Author: Consultant

• Canada’s new prime minister rejected the idea repeatedly voiced by President Donald Trump that the nation would become the 51st U.S. state.
• “We will never, ever, in any way, shape or form, be part of the United States,” Prime Minister Mark Carney said after being sworn in in Ottawa.
• Carney’s comments came after weeks of suggestions by Trump that Canada would be absorbed into the United States, and as the U.S. president imposes stiff tariffs on the neighboring country.

Trump rebuked by Canada PM Mark Carney on joining U.S.

Gold prices gained on Thursday, holding near all-time high levels, as elevated tariff uncertainty and bets on monetary policy easing by the Federal Reserve kept bullion’s appeal strong.

Spot gold firmed 0.7% to $2,953.39 an ounce, just shy from the record high of $2,956.15 scaled in February. U.S. gold futures were up 0.6% at $2,963.20.

“Gold is in a secular bull market. We forecast prices to trade between $3,000-$3,200 this year,” said Alex Ebkarian, chief operating officer at Allegiance Gold.

U.S. President Donald Trump’s latest trade policies have helped gold gain 12% so far this year, an asset preferred by investors amid geopolitical and economic turmoil. U.S. Commerce Secretary Howard Lutnick said a recession would be “worth it” to get Trump’s economic policies in place.

Data from the U.S. Labor Department showed producer prices were unexpectedly unchanged in February, while consumer price index rose 0.2% last month after accelerating 0.5% in January.

Meanwhile, the number of Americans filing new applications for unemployment benefits fell last week, but sharp government spending cuts and an escalating trade war threaten labor market stability.

“The Federal Reserve is going to be at a point where they might be forced to lower interest rates. A drop in interest rates is viewed as a positive for gold because the opportunity costs drops when yields drops,” Ebkarian added.

The Fed is expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range next Wednesday, having reduced it by 100 basis points since September. Traders expect the U.S. central bank to resume cutting borrowing costs in June after it paused its easing cycle in January.

Spot silver rose 0.1% at $33.26.

“A strong breakout above $33.30 could open the doors toward $34 for silver,” said Lukman Otunuga, senior research analyst at FXTM.

Platinum lost 0.2% to $981.90, while palladium dropped 0.6% to $943.24.

S&P Dow Jones Indices announced late Friday that it is adding two stocks and deleting four from the S&P/TSX Composite Index, the broadest measure of the Canadian market.

No changes are being made to the S&P/TSX 60, a selection of most of the largest companies in the composite.

S&P Dow Jones uses “float” – the value of shares that aren’t held by insiders and that therefore trade frequently and are easily available to the public – to judge whether a company should be included in its indexes. The index provider does not release its proprietary float calculations.

S&P said it will add Endeavour Silver Corp. EDR-T +3.60%increase and gold miner G Mining Ventures Corp. GMIN-T +3.68%increase.

S&P said it will delete forestry company Interfor Corp.IFP-T -0.79%decrease; energy-equipment seller Mattr Corp. MATR-T -2.10%decrease; restaurant owner MTY Food Group Inc MTY-T -2.93%decrease and real estate company Storagevault Canada Inc. SVI-DB-T +0.25%increase.

The changes will be effective at the open of markets on March 24.

The stocks S&P Dow Jones removed aren’t the worst performers of the year – they just have fallen enough since thelast quarterly rebalancing in December, to make them too small to stay in.

Mattr shares have fallen 19.7 per cent since the end of November, according to S&P Global Market Intelligence. Interfor has fallen 16.0 per cent, MTY is down 6.2 per cent, and StorageVault is down 1.0 per cent.

To get into the composite, a company’s float-adjusted market capitalization must be 0.04 per cent, or four-hundredths of a percentage point, of the total value of the index. To stay in the composite, a company’s float must not drop below 0.025 per cent, or 2.5 hundredths of a percentage point, of the total value of the index.

