‘That’s a Wrap’
By Rod Blake
Last Friday’s market sell-off spilled over to the new trading week and the North American equity markets opened sharply lower on worries of further economic destruction as China’s very restrictive Covid-19 lockdown was rumoured to be advancing from Shanghai to Beijing.
The commodity markets were caught in the downdraft with crude oil starting the week down $5.84 to US$95.79, while gold bullion dropped by $39 to US$1,893 and the Canadian dollar off by 1/3rd-of-a-cent to US$0.7838.
Kinross Gold Corp. ‘K-T’ & ‘KGC-N’ once again firmed up its balance sheet by selling its 90% interest in Ghana’s Chirano Gold Mine to Asante Gold Corp. ‘ASE-C’ in a cash & stock deal worth some US$225-million. This acquisition fast tracks Asante up to official status of gold producer and its shares’ responded by surging up by over 15% to $1.90.
In what could be the biggest new event in the development of electric vehicles (EVs) and demand on EV materials since Tesla Inc. ‘TSLA-Q’ introduced its first sedan in 2008 – Ford Motor Co. ‘F-N’ rolled its new electric F150 pick-up truck off its assembly line. Why is this so significant? The F150 has been North America’s largest selling vehicle for some 40-years. If a significant portion of this group goes electric it could put much more upward supply and price pressure on rare earths and other battery materials.
Natural gas prices once again spiked up to over US$7/mmbtus as Russia cuts off natural gas supplies to Poland and Bulgaria after those countries refused to pay for the much needed product in Russian rubles.
The power of high commodity prices is reflected in the 1st-quarter reports of two senior recourse companies as oil sands giant Cenovus Energy ‘CVE-T’ & ‘CVE-N’ announced a tripling of its quarterly dividend to $0.105-a-share while hard rock miner Teck Resources Ltd. ‘TECK.B-T & TECK-N’ announced record quarterly profit of $1.6-billion.
The way I see it – Bear markets dwell on bad news while bull markets discount the same. Case in point – Last fall, reports on the Chinese Covid-19 lockdown in Shanghai, Russian-Ukraine conflict, rising inflation and interest rate hikes were all discounted as the North America equity markets were at or near new highs. What could go wrong? Now, those same events hang over the markets like a heavy weight even though the economy is running at near capacity. Markets move on investor sentiment as well as facts & figures.
Case on point – the share price of Suncor Energy Inc. ‘SU-T & SU-N surged up by $5.07 or 12.03% to $47.22 on word that Elliott Investment Fund, a 3.4% shareholder, sent a letter to the board of the integrated energy company – outlining their plan to restore the company to its previous market prominence that included among others – selling the Petro Canada retail service stations.
The closely watched Baker Hughes Petroleum Rig Count reported the number of American drilling rigs rose by 3 to 698, an increase of 258 from this time last year. To the north – the number of Canadian rigs fell by 6 to 95 for an increase of 44 over a year ago.
For the Week – The DJI fell by 2.47% to 32,977, while the S&P 500 dropped 3.27% to 4,132 and the NASDAQ sunk by 3.83% to 12,839. Across the line – the TSX lost 2.00% to 20,762 and the TSX Venture fell by 2.75% to 814.
Of note – The NASDAQ cratered by 13.3% in April – it’s largest monthly drop since 2008.
Gold bullion lost 1.81% to US$1,897, as silver fell by 5.72% to US$22.76 and copper dropped by 4.57% to US$4.39. Meanwhile – crude oil gained 3.01% to US$104.69 while natural gas surged up by 12.06% to US$7.25. The Canadian dollar lost 0.71% to US$0.7317. Overall – the CRB Commodities Index gained 1.21% to 328.
And Finally – To put into perspective the potential growth of electric vehicles (EVs) and battery minerals – the International Energy Agency (IEA) recently estimated the number of EVs on the road will surge by over 730% , from today’s 15-million, to about 125-million in 2030. However, the full potential for EVs is replacing the 1.3-billion vehicles that cover the world’s roads today.
Good luck in the week ahead….