Author: Consultant

Canada’s annual inflation rate edges up to 6.8% in April

Canada’s annual inflation rate accelerated again in April, edging ahead of analyst expectations, largely driven by rising food and shelter prices, Statistics Canada data showed on Wednesday.

Headline inflation hit 6.8% in April, just beating analyst forecasts that the annual rate would stay flat at 6.7%, and edging closer to the 6.9% hit in January 1991. It was the 13th consecutive month above the Bank of Canada’s 1-3% control range.

Grocery prices rose 9.7% in April, the largest increase since September 1981, with consumers paying more for nearly everything at the grocery store, said Statscan. Prices for starchy staple foods like pasta and bread led gains.

“Russia’s invasion of Ukraine in late February put upward price pressure on food products that use wheat,” said Statscan. “Poor weather in growing regions has also impacted prices for food.”

Statscan, which will change how its tracks used car prices starting with its release next month, said in a separate paper that March’s headline rate would have been 6.9% instead of 6.7% had the new methodology been in place at the last basket update.

Shelter prices in April rose at their fastest pace since June 1983, as high housing costs and rising rent continued to drive gains, with mortgage interest costs rising on the month for the first time since April 2020.

Gasoline prices fell slightly in April from March. Still, consumers paid 36.3% more at the pump for gasoline in April compared with a year-ago.

The CPI common measure, which the Bank of Canada says is the best gauge of the economy’s performance, rose to 3.2% from an upwardly revised 3.0% in March and ahead of analyst forecasts of 2.9%. CPI trim was 5.1% and CPI median was 4.4%.

The Canadian dollar was trading at 1.2807 to the greenback, or 78.08 U.S. cents.

The pandemic housing boom is winding down. Economists forecast a 10-20% price correction

Economists are predicting that Canadian home prices will fall as much as 20 per cent this year as higher interest rates begin to hit the country’s booming real estate market.

Mortgage rates are expected to climb again as the Bank of Canada aggressively hikes interest rates to deal with runaway inflation. Economists expect higher borrowing costs will lead to a significant price drop in some of the hottest markets.

Toronto-Dominion Bank economist Rishi Sondhi forecasts a double-digit percentage decline in the national average home price over the March to December period this year. Bank of Montreal senior economist Robert Kavcic predicts a 10-per-cent to 20-per-cent drop in the home price index in certain regions.

“When we speak of housing correction it’s not a question of if, but where, how much and for how long,” Mr. Kavcic said in a research note. “Suburban markets in Ontario look shakiest,” he said.

The national home price index, which adjusts for pricing volatility, fell 0.6 per cent to $866,700 from March to April on a seasonally adjusted basis, according to the Canadian Real Estate Association, or CREA. That was the first drop since April, 2020, when homeowners struggled to sell their properties amid the pandemic economic lockdown.

The current drop in home prices was led by smaller markets in Southern Ontario. Oakville-Milton’s home price index was down 5.6 per cent from March to April, while London was off 4 per cent and Cambridge was down by 3.9 per cent, according to CREA.

The housing slowdown has been triggered by a rapid increase in borrowing costs over the past few months. The Bank of Canada’s next interest-rate announcement is scheduled for June 1. The central bank is widely expected to hike interest rates by another 50 basis points.

Realtors have described a sudden change in buyer sentiment. Some homes are not fetching any offers and sitting on the market for upward of a month. That is in contrast to the first two years of the pandemic when homes drew dozens of bidders and sold for hundreds of thousands of dollars over the listed price.

“The pandemic housing boom is clearly winding down. Bidding wars are easing and prices are beginning to flatten,” said Phil Soper, chief executive officer of Royal LePage.

“When markets overshoot as they have for the past two years, they correct,” he said, adding that it was too soon to say that the pendulum had swung completely over into a buyer’s market and that he is observing instances of both multiple offers and homes not selling.

Over all, CREA said the number of resales fell 12.6 per cent from March to April on a seasonally adjusted basis, a sharper drop than the previous month, with volumes falling in most regions across the country.

Cailey Heaps, a realtor who has been selling homes in Toronto for more than two decades, said she is still seeing multiple offers above the listed price but also said: “We are not seeing the same frenzy that was present in the early months of the year.”

CREA said a little more than half of the country was in a balanced market for the first time since June, 2020, when the economy was starting to reopen. Although the number of new listings fell from March to April, buyer demand has also waned.

Even if home prices drop by 20 per cent over the latter half of this year, values will still be higher than before the start of the pandemic. Since January, 2020, the national home price index is up 52.2 per cent.

