Author: Consultant

U.S. private payrolls increased less than expected in May while data for the prior month was revised lower, a report showed on Wednesday.

Private payrolls increased by 152,000 jobs last month after rising by a downwardly revised 188,000 in April, the ADP Employment report showed. Economists polled by Reuters had forecast private employment increasing by 175,000 last month.

The report was the latest indication that employment is not buckling under the weight of 525 basis points of interest rate increases from the Federal Reserve since March 2022, although other data has shown the job market is coming into better balance.

On Tuesday, the Labor Department reported job openings fell in April to the fewest in more than three years and the ratio of vacancies to the number of unemployed persons had returned to levels seen prior to the COVID-19 pandemic outbreak in early 2020.

The ADP report, jointly developed with the Stanford Digital Economy Lab, also precedes Friday’s more comprehensive and closely watched nonfarm payrolls report for May from the Bureau of Labor Statistics.

Economists polled by Reuters expect the BLS data to show 170,000 private-sector jobs were created last month, little changed from April’s 167,000, while total payroll growth is estimated at 185,000 versus 175,000 in April. The unemployment rate is forecast unchanged at 3.9 per cent and annual wage increases holding steady at 3.9 per cent.

The Canadian market tumbled Tuesday morning on heavy selling in materials and energy stocks, and despite regaining some lost ground subsequently, ended the day’s session notably lower.

Investors looked ahead to the Bank of Canada’s interest rate decision, due on Wednesday. The European Central Bank’s policy announcement, due on Thursday, and the U.S. jobs data, are also eyed for directional clues.

The benchmark S&P/TSX Composite Index ended with a loss of 138.51 points or 0.63% at 21,978.18, about 150 points off the day’s low of 21,828.40.

Materials and energy stocks were the major losers. The Materials Capped Index lost nearly 4%, while the Energy Capped Index dropped 2.06%. Shares from the rest of the sectors ended mixed.

Ssr Mining Inc (SSRM.TO), down 8.8%, was the biggest loser in the Materials index. Ero Copper (ERO.TO), Pan American Silver Corp (PAAS.TO), Ivanhoe Mines (IVN.TO), First Quantum Minerals (FM.TO), First Majestic Silver Corp (AG.TO), Seabridge Inc (SEA.TO), Teck Resources (TECK.B.TO), Filo Mining (FIL.TO), Silvercrest Metals (SIL.TO) and Hudbay Minerals (HBM.TO) lost 5 to 7%.

Energy stocks Veren Inc (VRN.TO), Precision Drilling Corp (PD.TO), Birchcliff Energy (BIR.TO), Enerplus Corp (ERF.TO), Vermilion Energy (VET.TO), Baytex Energy (BTE.TO), International Petroleum Corp (IPCO.TO) and Whitecap Resources (WCP.TO) ended down 2.7 to 4%.

Celestica Inc (CLS.TO), BRP Inc (DOO.TO), EQB Inc (EQB.TO) and West Fraser Timber (WFG.TO) were among the other major losers in the session.

Park Lawn Corporation (PLC.TO) zoomed nearly 60%. The company announced on Monday that it has entered into an arrangement agreement with Viridian Acquisition Inc., an affiliate of Homesteaders Life Company and Birch Hill Equity Partners Management Inc., pursuant to which Viridian and Birch Hill will acquire all of the issued and outstanding common shares of Park Lawn for a price of $26.50 per share in an all-cash transaction valued at approximately $1.2 billion.

GFL Environmental (GFL.TO) rallied 6.9%. Russel Metals (RUS.TO) climbed 4.7%. Stella-Jones (SJ.TO), Canadian Tire Corporation (CTC.TO), Metro Inc (MRU.TO), TFI International (TFII.TO), Waste Connections (WCN.TO), RB Global Inc (RBA.TO), Shopify Inc (SHOP.TO) and Stantec Inc (STN.TO) gained 1.9 to 3.2%.

• U.S. crude oil has erased most gains for the year and is now up just under 2% in 2024.
• In a surprise move, eight OPEC+ producers laid out a plan to phase out 2.2 million bpd in production cuts starting in October.
• The OPEC+ decision has let the “bearish genie out of the bottle,” analyst Tamas Varga said.

Crude oil prices today: WTI below $73 as OPEC+ to increase supply (cnbc.com)

• The influential Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, on Sunday agreed to extend their official crude output cuts into 2025, also stretching two other sets of supply curbs over different periods.
• In a Google-translated statement carried by the state-owned Saudi Press Agency, a subset of the OPEC+ alliance, including kingpins Saudi Arabia and Russia, said they would extend a set of nearly 1.7 million barrels per day of voluntary cuts that were set to expire at the end of this year.
• This smaller group of OPEC+ member will also stretch another round of voluntary output cuts totalling 2.2 million barrels per day until the end of the third quarter of this year.

