Calendar: What investors need to know for the week ahead
Monday May 9
China trade surplus, aggregate yuan financing, new yuan loans and money supply
Japan PMI
(8:30 a.m. ET) Canadian building permits for March.
(10 a.m. ET) U.S. wholesale inventories for March. The Street is projecting an increase of 1.8 per cent from the previous month.
Earnings include: Ballard Power Systems Inc.; Boardwalk REIT; CT Real Estate Trust; Curaleaf Holdings Inc.; Element Fleet Management Corp.; Ero Copper Corp.; Finning International Inc.; Galaxy Digital Holdings Ltd.; George Weston Ltd.; Hudbay Minerals Inc.; Ovintiv Inc.; RioCan REIT; Ritchie Bros Auctioneers
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Tuesday May 10
Japan household spending
(6 a.m. ET) U.S. NFIB Small Business Economic Trends Survey for April.
Earnings include: Bausch Health Companies Inc.; Converge Technologies Solutions Corp.; Cronos Group Inc.; Dentalcorp Holdings Ltd.; Equitable Group Inc.; Exchange Income Corp.; Freehold Royalties Ltd.; Innergex Renewable Energy Inc.; Intact Financial Corp.; InterRent REIT; Ivanhoe Mines Ltd.; Keyera Corp.; Kinross Gold Corp.; Northland Power Inc.; Nuvei Corp.; NuVista Energy Ltd.; Parex Resources Inc.; Pet Valu Holdings Ltd.; Spartan Delta Corp.; Summit Industrial Income REIT; Suncor Energy Inc.; Superior Plus Corp.
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Wednesday May 11
China CPI and PPI
Germany CPI
(8:30 a.m. ET) U.S. CPI for April. Consensus is a rise of 0.2 per cent from March and 8.1 per cent year-over-year.
(2 p.m. ET) U.S. Treasury budget for April.
Earnings include: Birchcliff Energy Ltd.; Boralex Inc.; Boyd Group Services Inc.; CCL Industries Inc.; Crombie REIT; Dye & Durham Ltd.; Goeasy Ltd.; Granite REIT; Interfor Corp.; Manulife Financial Corp.; Pan American Silver Corp.; Paramount Resources Ltd.; Power Corp. of Canada; Smart REIT; Stantec Inc.; Stella-Jones Inc.; Sun Life Financial Inc.; Tricon Capital Group Inc.; Vermilion Energy Inc.; Wesdome Gold Mines Ltd.; WSP Global Inc.
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Thursday May 12
Japan current account surplus and bank lending
(8:30 a.m. ET) U.S. initial jobless claims for week of May 7. The Street expects 180,000, down 20,000 from the previous week.
(8:30 a.m. ET) U.S. PPI for April. Consensus is a rise of 0.5 per cent from March and 10.7 per cent year-over-year.
Earnings include: Algonquin Power & Utilities Ltd.; Allkem Ltd.; Brookfield Asset Management Inc.; Canada Goose Holdings Inc.; Canadian Tire Corp. Ltd.; Cascades Inc.; CI Financial Corp.; Crescent Point Energy Corp.; Docebo Inc.; Dream Office REIT; ECN Capital Corp.; E-L Financial Corp. Ltd.; First Majestic Silver Corp.; H&R REIT; iA Financial Corp. Inc.; Intertape Polymer Group Inc.; Leon’s Furniture Ltd.; Lithium Americas Corp.; Northwest Healthcare Properties REIT; Peyto Exploration & Development Corp.; Primo Water Corp.; Quebecor Inc.; Terrascend Corp.
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Friday May 13
Euro zone industrial production
(8:30 a.m. ET) Canada’s new motor vehicle sales for March. Estimate is a decline of 20.0 per cent year-over-year.
(8:30 a.m. ET) U.S. import and export price indexes for April. Consensus projections are increases of 0.6 per cent and 0.7 per cent, respectively.
(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for April.
