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  • Russia says it won’t accept an oil price cap; warns of cutoffs

    Russia says it won’t accept an oil price cap; warns of cutoffs

    Russian authorities rejected a price cap on the country’s oil set by Ukraine’s Western supporters and threatened Saturday to stop supplying the nations that endorsed it.

    Australia, Britain, Canada, Japan, the United States and the 27-nation European Union agreed Friday to cap what they would pay for Russian oil at $60-per-barrel. The limit is set to take effect Monday, along with an EU embargo on Russian oil shipped by sea.

    Kremlin spokesman Dmitry Peskov said Russia needed to analyze the situation before deciding on a specific response but that it would not accept the price ceiling. Russia’s permanent representative to international organizations in Vienna, Mikhail Ulyanov, warned that the cap’s European backers would come to rue their decision.

    OPEC+ will keep oil policy unchanged in review talks, sources say

    Eric Reguly: The new price cap on Russian oil will not deliver the fatal blow to Putin’s war machine, maybe not even a bruise

    “From this year, Europe will live without Russian oil,” Ulyanov tweeted. “Moscow has already made it clear that it will not supply oil to those countries that support anti-market price caps. Wait, very soon the EU will accuse Russia of using oil as a weapon.”

    The office of Ukrainian President Volodymyr Zelensky, meanwhile, called Saturday for a lower price cap, saying the one adopted by the EU and the Group of Seven leading economies didn’t go far enough.

    “It would be necessary to lower it to $30 in order to destroy the enemy’s economy faster,” Andriy Yermak, the head of Zelensky’s office, wrote on Telegram, staking out a position also favoured by Poland – a leading critic of Russian President Vladimir Putin’s war in Ukraine.

    Under Friday’s agreements, insurance companies and other firms needed to ship oil would only be able to deal with Russian crude if the oil is priced at or below the cap. Most insurers are located in the EU and the United Kingdom and could be required to observe the ceiling.

    The Russian Embassy in Washington insisted that Russian oil “will continue to be in demand” and criticized the price limit as “reshaping the basic principles of the functioning of free markets.” A post on the embassy’s Telegram channel predicted the per-barrel cap would lead to “a widespread increase in uncertainty and higher costs for consumers of raw materials.”

    The price cap aims to put an economic squeeze on Russia and further crimp its ability to finance a war that has killed an untold number of civilians and fighters, driven millions of Ukrainians from their homes and weighed on the world economy for more than nine months.

    The General Staff of the Ukrainian Armed Forces reported that since Friday Russia’s forces had fired five missiles, carried out 27 air strikes and launched 44 shelling attacks against Ukraine’s military positions and civilian infrastructure.

    Kyrylo Tymoshenko, the deputy head of the president’s office, said the attacks killed one civilian and wounded four others in eastern Ukraine’s Donetsk region. According to the U.K. Defense Ministry, Russian forces “continue to invest a large element of their overall military effort and firepower” around the small Donetsk city of Bakhmut, which they have spent weeks trying to capture.

    In southern Ukraine’s Kherson province, whose capital city of the same name was liberated by Ukrainian forces three weeks ago following a Russian retreat, Gov. Yaroslav Yanushkevich said evacuations of civilians stuck in Russian-held territory across the Dnieper River would resume temporarily.

    Russian forces pulled back to the river’s eastern bank last month. Yanushkevich said a ban on crossing the waterway would be lifted during daylight hours for three days for Ukrainian citizens who “did not have time to leave the temporarily occupied territory.” His announcement cited a “possible intensification of hostilities in this area.”

    Kherson is one of four regions that Putin illegally annexed in September and vowed to defend as Russian territory. From their new positions, Russian troops have regularly shelled Kherson city and nearby infrastructure in recent days, leaving many residents without power. Running water remained unavailable in much of the city.

    The city continued to suffer heavy shelling Saturday that left many residents disoriented, toppled power lines and dumped torn-off tree branches on the roads.

    “When we start to repair (electricity networks), the shelling starts immediately,” said Oleksandr Kravchenko, who is in charge of high-voltage networks in Kherson. “We just repair electric lines and on the next day we have to repair lines again.”

    Ukrainian authorities also reported intense fighting in Luhansk and Russian shelling of northeastern Ukraine’s Kharkiv region, which Russia’s soldiers mostly withdrew from in September.

    The mayor of the city of Kharkiv, which remained under Ukrainian control during Russia’s occupation of other parts of the region, said some 500 apartment buildings were damaged beyond repair, and nearly 220 schools and kindergartens were damaged or destroyed. He estimated the cost of the damage at $9 billion.

    Russian Defense Minister Sergei Shoigu met Saturday in Minsk with the president and defense minister of Belarus, which hosts Russian troops and artillery. Belarus has said its own forces are not taking part in the war, but Ukrainian officials have frequently expressed concern that they could be induced to cross the border into northern Ukraine.

    Belarusian President Alexander Lukashenko said at the meeting that his troops and Russian forces train in co-ordination. “We ready ourselves as one grouping, one army. Everyone knows it. We were not hiding it,” he was quoted as saying by the news agency Interfax.