With the growth of index funds and other passive investing strategies, whether a stock is part of a major index can have a meaningful effect on share prices. Fund managers who track an index need to hold shares in the underlying companies. Canadian stocks added to the composite – which has about 220 to 250 members, depending on the quarter – can see price bumps before and after inclusion. Similarly, companies removed from the index lose a source of demand for their shares.

Research by Morningstar Direct for The Globe and Mail found Canadian mutual funds and exchange-traded funds with assets under management amounting to $265-billion had returns that were 95 per cent or more correlated with the S&P/TSX Composite over the 12 months ended Dec. 31, 2024. This included funds that explicitly say they track the index.

This week, S&P Dow Jones said it will consider a significant change that would allow some companies to appear in multiple countries’ indexes, paving the way for companies such as Brookfield Asset Management Ltd. BAM-T -2.50%decrease, Shopify Inc. SHOP-T -3.85%decrease, and the former Ritchie Bros. Auctioneers Inc. to be both Canadian and American.

S&P Dow Jones says it could allow companies “with significant ties to Canada” to stay in a Canadian index even if it normally would consider the company “domiciled” in another country. The company would need to be incorporated in Canada to be eligible.

Until now, S&P Dow Jones has said a company can have just one country of domicile – and that country’s stock indexes are where it needs to be.

U.S. producer prices were unchanged in February for the first time in seven months, while fewer Americans filed claims for unemployment benefits last week, pointing to a stable economy that should allow the Federal Reserve to keep interest rates steady next week.

But the calm painted by the reports from the Labor Department on Thursday could be upended by radical government spending cuts, which have pushed thousands of federal employees out of work, and an escalating trade war stemming from broad import tariffs.

The aggressive policies being pursued by President Donald Trump’s administration have sent business and consumer confidence plummeting, and raised the chances of a recession. U.S. airlines have cut their earnings estimates noting that corporations and consumers were scaling back spending because of mounting economic uncertainty.

“No factory inflation and no worrisome job layoffs either, so there is nothing to slow the economy’s advance for now,” said Christopher Rupkey, chief economist at FWDBONDS.

“Nevertheless, the radical, buzz-saw cuts in spending and personnel down in Washington could eventually spread to the rest of the private economy in the months to come and it has already created enough uncertainty for company CEOs to potentially halt the economy’s forward progress starting in the second quarter.”

The unchanged reading in the producer price index for final demand last month, the first since July, followed an upwardly revised 0.6 per cent increase in January, the Labor Department’s Bureau of Labor Statistics said.

Economists polled by Reuters had forecast the PPI rising 0.3 per cent after a previously reported 0.4 per cent increase in January. In the 12 months through February, the PPI climbed 3.2 per cent after rising 3.7 per cent in January.

But there were unfavourable details in the components that go into the calculation of the Personal Consumption Expenditures (PCE) price indexes, which are tracked by the U.S. central bank for its 2 per cent inflation target. That was similar to the consumer price data on Wednesday.

Goods prices rose 0.3 per cent, with a 53.6 per cent surge in wholesale egg prices accounting for two-thirds of the increase. Goods prices rose 0.6 per cent in January. A raging bird flu outbreak is driving egg prices higher, boosting the cost of food. Wholesale food prices shot up 1.7 per cent after increasing 1.0 per cent in January.

Energy prices fell 1.2 per cent. Excluding the volatile food and energy components, goods prices jumped 0.4 per cent after gaining 0.2 per cent in the prior month. Further gains are likely amid an escalation in trade tensions. President Donald Trump has ignited a trade war, increasing tariffs on goods from China to 20 per cent, with Beijing retaliating with duties of its own.

Trump imposed a new 25 per cent duty on Canadian and Mexican imports, before providing a one-month exemption for goods that meet the rules of origin under the U.S.-Mexico-Canada Agreement on trade. Enhanced steel and aluminum tariffs drew swift retaliation from Europe and Canada.

Economists expect the effects of the slew of tariffs by the Trump administration to show in the months ahead.

