Author: Consultant

  • Consumer prices rose less than expected in November, up 7.1% from a year ago

    Consumer prices rose less than expected in November, up 7.1% from a year ago

    • The consumer price index rose just 0.1% from the previous month, and increased 7.1% from a year ago, compared with respective estimates of 0.3% and 7.3%.
    • Core CPI rose 0.2% on the month and 6% on an annual basis, compared with respective estimates of 0.3% and 6.1%.
    • Stocks roared higher following the report as investors look for signs that runaway inflation is ebbing.
    • Inflation-adjusted average hourly earnings for workers rose 0.5% for the month, though they were still down 1.9% from a year ago.

    https://www.cnbc.com/2022/12/13/cpi-inflation-november-2022-.html

  • TOURMALINE

    Tourmaline is the largest producer of gas in Canada. That is important because in a commodity business size is everything. Along with size comes scale, and that is the secret to not only being the biggest producer, but grinding cost out of the operation.

    Another contrast between Tourmaline and their American counterparts is growth of the revenue basis QoQ and YoY. TRMLF’s exposure to the premium plays in the WCSB makes this possible.

    TRMLF production summary
    TRMLF production summary (OTCPK:TRMLF)

    Investors are often asked for patience in return of capital. TRMLF has adopted the fixed plus variable dividend policy that sends a big chunk of free cash back to shareholders. Growth to $1.00 per share on an annual basis is programmed to for 2023 for the fixed dividend. As you can see, the variable dividend forecast for next year is simply prodigious.

  • UK approves first coal mine in decades, sparking anger among environmentalists as energy costs soar

    UK approves first coal mine in decades, sparking anger among environmentalists as energy costs soar

    The United Kingdom this week approved its first new coal mine in 30 years, provoking anger among environmentalists who said the move is a step back for the country’s ambitions toward clean renewable energy. 

    The decision on the mine in the Cumbria area of northwest England came hours after the Conservative-led government reversed a ban on building new onshore wind farms in Britain. That was viewed by some opponents as a cynical attempt to offset criticism of the mine decision.  

    https://www.foxbusiness.com/politics/uk-approves-first-coal-mine-decades-sparking-anger-among-environmentalists-energy-costs-soar

  • US scientists make major breakthrough in ‘limitless, zero-carbon’ fusion energy: report

    US scientists make major breakthrough in ‘limitless, zero-carbon’ fusion energy: report

    Scientists have been struggling since the 1950s to harness the fusion reaction that powers the sun. But no group has been able to produce more energy from the reaction than it consumes. 

    Though developing fusion power stations at scale is still decades away, the breakthrough has significant implications as the world seeks to ween itself off of fossil fuels. Fusion reactions emit zero carbon and do not produce any long-lasting radioactive waste. Per The Times, a small cup of hydrogen fuel could potentially power a house for hundreds of years. 

    “If this is confirmed, we are witnessing a moment of history,” said Dr Arthur Turrell, a plasma physicist, told the paper. “Scientists have struggled to show that fusion can release more energy than is put in since the 1950s, and the researchers at Lawrence Livermore seem to have finally and absolutely smashed this decades-old goal.” 

    https://www.foxbusiness.com/energy/us-scientists-make-major-breakthrough-limitless-zero-carbon-fusion-energy-report

  • SpaceX launches lunar lander for Japanese venture ispace, which aims to create an economy around the moon

    SpaceX launches lunar lander for Japanese venture ispace, which aims to create an economy around the moon

    • Japanese lunar exploration company ispace began its long-anticipated first mission on Sunday, with a SpaceX Falcon 9 rocket launching the venture’s lunar lander.
    • “This is the very, very beginning of a new era,” ispace founder and CEO Takeshi Hakamada told CNBC.
    • If successful, ispace would be the first private company to land on the moon – a feat previously accomplished by global superpowers.

    https://www.cnbc.com/2022/12/11/spacex-launches-japanese-ispace-lunar-lander-first-mission.html

  • Economic Calendar: Dec 12 – Dec 16

    Economic Calendar: Dec 12 – Dec 16

    Monday December 12

    China aggregate yuan financing and new loans

    Japan machine tool orders

    (8:30 a.m. ET) Canada’s national balance sheet and financial flow accounts for Q3.

