Author: Consultant

Saudi crown prince’s visit to Turkey signals an ‘utterly remarkable’ posture change for Erdogan

• Since 2020, an informal boycott on Turkish goods in Saudi Arabia has been in place, and the kingdom for a period barred travel and flights into Turkey.
• A joint statement issued following the leaders’ talks detailed a new period of bilateral ties, including the removal of trade restrictions, more scheduled talks and a possible currency swap.
• This comes as Turkey faces an economic crisis, with inflation at a record high of more than 70% and a severely depreciated currency.

https://www.cnbc.com/2022/06/24/saudi-crown-prince-visit-turkey-in-major-posture-change-for-erdogan.html

Powell acknowledges Fed rate hikes could cause unemployment to climb

Powell – who was testifying before the House Financial Services Committee as part of a regular, semi-annual update on monetary policy – said it is “certainly possible” to control inflation without causing unemployment to rise, but suggested that may not be the case.

“There is a risk that unemployment will move up, from what is a historically low level though,” the Fed head said. 

Economic projections from the Fed’s June meeting show that officials expect the national unemployment rate to climb slightly over the next two years, rising from the current rate of 3.6% to 3.9% at the end of 2023 and 4.1% at the end of 2024. Powell said that an unemployment rate of that level would “still be very strong,” though it means some workers could be laid off. 

https://www.foxbusiness.com/economy/powell-acknowledges-fed-rate-hikes-could-cause-unemployment-climb

More than 22 million housing units needed in Canada by 2030 to solve affordability crisis: CMHC

Canada would need to more than double the number of homes it is projected to build by 2030 to restore housing affordability, the national housing agency said on Thursday.

The Canada Mortgage and Housing Corporation (CMHC)said 3.5 million more houses would be needed, on top of the 2.3 million housing units Canada is projected to add to the housing pool by 2030.

The agency said the provinces of Ontario and British Columbia are going to contribute two-thirds of the housing supply gap by 2030, while Quebec would also need more houses.

Home prices in Canada soared during the coronavirus pandemic, making housing unaffordable for many people in large cities like Toronto and Vancouver.

“Canada’s approach to housing supply needs to be rethought and done differently,” said Aled ab Iorwerth, CMHC’s deputy chief economist.

“There must be a drastic transformation of the housing sector, including government policies and processes, and an ‘all-hands-on-deck’ approach to increasing the supply of housing to meet demand,” Iorwerth added.

Canada has an ambitious plan to double the pace of homebuilding within a decade but finding enough skilled workers could be challenging due to a tight labor market.

CMHC said alternative approaches to construction could be tapped and more homes could also be added to the pool by increasing co-living arrangements and redeveloping existing properties.

Building more homes is a key peg of C$9.5 billion ($7.3 billion) in housing spending outlined by Prime Minister Justin Trudeau’s Liberal government in their 2022 budget.

At midday (June 23): Resource stocks send TSX lower

Canada’s main stock index fell on Thursday, led by weakness in resource stocks and on concerns over a global recession due to aggressive interest rate hikes.

At 10:39 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 60.38 points, or 0.32%, at 18,943.66.

Meanwhile, U.S. stock indexes inched higher as easing government bond yields lifted high-valued growth stocks.

“This is more a continuation of what we saw yesterday, i.e the sense that even though (Fed Chair Jerome) Powell reiterated he would be coming down strongly on inflation at the possible risk of growth, stocks took some comfort from that as rampant inflation is just as negative for equity valuations as is lower growth,” said Stuart Cole, head macro economist at Equiti Capital.

“But uncertainty is still the name of the game, and this is why we are seeing asset price moves that don’t always seem to make too much sense.”

Powell said on Wednesday the U.S. Federal Reserve is “strongly committed” to bringing down inflation that is running at a 40-year high while policymakers are not trying to cause a recession in the process.

Bombardier Inc jumped 4% to the top of the index after it said on Wednesday that workers on a key program for the business jet maker ratified a new labor contract that will deliver pay hikes of up to 18.5% over five years.

