Author: Consultant

Earnings: Aug 1 – Aug 5

Economic Calendar: Aug 1 – Aug 5

Monday August 1

Canadian markets closed

China, Japan and Euro zone manufacturing PMI

Germany retail sales

(10 a.m. ET) U.S. ISM manufacturing PMI for July. The Street expects a reading of 52.0, down from 53.0 in June.

(10 a.m. ET) U.S. construction spending for June. Consensus is an increase of 0.3 per cent from May.

Earnings include: Activision Blizzard Inc.; Devon Energy Corp.; Mosaic Co.; Pinterest Inc.; Simon Property Group Inc.

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Tuesday August 2

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for June.

Also: Canadian and U.S. auto sales for July.

Earnings include: Advanced Micro Devices Inc.; Airbnb Inc.; Air Canada; Capital Power Corp.; Caterpillar Inc.; Definity Financial Corp.; Dream Industrial REIT; Finning International Inc.; Gilead Sciences Inc.; Gibson Energy Inc.; International Petroleum Corp.; PayPal Holdings Inc.; S&P Global Inc.; SSR Mining Inc.; Starbucks Corp.; Waste Connections Inc.

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Wednesday August 3

China and Japan services and composite PMI

Euro zone PPI, retail sales and services and composite PMI

(10 a.m. ET) U.S. factory orders for June. Consensus is an increase of 1.0 per cent month-over-month.

(10 a.m. ET) U.S. ISM Services PMI for July.

Also: OPEC+ meeting

Earnings include: B2Gold Corp.; Booking Holdings Inc.; Boralex Inc.; Brookfield Infrastructure Partners LP; Ceridian HCM Holdings Inc.; Colliers International Group Inc.; Endeavour Mining Corp.; Enerplus Inc.; Goeasy Ltd.; Great-West Lifeco Inc.; Green Thumb Industries Inc.; Innergex Renewable Energy Inc.; Moderna Inc.; Nutrien Ltd.; NuVista Energy Ltd.; Ovintiv Inc.; Sun Life Financial Inc.; Tilray Inc.

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Thursday August 4

Germany factory orders

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

(8:30 a.m. ET) Canadian building permits for June.

(8:30 a.m. ET) U.S initial jobless claims for week of July 30. Estimate is 257,000, up 1,000 from the previous week.

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

Earnings include: Advantage Oil & Gas Ltd.; Amgen Inc.; BCE Inc.; Bombardier Inc.; Canadian Natural Resources Ltd.; ConocoPhillips; Constellation Software Inc.; Eli Lilly and Co.; First Majestic Silver Corp.; Gildan Activewear Inc.; IGM Financial Inc.; Kinaxis Inc.; Labrador Iron Ore Royalty Corp.; Lightspeed Commerce Inc.; Maple Leaf Foods Inc.; Primo Water Corp.; Open Text Corp.; Parkland Fuel Corp.; Pembina Pipeline Corp.; Resolute Forest Products Inc.; Restaurant Brands International Inc.; Ritchie Bros Auctioneers; Saputo Inc.; SNC-Lavalin Group Inc.; Suncor Energy Inc.; Thomson Reuters Corp.

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Friday August 5

Japan household spending

Germany industrial production

(8:30 a.m. ET) Canadian employment for July. Estimate is an increase of 0.5 per cent, or 15,000 jobs, with the unemployment rate rising by 0.1 per cent to 5.0 per cent.

(8:30 a.m. ET) U.S. nonfarm payrolls for July. Consensus is an increase of 250,000 jobs from June with the unemployment rate steady at 3.6 per cent.

(10 a.m. ET) Canada’s Ivey PMI for July.

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

Earnings include: Brookfield Business Partners LP; Brookfield Renewable Partners LP; Power Corporation of Canada; Premium Brands Holdings Corp.; Telus Corp.; Telus International; TransAlta Corp.; Turquoise Hill Resources Ltd.; Uni-Select Inc.

Savings are slowly dripping away as deposit interest lags far behind inflation

The savings accounts of Canadians have sprung a leak.