Compared with April of last year, the home price index is up 23.8 per cent.

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

Equities

Wall Street futures moved higher early Tuesday as markets weigh results from big U.S. retailers. Major European markets were positive in morning trading. TSX futures gained as crude prices edged higher.

In the early premarket period, Dow and S&P futures were each up by more than 1 per cent while Nasdaq futures advanced more than 2 per cent. On Monday, U.S. stocks put in a mixed session with the Nasdaq losing 1.2 per cent and the S&P 500 falling 0.39 per cent. The Dow edged up 0.08 per cent. Canada’s S&P/TSX Composite Index outperformed, advancing 0.53 per cent on a rally in energy shares.

“Markets remain in fight or flight mode while rolling the dice on recession odds,” Stephen Innes, managing partner with SPI Asset Management, said.

“Still, traders seem to be in the mood to stay bearish until proven otherwise.”

Early Tuesday, investors got results from Home Depot and Walmart as U.S. earnings season continues to wind down.

Home Depot hiked its full-year sales forecast on demand for home improvement tools and building materials. The retailer now expects comparable sales to increase about 3 per cent in fiscal 2022, compared to its previous forecast of a slight positive growth. Analysts were expecting a 1.4-per-cent increase, according to IBES data from Refinitiv.

However, Walmart cut its full-year profit forecast. The company said it expects fiscal 2023 earnings per share to fall about 1 per cent, compared to its previous forecast of a mid-single digit increase.

Meanwhile, Elon Musk’s US$44-billion bid to buy Twitter Inc. remains in the spotlight with Mr. Musk saying the deal can’t move forward until the social media company shows proof that spam bots account for less than 5 per cent of its total users.

“My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5% (spam accounts). This deal cannot move forward until he does,” Musk said in a tweet.

On Monday, Mr. Musk suggested he could seek a cheaper price for the deal, telling a conference in Miami: “You can’t pay the same price for something that is much worse than they claimed.” Last week, Mr. Musk said the Twitter deal was on hold pending further user data from Twitter.

In this country, The Globe’s Alexandra Posadzki reports that Quebecor Inc. chief executive officer Pierre Karl Péladeau is crediting recent regulatory decisions with encouraging competition in the wireless sector, as Quebecor’s Videotron Ltd. subsidiary prepares to expand its mobile services beyond its home province of Quebec.

Overseas, the pan-European STOXX 600 rose 1.6 per cent in morning trading. Britain’s FTSE 100 gained 0.76 per cent. Germany’s DAX and France’s CAC 40 advanced 1.46 per cent and 1.37 per cent, respectively.

In Asia, Japan’s Nikkei finished 0.42-per-cent higher. Hong Kong’s Hang Seng jumped 3.27 per cent as Chinese tech shares surged.

S&P 500 FUTURES

4,071.50+66.75 (1.67%)

DOW FUTURES

32,582.00+423.00 (1.32%)

TSX 60 FUTURES

1,234.30+11.40 (0.93%)

PAST DAY

1.67%1.32%0.93%

CLOSE, MAY 16

6:35 A.M., MAY 17

SOURCE: BARCHART

Commodities

Crude prices were up in early going helped by optimism over the potential for further easing of COVID-19 restrictions in China and continued efforts in the EU to gradually phaseout Russian crude.

The day range on Brent is US$113.64 to US$115.14. The day range on West Texas Intermediate is US$113.49 to US$114.98.

“Oil prices have remained near multi-week highs this week, supported by surging gasoline and distillate prices in the U.S., and fears around an EU ban on Russian oil imports remaining in play,” OANDA senior analyst Jeffrey Halley said.

Sentiment was underpinned by reports that Shanghai marked a third consecutive day with no new COVID-19 cases outside quarantine zones. Shanghai plans to resume outdoor activities in stages, with most restrictions on movement remaining in place until May 21. The lockdown is likely to be lifted by June.

Markets have been nervously watching the situation in China, concerned that tough COVID-19 restrictions will hit demand and weigh on the broader economy.

Later in the session, traders will get weekly crude inventory numbers from the American Petroleum Institute. More official numbers follow on Wednesday morning from the U.S. Energy Information Administration.

Analysts are expecting to see a further decline in crude stocks.

In other commodities, gold prices steadied.

Spot gold was up 0.1 per cent at US$1,826.29 per ounce by early Tuesday morning. U.S. gold futures gained 0.6 per cent to US$1,825.00.