    (2 p.m. ET) U.S. budget balance for November.

    (3:25 p.m. ET) Bank of Canada governor Tiff Macklem holds a fireside chat in Vancouver at the Business Council of British Columbia

    Earnings include: Mainstreet Equity Corp.

    ==

    Tuesday December 13

    Germany CPI

    (8:30 a.m. ET) Canada’s new motor vehicle sales for October. Estimate is a year-over-year decline of 5.0 per cent.

    (8:30 a.m. ET) U.S. CPI for November. The Street is projecting a rise of 0.3 per cent from October and 7.3 per cent year-over-year. That would be down from 0.4 per cent and 7.7 per cent, respectively, in the last monthly report.

    Also: U.S. Fed meeting begins.

    Earnings include: Transcontinental Inc.

    ==

    Wednesday December 14

    Japan core machine orders and industrial production

    Euro zone industrial production

    (8:30 a.m. ET) Canadian construction investment for October.

    (8:30 a.m. ET) Canada’s manufacturing sales and new orders for October.

    (8:30 a.m. ET) U.S. import prices for November. The Street expects a decline of 0.5 per cent from October but up 3.0 per cent year-over-year.

    (2 p.m. ET) U.S. Fed announcement with chair Jerome Powell’s press briefing to follow.

    Earnings include: Lennar Corp.

    ==

    Thursday December 15

    China industrial production, retail sales and fixed asset investment

    Japan trade balance

    Bank of England monetary policy announcement

    (8:15 a.m. ET) Canadian housing starts for November. The Street is forecasting an annualized rate decline of 4.5 per cent.

    (8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 10. Estimate is 234,000, up 4,000 from the previous week.

    (8:30 a.m. ET) U.S. retail sales for November. The Street expects a decline of 0.1 per cent from October.

    (8:30 a.m. ET) U.S. Philadelphia Fed Index for December.

    (9 a.m. ET) Canada’s existing home sales and average prices for November. Estimates are year-over-year declines of 39.0 per cent and 11.5 per cent, respectively.

    (9 a.m. ET) Canada’s MLS Home Price Index for November. Estimate is a decline of 4.0 per cent year-over-year.

    (9:15 a.m. ET) U.S. industrial production for November. Consensus is a rise of 0.1 per cent month-over-month with capacity utilization rising 0.1 per cent to 79.9 per cent.

    (10 a.m. ET) U.S. business inventories for October.

    Earnings include: Adobe Systems Inc.; Empire Co. Ltd.; Enghouse Systems Ltd.; Oracle Corp.

    ==

    Friday December 16

    Japan manufacturing and services PMI

    Euro zone PMI and CPI

    (8:30 a.m. ET) Canadian wholesale trade for October. Estimate is a month-over-month increase of 1.3 per cent.

    (8:30 a.m. ET) Canada’s new housing price index for November. Estimate is a decline of 0.3 per cent from October but up 4.0 per cent year-over-year.

    (8:30 a.m. ET) Canada’s international securities transactions for October.

    Earnings include: Accenture PLC

  • Oil rebounds from 2022 lows on Chinese demand hopes, tanker delays

    Oil rebounds from 2022 lows on Chinese demand hopes, tanker delays

    Oil rebounded on Thursday after four sessions of decline, boosted by hopes that easing anti-COVID measures in China will revive demand and by signs that some tankers carrying Russian oil have been delayed after a G7 price cap came into effect.

    China on Wednesday announced the most sweeping changes to its resolute anti-COVID regime since the pandemic began, while at least 20 oil tankers faced delays in crossing to the Mediterranean from Russia’s Black Sea ports.

    Brent crude rose 29 cents, or 0.4 per cent, to $77.46 a barrel by 0905 GMT, while U.S. West Texas Intermediate (WTI) crude gained 73 cents, or 1 per cent, to $72.74.