  • CIBC got clobbered this week. The stock is worth a look

    CIBC got clobbered this week. The stock is worth a look

    If you’re worried about the ability of Canadian Imperial Bank of Commerce CM-T -0.70%decrease to navigate through rising interest rates, a deteriorating housing market and an unstable economy, relax: The market is way ahead of you.

    After reporting disappointing quarterly financial results on Thursday, CIBC’s share price fell 7.7 per cent, which is an unusually severe one-day decline for a big-bank stock.

    The share price is now down 28 per cent from a high point in early February, making it the worst performer among its peers over this period.

    But CIBC also stands out with an attractive dividend yield of 5.7 per cent and a valuation that is at the low end of its historical range. Does that make it a bargain worth betting on?

    Canadian banks have been struggling this year as rising interest rates weigh on economic activity and raise concerns about the financial health of homeowners with large mortgages.

    As a group, the Big Six banks are down by an average of 9 per cent. For a sector that outperforms the broader stock market over the long term, this year is a fail: The banks have lagged the S&P/TSX Composite Index by 5 percentage points in 2022 with one month left.

    This week, the banks’ fiscal-fourth-quarter results shed some light on why the group has lost the affection of investors. As a group, the banks are setting aside more money to cover bad loans and reporting flat or even lower profits than a year ago.

    CIBC offered a particularly uninspiring snapshot.

    The bank’s net income declined 18 per cent from the same quarter last year, and 29 per cent from the previous quarter, largely because it set aside far more money to cover bad loans given the dimmer outlook for U.S. and Canadian economic activity.

    These provisions for credit losses jumped to $436-million in the fourth quarter, up 459 per cent from the same quarter last year.

    “This quarter doesn’t really reflect the earnings power of the bank,” Victor Dodig, CIBC’s chief executive officer, said during a conference call with analysts on Thursday.

    Mr. Dodig said he preferred to focus on the full fiscal year, in which the bank acquired retailer Costco’s Canadian credit card portfolio, with two million cardholders. CIBC also added a net 350,000 clients to the bank, 38 per cent of them deemed highly desirable affluent bank customers with money to invest.

    However, a number of analysts didn’t like what they saw in the fourth quarter, and responded by cutting their target prices, or where they expect CIBC shares to trade within 12 months.

    Gabriel Dechaine, an analyst at National Bank of Canada, slashed his target price to $67 from $80 previously, which is a 16-per-cent haircut. He also changed his recommendation on the stock to “sector perform” from “outperform,” essentially removing the “buy” recommendation he had on the stock for the past two years.

    One key concern of analysts: Margins on loans are being squeezed, particularly in the case of mortgage renewals – a serious hurdle for CIBC given the bank’s relatively high exposure to the Canadian housing market.

    “This issue could persist over the next couple of quarters, which is reflected in management’s guidance for improved margins only by the second half of fiscal 2023,” Mr. Dechaine said in a note.

    Still, long-term investors with an appetite for risk might see a few reasons to give the stock some consideration.

    For one thing, Canadian bank stocks have gone in wildly different directions this year. At one extreme, top-performing Royal Bank of Canada – big, diversified and deemed a safer bet in an uncertain environment – has outperformed CIBC by more than 19 percentage points in 2022.

    This wide dispersion suggests that the stock market is expecting an economic downturn that will disproportionately affect CIBC, yet the bank is already preparing for economic uncertainty with provisions for loan losses and a robust financial buffer.

    For another, CIBC’s valuation is down. According to data from RBC Dominion Securities, released last week before the banks reported their fourth-quarter results, CIBC’s stock trades at just 8.6 times estimated 2023 earnings. That’s well below the 15-year average of 9.8 and it suggests the downside risk could be low.

    And lastly, consider CIBC’s dividend yield. At 5.7 per cent, it offers investors a handsome reward for taking a chance on an unpopular stock – and a powerful incentive to wait out economic uncertainty.

  • OPEC+ agrees to stick to its existing policy of reducing oil production ahead of Russia sanctions

    OPEC+ agrees to stick to its existing policy of reducing oil production ahead of Russia sanctions

    • The European Union is poised to ban all imports of Russian seaborne crude from Monday.
    • The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.
    • Oil prices have fallen to below $90 a barrel from more than $120 in early June ahead of potentially disruptive sanctions on Russian oil

    An influential alliance of oil producers on Sunday agreed to stay the course on output policy ahead of a pending ban from the European Union on Russian crude.

    OPEC and non-OPEC producers, a group of 23 oil-producing nations known as OPEC+, decided to stick to its existing policy of reducing oil production by 2 million barrels per day, or about 2% of world demand, from November until the end of 2023.

    Energy analysts had expected OPEC+ to consider fresh price-supporting production cuts ahead of a possible double blow to Russia’s oil revenues.

    The European Union is poised to ban all imports of Russian seaborne crude from Monday, while the U.S. and other members of the G-7 will impose a price cap on the oil Russia sells to countries around the world.

    The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.

    Oil prices have fallen to below $90 a barrel from more than $120 in early June ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.

    Led by Saudi Arabia and Russia, OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for the group to pump more to lower fuel prices and help the global economy.

