Author: Consultant

TSX Snaps 7-session Winning Streak, Ends Notably Lower

After seven successive days of gains, Canadian stocks drifted lower on Tuesday as worries about rising inflation and fears of tighter policy measures by the Federal Reserve and other central banks triggered selling at several counters.

The benchmark S&P/TSX Composite Index ended with a loss of 190.06 points or 0.91% at 20,729.34.

Data released by Statistics Canada before the opening bell this morning showed the pace of economic growth in Canada slowed in the first quarter compared with the end of 2021.

The data said real gross domestic product grew at an annualized rate of 3.1% in the first quarter, helped by business investment and household spending. That was down from an annualized rate of 6.6% in the fourth quarter of 2021 as export volumes dropped 2.4% for the quarter, following two consecutive quarterly increases, due in part to decreased trade in energy products.

Energy stocks were the major losers as oil prices turned weak on reports that some members of the Organization of the Petroleum Exporting Countries (OPEC) are in favor of suspending Russia’s participation in an oil-production deal.

The Energy Capped Index dropped 2.77%. Imperial Oil (IMO.TO), Canadian Natural Resources (CNQ.TO), Vermilion Energy (VET.TO), Enerplus Corp (ERF.TO) and Suncor Energy (SU.TO) ended lower by 3 to 4.2%.

The Health Care Capped Index shed 1.55%. Bausch Health Companies (BHC.TO) ended lower by 5.3%, while Well Health Technologies (WELL.TO), Tilray Inc (TLRY.TO) and Aurora Cannabis (ACB.TO) lost 4.9%, 4.25% and 3.1%, respectively.

The Information Technology Capped Index also shed more than 1.5%. Hut 8 Mining Corp (HUT.TO), BlackBerry (BB.TO), Softchoice Corp (SFTC.TO), Converge Technology Solutions (CTS.TO), Magnet Forensics (MAGT.TO), Nuvei Corp (NVEI.TO) and Docebo Inc (DCBO.TO) ended lower by 4 to 8.1%.

The Materials Index drifted down 1.38%. Lithium Americas Corp (LAC.TO) tanked 14.6%. Stelco Holdings (STLC.TO), Fortuna Silver Mines (FVI.TO), Teck Resources (TECK.B.TO), Capstone Mining Corp (CS.TO) and Silvercrest Metals (SIL.TO) lost 5 to 6.5%.

Quebecor Inc (QBR.A.TO), Nutrien (NTR.TO), Linamar Corporation (LNR.TO), Colliers International Group (CIGI.TO), Open Text Corporation (OTEX.TO), Dollarama Inc (DOL.TO) and Kinaxis (KXS.TO) gained 1 to 4.5%.

Russia widens Europe gas cuts and halts Dutch, Danish and German contracts

Russia widened its gas cuts to Europe on Tuesday with Gazprom saying it will turn off supplies to several “unfriendly” countries which have refused to accept Moscow’s roubles-for-gas payment scheme.

The move by the Russian gas giant is the latest retaliation to Western sanctions imposed on Moscow following its Feb. 24 invasion of Ukraine, escalating its economic battle with Brussels and pushing up European gas prices.

Gazprom said on Tuesday it had fully cut off gas supplies to Dutch gas trader GasTerra.

It later said it would also stop as of June 1 gas flows to Denmark’s Orsted and to Shell Energy for its contract on gas supplies to Germany, after both failed to make payments in roubles.

The announcements follow Monday’s agreement by European Union leaders to cut the European Union’s imports of Russian oil by 90% by year-end, the bloc’s toughest yet response to the invasion.

NO THREAT TO SUPPLY

GasTerra, which buys and trades gas on behalf of the Dutch government, said it had contracted elsewhere for the 2 billion cubic meters (bcm) of gas it had expected to receive from Gazprom through October.

“This is not yet seen as a threat to supplies,” said Economy Affairs Ministry spokesperson Pieter ten Bruggencate.

Orsted, which has also said there was no immediate risk to Denmark’s gas supplies, said on Tuesday it would turn to the European gas market to fill the gap.