The cost of services fell 0.2 per cent amid a 1.4 per cent decline in margins for machinery and vehicle wholesaling, after rising 0.6 per cent in January. There were also decreases in the margins for food and alcohol, automobiles and automobile parts as well as apparel, footwear, and accessories retailing.

But prices for hospital inpatient care increased 0.8 per cent. Portfolio management fees rose 0.5 per cent, while airline fares were unchanged. Hotel and motel accommodation prices dipped 0.1 per cent.

Portfolio management fees, health care, hotel and motel accommodation and airline fares are among the components that go into the calculation of the core PCE price index.

With the two reports in hand, economists estimated that the PCE price index excluding the volatile food and energy components rose by 0.3 per cent in February, with high odds for a 0.4 per cent increase. Core PCE inflation gained 0.3 per cent in January.

It was forecast rising 2.7 per cent year-on-year after advancing 2.6 per cent in January. The Fed is expected to keep its benchmark overnight interest rate in the 4.25 per cent-4.50 per cent range next Wednesday, having reduced it by 100 basis points since September.

U.S. stocks opened lower. The dollar advanced against a basket of currencies. U.S. Treasury yields rose.

Financial markets expect the Fed to resume cutting borrowing costs in June after it paused its easing cycle in January, as the escalation in trade tensions threatens the economic expansion. The policy rate was hiked by 5.25 percentage points in 2022 and 2023 to tame inflation.

A separate report from the Labor Department showed initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 220,000 for the week ended March 8. Economists had forecast 225,000 claims for the latest week.

Risks for the labour market are, however, tilted to the downside. Thousands of federal government workers, mostly on probation, have been fired by tech billionaire Elon Musk’s Department of Government Efficiency, or DOGE, an entity created by Trump to drastically shrink the government.

Unions representing some of the civil servants have challenged the layoffs, resulting in reinstatements. Agencies have a Thursday deadline to submit plans for large-scale layoffs. The federal government upheaval has not yet significantly filtered through to official labour market data.

A separate unemployment compensation for federal employees (UCFE) program, which is reported with a one-week lag, showed applications little changed.

“With all the gyrations between DOGE, agency cuts, and the courts, the number of federal employees already going without a paycheque is unclear,” said Andrew Stettner, a senior fellow at the Century Foundation. “What we know … is that the cruel way in which Trump is cutting government payrolls is making it hard for laid-off federal employees to get benefits.”

Spending cuts have, however, impacted contractors, accounting for the elevation in Washington D.C. claims.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 27,000 to a seasonally adjusted 1.870 million during the week ending March 1, the claims report showed.

The European Union has announced retaliation plans in response to President Donald Trump’s 25% steel and aluminum tariffs. 

A European Commission press release declares that EU retaliatory actions could apply to American exports worth up to €26 billion.

European Commission President Ursula von der Leyen spoke against tariffs, but said that the move was a “proportionate” response to the U.S.

“Tariffs are taxes. They are bad for business, and worse for consumers,” she said. “The European Union must act to protect consumers and business. The countermeasures we take today are strong but proportionate. As the United States are applying tariffs worth $28 billion dollars, we are responding with countermeasures worth $26 billion Euros.”

The EU’s retaliation is slated to come in two parts.

“First, the Commission will allow the suspension of existing 2018 and 2020 countermeasures against the US to lapse on 1 April. These countermeasures target a range of US products that respond to the economic harm done on €8 billion of EU steel and aluminium exports,” the European Commission press release notes

Trump’s new 25% tariffs on Canadian steel and aluminum went into effect Wednesday

Canada announced $21 billion in additional tariffs against the U.S. Wednesday after President Donald Trump’s new 25% tariffs on steel and aluminum went into effect.

Canada is the biggest foreign supplier of steel and aluminum to the U.S.