“The yellow metal has been very vulnerable to rising yields and a stronger [U.S.] dollar recently as central banks are forced into much more aggressive action,” OANDA senior analyst Craig Erlam said in a note.

“With the dollar remaining a hot favourite and pressure intensifying on central banks to tackle inflation, gold could remain out of favour for a while yet.”

HIGH GRADE COPPER

US$4.26+0.07 (1.71%)

SPOT GOLD

US$1,831.80+17.80 (0.98%)

WTI

US$115.18+0.98 (0.86%)

PAST DAY

1.71%0.98%0.86%

CLOSE, MAY 16

6:35 A.M., MAY 17

SOURCE: BARCHART

Currencies

The Canadian dollar was higher, trading around 78 US cents, as its U.S. counterpart eased for a third session against a group of world currencies.

The day range on the loonie is 77.79 US cents to 78.08 US cents.

There were no major Canadian economic releases on Tuesday’s calendar. In the U.S., Federal Reserve chair Jerome Powell will speak at a conference this afternoon on the central bank’s plan for taming inflation.

In world currencies, the U.S. dollar index was down 0.39 per cent to 103.76, more than 1-per-cent below last week’s two-decade high of 105.010, according to figures from Reuters.

The euro rose 0.4 per cent to US$1.0476.

The yen was 0.24-per-cent lower at 129.41 per U.S. dollar, holding above a two-decade low while Britain’s pound jumped 1.2 per cent to US$1.2469.

In bonds, the yield on the benchmark U.S. 10-year note was modestly higher at 2.913 per cent in the predawn period.

CANADIAN DOLLAR/U.S. DOLLAR

US$0.7800+0.0017 (0.2146%)

PAST DAY

PREV. CLOSE1:35 A.M., MAY 17

0:00 A.M., MAY 17

US$0.7794

6:35 A.M., MAY 17

US$0.7800

SOURCE: BARCHART

Economic news

(8:30 a.m. ET) Canada’s international securities transactions for March.

(8:30 a.m. ET) U.S. retail sales for April.

(9:15 a.m. ET) U.S. industrial production for April.

(10 a.m. ET) U.S. NAHB Housing Market Index for May.

(10 a.m. ET) U.S. business inventories for March.

With Reuters and The Canadian Press

Oil prices rise on China demand optimism, gasoline strength

Oil prices rose on Monday on optimism that China would see significant demand recovery after positive signs that coronavirus pandemic was receding in the hardest-hit areas.

Brent crude advanced 2.4% to $114.24, while U.S. West Texas Intermediate (WTI) crude settled 3.4% higher at $114.20 per barrel.

Shanghai aims to reopen broadly and allow normal life to resume for the city’s 25 million people from June 1, a city official said on Monday, after declaring that 15 of its 16 districts had eliminated cases outside quarantine areas.

However, it is estimated that 46 cities in China are under lockdowns, hitting shopping, factory output and energy usage.

“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

In line with the unexpected industrial output decline, China processed 11% less crude oil in April, with daily throughput the lowest since March 2020.

U.S. gasoline futures set an all-time high again on Monday as falling stockpiles fuelled supply concerns.

“Oil prices will remain bullish, especially WTI’s near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

Oil prices also found some support as the European Union’s diplomats and officials expressed optimism about reaching a deal on a phased embargo of Russian oil despite concerns about supply in eastern Europe.

Austria expects the EU to agree on the sanctions in the coming days, Foreign Minister Alexander Schallenberg said on Monday.

German Foreign Minister Annalena Baerbock said the bloc would need a few more days to find agreement.

“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near $110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory.

Dow futures rally 400 points, Home Depot jumps on earnings

PUBLISHED MON, MAY 16 20226:06 PM EDTUPDATED 1 MIN AGO

U.S. stock futures were sharply higher on Tuesday morning as the market tried to bounce after a punishing bear market for the tech-heavy Nasdaq and a 19% pullback for the S&P 500.

Futures contracts tied to the Dow Jones Industrial Average jumped 400 points, or 1.4%. S&P 500 futures gained 1.7%, while Nasdaq 100 futures added 2.1%.

Those moves come as several names rose in Tuesday premarket trading. Citigroup shares jumped 5% in premarket trading after a filing revealed Monday evening that Warren Buffett’s Berkshire Hathaway added a nearly $3 billon stake in the struggling bank in the first quarter.

