In a capital markets session at the Prospectors and Developers Association of Canada, investment bankers from BMO Capital Markets, TD Securities, CIBC Capital Markets and RBC Capital Markets discussed the impact the outbreak of the coronavirus, or Covid-19, is having on markets and banking. Anthony Vaccaro, group publisher of The Northern Miner, moderated the session, with Michael Faralla, managing director and head of global mining at TD; Ilan Bahar, managing director and head of global mining BMO; Chris Gratias, managing director and head of global mining at CIBC; and Ryan Latinovich, managing director and head of global mining at RBC.
Anthony Vaccaro: I think it’s fair to say that the coronavirus is a classic Black Swan and it’s had a devastating impact on markets. How do you see this affecting markets in the medium and long-term?
Michael Faralla, TD Securities: There are a couple of things. Two different parts to the metals market especially as it relates to the TSX relative to the gold sector, which is an important part of the market for us, and gold is really more of a financial instrument than a physical or industrial commodity, and then we’ve got the industrial commodities, base metals and bulks. As you’ve seen in the last three or four weeks, as Covid got worse and worse you saw gold behaving as a typical safe-haven asset, and we saw gold prices going up and gold equities responding and reasonably positive for the gold price.
Conversely, industrial metals, base metals, are looking forward to an industrial slowdown globally, and we’re starting to see that data come through. I think there was PMI data out today for the U.S. that showed PMI for February down to 35%, which is the lowest number on record, so coronavirus impacts in the short term industrial production, and we’ve seen base and bulk prices going lower. So there’s definitely that divergence in the market in the short term and in the long term.
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