Author: Consultant

• Just days after the Canadian government negotiated a deal to end the West Coast ports strike, a key caucus of ILWU Canada union members voted down the deal on Tuesday night sending rank-and-file members back to picket lines.
• But Canada’s independent Industrial Relations Board deemed the strike illegal on Wednesday and union workers were back on the docks.
• $6.5 billion in trade is anchored offshore of Canada and the restart of the strike will add to supply chain congestion that already built up during the initial strike’s 13-day period.
• “Things are once again thrown into turmoil,” said a supply chain manager.

https://www.cnbc.com/2023/07/19/canadian-port-workers-are-back-on-strike-after-rejecting-labor-deal.html

Published: 7/19/2023 8:53 AM ET

Crude oil prices extended gains on Wednesday amidst hopes of a less hawkish monetary policy stance by central banks. Evidence of a firmly downward inflation trajectory revealed in the latest updates from the Euro Area and the U.K renewed hopes of a softer monetary policy stance by central banks, lifting Brent Crude futures above the $80 level.

The rally is despite the weaker-than-expected inventory build in the U.S. Data released on Tuesday by the American Petroleum Institute had showed crude oil inventories decline by 0.80 million barrels during the week ended July 14, lower than the decline of 2.25 million barrels that markets were expecting. Crude oil inventories had increased by more than 3 million barrels in the previous week.

Brent Oil Futures for September settlement which had finished Tuesday’s trading at $79.63 traded between $78.19 and $80.38. It is currently at $80.17, having gained 0.68 percent from the previous close.

West Texas Intermediate Crude Oil Futures for September settlement which had a closing price of $75.66 on Tuesday ranged between a high of $76.23 and a low of $75.33. The current price of $76.05 represents a gain of 0.52 percent from the previous close.

Both the crude oil benchmarks added to Tuesday’s gains. Brent Futures recorded larger gains, offsetting in part the comparatively lower gains in Tuesday’s rally.

A third of Canadians have changed or cancelled their vacation plans due to inflation, according to a new survey by Leger.

Of those who have changed their vacation plans, 46 per cent are also cutting back on dining out, found the July survey of 1,526 Canadians.

Inflation slowed to 2.8 per cent in June, but the price of groceries continued to climb, with prices rising 9.1 per cent last month, Statistics Canada said. Lower inflation was led by a decline in gasoline prices compared with last year, the agency reported.

In addition to concerns about inflation, Canadians are also feeling the sting of flight delays and cancellations when it comes to their vacation plans.

Delays, cancellations and lost luggage were the hallmarks of air travel as the industry ramped up to meet demand amid loosening COVID-19 restrictions.

Almost half of Canadians surveyed by Leger said they think airlines aren’t reliable when it comes to their departures and arrivals.

Six in 10 Canadians who have taken at least one flight in the past year said they have experienced flight delays, while two in 10 experienced cancellations. Almost two in 10 experienced baggage delays, while another 10 per cent experienced lost baggage.

Because of these disruptions, more than half of Canadians said they are looking to book only direct flights.

Thirty-five per cent of Canadians said they’re planning to go on vacation this summer, the Leger poll found.

Among those who said they have changed their vacation plans due to inflation, 43 per cent said they are opting for less expensive accommodation options, while 41 per cent are cutting back on activities and attractions and 39 per cent are taking a shorter trip.

In May, Greater Toronto Airports Authority president and CEO Deborah Flint said Pearson Airport had hired 10,000 new employees since the previous summer to handle rising demand, and modernized some of its systems.

Those new hires have helped increase baggage system reliability, cut security wait times and decreased holds on board aircraft, Flint announced Tuesday.

However, it hasn’t been all smooth sailing this summer. Over the Canada Day long weekend, Air Canada delayed or cancelled almost 2,000 flights, with passengers posting photos online of long lines and busy terminals that hearkened back to last year’s chaos.

The airline at the time said it may take longer to recover from an issue along the system when a network is running at full tilt, and said thunderstorms in the Montreal area and the U.S. contributed to the disruptions.

U.S. stocks advanced on Tuesday, partly boosted by a round of solid bank earnings which helped put the Dow on track for its longest streak of daily gains in more than two years. The TSX also rose, propelled primarily by the energy and resource sectors, closing at a two-month high as a slowdown in Canadian inflation to less than 3% further bolstered investor sentiment.

Morgan Stanley shares jumped 6.45%, their biggest one-day percentage climb since Nov. 9, 2020 after topping expectations as growth in the bank’s wealth management business offset lower trading revenue.

Bank of America gained 4.42% after its profit beat expectations by earning more from customers’ loan payments, while investment banking and trading fared better than expected.

Shares of other banks also rose on Tuesday, with Bank of New York Mellon up 4.11%, and PNC Financial up 2.51%, after they reported quarterly results.

“They are surprising. This morning all the banks reported, all beat earnings expectations and all except PNC beat revenue expectations,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.

“I always hate to extrapolate the big bank earnings, which are always the first ones, to the rest of the market. We have a lot more coming here but earnings estimates have been brought down and banks are able to surprise.”