“Today, I am announcing that the government of Canada, following a dollar-for-dollar approach, will be imposing, as of 12:01 a.m. tomorrow, March 13, 2025, 25% reciprocal tariffs on an additional $29.8 billion of imports from the United States,” Canadian Finance Minister Dominic LeBlanc said. “This includes steel products worth $12.6 billion and aluminum products worth $3 billion as well as additional imported U.S. goods worth $14.2 billion.” 

“The list of additional products affected by counter-tariffs includes computers, sports equipment, and cast iron products as examples,” he continued.

“We will not stand idly by while our iconic steel and aluminum industries are being unfairly targeted,” LeBlanc added, according to the CBC. 

President Donald Trump’s 25% tariff increase on all steel and aluminum imports officially took effect on Wednesday, the latest move in the administration’s plans to reshape global trade norms in favor of U.S. manufacturing.  

The action prompted retaliation from the European Commission, which announced shortly after Trump’s tariffs took effect that it would impose counter tariffs on the equivalent of $28 billion worth of U.S. goods starting next month. 

“We regret the unjustified US 25% tariff on steel and aluminium imports. The EU will protect its consumers and businesses,” the Commission said in a statement. “We are launching swift, proportionate countermeasures worth up to ($28 billion), matching the economic impact of the US tariffs.”

Trump’s action to bulk up protections for American steel and aluminum producers restores effective global tariffs of 25% on all imports of the metals and extends the duties to hundreds of downstream products made from the metals – everything from nuts and bolts to bulldozer blades and soda cans.

The countries most affected by the tariffs are Canada, the biggest foreign supplier of steel and aluminum to the U.S., Brazil, Mexico and South Korea, which all have enjoyed some level of exemptions or quotas.

Bank of Canada’s March 12 interest rate announcement

The Bank of Canada cut its policy interest rate by a quarter percentage point to 2.75 per cent and warned of an economic downturn amid a trade war with the United States. This is the seventh consecutive rate cut since last summer.

Governor Tiff Macklem said the bank would “proceed carefully with any further changes” to the policy rate given the challenges of balancing the downside risk to economic activity with the upside risk to inflation caused by tariffs.

Just when canola farmer Roger Chevraux thought things were bad enough, they got worse.

Since U.S. President Donald Trump’s inauguration in January, canola farmers and processors have faced the threat of 25-per-cent tariffs on $7.7-billion of exports to the United States, their largest market.

Now, Canada’s second-largest export market, China, says it is introducing 100-per-cent tariffs on more than $900-million of canola oil and meal on March 20.

This double threat against one of Canada’s largest crops is starting to trickle down through the Prairie agricultural supply chain. Some grain handlers – potentially shut off from two of their largest markets – are closing bids on canola.

“I’ve never seen this before,” said Mr. Chevraux, a fourth-generation farmer who is also chairman at the Canadian Canola Growers Association.

“It’s never good when we lose a market, especially one that size.”

The industry is caught in the middle of political tensions far outside its control. It is hoping Ottawa will negotiate a better deal with Beijing, and the potential double trade war won’t cause lasting effects to a $43.7-billion Canadian product that provides more than 200,000 jobs.

Beijing announced the tariffs Saturday as part of $3.7-billion worth of levies against Canadian agricultural and food products, including 25-per-cent duties on pork and seafood products, in a retaliatory move against Ottawa’s August decision to impose 100-per-cent tariffs on Chinese electric vehicles. That levy was aimed at keeping North America’s industry competitive.

The continued uncertainty is also deterring investment in what until recently wasa fast-paced multibillion-dollar push toward value-added processing in canola seed crushing.

But Mr. Chevraux, like the 40,000 canola farmers across Canada, has few options. Seeding across Western Canada will begin by the start of May at the latest. Switching crops now is challenging.

“This is coming at a moment when we just can’t take any more body blows,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association.

China is the second largest market for Canadian canola seed, oil and meal, after the United States. The tariffs do not apply to seed. However, China imports $20.6-million of Canadian canola oil and is an irreplaceable market for $918-million of canola meal.