    “Today, we do see some green price action,” said Naeem Aslam, analyst at Avatrade. “Prices are oversold due to the intense sell-off for the past few days. However, the price action still doesn’t show a strong bullish bias.”

    Both Brent and U.S. crude hit 2022 lows on Wednesday, unwinding all the gains made after Russia’s invasion of Ukraine exacerbated the worst global energy supply crisis in decades and sent oil close to its all-time high of $147.

    Western officials were in talks with Turkish counterparts to resolve the tanker queues, a British Treasury official said on Wednesday, after the G7 and European Union rolled out new the restrictions on Dec. 5 aimed at Russian oil exports.

    The queues suggest that “available supply from the Black Sea is already affected by the punitive measure,” said Tamas Varga of oil broker PVM.

    “In a healthy economic climate, such a development would be the equivalent of firing the starting gun in the race back to $100.”

    Concerns of economic slowdown, weakening fuel demand and the prospect of more interest rate hikes in the United States weighed. The Federal Reserve is widely expected to raise interest rates by 50 basis points next week.

    While U.S. crude inventories fell last week, gasoline and distillate inventories surged, adding to concern about easing demand.

  • Bank of Canada delivers half-point rate hike, signals end of aggressive campaign may be near

    Bank of Canada delivers half-point rate hike, signals end of aggressive campaign may be near

    The Bank of Canada increased interest rates for the seventh consecutive time on Wednesday, surprising markets with another oversized move while signaling that it may be nearing the end of its historic rate-hike cycle.

    The bank’s governing council raised the benchmark lending rate by half a percentage point to 4.25 per cent, the highest level since early 2008.

    This is the latest step in a nine-month dash to increase Canadian borrowing costs, which has driven mortgage expenses sharply higher and plunged the housing market into a deep funk. The central bank is squeezing Canadian finances in an effort to slow spending throughout the economy and get the highest inflation in four decades under control.

    Investors were expecting a more dovish quarter-point increase. But even as the bank defied those expectations it softened its language about future rate increases – a sign that its rate-hike campaign is fast approaching a turning point, with a potential pause coming as early as January.

    “Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance,” the bank said in its one-page rate decision statement. In previous rate announcements, the bank had said that it expected rates “will need to rise further.”

    The bank said it remains “resolute” in its commitment to tackling high inflation, which is eroding wages and making life less affordable for Canadians.

    Bank of Canada rate decision: Follow live updates

    But after pushing the policy rate up by 400 basis points since March, in one of the fastest monetary policy tightening cycles on record, Bank of Canada Governor Tiff Macklem and his team are having to balance the risk of doing too little to fight inflation against the risk of doing too much and crashing the economy. (A basis point is 1/100th of a percentage point.)

    Interest-rate increases take time to affect the economy, often up to six to eight quarters. Sectors that rely on borrowed money, such as real estate and car sales, typically get hit first. Other industries are pinched over time, as people spend more money servicing their debt and have less to spend on other things.

    This lag means the Bank of Canada can’t immediately measure the effects of its rate hikes, which creates the risk that it will increase borrowing costs more than is necessary to bring inflation under control. The central bank is already forecasting near-zero growth over the next three quarters, putting the Canadian economy right on the edge of recession.

    “The tightening cycle likely has reached its zenith, but we’ll need the pain of these higher rates to persist for a while to stall economic growth and thereby cool inflation,” Canadian Imperial Bank of Commerce chief economist Avery Shenfeld wrote in a note to clients.

    Financial markets expect the Bank of Canada to stand pat at 4.25 per cent at its next rate decision on Jan. 25.

    Inflation has trended down since the summer. Annual Consumer Price Index inflation stood at 6.9 per cent in October, down from a peak of 8.1 per cent in June, and the bank noted that three-month indicators suggest that price pressures “may be losing momentum.” That said, inflation is still more than three times the central bank’s 2-per-cent target. It does not expect inflation to reach 2 per cent until 2024.