“The gas for Denmark must, to a larger extent, be purchased on the European gas market. We expect this to be possible,” Orsted Chief Executive Mads Nipper said in a statement shortly after Gazprom’s announcement.

The benchmark front-month gas contract rose around 5% on Tuesday afternoon to around 91.05 euros/MWh but remained well below highs over 300 euros/MWh hit in early March.

“While the market was largely expecting both companies to be cut off, this development will make the supply-demand balance that much tighter,” ICIS analyst Tom Marzec-Manser said on Twitter.

Russian gas flows to Germany via the Nord Stream pipeline fell on Tuesday which analysts said was likely due to the Nederlands being cut off.

Moscow had already stopped natural gas supplies to Bulgaria, Poland and Finland citing their refusal to pay in Russian roubles, a demand made in response to Western sanctions that have isolated Russia.

German, Italian and French companies, however, have said they would engage with the scheme to maintain supplies.

The supply cuts have boosted already high gas prices, turbocharging inflation and spurring European governments and companies to chase alternative sources and the infrastructure to handle them, including floating storage and regasification units (FSRUs).

STORAGE

Europe has been rushing to fill its gas storage sites ahead of winter, wary of Russian supply cuts, which typically provides around 40% of Europe’s gas.

Dutch gas storage is now around 37% full, data from Gas Infrastructure Europe showed.

The Dutch government last week said it would increase subsidies to 406 million euros to encourage companies to fill the Bergermeer facility, one of the largest open-access gas storage facilities in Europe.

Danish gas storages are currently 55% full and will be able to supply all Danish and Swedish gas customers for five months if supplies from Germany get cut off, a letter from the Danish energy minister Dan Jorgensen to parliament showed.

GDP disappoints, but Bank of Canada unlikely to alter rate path

Canada’s economic growth slowed in the first quarter of 2022, but an acceleration in demand showed why the Bank of Canada is unlikely to deviate from its course of rapid interest rate hikes.

After adjusting for inflation, gross domestic product grew at an annualized pace of 3.1 per cent, slowing from 6.6 per cent in the fourth quarter of 2021, Statistics Canada said on Tuesday. While that growth was in line with the central bank’s expectations, it fell short of the median estimate from Bay Street analysts, who called for growth of 5.2 per cent.

The weak spot in Tuesday’s report was international trade, with both exports and imports falling. However, economists were largely upbeat about other details – notably, that consumers and businesses are continuing to spend amid sky-high inflation. Final domestic demand rose 4.8 per cent on an annualized basis, with hefty gains in household spending, business investment and purchases of residential real estate.

The Canadian economy also held up better than other major economies during a first quarter that was jolted by the Omicron variant of COVID-19. For instance, the United States and Japan posted GDP declines at the outset of the year, while growth was muted in the euro zone.

“The relative resilience of the Canadian economy in the quarter may be a broader theme for 2022, aided by its heavy commodity component and a greater capacity to rebound in the service sector following two years of heavy restrictions,” Bank of Montreal chief economist Doug Porter wrote in a note to clients.

Financial analysts said the GDP report was unlikely to redirect the Bank of Canada from its quickest pace of policy tightening in decades. The central bank is widely expected to hike its benchmark interest rate by half a percentage point on Wednesday, taking that rate to 1.5 per cent, as part of its bid to slow inflation, which recently hit a 31-year high of 6.8 per cent.

The bank’s policies are “now geared almost exclusively on scalding inflation – so a modest growth miss is not going to divert coming rate hikes one iota,” Mr. Porter added.

In various respects, the Canadian consumer appears to be in good shape. Compensation of employees rose 3.8 per cent in the first quarter in nominal terms, following a 2-per-cent rise in the fourth quarter. It was the largest growth in compensation since 1981, excluding the third quarter of 2020, when the country was rebounding from the first wave of COVID-19.

Canadians also hung on to more of their money. The household savings rate rose to 8.1 per cent of disposable income from 6.9 per cent – and far above the quarterly average of 3.4 per cent during the 2010s.

Households have amassed a bulk of savings during the pandemic, particularly those in higher income brackets, and that’s helping them to continue spending amid lofty inflation. Household spending rose at an annualized rate of 3.4 per cent, with strong purchases of durable goods.