The broader industrial sector rose 0.4%, while the energy sector slid 1.7% as oil prices edged higher on Thursday after earlier falls as investors weighed the risks of recession and how fuel demand will be affected by rising interest rates and tight supplies.

Brent crude futures rose by 50 cents, or 0.5%, to $112.24, having dropped to as low as $108.04 earlier in the session.

U.S. West Texas Intermediate (WTI) crude futures were up 35 cents, or 0.3%, at $106.54 after touching a session low of $102.32.

In Toronto, the materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.4%, weighed down by weakness in copper prices.

In the previous session, the benchmark index slipped after data showed that domestic inflation accelerated to 7.7% in May, the highest since January 1983.

Meanwhile, Bank of Canada Senior Deputy Governor Carolyn Rogers said on Wednesday that inflation in Canada was much too high and did not rule out a 75-basis-point increase at the central bank’s July decision

Stocks rose in morning trading on Wall Street Thursday and added to gains for the week as investors remain focused on inflation and rising interest rates.

The S&P 500 rose 0.5%. The Dow Jones Industrial Average rose 101 points, or 0.3%, to 30,580 and the Nasdaq rose 0.7%.

Big technology and health care companies did much of the heavy lifting. Microsoft rose 1.2% and Johnson & Johnson rose 1.5%.

Energy stocks fell as oil prices edged lower. Valero fell 2.6%.

Bond yields fell significantly. The yield on the 10-year Treasury fell to 3.03% from 3.15% late Wednesday.

Major indexes are on track for weekly gains amid turbulent trading and a broader slump that has kept the benchmark S&P 500 in the red for 10 of the last 11 weeks. Stocks have swung between sharp gains and losses as investors try to determine whether a recession is looming.

The central bank is attempting to temper inflation’s impact with higher interest rates, but Wall Street is worried that it could go too far in slowing economic growth and actually bring on a recession.

Investors are monitoring Fed Chair Jerome Powell’s second day of testimony to Congress. He is testifying to a House committee Thursday, a day after testifying to a Senate committee.

On Wednesday Powell said a recession was “certainly a possibility” as the U.S. central bank tries to rein in inflation. He is speaking to Congress a week after the Fed raised its benchmark interest rate by three quarters of a percentage point, its biggest hike in nearly three decades. Fed policymakers also forecast a more accelerated pace of rate hikes this year and next than they had predicted three months ago, with its key rate to reach 3.8% by the end of 2023. That would be its highest level in 15 years.

Earlier Thursday the Labor Department said fewer Americans applied for jobless benefits last week as the U.S. job market remains robust despite four-decade high inflation. The solid job market is a bright point in an otherwise weakening economy, with consumer sentiment and retail sales showing increasing damage from inflation.

Stubbornly high inflation and weak data from other sectors of the economy remain a key concern for Wall Street. High prices on everything from food to clothing have pressured consumers to shift spending from big ticket items like electronics to necessities. The pressure has been worsened by record-high gasoline prices that show no sign of abating amid a supply and demand disconnect.

Reuters and The Associated Press

Canada’s inflation rate spikes to 7.7% in May, highest since 1983

Canadian inflation accelerated to the highest rate in nearly four decades in May as calls broaden for policy makers to find new ways of curbing runaway price growth.

The consumer price index (CPI) rose 7.7 per cent in May from a year earlier, rising from April’s 6.8-per-cent pace, Statistics Canada said on Wednesday. It was the highest inflation rate since 1983 and part of a broader surge in prices that’s taken hold in advanced economies.

The recent jump in energy prices, stoked by the Russia-Ukraine war, is having a tangible effect on the numbers. Gasoline prices rose 12 per cent in May alone and were up 48 per cent from a year earlier; the national average price for regular unleaded remains north of $2 a litre.

Super savers are fighting rising grocery costs – and inflation – one deal at a time

Still, consumers are feeling the pressure on several fronts – from surging costs in the grocery aisle and at furniture stores, to pricey hotel rates and escalating rents.

“Price pressures continued to be broad-based, pinching the pocketbooks of Canadians and in some cases affecting their ability to meet day-to-day expenses,” Statscan said in its report.