The Dow Jones Industrial Average rose 366.58 points, or 1.06%, to 34,951.93, the S&P 500 gained 32.19 points, or 0.71%, at 4,554.98 and the Nasdaq Composite added 108.69 points, or 0.76%, at 14,353.64.

The Dow registered its seventh-straight session of gains, its longest streak since March 2021, and closed at its highest level since April 2022.

Some of the largest U.S. banks such as JP Morgan last week cited a profit boost from higher rates and indicated the economy remained resilient.

The S&P 500 banks index ended 1.90% firmer at 317.02, its highest closing level since March 8, when the start of a mini-bank crisis created a sharp sell-off in the sector. The KBW regional banking index also climbed 4.10% to 96.25 , its highest close since March 21.

Charles Schwab jumped 12.57%, the best performer on the S&P 500, after the brokerage posted a smaller-than-expected drop in quarterly profit.

Technology, up 1.26%, was the best performing sector, as Microsoft shares gained 3.98 to a record close of $359.49 after announcing it would charge more to access new artificial intelligence features in its Office software.

Equities have rallied recently, with the S&P 500 and Nasdaq climbing to 15-month highs on data showing economic resilience, cooling inflation and a solid labor market.

Data released early on Tuesday showed retail sales rose less than expected in June on a decline in building materials and service station receipts, although consumers boosted or maintained their spending levels. In addition, production at domestic factories unexpectedly fell during the month, but rebounded in the second quarter as motor vehicle output accelerated.

UnitedHealth also bolstered the Dow as it climbed 3.29%, providing about 105 points to the upside, after Bernstein upgraded the health insurer to an “outperform” rating.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 149.78 points, or 0.7%, at 20,376.57, its highest closing level since May 15.

Canada’s annual inflation rate dropped more than expected to a 27-month low of 2.8% in June, moving below the top of the Bank of Canada’s 1% to 3% control range for the first time since March 2021, helped by lower energy prices.

Energy rose 2.7% as oil settled 2.2% higher at $75.75 a barrel, while the materials group, which includes precious and base metals miners and fertilizer companies, added 1.9%. Financials advanced 0.8%.

Volume on U.S. exchanges was 10.54 billion shares, compared with the 10.58 billion average for the full session over the last 20 trading days. Advancing issues outnumbered decliners on the NYSE by a 2.76-to-1 ratio; on Nasdaq, a 1.62-to-1 ratio favored advancers. The S&P 500 posted 53 new 52-week highs and three new lows; the Nasdaq Composite recorded 157 new highs and 75 new lows.

Reuters, Globe staff

Canada Mortgage and Housing Corp. says the annual pace of housing starts in June posted its largest month-over-month increase in a decade powered by work beginning on new multi-unit projects.

The national housing agency says the seasonally adjusted annual rate of housing starts in Canada totalled 281,373 units in June, up from 200,018 in May.

The increase came as the annual pace of urban starts increased 46 per cent to 262,815 units in June. The rate of multi-unit urban starts rose 59 per cent to 219,914, while the rate of starts for single-detached urban homes increased three per cent to 42,901.

The annual rate of housing starts in Vancouver in June was up 71 per cent from May, while Toronto doubled the pace set in the previous month.

CMHC estimated the annual pace of rural starts at 18,558 units for June.

The six-month moving average of the annual pace of housing starts was 234,974 units in June, up from 229,520 units in May.

Canada’s annual inflation rate dropped more than expected to a 27-month low of 2.8 per cent in June, data showed on Tuesday, but excluding energy prices inflation was still barely inching lower after 10 interest rate hikes in less than 18 months.

Analysts polled by Reuters had forecast inflation to drop to 3.0 per cent from 3.4 per cent in May. Month-over-month, the consumer price index was up 0.1 per cent, Statistics Canada said, which was also lower than the 0.3 per cent forecast.

June’s reading, which benefited from a comparison to the four-decade high inflation a year earlier, means the annual rate was within the Bank of Canada’s 1 per cent to 3 per cent control range for the first time since March 2021. The bank targets 2 per cent inflation.

“Inflation is definitely moving in the right direction, but we’re seeing stickier and more persistent core measures,” said Michael Greenberg, senior vice president and portfolio manager at Franklin Templeton Investment Solutions.

Excluding food and energy, prices rose 3.5 per cent compared with a 4.0 per cent rise in May. Grocery prices rose 9.1 per cent year-over-year in June, a tick higher than the increase recorded in May. Prices of food from restaurants slowed slightly in June from May.

The average of two of the Bank of Canada’s (BoC) core measures of underlying inflation, CPI-median and CPI-trim, came in at 3.8 per cent compared with 3.9 per cent in May.

The Bank of Canada last week raised rates to a 22-year high of 5.0 per cent and said it could hike them further if fresh data shows inflation is stalling above its target.

The central bank, citing excess demand, said last week that it expects inflation to remain around 3 per cent over the next year before dropping to the bank’s 2 per cent target by mid-2025, six months later than previously anticipated.

“We’re still not at 2 per cent,” said Jules Boudreau, senior economist at Mackenzie Investments. “So there’s still some work to be done. But policy is probably restrictive enough at the moment to do that.”

