by housing, produced strong results. Chevron announced they are cutting their long-term spending in response to this year’s slump in oil prices. Over the next five years they plan on spending as much as $16 billion annually down form $22. 3M is cutting nearly 3,000 jobs or 3% of their workforce as they accelerate their cost cutting efforts and transformation toward technology and automation. The Justice Department is looking at whether Facebook has squeezed start up rivals in virtual technology. Companies are accusing them of tactics used in social media to eliminate competition in virtual reality. Signet Jewelers is up big in premarket trading after reporting a surprise profit and a good start to the holiday season. Same-store sales rose compared to last year and they were able to eliminate $100mm in costs.

Oil prices edged lower this morning as ahead of today's much anticipated OPEC+ meeting; at the time of writing, NYM WTI Crude futures were down -60 bps to US$45.02/bbl while ICE Brent Crude futures were down -40 bps to US$48.05/bbl.  After direct talks, Russia and Saudi Arabia are reported to have agreed upon a plan for continued output cuts which will be presented to other members.  Reports were mixed; some were saying the deal was close, while others cite uncertainty.  If there's one thing these traders don't like, it's uncertainty.  Elsewhere, Alaskan North Slope crude spot prices have risen considerably on the back of increased Chinese demand.  The state is poised to export the most crude in almost two decades, with volumes having doubled y/y to 15.6mm bbl.  

Gold prices moved slightly higher despite more ETF selling; at the time of writing, spot gold prices were up +40 bps to US$1,838.47/oz.  Funds marked an eight consecutive day of selling and marked the longest run of outflows in nearly 4 years - yesterday saw outflows totaling US$525mn.  In other commodities news, iron ore exports out of Australia surged to another fresh high.  The exports totaled ~US$8.2bn in October, surpassing the previous record set in September.  

Fixed income and economics

The release of yesterday afternoon’s latest Beige Book was mostly a mixed bag with the positives of an uptick in November business activity countered by concerns of the rising probability of further shutdowns. While the expansion was characterized as modest or moderate and most districts reported positive outlooks, three of the four Midwestern Districts observed that activity began to slow last month. The general view projected that growth will slow to 2.5% in the fourth quarter and the economy will slip into a modest contraction early next year (though “cautious optimism” on the outlook following positive vaccine news was expressed by most surveyed). Downside risks also included the looming expiration of unemployment benefits and moratoriums on evictions and foreclosures. A mildly positive payrolls print was signaled for this Friday but highlighted an incomplete recovery as virus-induced hiring difficulties were feared to lead to a drop in employment over the winter months (before recovering in 2021). The holiday shopping outlook was uncertain particularly among brick-and-mortar stores whom “expressed high uncertainty, with many being cautious about stocking up for the holidays.

Not likely to move markets at all given tomorrow’s nonfarm payroll release, but weekly Initial jobless claims ending November 28 came in at 712K to beat the 775K forecast. That similarly fell from 787K prior and marked the second fewest filings since the pandemic began. Continuing claims also improved to 5.52MM versus 6.09MM prior. And earlier this morning, the Challenger Job Cuts survey improved to 45.4% year over year and down from October's 60.4% print. It’s worth reiterating that markets should look past these data points though as several distortions in the readings have been occurring recently due to the unprecedented nature of the pandemic. The U.S. Department of Labor has been using the number of total weeks claimed as a proxy for the number of individuals claiming benefits. As a result, the reported numbers “do not accurately estimate the number of unique individuals claiming benefits,” according to the Government Accountability Office (GAO). This clarification disclaimer should be published in upcoming releases, potentially implying lower recent claim counts.

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The work of today is the history of tomorrow and we are its makers.

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Contributors: C. Basinger, D. Benedet, C. Kerlow, D. Mak, A. Tjiang, B. Gustafson

Charts are sourced to Bloomberg unless otherwise noted.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth Limited or its affiliates. Assumptions, opinions and estimates constitute the author's judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. Richardson Wealth Limited, Member Canadian Investor Protection Fund. Richardson Wealth is a trademark of James Richardson & Sons, Limited used under license.