To tamp down inflation, central bankers have embarked on their quickest pace of interest rate hikes in decades. The Bank of Canada has raised its benchmark interest rate at three successive meetings, taking it to 1.5 per cent from a pandemic low of 0.25 per cent. Last week, the U.S. Federal Reserve hiked its key rate by three-quarters of a percentage point, bringing the target range to between 1.5 per cent and 1.75 per cent. Central bankers have indicated that several more rate hikes are coming in order to bring inflation to heel.

The Bank of Canada will make its next rate decision on July 13. Several financial analysts expect the central bank to match the Fed with its own outsized hike of 75 basis points.

“The Bank of Canada needs to get a handle on prices soon,” Royce Mendes, macro strategist at Desjardins Securities, wrote in a note to clients. “The acceleration in inflation will likely force the Bank of Canada to raise rates a further 75 [basis points], a jumbo-sized move central bankers should have made earlier this month.”

Global markets have plunged recently as investors sour on the state of the economy. Central bankers are trying to tame inflation via higher interest rates, but without sending the economy into a recession – an outcome that is dimming as lofty inflation persists.

Of late, there have been growing calls for governments to find new ways of easing the financial pressures that households are under. On Sunday, Bank of Nova Scotia published a report that called on the federal Liberal Party to do more to tackle inflation, largely via less government spending. “It is fair to say that fiscal policy authorities in Canada are doing nothing of any significance to slow inflation at the moment,” the report said.

Speaking to a Bay Street audience last week, Deputy Prime Minister Chrystia Freeland pointed to $8.9-billion in previously announced measures that will help various Canadians with their living expenses, including a 10-per-cent increase in Old Age Security for seniors over 75 and increased funding for child care and rent support. Ms. Freeland did not announce any new measures that day.

U.S. Treasury Secretary Janet Yellen, who met with Ms. Freeland in Toronto on Monday, said the White House was considering a range of policy options to tackle inflation, including a gas tax cut. Ms. Freeland would not rule anything out, but said a reduction in gas taxes would hamper efforts to shrink the deficit, and she pointed to carbon tax rebates that households receive.

On both sides of the border, consumers are growing more pessimistic about the economy. Thus far, their spending is holding up well, helped by the hordes of cash that many households accumulated during the pandemic, when spending options were limited. But those savings are being eroded by high inflation, and waning confidence could translate into weaker spending.

Empire Reports Fourth Quarter and Fiscal 2022 Results

Empire Company Limited (“Empire” or the “Company”) (TSX:EMP-A.TO) today announced its financial results for the fourth quarter and full year ended May 7, 2022. For the quarter, the Company recorded net earnings of $178.5 million ($0.68 per share) compared to $171.9 million ($0.64 per share) last year.

Empire Reports Fourth Quarter and Fiscal 2022 Results (newswire.ca)

Before the Bell: What every Canadian investor needs to know today

Equities

Wall Street futures fell early Wednesday after the previous session’s bounce as traders await fresh comments from Federal Reserve chair Jerome Powell. Major European markets were down, giving up gains from the previous day. TSX futures were also weaker.

In the early premarket period, futures linked to all three main U.S. indexes were underwater, with Nasdaq futures off by roughly 2 per cent. On Tuesday, the Nasdaq ended up 2.51 per cent while the S&P 500 added 2.45 per cent and the Dow gained more than 600 points. The S&P/TSX Composite Index finished up 0.38 per cent extending the rebound from Friday’s rout on gains in energy shares.

On Wednesday, markets will have a close eye on an appearance by Mr. Powell on Capitol Hill, looking for indications of how aggressive the Fed will be in hiking rates as it looks to temper high inflation.

“Jerome Powell’s semiannual testimony could turn the market mood sour again as the Fed chief is expected to reiterate his strong commitment to fighting inflation even if it means slower economy and a softer jobs market,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.

“Yesterday’s rally in stocks could be another dead cat bounce, and we may see the market painted in red in the following sessions,” she said.

In this country, inflation is front and centre with the release of the May consumer price index figures from Statistics Canada ahead of the start of trading.