Citi shares have underperformed the rest of the financial sector in the past 12 months, down nearly 40% while the Financial Select Sector SPDR Fund is off by 12% over the same period.

Travel stocks popped in the premarket after United Airlines raised its revenue outlook for the second quarter on improved consumer demand. United Airlines’ stock price rose 4%, Delta’s jumped 3% and American Airlines’ jumped 3%.

Home Depot shares rose more than 3% in the premarket after the home improvement retailer posted better-than-expected quarterly results. The company also raised its full-year outlook.

Semiconductor stocks climbed higher in premarket trading. Shares of Advanced Micro Devices jumped more than 3% following an upgrade from Piper Sandler, which said the stock looked attractive after falling 34.5% this year. Nvidia’s stock price rose 3%, Qualcomm’s jumped 2.4% and Micron Technology’s rose 2%.

Meanwhile, Walmart shares dropped more than 5% in the premarket after the retail giant reported an earnings miss because of inflation pressure. The company raised its sales outlook, but lowered its profit forecast.

Tuesday’s gains come after a strong overnight session in Asia, as traders cheered encouraging Covid news out of China. Tuesday marked the third straight day that Shanghai — a key economic hub in the country that has been hit with a strict Covid lockdown — did not record a virus infection outside of the city’s quarantine zones.

“On top of this, investors were encouraged by three consecutive days of relatively normal and boring price action in US stocks, a sharp contrast to the last few weeks,” wrote Adam Crisafulli of Vital Knowledge.

Tuesday’s bounce marks the market’s latest attempt at a recovery following weeks of steep losses. The S&P 500 is coming off a six-week losing streak — its longest since 2011. The Dow, meanwhile, has fallen for seven straight weeks, marking its longest weekly slide since 2001. Year to date, the S&P 500 and Dow are down 15.9% and 11.3%, respectively.

Investors were also watching out for retail sales numbers hitting at 8:30 a.m. ET. Those figures will give a clue as to how well the consumer is faring with surging U.S. inflation that has prompted the Federal Reserve to tighten monetary policy.

Inflation concerns have been a mounting headwind for stocks, with some investors worried the economy could ultimately tip into a recession.

“We see clear late-cycle indicators, and while the risk of economic growth contraction or recession has risen steadily through the first four-and-a-half months of this year, we are now beginning to cross over a probability level that makes recession a base case for the end of this year and beginning of next,” Darrell Cronk, president of Wells Fargo Investment Institute wrote in a note Monday.

https://worlddebtclocks.com/canada

Saudi Oil Giant Aramco’s First-Quarter Profits Surge 80%

DUBAI, United Arab Emirates (AP) — Oil giant Saudi Aramco said Sunday its profits soared more than 80% in the first three months of the year, as the state-backed company cashes in on the volatility in global energy markets and soaring oil prices following Russia’s invasion of Ukraine.

The bumper first-quarter earnings by the firm formally known as the Saudi Arabian Oil Co. show a record net income of $39.5 billion, up from $21.7 billion during the same period last year.

Already, resurgent economic activity and the relaxation of global coronavirus restrictions had revived demand for hydrocarbons and delivered strong annual results for the state-backed company last year.

Oil prices rallied to a 14-year high of $139 a barrel in March immediately after Russia’s invasion of Ukraine, although later receded as Russian oil continued to flow and new lockdowns hurt oil demand in China. International benchmark Brent crude traded over $111 a barrel Sunday.

Aramco overtook Apple as the world’s most valuable company as higher oil prices pushed its shares to record levels last week, with the company’s market cap at $2.43 trillion.

India Open To Exporting Wheat To Needy Nations Despite Ban

India on Sunday said it would keep a window open to export wheat to food-deficit countries at the government level despite restrictions announced two days earlier.

India’s Commerce Secretary B.V.R. Subrahmanyam told reporters the government will also allow private companies to meet previous commitments to export nearly 4.3 million tons of wheat until July. India exported 1 million tons of wheat in April.

India mainly exports wheat to neighboring countries like Bangladesh, Nepal and Sri Lanka.

A notice in the government gazette by the Directorate of Foreign Trade on Friday said a spike in global prices for wheat was threatening the food security of India and neighboring and vulnerable countries.

A key aim of restrictions on exports is to control rising domestic prices. Global wheat prices have risen by more than 40% since the beginning of the year.

Before the war, Ukraine and Russia accounted for a third of global wheat and barley exports. Since Russia’s Feb. 24 invasion, Ukraine’s ports have been blocked and civilian infrastructure and grain silos have been destroyed.