Oil alliance OPEC+ extends collective crude production cuts into 2025 (cnbc.com)

Canada’s economy grew at a slower pace in the first quarter of the year than economists and the Bank of Canada expected, increasing the possibility that the central bank will cut its benchmark interest rate next week. 

Statistics Canada said real gross domestic product (GDP) grew 1.7 per cent at an annualized rate in the first quarter of the year, weaker than the 2.2 per cent that economists expected and short of the Bank of Canada’s forecast of 2.8 per cent. In the first quarter the economy grew 0.4 per cent. Fourth-quarter GDP growth was also revised down, from an annualized rate of 1 per cent to 0.1 per cent. 

Canada’s economy showed no growth in March, following a 0.2 per cent increase in February. Advanced estimates show GDP grew 0.3 per cent in April, due to increases in manufacturing, mining, and quarrying. 

The data comes days before the Bank of Canada is set to make an interest rate announcement that could see the central bank cut rates for the first time since early in the COVID-19 pandemic.

“While the downside surprise in Q1 was driven by a big cut in business inventories, the reality is that underlying growth remains well short of potential, and slack is building for the overall economy,” BMO chief economist Douglas Porter wrote in a research note on Friday reacting to the data. 

“For the Bank of Canada, we believe the main message is that the output gap is widening, as reinforced by a less-tight job market, modestly increasing the chances of a rate cut next week. There are respectable arguments on both sides of the decision, but we believe the balance of evidence points to a cut.”

Money markets increased bets for a rate cut in June, from 66 per cent before the data was released to almost 80 per cent, according to Reuters.

“Given the weaker trend in GDP, and the cooling in inflation, the Bank of Canada remains on track to deliver the first interest rate cut at next week’s meeting,” CIBC economist Katherine Judge wrote in a research note. 

“The Q1 figure was well below the Bank of Canada’s last published MPR forecast (2.8 per cent), and activity looks even more sluggish when accounting for population growth, as the surge in domestic demand looks to be a one-off in the broader trend of weak readings seen last year.” 

While the report missed expectations, Desjardins’ senior director of Canadian economics Randall Bartlett noted “the details of the release were more positive than the headline suggests.” 

Household spending increased 0.7 per cent in the first quarter due to a rise in services spending. The household savings rate also hit seven per cent in the quarter, the highest rate since Q1 of 2022. Business investment rose 0.8 per cent, driven by more spending on engineering structures largely within the oil and gas industry. At the same time, Statistics Canada noted widespread slowdown in business investment in inventories, with the retail auto industry posting the largest deceleration. 

“While headline real GDP growth looks as though it will be respectable in the first half of this year, it will be notably below the pace recently forecasted by the Bank of Canada,” Bartlett wrote. 

Monday June 3

China PMI

Japan manufacturing PMI and capital spending

(9:30 a.m. ET) Canada’s S&P manufacturing PMI for May.

(9:45 a.m. ET) U.S. S&P manufacturing PMI for May.

(10 a.m. ET) U.S. ISM manufacturing PMI for May.

(10 a.m. ET) U.S. construction spending for April. The Street is projecting an increase of 0.2 per cent from March.

Also: Canadian and U.S. auto sales

Earnings include: Coveo Solutions Inc.

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Tuesday June 4

Germany unemployment

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for April.

(10 a.m. ET) U.S. factory orders for April. Consensus is a rise of 0.6 per cent from March.

Earnings include: CrowdStrike Holdings Inc.; Ferguson PLC; Hewlett Packard Enterprise Co.

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Wednesday June 5

Japan and Euro zone services and composite PMI

(8:15 a.m. ET) U.S. ADP National Employment Report for May.

(8:30 a.m. ET) Canada’s labour productivity for Q1.

(9:30 a.m. ET) Canada’s global services PMI for May.

(9:45 a.m. ET) Bank of Canada policy announcement with press conference to follow.

(9:45 a.m. ET) U.S. S&P Global Services/Composite PMI for May.

(10 a.m. ET) U.S. ISM Services PMI for May.

Earnings include: Dollar Tree Inc.; Lululemon Athletica Inc.; North West Co. Inc.; Transcontinental Inc.

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Thursday June 6

China trade surplus

Euro zone retail sales

Germany factory orders

ECB monetary policy meeting

(8:30 a.m. ET) Canada’s merchandise trade balance for April.