As inflation tops eight per cent, anyone with money in the bank is seeing their savings drip away at the fastest rate on record because interest rates for savings accounts, still largely languishing at around one per cent, haven’t kept up.

“They will lose money. The value of their savings is decreasing,” said Claire Célérier, an associate professor of finance at the University of Toronto’s Rotman School of Management.

It’s a sharp contrast to the last time inflation ran this hot. In 1981, inflation peaked at over 12 per cent, but Statistics Canada data says bank accounts were paying out 19 per cent interest, and even in 1990 when inflation was running a little under five per cent, accounts were paying out over nine per cent.

There are several reasons for the lag, but part of the problem is the concentration of Canada’s banking sector, said Prof. Célérier.

“When there is lower competition between banks, then it takes more time for them to adjust rates on deposit accounts.”

Banks simply don’t have much incentive to change rates unless they have to, she said.

“When banks don’t increase rates on deposits they’re making more profits … It’s a very easy way to make profits, to have a low rate on deposit accounts.”

Part of what boosted rates in the early 1980s was the introduction of money market mutual funds, providing a competitive alternative to bank accounts for average savers.

There are an increasing number of online banks and credit unions with competitive rates. After the Bank of Canada raised its key interest rate by one percentage point in July, Oaken Financial boosted its rate from 1.65 per cent to 2.25 per cent, while Duca credit union increased its rate from 3.1 per cent to 3.25 per cent, said Natasha Macmillan, Ratehub.ca’s director of everyday banking.

Canadians, however, don’t tend to switch banks very often. An Accenture survey from 2020 found that fewer than four per cent of consumers said they had switched their primary bank account in the last year.

Some banks have also started to increase rates, though often via short-term promotions and other restrictions, and it’s not across the board.

“Banks are very quick to pass on the higher interest rates on the borrowing side but are much slower to do so for those that are seeking to save,” said Ms. Macmillan.

Scotiabank is offering a temporary rate of up to 4.05 per cent interest thanks to several time-limited bonuses (some tied to new deposits) on top of their regular 1.35 per cent rate. CIBC is offering up to 3.55 per cent interest that then drops to 0.8 per cent after 120 days, up from a February 1.5 per cent promotional rate that dropped to 0.3 per cent.

TD Bank, meanwhile, offers 0.05 per cent interest on balances above $5,000 for its high interest savings account (it does offer a separate account that pays one per cent for balances above $10,000), RBC offers 0.8 per cent for its high interest account and BMO has a one per cent savings option.

Macmillan said that more people moving to alternative lenders could put more pressure on the big players.

“As more Canadians are getting more comfortable shopping around or moving to a bank that they might not recognize as much, kind of the big five, big six banks will start to feel that competitive pressure, and increasingly start to change their rates accordingly.”

Part of the challenge though is that banks are not so desperate for deposits after Canadians have seen savings swell during the pandemic.

“The banks right now are flush with cash and liquidity, and their deposit levels are still elevated,” said Carl De Souza, senior vice-president of North American financial institutions at DBRS Morningstar.

“So there’s less pressure to increase the deposit rate, unless deposits start reducing dramatically or a competitor raises rates.”

Mr. De Souza noted that credit unions offer higher rates in part because they’re designed to serve members, and not just make a profit for shareholders like banks, but that there is still some hesitation among consumers.

“Certain individuals may not want to put money with credit unions because they perceive them to be riskier than large banks, despite the higher rates that those credit unions pay.”

Many credit unions, however, also haven’t raised rates much. Vancity is still offering 0.75 per cent interest on its main accounts since it also doesn’t have a strong need for more deposits, said chief financial officer Clayton Buckingham.

“Really how we’re setting rates is looking at overall funding needs for the organization.”

Higher customer deposits have helped meet the higher loan demand and buffered the credit union’s need for more funds, but that could change if the market shifts more, said Mr. Buckingham.

“It comes down to the competitive market. That’s driving the majority of movement, so if rates are going up at the rest of the banks and credit unions out there, then we need to follow suit.”

He said customers are instead gravitating to Vancity’s term deposits, which is similar to a guaranteed investment certificate. The products, which are linked more closely to bond rates, have climbed much faster than deposit rates, with some institutions offering rates above five per cent for longer term commitments.