At the same time, India’s own wheat harvest has suffered from a record-shattering heat wave that is stunting production.

He said India’s wheat production this year has come down by three million tons from 106 million tons last year. Wheat prices have shot up by 20-40% in India.

“The current rise in prices seems to be a panic reaction rather than a reaction based on a genuine collapse in supply or a sudden shooting of demand,” Subrahmanyam said.

Even though it is the world’s second-largest producer of wheat, India consumes most of the wheat it produces. It had set a goal of exporting 10 million tons of the grain in 2022-23, looking to capitalize on the global disruptions to wheat supplies from the war and find new markets for its wheat in Europe, Africa and Asia.

Up to 90 million tons of wheat were consumed in India last year out of a total production of 109 million tons, Subrahmanyam said, adding that India exported 7 million tons of wheat last year.

Economic Calendar May 16 2022

Monday May 16

China retail sales, industrial production and fixed asset investment

Japan machine tool orders

Euro zone trade deficit

(8:30 a.m. ET) Canadian housing starts for April. The Street is forecasting an annualized rate rise of 0.5 per cent.

(8:30 a.m. ET) Canadian manufacturing sales and new orders for March. The Street expects increases of 2.0 per cent and 2.5 per cent, respectively, from the previous month

(8:30 a.m. ET) U.S. Empire State Manufacturing Survey for May.

(9 a.m. ET) Canada’s existing home sales for April. Estimate is a decline of 25.0 per cent year-over-year with average prices rising 9.0 per cent.

(9 a.m. ET) Canada’s MLS Home Price Index for April. Estimate is a rise of 25.0 per cent year-over-year.

(4 p.m. ET) U.S. net TIC flows for March.

Earnings include: Canadian Apartment Properties REIT; Columbia Care Inc.; Headwater Exploration Inc.; K92 Mining Inc.

—

Tuesday May 17

Japan tertiary industry index

Euro zone GDP

(8:30 a.m. ET) Canadian construction investment for March.

(8:30 a.m. ET) Canada’s international securities transactions for March.

(8:30 a.m. ET) U.S. retail sales for April. The Street is projecting an increase of 0.9 per cent from March.

(9:15 a.m. ET) U.S. industrial production for April. Consensus is an increase of 0.4 per cent from March with capacity utilization rising 0.2 per cent to 78.5 per cent.

(10 a.m. ET) U.S. NAHB Housing Market Index for May.

(10 a.m. ET) U.S. business inventories for March.

Earnings include: Dream Unlimited Corp.; Home Depot Inc.; Union Corporations Ltd.; Walmart Inc.

—

Wednesday May 18

Japan GDP and industrial production

Euro zone CPI

(8:30 a.m. ET) Canada’s CPI for April. The Street is projecting an increase of 0.6 per cent from March and up 6.8 per cent year-over-year.

(8:30 a.m. ET) U.S. housing starts (and revisions) for April. Consensus is an annualized rate decline of 1.8 per cent.

(8:30 a.m. ET) U.S. building permits for April. Consensus is an annualized rate dip of 2.7 per cent.

Also: G7 meetings of finance ministers and central bank governors (through Friday).

Earnings include: Analog Devices Inc.; Bellus Health Inc.; Cisco Systems Inc.; Lowe’s Companies Inc.; MAG Silver Corp.; Target Corp.

—

Thursday May 19

Japan trade balance and core machine orders

(8:30 a.m. ET) Canada’s industrial product and raw materials price index for April. Estimates are month-over-month declines of 0.5 per cent and 1.0 per cent, respectively.

(8:30 a.m. ET) Canada’s new housing price index for April. Estimate is an increase of 1.8 per cent from March and 11.0 per cent year-over-year.

(8:30 a.m. ET) U.S. initial jobless claims for week of May 14. Estimate is 200,000, down 3,000 from the previous week.

(8:30 a.m. ET) U.S. Philadelphia Fed Index for May.

(10 a.m. ET) U.S. existing home sales for April. Consensus is an annualized rate decline of 2.1 per cent.

Earnings include: Applied Materials Inc.; ATS Automation Tooling Systems Inc.; CAE Inc.; Lightspeed Commerce Inc.; Salesforce.com Inc.

—

Friday May 20

Japan CPI

Euro zone consumer confidence and PPI

(8:30 a.m. ET) Canada’s household and mortgage credit for March.

(10 a.m. ET) U.S. quarterly services survey for Q1.

Earnings include: Deere & Co.