(10:30 a.m. ET) Bank of Canada Senior Loan Officer Survey.
Earnings include: Definity Financial Corp.; Emera Inc.; NexGen Energy Ltd.; Onex Corp.; Seabridge Gold Inc.; Solaris Resources Inc.
Longtime China bull Stephen Roach says there’s ‘no way’ Beijing will meet its 5.5% growth target
China is facing “enormous risk” and “formidable pressures” at the moment, according to economist Stephen Roach, who has been a longtime bull on the Asian giant.
Beijing has officially set a growth target of around 5.5% for the Chinese economy this year, but Roach says “it will be lucky if it makes 4.”
A slowdown in the Chinese economy is set to have global ramifications, he warned, with Beijing now unable to bail out the world the same way it did after the global financial crisis.
BCE Reports First-Quarter Profit Up More Than 30 Per Cent From Year Ago
BCE Inc. reported its first-quarter profit rose more than 30 per cent compared with a year ago as its revenue also moved higher.
BCE CEO Mirko Bibic said it was the first quarter since the start of the pandemic in which the company’s consolidated financial results surpassed pre-COVID levels.
The company said its profit attributable to common shareholders totalled $877 million or 96 cents per share for the quarter ended March 31, up from $642 million or 71 cents per share a year earlier.
Operating revenue totalled $5.85 billion, up from $5.71 billion in the first three months of 2021.
Wireless revenue rose to $2.21 billion compared with $2.1 billion a year ago, while wireline revenue slipped to $3.01 billion from $3.08 billion. Bell Media revenue totalled $825 million, up from $713 million in the same quarter last year.
On an adjusted basis, BCE said it earned 89 cents per share in its latest quarter, up from an adjusted profit of 78 cents per share a year earlier.
This report by The Canadian Press was first published May 5, 2022.
Telus Reports Q1 Profit And Revenue Up From Year Ago, Raises Quarterly Dividend
Telus Corp. reports that its first-quarter profit increased compared with a year ago as its revenue climbed more than six per cent.
The telecom company has also raised its quarterly dividend to 33.86 cents per share, up 7.1 per cent from 31.62 cents.
Telus says its net income attributable to common shares totalled $385 million or 28 cents per share for the quarter ended March 31, compared with $331 million or 25 cents per share a year ago.
Operating revenues and other income rose to $4.28 billion compared with $4.02 billion in the first quarter of 2021.
The company says it added a record 148,000 new customers in the quarter including 46,000 mobile phones, 30,000 internet additions and 26,000 security additions.
On an adjusted basis, Telus says it earned 30 cents per share in its most recent quarter compared with 27 cents per share a year ago.
This report by The Canadian Press was first published May 6, 2022.
Enbridge Reports $1.93B First-Quarter Profit As Energy Demand And Prices Grow
Enbridge Inc. says its profits rose in the first quarter as energy demand and prices continue to grow.
The pipeline company reported earnings attributable to common shareholders of $1.927 billion compared with $1.9 billion in the same quarter last year.
Enbridge says the profit amounted to 95 cents per share for the quarter ended March 31 compared with 94 cents per share a year ago.
The Calgary-based company said cash provided by operating activities hit $2.94 billion in the first three months of the year, compared with $2.56 billion in the same period of 2021.
On an adjusted basis, Enbridge says it earned 84 cents per share for the quarter, up from an adjusted profit of 81 cents per share in the same quarter last year.
Enbridge president and CEO Al Monaco says growing energy demand and an underinvestment in new supply is driving energy shortages and higher prices.
“This global energy crisis further heightens the essential role that conventional energy will play for decades to come,” he said in a statement.
“Now, more than ever, it’s evident that all forms of energy, conventional and low carbon, are needed to meet the growing demand while ensuring society has access to affordable, reliable, secure and cleaner energy.”