The price of gasoline, which led the slowdown, fell 21.6 per cent compared with June 2022 when China, the largest importer of crude oil, eased some COVID-19 public health restrictions that contributed to higher global demand.

Oil dropped by more than 1% on Monday after weaker than expected Chinese economic growth fueled concern over demand in the world’s second-biggest oil consumer while a partial restart of halted Libyan output also pressured.

China’s gross domestic product (GDP) grew 6.3% year on year in the second quarter, compared with analyst forecasts of 7.3%, with its post-pandemic recovery faltering rapidly owing to weakening demand at home and abroad.

“The GDP came in below expectations, so will do little to ease concerns over the Chinese economy,” said Warren Patterson, ING’s head of commodities research.

Brent crude last fell 52 cents, or 0.65%, to $79.35 a barrel after losing more than 1% earlier in the session. U.S. West Texas Intermediate crude dropped by 43 cents, or 0.57%, to $74.99 on a second straight day of losses for both contracts.

“China data was always looked forward to with a degree of hope; well, for bulls anyway,” John Evans of oil broker PVM said in a report. “However, the contemporary economic backdrop for Asia’s driver seems to now be wheeled out for the bears.”

Both benchmarks had notched three weeks of gains and touched their highest since April last week, finding support from OPEC+ output curbs and unplanned outages in Libya and Nigeria.

Oil also came under pressure on Monday from the resumption of output at two of the three Libyan fields that were shut last week. Output had been halted by a protest against the abduction of a former finance minister.

In another sign of tighter supplies, Russian oil exports from western ports are set to fall by 100,000-200,000 bpd next month, a sign that Moscow is making good on a pledge for supply cuts in tandem with Saudi Arabia, two sources said on Friday.

• First inked in July 2022, the U.N.-brokered Black Sea Grain Initiative has been repeatedly elongated in short increments.
• It was set to lapse on Monday at midnight, Istanbul time.

Russia on Monday said it has suspended a humanitarian corridor to deliver key Ukrainian grains to global markets, hours before the agreement’s expiry.

First inked in July 2022, the U.N.-brokered Black Sea Grain Initiative has been repeatedly elongated in short increments, amid increasing discontent from Russia over perceived restrictions that limit the full dispatch of its own grain and fertilizer exports. The initiative was set up to abate a global food crisis, after Moscow launched a full-scale invasion of fellow key grain exporter and neighbor Ukraine.

It was set to lapse on Monday at midnight, Istanbul time.

“In fact, the Black Sea agreements ceased to be valid today. As the President of the Russian Federation said earlier, the deadline is July 17. Unfortunately, the part relating to Russia in this Black Sea agreement has not been implemented so far. Therefore, its effect is terminated,” Kremlin spokesperson Dmitry Peskov said, in Google-translated comments reported by Russian state news agency Tass on Monday.

The pact allowed the export of commercial food and fertilizer supplies, including ammonia, from three Ukrainian ports in the Black Sea – Odesa, Chornomorsk and Pivdennyi, previously known as Yuzhny. Cargo ships proceed through the agreed humanitarian corridor to Istanbul, one of the busiest ports of Turkey, whose administration under President Recep Tayyip Erdogan has been deeply immersed in the negotiations.

This is a breaking news story, please check back later for more.

BEIJING — China said Monday that second-quarter gross domestic product grew by 6.3% from a year ago, missing expectations.

The unemployment rate among young people ages 16 to 24 was 21.3% in June, a new record.

The 6.3% GDP print for the second quarter marked a 0.8% pace of growth from the first quarter, slower than the 2.2% quarter-on-quarter pace recorded in the first three months of the year. Analysts polled by Reuters had predicted a 7.3% increase in the second quarter GDP.

Retail sales for June rose by 3.1%, a touch below the 3.2% expected.

Industrial production for June rose by 4.4% from a year ago, better than the 2.7% forecast.

Fixed asset investment for the first half of the year rose by 3.8%, better than the 3.5% predicted.

The unemployment rate for people in cities was 5.2% in June.

China ended its Covid-19 controls in December. An initial economic rebound has lost steam. The massive real estate sector has struggled to recover, while exports have plunged due to falling global demand.

Within China, lackluster consumer demand has led to no change in prices in June. The People’s Bank of China said last week it expected a dip in July, but anticipated inflation would pick back up later this year.

Domestic travel has been a bright spot in the recovery. Urban residents more than doubled their tourism spending in the first half of the year from a year ago, to 1.98 trillion yuan ($280 billion), according to the Ministry of Culture and Tourism. However, it said rural residents’ spending on travel only rose by about 40% during that time.

The combined first-half total of 2.3 trillion yuan was less than the 2.78 trillion yuan reported for the first six months of 2019, before the pandemic, official data showed.

Beijing last week said it would extend property support measures. Authorities have also announced broad support for exports. The country has also extended tax breaks for electric car purchases, a growing industry the government is keen to support.

But Beijing has otherwise shown reluctance to embark on greater stimulus, especially as local government debt has soared. A Politburo meeting expected later this month could provide more details on economic policy.

This is breaking news. Please check back for updates.