In April, the annual rate of inflation hit a decades high of 6.8 per cent and economists are expecting to see a further spike in this morning’s report. Forecasts suggest the annual rate could touch 7.4 per cent in May. Economists are increasingly expecting the Bank of Canada to hike rates at its next policy meeting by 75 basis points following a similar move recently by the Fed.

“Our economists expect Canadian CPI to have jumped yet again, to 7.4 per cent from 6.8 per cent in April, driven mainly by surging prices at the pump and grocery bills,” RBC chief currency strategist Adam Cole said.

“Pressure on energy and food prices in particular will persist. But prices are rising across the board. Almost 60 per cent of the CPI basket is growing faster than the top end of the Bank of Canada’s 1-per-cent to 3-per-cent target range.”

Inflationary pressures along with the Fed’s latest outsized move on rates raise the odds that the Bank of Canada will follow suit in July, he said.

“The pace and magnitude of future rate hikes still depends heavily on inflation going forward,” Mr. Cole said. “And roughly half of Canada’s current headline rate is driven by global rather than domestic cost pressures.”

On the corporate side, Canadian investors will get results early Wednesday from Sobeys-parent Empire Co. Ltd.

Overseas, the pan-European STOXX 600 fell 1.67 per cent morning trading. Britain’s FTSE 100 was down 1.31 per cent. Germany’s DAX and France’s CAC 40 were off 2.27 per cent and 1.78 per cent, respectively.

In Asia, Japan’s Nikkei finished down 0.37 per cent. Hong Kong’s Hang Seng dropped 2.56 per cent on weakness in tech stocks.

TSX 60 FUTURES

1,149.70-13.00 (-1.12%)

DOW FUTURES

30,173.00-352.00 (-1.15%)

S&P 500 FUTURES

3,716.75-51.00 (-1.35%)

PAST DAY

-1.12%-1.15%-1.35%4:28 A.M., JUNE 22

CLOSE, JUNE 21

5:26 A.M., JUNE 22

SOURCE: BARCHART

Commodities

Crude prices fell in early going with an expected move by U.S. President Joe Biden to ease costs for drivers tempering sentiment.

The day range on Brent is US$108.62 to US$114.45. The range on West Texas Intermediate is US$103.20 to US$109.76. Both benchmarks were down more than 4 per cent in the predawn period.

“There is a distinct lack of drivers behind this move, and certainly no headlines to justify it,” OANDA senior analyst Jeffrey Halley said.

“I surmise that President Biden’s expected announcement of a temporary suspension of Federal fuel taxes [on Wednesday] has prompted the selling, and I do note the U.S.-centric WTI contract is leading the charge lower.”

Later in the day, Mr. Biden is expected to call for a temporary suspension of the U.S. federal tax on gasoline, according to a report by Reuters. The move is aimed at addressing high costs for consumers and soaring inflationary pressures.

Later Wednesday, traders will also got the first of two weekly U.S. inventory reports, with new figures from the American Petroleum Institute. More official government figures will follow on Thursday morning.

In other commodities, gold prices slid alongside a firmer U.S. dollar.

Spot gold fell 0.3 per cent to US$1,826.41 per ounce by early Wednesday morning, extending losses to a fourth straight session. U.S. gold futures dropped 0.6 per cent to US$1,827.40.

“Although gold’s interminable range-trading continued overnight, the falls of the past three sessions hint that any upward momentum for the yellow metal is doing an Elvis and is leaving the building,” Mr. Halley said.

“Gold has been grinding lower, even as U.S. yields and the U.S. dollar trade sideways,” Mr. Halley said.

SPOT GOLD

US$1,831.30-8.50 (-0.46%)

HIGH GRADE COPPER

US$3.90-0.14 (-3.55%)

WTI

US$104.04-5.42 (-4.95%)

PAST DAY

-0.41%-3.32%-5.00%

CLOSE, JUNE 21

5:05 A.M., JUNE 22

SOURCE: BARCHART

Currencies

The Canadian dollar was weaker, hit by uncertain risk sentiment and lower commodities prices, while its U.S. counterpart advanced against a basket of world currencies.