Mr. Buckingham noted that it’s also still early days for inflation in general with tremendous uncertainty ahead, so financial institutions are proceeding cautiously. If deposits keep tracking down as people dip into their savings to cover increasing costs then financial institutions may have to raise rates to attract deposits, but if loan demand drops over economic worries then lenders might not need as much capital on hand.

“We’re seeing just a starting impact of what may happen in the high inflationary environment … for now it’s still everybody figuring this out.”

China markets rise after private survey shows Chinese factory activity grew; HSBC shares up 5%

• Mainland China stocks rose along with most other Asia-Pacific indexes on Monday as a private survey on Chinese factory activity showed slight growth at 50.4.
• Over the weekend, China’s official Purchasing Managers’ Index reading for July came in at 49, down from 50.2 in June and lower than the expected 50.4.
• On Friday in the U.S., Alibaba was added to a list of companies at risk of delisting under the Holding Foreign Companies Accountable Act. U.S.-listed shares plunged 11% in the regular trading session.

https://www.cnbc.com/2022/08/01/asia-markets-caixin-manufacturing-pmi-china-currencies-oil.html

Oil prices slip ahead of OPEC+ meeting

• Oil prices dropped early on Monday as investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.
• Brent crude futures dropped 63 cents, or 0.6%, to $103.34 a barrel by 0000 GMT. U.S. West Texas Intermediate crude was at $97.87 a barrel, down 75 cents, or 0.7%, after hitting a session low of $97.55 when trading commenced in Asia.

Oil prices dropped early on Monday as investors braced for this week’s meeting of officials from OPEC and other top producers on supply adjustments.

Brent crude futures dropped 63 cents, or 0.6%, to $103.34 a barrel by 0000 GMT. U.S. West Texas Intermediate crude was at $97.87 a barrel, down 75 cents, or 0.7%, after hitting a session low of $97.55 when trading commenced in Asia.

Both contracts rebounded more than $2 a barrel on Friday as risk appetite improved among investors. However, both Brent and WTI ended July with their second straight monthly losses for the first time since 2020, as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.

ANZ analysts said fuel sales to drivers in Britain are waning, while gasoline demand remains below its five-year average for this time of the year. Reflecting this, analysts in a Reuters poll reduced for the first time since April their forecast for 2022 average Brent prices to $105.75 a barrel, and to $101.28 for WTI.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, will meet on Wednesday to decide on September output.

Two of eight OPEC+ sources in a Reuters survey said a modest increase for September will be discussed at the Aug. 3 meeting, while the rest said output would likely be held steady.

The meeting comes after U.S. President Joe Biden visited Saudi Arabia last month.

“While President Biden’s visit to Saudi Arabia produced no immediate oil deliverables, we believe that the Kingdom will reciprocate by continuing to gradually increase output,” RBC Capital analyst Helima Croft said in a note.

The start of August sees OPEC+ having fully unwound record output cuts in place since the Covid-19 pandemic took hold in 2020.

The group’s new secretary general Haitham al-Ghais reiterated on Sunday that Russia’s membership in OPEC+ is vital for the success of the agreement, Kuwait’s Alrai newspaper reported.

Meanwhile, U.S. oil production continued to climb as the rig count rose by 11 in July, increasing for a record 23rd month in a row, data from Baker Hughes showed.

Mainland China markets rise after private survey shows Chinese factory activity grew slightly

• Mainland China stocks rose along with most other Asia-Pacific indexes on Monday as a private survey on Chinese factory activity showed slight growth at 50.4.
• Over the weekend, China’s official Purchasing Managers’ Index reading for July came in at 49, down from 50.2 in June and lower than the expected 50.4.
• On Friday in the U.S., Alibaba was added to a list of companies at risk of delisting under the Holding Foreign Companies Accountable Act. U.S.-listed shares plunged 11% in the regular trading session.

https://www.cnbc.com/2022/08/01/asia-markets-caixin-manufacturing-pmi-china-currencies-oil.html

George Weston Limited Reports Second Quarter 2022 Results

George Weston Limited (TSX: WN) (“GWL” or the “Company”) today announced its consolidated unaudited results for the 12 weeks ended June 18, 2022⁽²⁾.