This report by The Canadian Press was first published May 6, 202
Job growth accelerated by 428,000 in April, more than expected as jobs picture stays strong
Nonfarm payrolls grew by 428,000 for April, a bit above the Dow Jones estimate of 400,000 and identical to March.
The unemployment rate held at 3.6% after being expected to nudge lower to 3.5%.
Leisure and hospitality led job gains followed by manufacturing and transportation and warehousing.
Wages rose 0.3% and were up 5.5% from a year ago, about the same as March.
The U.S. economy added slightly more jobs than expected in April amid an increasingly tight labor market and despite surging inflation and fears of a growth slowdown, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls grew by 428,000 for the month, a bit above the Dow Jones estimate of 400,000. The unemployment rate was 3.6%, slightly higher than the estimate for 3.5%. The April total was identical to the downwardly revised count for March.
There also was some better news on the inflation front: Average hourly earnings continued to grow, but at a 0.3% level for the month that was a bit below the 0.4% estimate. On a year-over-year basis, earnings were up 5.5%, about the same as in March but still below the pace of inflation.
An alternative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons, sometimes referred to as the “real” unemployment rate, edged higher to 7%.
The labor force participation rate, a key measure of worker engagement, fell 0.2 percentage points for the month to 62.2%, tied for the lowest of the year as the labor force contracted by 363,000.
Leisure and hospitality again led job growth, adding 78,000. The unemployment rate for the sector, which was hit hardest by the Covid pandemic, plunged to 4.8%, its lowest since September 2019 after peaking at 39.3% in April 2020. Average hourly earnings for the sector increased 0.6% on the month and are up 11% from a year ago.
Other big gainers included manufacturing (55,000), transportation and warehousing (52,000), Professional and business services (41,000), financial activities (35,000) and health care (34,000). Retail also showed solid growth, adding 29,000 primarily from gains in food and beverage stores.
Some of the details in the report, though, were not as strong.
The survey of households actually showed a decline of 353,000, leaving the level 761,000 short of where it was in February 2020, just prior to the start of the pandemic.
Stock futures moved lower as Wall Street digested the report and government bond yields were mostly higher.
The report likely will do little to sway the Federal Reserve from its current path of interest rate increases. The central bank announced Wednesday it would increase its benchmark interest rate half a percentage point in what will be an ongoing effort to stamp out price increases running at their fastest pace in more than 40 years.
“Overall, with labor market conditions still this strong — including very rapid wage growth — we doubt that the Fed is going to abandon its hawkish plans because of the current bout of weakness in equities,” said Paul Ashworth, chief U.S. economist at Capital Economics.
The job growth comes with U.S. economy experiencing its worst growth quarter since the start of the pandemic and worker output for the first three months that declined 7.5%, the biggest slowdown since 1947 and the second-worst quarter ever recorded. GDP was off 1.4% for the January-through-March period.
Trade Minister Mary Ng and U.S. counterpart Katherine Tai say they are forging closer trade ties between their two countries, in spite of lingering irritants.
Tai is in Ottawa for a two-day visit to Canada — her first since becoming President Joe Biden’s trade representative a year ago.
Tai says while the two countries clearly have trade differences, their interests are closely aligned in the context of competing with the rest of the world.
She also says Biden’s Buy American doctrine represents a federal procurement policy that shouldn’t be seen as a barrier to international trade.
Ng says she’s looking forward to showing her counterpart a GM facility Friday in Markham, Ont., where they will see integrated Canada-U.S. supply chains in action.
The pair are expected to meet with union leaders later today, as well as the owners of small and medium-sized businesses Friday in Toronto.
Stocks and bonds tumble on fear Fed may need bigger rate hike to tame inflation
Stocks suffered one of their biggest days of losses Thursday since the start of the pandemic, an abrupt reversal from sharp gains one day earlier, in a viscous selloff that illustrated the unease among investors that central banks will be able to move quickly on combating inflation without igniting a recession.