The day range on the loonie is 76.94 US cents to 77.43 US cents.

Canadian investors will get inflation figures ahead of the start of trading with economists expecting to see another spike in price pressures.

On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was up 0.33 per cent at 104.8, according to figures from Reuters.

The euro fell 0.4 per cent to US$1.0497.

The yen slid 0.3 per cent to 136.3 per U.S. dollar, having hit 136.71 in early trade, its lowest since October 1998, Reuters reports.

Other commodities-linked currencies were also lower. The Norwegian krone fell 1.3 per cent against the U.S. dollar. The Australian dollar slid 1.1 per cent to US$0.6898 by early Wednesday.

In bonds, the yield on the U.S. 10-year note was lower at 3.222 per cent.

CANADIAN DOLLAR/U.S. DOLLAR

US$0.7708-0.0032 (-0.4122%)

PAST DAY

PREV. CLOSE

0:00 A.M., JUNE 22

US$0.7711

5:05 A.M., JUNE 22

US$0.7708

SOURCE: BARCHART

More company news

Boeing expects supply chain problems to persist almost until the end of 2023, led by labour shortages at mid-tier and smaller suppliers, partly due to the faster-than-expected return of demand, its chief executive said on Wednesday. Boeing said last month that production of its 737 aircraft had been slowed by shortages of a single type of wiring connector, while some of its airline customers had been forced to cancel flights due to a lack of staff in the post-pandemic recovery. “The shift from demand to now supply issues … is remarkable, the speed with which it happened,” Boeing Chief Executive David Calhoun said at Bloomberg’s Qatar Economic Forum in Doha.

Economic news

(8:30 a.m. ET) Canada’s CPI for May.

(9:30 a.m. ET) U.S. Fed Chair Jerome Powell testifies to the Senate Banking Committee.

With Reuters and The Canadian Press

PUBLISHED TUE, JUN 21 20226:07 PM EDTUPDATED 23 MIN AGO

U.S. stock index futures fell early Wednesday after the major averages jumped in regular trading hours, attempting to claw back some losses following weeks of selling.

Futures contracts tied to the Dow Jones Industrial Average fell 420 points or 1.4%, while S&P 500 futures declined 1.6%. Nasdaq 100 futures fell 1.8%.

The Dow on Tuesday surged 641 points, or 2.15%. The S&P 500 added 2.45%, turning in its best day since May 4. The jump comes after the benchmark index slumped 5.79% last week in its worst weekly performance since March 2020.

The Nasdaq Composite advanced 2.51% on Tuesday, following its tenth week of losses in the last 11 weeks.

Growing fears that the economy will tip into a recession have recently weighed on stocks. The Federal Reserve last week hiked interest rates by three-quarters of a percentage point, the central bank’s largest rate increase since 1994.

The move came as the Fed tries to cool inflation, which has surged to a 40-year high.

“We don’t see a U.S. or global recession in ’22 or ’23 in our base case, but it’s clear that the risks of a hard landing are rising,” UBS said Tuesday in a note to clients.

“Even if the economy does slip into a recession, however, it should be a shallow one given the strength of consumer and bank balance sheets,” the firm added.

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Goldman Sachs, meantime, believes a recession is becoming increasingly likely for the U.S. economy, saying that the risks of a recession are “higher and more front-loaded.”

“The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply,” the firm said in a note to clients.

Tuesday’s rally begs the question of whether the action is short-term relief after weeks of selling, or a meaningful change in sentiment. Tuesday’s strength was broad-based. All 11 S&P sectors registered gains on the day, with energy leading the way, climbing 5.8%.

“Our expectations are that market volatility will likely persist near term until the actions taken by the Federal Reserve thus far … and the actions it takes going forward have had time to work through the system,” Oppenheimer said Tuesday in a note to clients.

Fed Chair Jerome Powell will appear before Congress on Wednesday, kicking off two days of testimony. On the earnings front, KB Home will post results after the market closes on Wednesday.

Retirement accounts lose trillions in stock rut

https://www.foxbusiness.com/markets/retirement-accounts-lose-trillions-stock-rut