GWL’s 2022 Second Quarter Report has been filed on SEDAR and is available at sedar.com and in the Investor Centre section of the Company’s website at weston.ca.

“Loblaw and Choice Properties delivered strong and consistent operating results during the second quarter and are well-positioned in the current economic environment,” said Galen G. Weston, Chairman and CEO, George Weston Limited. “George Weston’s strong and stable market-leading businesses continue to drive long-term value as they execute against their strategic agendas.”

Loblaw Companies Limited (“Loblaw”) delivered strong operational and financial results as it continued to execute on retail excellence in its core businesses, while advancing its growth and efficiencies initiatives. Loblaw’s drug retail performance continued to drive overall margin expansion, as sales benefited from growth in higher margin front store categories. Loblaw’s positive trend in food retail continued with its conventional stores performing well relative to peers and sales growth in its discount banners, heightened by the strength of No Frills^® and Maxi^® hard-discount stores and Loblaw’s value focused control brand no name^®. In the quarter, Loblaw continued to pursue its strategic growth agenda by completing the acquisition of Lifemark Health Group (“Lifemark”) and announcing PC Express Rapid Delivery, furthering Loblaw’s purpose to help Canadians Live Life Well.

Choice Properties Real Estate Investment Trust (“Choice Properties”) delivered solid operating results in the second quarter with improved occupancy across its portfolio and advancements in its development initiatives. With a focus on its long-term strategy, Choice Properties continued to execute on its mixed-use and industrial development projects and completed seven property transactions totaling $228 million. Subsequent to the end of the second quarter of 2022, Choice Properties successfully issued $500 million of 10-year term unsecured debentures and redeemed $300 million of debentures coming due, reinforcing its strong and flexible capital structure.

https://www.newswire.ca/news-releases/george-weston-limited-reports-second-quarter-2022-results-809731393.html

Auto Parts Maker Magna Posts Q2 Loss As It Records Impairment Charge In Russia

Magna International Inc. posted a loss in its most recent quarter as it recorded a non-cash impairment charge related to its investment in Russia.

The Ontario-based auto parts maker, which keeps its books in U.S. dollars, says it lost US$156 million or 54 cents per diluted share in the second quarter, which includes $1.24 of non-cash impairment charges related to the company’s investment in Russia.

The results compared with earnings of US$424 million or US$1.40 per diluted share in the same quarter of 2021.

Adjusted net income fell to US$243 million or 83 cents per share, compared with US$426 million or US$1.40 per share a year earlier.

Magna says sales for the three months ended June 30 were US$9.36 billion, a 3.6 per cent increase from US$9.03 billion last year.

The company says higher sales were mainly due to a two per cent increase in global light vehicle production, largely driven by a 14 per cent increase in North America.

“Our second quarter results were largely in line with our expectations, excluding the impairment of our investment in Russia,” Magna CEO Swamy Kotagiri said in a statement Friday.

“While we anticipate ongoing industry disruption through at least the remainder of 2022, we expect light vehicle production and our earnings to increase in the second half of the year, compared to the first half.”

Imperial Oil Second Quarter Profit Soars Amid Higher Production And Energy Prices

CALGARY — Imperial Oil Ltd. recorded a meteoric rise in profit in its latest quarter amid soaring energy prices and higher production.

The Calgary-based company says its net income in the second quarter was $2.41 billion or $3.63 per share, more than six times higher than the $366 million or 50 cents per share it recorded in the same period of 2021.

Total revenue and other income in the three months ended June 30 amount to $17.31 billion, compared with $8.05 billion last year.

Imperial says its upstream production was 413,000 gross oil equivalent barrels per day, the highest second quarter in more than 30 years.

The company also announced a third quarter dividend of 34 cents per share.

Brad Corson, Imperial’s chairman, president and CEO, says the company’s results are underpinned by an ongoing focus on safe and reliable operations and commodity price strength.

This report by The Canadian Press was first published July 29, 2022.