The selling encompassed more than equities, leaving even balanced portfolios bruised. Bond prices fell as yields – which move inversely – reached new multi-year highs. Bitcoin lost nearly 10 per cent of its value. And the U.S. dollar hit a 20-year high among major currencies, which left most commodities struggling to gain much traction given that a stronger greenback makes them more expensive to buy globally.
The U.S. Federal Reserve on Wednesday raised interest rates by half a percentage point as expected, but in a move that wasn’t as widely anticipated, Federal Reserve Chair Jerome Powell explicitly ruled out a more aggressive hike of 75 basis points in a coming meeting.
Traders in credit markets on Thursday, however, didn’t seem too convinced. They raised their bets on a 75 basis-point hike at the Fed’s June meeting.
Futures on the federal funds rate, which is one mechanism used an indication of where traders see monetary policy heading, priced in a roughly 75 per cent chance of a three quarters of a percentage point tightening by the Fed at next month’s policy meeting. Rate futures have also factored in more than 200 basis points of cumulative hikes for 2022.
“Yesterday’s sharp rally was not rooted in reality and today’s dramatic selloff is a reversal of that misplaced exuberance,” said Ben Kirby, co-head of investments at Thornburg Investment Management.
The benchmark S&P 500 fell 3.6 per cent, marking its biggest loss in nearly two years, a day after it posted its biggest gain since May 2020. The Nasdaq slumped 5 per cent, its worst drop since June 2020. The losses by the Dow – at just over 1,000 points – and the other indexes offset the gains from a day earlier.
“Concerns focus on whether the Fed will have to become even more hawkish to bring demand down — and that would involve slowing the economy more than they now project,” said Quincy Krosby, chief equity strategist for LPL Financial. “And today’s market action is questioning whether `soft-ish’ is plausible.”
Canada’s main stock index unwound most of a two-day rally and fell 2.3 per cent, its biggest daily decline since Nov. 30, 2021. The selloff across sectors was broad, and particularly felt in the technology arena, as Shopify lost another 14 per cent of its value after the e-commerce giant reported its slowest quarterly revenue growth in about seven years and delivered a big miss on profit.
Bombardier Inc shares declined 8.3 per cent even as the business jet maker reported a smaller quarterly adjusted loss.
Canadian bond yields, meanwhile, closely tracked a move higher in U.S. Treasuries on Thursday.
The Canadian 10-year government bond reached an 11-year high of 3.069 per cent. The yield on 10-year U.S. Treasury notes was up 13.9 basis points to 3.054 per cent after crossing above 3.1 per cent for the first time since November 2018.
The fight against inflation is global. The Bank of England on Thursday raised its benchmark interest rate to the highest level in 13 years, its fourth rate hike since December as U.K. inflation runs at 30-year highs. The Bank of Canada raised its policy rate by 50 basis points in April to 1 per cent, and signalled that another half-point rate hike is on the table for its upcoming meeting in June.
Data shows the long end of the U.S. Treasury market – bonds with the greatest durations – has suffered the most deeply negative returns this year going back to at least 1928, said Joseph LaVorgna, chief economist for the Americas at Natixis in New York.
“I’m surprised by the price action in the Treasury market because this has been an extraordinary historic move,” he said. “This is a pretty big move on top of an already significant move. It’s due to rising real yields,” LaVorgna said. Real yields take into account the impact of inflation.
Markets will remain volatile until there is a clear picture of Fed rate policy and its trajectory later this year, said Anthony Saglimbene, global market strategist at Ameriprise Financial.
Investors are “worried that when we get to the back half of this year, the Fed is going to be so aggressive with raising interest rates that they’re going to take the economy into a recession,” he said, adding “there’s an overall negative sentiment in the market.”
Worries about fast-paced rate increases at a time of China’s COVID-19 lockdowns and the war in Ukraine to slow surging inflation have heavily weighed on stock markets this year.
