Author: Consultant

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.

Oil climbs ahead of EU meeting on Russia sanctions

• 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

Japan’s Nikkei 225 jumps 2% as Asia stocks rise ahead of major economic data this week

• Shares in Asia-Pacific were higher in Monday trade, with Japanese stocks leading gains regionally.
• China is set to announce its official manufacturing Purchasing Managers’ Index for May on Tuesday, while U.S. jobs data is expected Friday.
• Markets in the U.S. are closed on Monday for a holiday.

https://www.cnbc.com/2022/05/30/asia-markets-china-economy-currencies-oil.html

At Davos, a World Economic Forum without economics

Gloomy and foreboding clouds loomed over the Swiss Alps at this year’s annual meeting of the World Economic Forum. Geopolitics dominated conversations in Davos more than ever before as war rages on in Ukraine, food shortages threaten and uncertainty mounts over the U.S.-China relationship.

Russia House on Davos’s promenade, formerly a hub for oligarchs and politicians conducting business, was transformed into an exhibition of alleged Russian war crimes, and the conference was rife with Ukrainian delegates, including the mayor of Kyiv, Vitali Klitschko, petitioning for further support and sanctions against their aggressor.

That conflict and other geopolitical developments, not least of which is the potential for famine in many parts of the world, have business leaders rightly concerned, but what was startling was the lack of emphasis on major economic issues that have them equally apprehensive.

In private conversation, virtually everyone agreed that the combination of inflation, stock-market declines, lockdowns in China and the growing possibility for a major global recession are contributing to a troubling economic outlook. And yet this year’s agenda was short on discussion of these issues. By comparison, in 2009, after the global financial crisis, the Forum was equally gloomy, but acutely focused on economic recovery plans and how the globalized system could respond to the shock.

Davos ends with Germany pushing global work on climate, war

Geopolitics and economics are inextricably linked and Davos usually serves as a place where the two realms can interact to discuss solutions. This year, something was different.

Unsurprisingly, Russian and Chinese delegates didn’t attend, but also absent were many Western politicians. The leading Canadian official there was François-Philippe Champagne, our Minister of Innovation, Science and Industry, but even he didn’t stay long enough to partake in an Invest in Canada event that was sparsely attended, largely thanks to the absence of any Canadian leaders.

Business leaders concerned with growing economic and geopolitical risks all wanted political leaders to be in Davos, to discuss Ukraine, sanctions, China and economic policy, but were left disappointed, and the lack of politicians only added to the uncertain mood. Notable exceptions included German Chancellor Olaf Scholz and Dutch Prime Minister Mark Rutte, who were present and engaged.

Geopolitical discussions, such as Volodymyr Zelensky’s virtual address, packed seats at the Forum. Conversely, discussions on economics were most notable for empty venues. It’s not as if business leaders aren’t seized with the multitude of threats facing the global economy, not least of which is rising inflation, but perhaps it was because on their own they are limited in how they can address them.

This was probably the year that political leaders needed to be at the Forum more than ever. However, it was also the year where it was most difficult for them to attend. During a cost-of-living crunch, a war in Europe, increased inequality, and people becoming more polarized and disenfranchised (not to mention the heightened conspiratorial theories around the Forum), many politicians wouldn’t dare be seen in Davos. That’s partly because of the fear of backlash from constituents and partly a failure to acknowledge that the private sector could contribute to the solution to many of the ills facing the world.

To be clear, it is equally a failure of the private sector to believe that issues such as climate change, which seem to have declined on the Davos agenda, cannot be solved without significant political and regulatory co-ordination and oversight.

In spite of many people’s skepticism about the Forum, those gathered there have a desire and an incentive to prevent the world being plunged into crisis. They come to work with politicians on energy transition, the impacts of supply chain disruptions, labour shortages, food supply and wealth inequality.

Whether the format of the Forum is effective is a separate question, especially as those most affected by these issues sadly are not part of the conversation. But we do need a venue to take on these issues, with both public and private sector involvement. And, in that regard, this year’s meeting failed.

Nevertheless, there were a few positive signs. It seems the shocks of the past two years and the lessons of the past two decades have galvanized a change in approach from capitalism’s leading proponents. Resilience, sustainability and long-termism have been incrementally advanced from the fringes of the Forum over its 50-year history and now have become central.

In addition, it was clear that technology is having positive benefits for the world and can be applied to complex public issues. For instance, a case study was presented about how big data and analytics (provided through a public-private partnership) helped Britain’s National Health Service lead the world on vaccine rollout and is now creating efficiency in dealing with that system’s COVID-19-caused backlog. It is model for other single-payer health systems, including our own.

It is examples such as these that demonstrate the positive impact of the World Economic Forum.

It makes sense that people are fed up with the status quo, but the reality is that with so many economic and geopolitical problems persisting and proliferating, government and business need to come together to chart a path forward. This was the year, above others, when politicians could have stood and defended their participation.

I am not a pessimist by nature, nor an alarmist, but there is a cacophony of economic issues that are very real and very urgent, starting with inflation. For summits such as this to be effective, we need the most powerful people in the world there to debate issues and, ideally, potential solutions. And, whether we like it or not, those people are still our politicians.