    Heading into Wednesday’s rate decision, Bay Street analysts were split over whether the bank would move by 25 or 50 basis points. Recent economic data has been ambiguous, sending conflicting signals about how much the economy is weakening in the face of higher interest rates.

    Canadian GDP grew nearly twice as fast as the Bank of Canada was expecting in the third quarter, and the unemployment rate remains near a historic low. The bank said in its rate statement that the economy continues to operate with “excess demand.” That means Canadians want to buy more than the economy can supply and businesses want to hire more workers than are available, pushing up both prices and wages.

    At the same time, there is growing evidence that higher interest rates are “restraining domestic demand,” the bank said. This is clearest in the housing market. National home sales were down 36 per cent year-over-year in October, and prices down 10 per cent.

    There are also signs that consumers are tightening their belts. Household spending fell 0.3 per cent in the third quarter, the first drop since the second quarter of 2021.

    The bank said there is more pain on the horizon, as “growth will essentially stall through the end of this year and the first half of next year.”

    Mr. Macklem said in a speech last month that unemployment needs to rise to get inflation under control, although he is not expecting joblessness to increase as sharply as it did in previous recessions.

    ‘The tightening cycle likely has reached its zenith’: How the Street is reacting to today’s BOC rate hike

    In a separate speech last month, the bank’s senior deputy governor, Carolyn Rogers, said homeowners with variable rate mortgages who stretched themselves financially to buy homes during the pandemic are experiencing a particularly “painful” adjustment. Bank of Canada research shows around half of all variable rate mortgages with fixed monthly payments have already hit “trigger rates,” which frequently means the borrowers need to up their monthly payments. This could rise to 65 per cent in the coming months, the bank projects.

    Variable rate mortgages are typically tied to commercial bank prime rates. Canada’s large banks all raised their prime rates to 6.45 per cent from 5.95 per cent on Wednesday after the Bank of Canada announcement.

    While Wednesday’s rate hike will squeeze some homeowners, the bank’s signal that it will stop raising rates soon is good news for the housing market, Royal LePage chief executive Phil Soper said in an interview.

    He said plenty of buyers are sitting on the sidelines, not because they can’t afford homes, but because they’re uncertain about the direction of the market. “It’s not a capacity issue. It’s a confidence issue,” he said.

    He thinks home prices have slightly farther to fall, and that they will bottom out in the first quarter of 2023 at about 12 per cent below the same quarter last year.

    The rate decision drew the ire of opposition politicians during Question Period in Ottawa on Wednesday. Conservative Party Leader Pierre Poilievre called it “another uppercut for Canadians,” and argued that federal spending is fuelling inflation and forcing the bank to tighten rates.

    NDP Leader Jagmeet Singh said the rate hike will “mean a lot of pain for Canadian families,” and called on the government to come up with “a way to tackle the inflation that doesn’t create pain for workers.”

    Liberal associate finance minister Randy Boissonnault responded that the Bank of Canada is independent from politics. “The bank is doing their job, we’re doing our job,” he said.

    Inflation has become a topic of intense political debate over the past year, and politicians on both the left and the right have been critical of the central bank. Mr. Poilievre has said he would fire Mr. Macklem if the Conservatives form government, while Mr. Singh has said the bank’s approach to inflation fighting has “absolutely no merit.”

    Josh Nye, senior economist with Royal Bank of Canada, said it’s too early to judge whether or not the bank’s aggressive rate-hike campaign has been a success.

    “Whether they have calibrated monetary policy properly to the situation, that’s only going to be apparent in hindsight. I think that will depend on how much economic activity slows in 2023 and how quickly inflation gets back down to the bank’s 2-per-cent target,” he said.

  • Live updates: Bank of Canada raises key interest rate by 50 basis points, delivering seventh consecutive increase

    Live updates: Bank of Canada raises key interest rate by 50 basis points, delivering seventh consecutive increase

    The latest on the Bank of Canada’s rate decision

    MARK RENDELL

    The Bank of Canada raised its benchmark interest rate by 50 basis points, surprising markets with another oversized rate hike and signaling that it may be nearing the end of its historic rate-hike cycle.