Energy markets remain volatile as the conflict in Ukraine continues and demand remains high amid tight supplies of oil. European governments are trying to replace energy supplies from Russia and are considering an embargo. OPEC and allied oil-producing countries decided Thursday to gradually increase the flows of crude they send to the world.
Higher oil and gas prices have been contributing to the uncertainties weighing on investors as they try to assess how inflation will ultimately impact businesses, consumer activity and overall economic growth.
On Thursday, U.S. West Texas Intermediate crude rose 45 cents, or 0.4 per cent, to settle at US$108.26. That was the highest close for WTI since March 25.
On Wall Street, technology megacaps slumped. Google-parent Alphabet Inc , Apple Inc, Microsoft Corp, Meta Platforms, Tesla Inc and Amazon.com all fell between 4.3% and 8.3%.
However, it was not just high-growth stocks, which have struggled in 2022 as the prospect of rate rises had investors questioning their future earnings potential. The selloff hit all areas of the market, as traders headed for the exits.
“Investors aren’t looking at fundamentals (such as earnings) right now, and this is more of a sentiment issue,” said Megan Horneman, chief investment officer at Verdence Capital Advisors.
Only 19 of the S&P 500′s constituents closed in positive territory, one of which was Twitter Inc, which ended 2.6% higher.
Elon Musk revealed on Thursday that Oracle’s co-founder Larry Ellison and Sequoia Capital were among investors that would back his takeover of the social media giant with $7.14 billion of financing.
All of the 11 major S&P sectors declined, with consumer discretionary leading the way with a 5.8% drop. The index was dragged by Etsy Inc and eBay Inc, down 16.8% and 11.7% respectively, after both forecast Q2 revenue would be below Wall Street’s estimates.
The technology sector was the next biggest loser, down 4.9%, with Intuit Inc among those weighing the heaviest. It slipped 8.5%, to its lowest finish in a year, a day after agreeing to pay a $141 million settlement centered on deception claims around its TurboTax product.
“You’re seeing those areas of the market which are purely discretionary, they are the ones getting hit today because everyone is anticipating that this is going to be a challenging period for consumers over the next several quarters,” said Horneman of Verdence Capital Advisors.
The CBOE Volatility index, also known as Wall Street’s fear gauge, climbed to 31.20 points.
The focus now shifts to the U.S. Labor Department’s closely watched monthly employment report on Friday for clues on labor market strength and its impact on monetary policy.
Volume on U.S. exchanges was 13.45 billion shares, compared with the 12.01 billion average for the full session over the last 20 trading days. The S&P 500 posted two new 52-week highs and 43 new lows; the Nasdaq Composite recorded 20 new highs and 446 new lows.
OPEC+ agrees to another modest production increase after EU outlines Russian oil ban
Oil producer group OPEC+ on Thursday agreed to rubber-stamp another small production increase for June, amid persistent concerns over weaker Chinese demand and shortly after the world’s largest trading bloc outlined proposals for new sanctions against Russian crude.
The influential energy alliance of OPEC and non-OPEC partners decided to raise production targets by 432,000 barrels per day for next month, sticking to an existing strategy of gradually unwinding record supply cuts.
OPEC+ will hold its next meeting on June 2.
Led by OPEC kingpin Saudi Arabia, the group swiftly agreed in late March to raise its output targets for May.
“OPEC+ is unlikely to supply additional oil into the market to resolve any market tightness, as they are very happy with prices remaining above $100/bb,” Ajay Parmar, senior oil market analyst at commodity intelligence service ICIS, said in a research note.
“Any substantial increase in additional supply from OPEC+ will threaten these high prices, and so instead, they are expected to continue with the slow claw-back of market share throughout 2022,” Parmar said.
The group’s latest meeting comes amid an unfolding supply crisis. The European Union on Wednesday announced plans to ban Russian oil imports within six months and refined products by the end of the year in its latest round of economic sanctions.
The bloc’s proposed measures reflect the widespread anger at Russian President Vladimir Putin’s unprovoked onslaught in Ukraine.