The flip side is that, because people are able to keep spending, that’s helping to fuel the rapid climb in consumer prices. After Wednesday’s rate decision, several analysts expect the Bank of Canada to hike by another half a percentage point in July – a rapid pace of increases that some households could struggle to adapt to.

This cycle of monetary policy tightening has already led to weaker sales and falling prices in many of Canada’s exuberant housing markets.

However, that shift hadn’t yet materialized in Tuesday’s GDP report. Investment in residential real estate jumped by 18 per cent, on an annualized basis, driven by expenditures on renovations and costs associated with home purchases.

“Another large positive contribution from residential investment clearly won’t be repeated,” Andrew Grantham, senior economist at CIBC Capital Markets, said in a client note.

While trade slipped during the opening months of 2022, Canada’s terms of trade – the ratio between the price of exports and imports – jumped to a record high, owing to the recent surge of commodity prices, such as crude oil and lumber.

Before the Bell: May 31

Equities

Wall Street futures wavered early Tuesday as traders head back to work after a long weekend. Major European markets were mixed after a weaker start. TSX futures wavered despite a jump in crude prices after after the EU agreed to a partial ban on Russian oil.

In the early premarket period, futures tied to all three key U.S. indexes struggled for direction after a choppy overnight period. U.S. markets were closed on Monday. The S&P/TSX Composite Index rose 0.82 per cent on Monday, marking its seventh straight day of gains.

Sentiment drew support from news of easing COVID-19 restrictions in China. Shanghai authorities said they will lift the city’s lockdown from midnight on Wednesday, allowing private cars back on to the roads and people to freely move in and out of low-risk housing compounds, according to a Reuters report. Traders have been cautiously watching the situation in China, concerned that tough COVID-19 controls would impact the broader world economy.

In this country, Canadian investors will get a reading on March and first-quarter gross domestic product growth before the start of trading.

“RBC economists forecast Q1 GDPgrew at a 4.5% rate (annualized; consensus 5.2 per cent),” RBC chief currency strategist Adam Cole said.

“Residential investment is expected to tick lower on a dip in home starts and decelerating home resale markets. Net trade is tracking a sizeable subtraction with exports falling more than imports. But we expect consumer spending rebounded quickly following the disruption to spending on services from the Omicron variant in January.”

On the corporate side, The Globe’s Alexandra Posadzki reports that Rogers Communications Inc. and Shaw Communications Inc. have agreed not to close their $26-billion merger until they either reach a deal with the Commissioner of Competition or win a challenge in front of the Competition Tribunal. Matthew Boswell, the Commissioner of Competition, has filed an application to block the merger of the country’s two largest cable networks, arguing the takeover has already reduced competition for wireless services and would result in higher cellphone bills.

In the U.S., U.S. President Joe Biden and Federal Reserve Chair Jerome Powell are slated to meet at the White House on Tuesday as the Fed continues its campaign of hiking rates.

Wall Street will also get results from HP and Salesforce after the close of trading.

Overseas, the pan-European STOXX 600 slid 0.08 per cent in morning trading. Britain’s FTSE 100 edged up 0.48 per cent. Germany’s DAX and France’s CAC 40 were down 0.30 per cent and 0.66 per cent, respectively.

In Asia, Japan’s Nikkei closed down 0.33 per cent. Hong Kong’s Hang Seng gained 1.38 per cent.

S&P 500 FUTURES

4,138.75-17.00 (-0.41%)

TSX 60 FUTURES

1,257.40-6.00 (-0.47%)

DOW FUTURES

32,979.00-179.00 (-0.54%)

PAST DAY

-0.41%-0.47%-0.54%

CLOSE, MAY 27

6:44 A.M., MAY 31

SOURCE: BARCHART

Commodities

Crude prices jumped in early going after the EU agreed to a partial ban on Russian oil.

The day range on the Brent for July delivery is US$121.60 to US$124.10. The range on West Texas Intermediate is US$116.89 to US$119.43. Both benchmarks look set to close out May with their sixth month of gains.

This week, EU leaders agreed in principle to cut 90 per cent of oil imports from Russia by the end of 2022. The embargo exempts pipeline oil from Russia as a concession to Hungary.