Canola meal – a byproduct from crushing seed – is a source of high-protein feed for livestock and aquaculture. The largest market is California’s dairy sector. The second largest is Chinese livestock and aquaculture, where it is fed to pork and farmed fish.

Replacing these markets is near impossible, Mr. Vervaet said. Few jurisdictions outside the United States and China have the scale of livestock or aquaculture production to absorb the quantities produced by crushing plants in the Canadian Prairies.

And this crushing plant capacity is expanding, fast.

Since 2021, five major investments were aimed at increasing crushing capacity by 60 per cent. These investments came from grain heavyweights Cargill, Louis Dreyfus Company, Richardson International, Viterra Canada, alongside a joint venture from Federated Co-operatives Limited and AGT Foods and Ingredients.

But these projects are beset by other challenges. Legislation in the U.S. and Canada that incentivizes gasoline producers to insert clean fuels into their mix drove the push to canola oil refineries. However, shaky trade with the U.S. is upending export demand, while the looming federal election has thrown the domestic market into uncertainty. Conservative Leader Pierre Poilievre has dubbed renewable-fuel legislation a “second carbon tax.”

These factors drove Federated Co-operatives Limited to announce an indefinite pause on their multibillion-dollar canola crush and refinery plant in Regina on Jan. 17.

Mr. Chevraux could consider planting another crop until the trade war with China abates, however, planning for canola is already under way. Switching would require him to buy different fertilizers, source different seed and reconsider his crop rotation.

Instead, he is hoping Ottawa will be able to successfully negotiate with China.

However, the Asian nation has had long-standing grievances with Canadian canola imports.

In September, Beijing started a one-year anti-dumping investigation into Canadian canola imports. The move came weeks before Canada launched 100-per-cent tariffs on Chinese-made EVs.

While the current tariffs do not include seed imports, there is still room for escalation, Rosa Wang, an analyst with agricultural consultancy JCI, told The Globe and Mail on Saturday. These exports – worth around $4-billion – are the lion’s share of Canada’s market stake in China.

Canola farmers and processors are therefore in the middle of a complex geopolitical fight, far from their own making, that could very well escalate, said Chris Davison, president and chief executive officer of Canola Council of Canada.

Matthew Glover, a spokesman for Saskatchewan Premier Scott Moe, said in a statement that his province is being disproportionately affected by the Chinese tariffs.

“We have reached out to the Federal Government to request they engage with China for a resolution as soon as possible.”

The Canadian dollar CADUSD +0.05%increase weakened against its U.S. counterpart on Monday as investors bet that the Bank of Canada would continue its easing campaign this week to support an economy threatened by U.S. trade tariffs.

The loonie was trading 0.3 per cent lower at 1.4425 to the U.S. dollar, or 69.32 U.S. cents, after touching its weakest intraday level since last Wednesday at 1.4440. Members of the ruling Liberal party in Canada have bet on former central banker Mark Carney as the man best placed to take on U.S. President Donald Trump, who has threatened annexation as well as launching a trade war and punishing tariffs on Canada.

Economic confidence will suffer even if tariffs continue to be delayed, keeping the Canadian dollar “on the weak side,” said Aaron Hurd, senior portfolio manager in the currency group at State Street Global Advisors.

“If you’re an exporter or a U.S. company with production in Canada, you’re not going to do any capex (capital expenditure) until you’ve a lot more certainty.”

Investors see an 87 per cent chance that the BoC will cut its benchmark interest rate by 25 basis points on Wednesday, after the central bank lowered the rate by two percentage points since June to a level of 3 per cent.

“That expected rate cut is going to help keep a lid on CAD as well,” Hurd said. The price of oil, one of Canada’s major exports, was trading 1.1 per cent lower at $66.28 a barrel on tariff uncertainty and rising output from OPEC+ producers. Canadian government bond yields moved lower across the curve, tracking moves in U.S. Treasuries, as investors grew more concerned about the prospects of a U.S. recession. The 10-year was down 5 basis points at 2.983 per cent.