  • Manufacturing orders from China down 40% in unrelenting demand collapse

    Manufacturing orders from China down 40% in unrelenting demand collapse

    • U.S. manufacturing orders in China are down 40% in what a logistics manager described to CNBC as an unrelenting demand collapse.
    • Asia-based shipping firm HLS recently told clients it is a “very bad time for the shipping industry.”
    • China to U.S. container volume was down 21% between August and November.
    • Chinese factories are shutting down two weeks earlier than usual ahead of Chinese New Year.

    https://www.cnbc.com/2022/12/04/manufacturing-orders-from-china-down-40percent-in-demand-collapse.html

  • OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

    OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

    • OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
    • The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.

    https://www.cnbc.com/2022/12/02/opec-meeting-oil-output-cuts-on-the-table-ahead-of-russia-sanctions.html

  • Beijing, Shenzhen loosen more Covid curbs as China easing gathers pace

    Beijing, Shenzhen loosen more Covid curbs as China easing gathers pace

    • Although daily cases hover near all-time highs, some cities are taking steps to loosen Covid-19 testing requirements and quarantine rules amid an economic slowdown and public frustration that has boiled over into unrest.
    • Beijing residents cheered the removal of Covid-19 testing booths while Shenzhen followed other cities in announcing it would no longer require commuters to present their test results to travel.
    • China began tweaking its approach last month, urging localities to become more targeted. Initial reactions, however, were marked with confusion and even tighter lockdowns as cities scrambled to keep a lid on rising cases.

    https://www.cnbc.com/2022/12/03/beijing-shenzhen-loosen-more-covid-curbs-as-china-easing-gathers-pace.html

  • Economic Calendar: Dec 5 – Dec 9

    Economic Calendar: Dec 5 – Dec 9

    Monday December 5

    China, Japan and Euro zone services and composite PMI

    (8:30 a.m. ET) Canadian building permits for October. Estimate is an increase of 5.0 per cent month-over-month.

    (10 a.m. ET) U.S. factory orders for October. The Street is forecasting a month-over-month increase of 0.7 per cent.

    (10 a.m. ET) U.S. ISM services PMI for November.

    ==

    Tuesday December 6

    China foreign reserves and trade surplus

    Japan household spending

    Germany factory orders

    (8:30 a.m. ET) Canada’s merchandise trade balance for October.

    (8:30 a.m. ET) U.S. goods and services trade balance for October.

    (10 a.m. ET) Canadian Ivey PMI for November.

    Earnings include: AutoZone Inc.; Evertz Technologies Ltd.; Ferguson PLC

    ==

    Wednesday December 7

    Euro zone GDP

    Germany industrial production

    (8:30 a.m. ET) U.S. productivity for Q3. The Street expects an annualized rate rise of 0.3 per cent with unit labour costs increasing 3.2 per cent.

    (10 a.m. ET) Bank of Canada policy announcement.

    (3 p.m. ET) U.S. consumer credit for October.

    Earnings include: Brown Forman; Campbell Soup Co.; Descartes Systems Group Inc.; Dollarama Inc.; North West Co. Inc.; Snowflake Inc.

    ==

    Thursday December 8

    Japan GDP, current account balance and bank lending

    (8:30 a.m. ET) U.S. initial jobless claims for week of Dec. 3. Estimate is 230,000, up 5,000 from the previous week.

    (12:30 p.m. ET) Bank of Canada Deputy Governor Sharon Kozicki delivers the Economic Progress Report in Montreal.

    (10 a.m. ET) U.S. quarterly services survey for Q3.

    Also: Quebec’s fiscal update

    Earnings include: Broadcom Inc.; Chewy Inc.; Costco Wholesale Corp.; Lululemon Athletica Inc.

    ==

    Friday December 9

    China CPI, PPI, aggregate yuan financing, new loans and money supply

    (8:30 a.m. ET) Canadian capacity utilization for Q3.

    (8:30 a.m. ET) U.S. PPI for November. Consensus is a increase of 0.2 per cent from October and up 7.2 per cent year-over-year.

    (10 a.m. ET) U.S. wholesale trade for October.

    (10 a.m. ET) U.S. University of Michigan Consumer Sentiment Index for December (preliminary reading).

    Earnings include: Laurentian Bank of Canada

  • OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

    OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap

    • OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
    • The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.
    • RBC Capital Markets’ Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.

    https://www.cnbc.com/2022/12/02/opec-meeting-oil-output-cuts-on-the-table-ahead-of-russia-sanctions.html

  • Payrolls and wages blow past expectations, flying in the face of Fed rate hikes

    Payrolls and wages blow past expectations, flying in the face of Fed rate hikes

    • Nonfarm payrolls increased 263,000 for the month while the unemployment rate was 3.7%, the Labor Department reported Friday.
    • The payrolls number was well above the 200,000 estimate, while the unemployment rate was in line.
    • Average hourly earnings jumped 0.6% for the month, double the estimate, and 5.1% annually versus the 4.6% expectation.

    https://www.cnbc.com/2022/12/02/jobs-report-november-2022.html