“The price action by oil this past week has been ominous, suggesting that supplies of refined products is getting worse, and not better,” OANDA senior analyst Jeffrey Halley said.

“The EU oil ban on Russia further complicates that picture and I am wondering how long markets can continue bottom-fishing elsewhere while ignoring oil’s price rise.”

Sentiment also drew support from news that Shanghai will end its two-month long COVID-19 lockdown, allowing most residents to leave their homes and drive vehicles starting Wednesday.

Later in the week, members of the OPEC+ group are scheduled to meet to discuss production levels. Early reports suggest that the group will stick to its current plan of hiking output by 432,000 barrels per day.

Elsewhere, gold prices eased as the U.S. dollar firmed.

U.S. gold futures were nearly flat at US$1,858.00.

WTI

US$118.55+3.48 (3.02%)

HIGH GRADE COPPER

US$4.33+0.03 (0.62%)

SPOT GOLD

US$1,854.00-3.30 (-0.18%)

PAST DAY

3.02%0.62%-0.18%3.02%0.62%-0.18%

CLOSE, MAY 27

7:12 A.M., MAY 31

SOURCE: BARCHART

WTI

US$118.55+3.48 (3.02%)

HIGH GRADE COPPER

US$4.33+0.03 (0.62%)

SPOT GOLD

US$1,854.00-3.30 (-0.18%)

PAST DAY

CLOSE, MAY 27

7:12 A.M., MAY 31

SOURCE: BARCHART

Currencies

The Canadian dollar was weaker as its U.S. counterpart steadied against a group of world currencies.

The day range on the loonie is 78.83 US cents to 79.04 US cents.

Traders will be watching March and first-quarter GDP figures later in the morning. Those numbers come ahead of Wednesday’s Bank of Canada rate decision.

On world markets, the U.S. dollar index was at 101.71, having fallen to a five-week low of 101.29 overnight, according to figures from Reuters.

The euro was at US$1.0737, down 0.4 per cent, having hit a five-week high of $1.0786 overnight. The euro is set for a 2.2-per-cent gain in May. That would be the biggest monthly rise in a year.

In bonds, the yield on the benchmark U.S. 10-year note edged up and was at 2.821 per cent by early Tuesday morning.

More company news

Cenovus Energy Inc said on Tuesday it would restart its West White Rose project offshore Newfoundland and Labrador

South African miner Gold Fields Ltd agreed to buy Canada-based precious metals miner Yamana Gold Inc in an all-share deal valuing the Toronto-listed company at US$6.7-billion. Gold Fields said its shareholders will own about 61 per cent of the combined group, while Yamana Gold shareholders will own around 39 per cent after the deal completes.

Unilever named activist investor Nelson Peltz as a new board member on Tuesday after his Trian Fund Management disclosed a 1.5-per-cent stake in the consumer goods giant. Unilever said it had held “extensive and constructive discussions” with Peltz, who will join as a non-executive director from July.

Economic news

(830 am ET) Canada real GDP for the first quarter.

(9 am ET) S&P Corelogic Case-Shiller 20-city Home Price Index.

(945 am ET) Chicago PMI.

(10 am ET) Conference Board Consumer Confidence Index for May.

With Reuters and The Canadian Press

(33) Gravitas Plus: Which countries could go the Sri Lanka way – YouTube

PUBLISHED MON, MAY 30 202212:50 AM EDT

• Brent crude futures gained 46 cents, or 0.4%, to $119.89 a barrel at 0111 GMT.
• U.S. West Texas Intermediate (WTI) crude futures jumped 60 cents, or 0.5%, to $115.67 a barrel, extending solid gains from last week.

https://www.cnbc.com/2022/05/30/oil-markets-russia-european-union.html

CGI completes acquisition of French-based Harwell Management to offer a broader range of financial consulting services

Paris, France, May 30, 2022

CGI (NYSE: GIB) (TSX: GIB.A) has completed, through its subsidiary CGI France SAS (“CGI France”), the previously announced acquisition of Harwell Management, a leading management consulting firm specializing in financial services for the French market. As the demand for management consulting services rises worldwide, CGI continues to broaden its capabilities to ensure the delivery of end-to-end capabilities, deep industry knowledge and experience, close collaboration, and trusted partnership for clients in France and across the globe.