    This moves the central bank’s policy rate to 4.25 per cent from 3.75 per cent – the first time it has topped 4 per cent since early 2008.

    The Bank of Canada raised its benchmark interest rate by 50 basis points, surprising markets with another oversized rate hike while signaling that it may be nearing the end of its historic rate-hike cycle.

    The Wednesday announcement lifts the policy rate to 4.25 per cent from 3.75 per cent, the highest level since early 2008. Markets were expecting a smaller 25-basis-point increase. (A basis point is one hundredth of a percentage point).

    While the bank opted for another large move, it softened its language about future rate increases – a sign that its aggressive campaign against inflation may be approaching a turning point.

    “Looking ahead, Governing Council will be considering whether the policy interest rate needs to rise further to bring supply and demand back into balance,” the bank said in its one-page rate decision statement. In previous rate announcements, the bank had said that it expected rates “will need to rise further.”

    Bank of Canada rate decision: Follow live updates

    This shift in language will inform market expectations about how much further the bank intends to go before pausing its rate hikes. Markets are pricing a “terminal rate” of 4.25 per cent. Canadian bond yields rose slightly following the announcement, and the Loonie strengthened against the U.S. dollar.

    The bank has now increased interest rates seven times since March in an effort to tackle the highest inflation in decades. Higher interest rates make it more expensive for households and businesses to borrow money and service existing debts. The goal is to lower spending throughout the economy to slow the pace of price increases.

    Inflation has trended down since the summer. Annual consumer price index inflation stood at 6.9 per cent in October, down from a peak of 8.1 per cent in June, and the bank noted that three-month indicators suggest that price pressures “may be losing momentum.” But inflation is still more than three times the central bank’s 2-per-cent target and people’s expectations about future inflation remain elevated.

    “The tightening cycle likely has reached its zenith, but we’ll need the pain of these higher rates to persist for a while to stall economic growth and thereby cool inflation,” Canadian Imperial Bank of Commerce chief economist Avery Shenfeld wrote in a note to clients.

    ‘The tightening cycle likely has reached its zenith’: How the Street is reacting to today’s BOC rate hike

    Heading into the decision, Bay Street Analysts were split on whether the bank would move by 25 or 50 basis points. Recent economic data has been ambiguous, sending conflicting signals about how much the economy is weakening in the face of higher interest rates.

    The Bank of Canada highlighted the resilience of the economy in its rate statement, noting that GDP in the third quarter was “stronger than expected.” It said the economy continues to operate in “excess demand,” with tight labour markets and near record-low unemployment.

    At the same time, the bank said that higher rates are “restraining domestic demand.” The housing market is in a deep slump, with national sales down 36 per cent year-over-year in October, and prices down 10 percent. There are also signs that consumers are tightening their belts in response to higher rates. Household spending fell 0.3 per cent in the third quarter, the first drop since the second quarter of 2021.

    “We assume that the resilience of the labour market and a desire not to send too dovish a message will cause the Bank to enact one final 25-basis-point hike in January,” Stephen Brown, senior Canada economist with Capital Economics wrote in a note to clients. “But with Canadian oil prices tumbling below $50 in recent days, almost 40 per cent lower than the Bank assumed in its October Monetary Policy Report, it would not be a complete surprise if today marks the last hike in this cycle.”

    Monetary-policy changes take time to work through the economy, often up to six to eight quarters. This lag opens up the risk of overtightening if the bank is not careful. Over the past month-and-a-half, Bank of Canada Governor Tiff Macklem has begun arguing that the bank needs to balance doing too little to fight inflation against the risk of doing too much and crashing the economy.

    “Overall, the data since the October MPR support the Bank’s outlook that growth will essentially stall through the end of this year and the first half of next year,” the bank said. Its latest economic forecast from October shows near-zero growth for the next three quarters putting the Canadian economy right on the edge of recession.

    Deputy governor Sharon Kozicki will deliver a speech on Thursday explaining the bank’s decision. The next rate decision is on January 25.