Founded in 2009, Harwell Management has 150 employees who will join CGI Business Consulting in France, expanding its offerings in various financial services segments, including retail banking, corporate and investment banking, capital markets, insurance and healthcare mutuals, as well as other specialized financial services, such as leasing, personal financing and factoring.

https://www.cgi.com/en/cgi-completes-acquisition-french-based-harwell-management-offer-broader-range-financial-consulting-services#:~:text=Paris%2C%20France%2C%20May%2030%2C%202022%20CGI%20%28NYSE%3A%20GIB%29,specializing%20in%20financial%20services%20for%20the%20French%20market.

Oil Prices Hit Over Two-month Highs Ahead Of EU Meeting

Oil prices hit their highest level in more than two months on Monday, as China eased COVID-19 restrictions and moved to stimulate the country’s faltering economy.

Benchmark Brent crude futures rose half a percent to $116.12 a barrel, while U.S. crude futures were up half a percent at $115.64.

Both Beijing and Shanghai eased COVID restrictions, with authorities in Shanghai rolling out a total of 50 stimulus measures to support the local economy, which has been hit hard by the restrictions.

Investors also await the outcome of a two-day meeting of EU member states later in the day to debate the sixth package of sanctions to punish Moscow.

A high-ranking EU official stated that it is critical to keep working and not give up until the deal on the sixth package of sanctions is reached.

The EU failed on Sunday to agree on an embargo of Russian oil over Moscow’s invasion of Ukraine.

Also, the oil producers’ international cartel, the Organization of the Petroleum Exporting Countries (OPEC), is set to rebuff Western calls to speed up their oil output additions when they meet on Thursday.

Published: 5/30/2022 1:53 PM ET

Canadian Market Set For Another Bright Close

Canadian stocks are extending gains to a seventh straight session thanks to sustained buying at several counters from across various sectors on Monday.

Gains in Asian and European markets amid optimism about economic recovery in China following an announcement of additional stimulus and easing of coronavirus restrictions in Shanghai contribute to the bullish sentiment in the Canadian market.

The benchmark S&P/TSX Composite Index is up 169.11 points or 0.82% at 20,917.69.

Energy, consumer discretionary and technology stocks are up with strong gains. Financials, healthcare and consumer staples shares are among the other major gainers.

The Energy Capped Index is up nearly 2%. Advantage Oil & Gas (AAV.TO), Secure Energy Services (SES.TO), Parex Resources (PXT.TO), Baytex Energy (BTE.TO), Paramount Resources (POU.TO), Cenovus Energy (CVE.TO), Peyto Exploration (PEY.TO), MEG Energy (MEG.TO) and Arc Resources (ARX.TO) are up 2.5 to 6%.

The Consumer Discretionary Capped Index is up 1.81%. Canada Goose Holdings (GOOS.TO), Brp Inc (DOO.TO), Linamar Corp (LNR.TO), Restaurant Brands International (QSR.TO), Sleep Country Canada Holdings (ZZZ.TO) and Spin Master Corp (TOY.TO) are gaining 2 to 3.1%.

In the technology section, Hut 8 Mining Corp (HUT.TO) is soaring nearly 11%. Softchoice Corp (SFTC.TO) is rising 7.5%, while Converge Technology Solutions (CTS.TO), Lightspeed Commerce (LSPD.TO), Tecsys Inc (TCS.TO) and Dye & Durham (DND.TO) are up 5 to 6%.

Among financials shares, Goeasy (GSY.TO) is up 3.5% and CDN Western Bank (CWB.TO) is gaining 2.3%, while Canadian Imperial Bank of Commerce (CM.TO), Laurentian Bank (LB.TO), Royal Bank of Canada (RY.TO) and Sun Life Financial (SLF.TO) are up 1 to 1.2%.

Data released by Statistics Canada showed Canada recorded a current account of C$5.03 billion in the first quarter of 2022, from the downwardly revised gap of C$0.14 billion in the previous quarter.