(8:30 a.m. ET) U.S. initial jobless claims for week of June 1. Estimate is 222,000, up 3,000 from the previous week.

(8:30 a.m. ET) U.S. productivity and unit labor costs for Q1. Consensus estimates are annualized rate rises of 0.3 per cent and 4.8 per cent, respectively.

(8:30 a.m. ET) U.S. goods and services trade deficit (and revisions) for April.

Earnings include: Enghouse Systems Ltd.; JM Smucker Co.; Saputo Inc.

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Friday June 7

Japan household spending

Euro zone real GDP

Germany trade surplus and industrial production

(8:30 a.m. ET) Canadian employment for May. The Street expects a rise of 0.1 per cent, or 25,000 jobs, from April with the unemployment rate rising 0.1 per cent to 6.1 per cent and average hourly wages rising 4.8 per cent year-over-year.

(8:30 a.m. ET) U.S. nonfarm payrolls for May. Consensus is a rise of 180,000 jobs month-over-month with the unemployment rate remaining at 3.9 per cent and average hourly wages increasing 0.3 per cent from April and 3.9 per cent year-over-year.

(10 a.m. ET) U.S. wholesale inventories for April. Estimate is a month-over-month increase of 0.1 per cent.

(12 p.m. ET) U.S. flow of funds for Q1.

(3 p.m. ET) U.S. consumer credit for April.

Oil prices fell on Friday, extending losses to a third straight day, amid concerns about the outlook for demand. Expectations of interest rate cuts by central banks, and hopes that the OPEC+ will extend production cuts into the third quarter helped limit oil’s losses.

Data showing a contraction in China’s manufacturing sector has added to concerns about the outlook for oil demand.

The latest survey from the National Bureau of Statistics showed China slipped into contraction territory in May, with a manufacturing PMI score of 49.5.

That missed forecasts for a score of 50.5 and was down from 50.4 in April, and it moves beneath the boom-or-bust line of 50 that separates expansion from contraction.

The non-manufacturing PMI came in at 51.1, shy of expectations for 51.5 and down from 51.2 in the previous month. The composite PMI was 51.0 versus forecasts for 51.4 and down from 51.7 a month earlier.

West Texas Intermediate crude oil futures for July ended down by $0.92 at $76.99 a barrel.

Brent crude futures were down $0.71 or 0.85% at $81.17 a barrel a little while ago.

A report from Baker Hughes said the oil rig count in the U.S. dropped by one this week to 496, which is less than 59 rigs a year ago.

Data from the Commerce Department said the personal consumption expenditures (PCE) price index rose by 0.3% for the third straight month in April, matching economist estimates.

Meanwhile, the report said the core PCE price index, which excludes food and energy prices, crept up by 0.2% in April after rising by 0.3% in March. Economists had expected another 0.3% increase.

The annual rates of growth by the PCE price index and the core PCE price index were both unchanged from the previous month at 2.7% and 2.8%, respectively. The readings matched expectations.

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

The Commerce Department said real personal spending, which excludes price changes, edged down by 0.1% in April after climbing by 0.4% in March.

CWB Financial Group CWB-T +1.38%increase raised its quarterly dividend to 35 cents per common share, up one cent from its previous quarter, as it reported its second-quarter profit rose compared with a year ago.

The Edmonton-based bank says it earned common shareholders’ net income of $76.4-million or 79 cents per diluted share for the quarter ended April 30, up from $70-million or 73 cents per diluted share a year earlier.

Revenue totalled $285.9-million, up from $264.4-million in the same quarter last year.

Provisions for credit losses totalled $23.1-million compared with $10.3-million a year earlier.

On an adjusted basis, CWB says it earned 81 cents per share in its latest quarter compared with an adjusted profit of 74 cents per share in the same quarter last year.

The average analyst estimate had been for a profit of 86 cents per share, according to estimates compiled by financial markets data firm LSEG Data & Analytics.

The U.S. economy grew more slowly in the first quarter than previously estimated after downward revisions to consumer spending, the Commerce Department reported on Thursday.

Gross domestic product – the broadest measure of economic activity – grew at an 1.3 per cent annualized rate from January through March, down from the advance estimate of 1.6 per cent and notably slower than the 3.4 per cent pace in the final three months of 2023.

The downgrade of first-quarter growth followed recent softness in readings of retail sales and equipment spending.

A measure of inflation during the first quarter was revised down to 3.3 per cent from 3.4 per cent, the stiffest quarterly price-pressure growth in a year. After easing through much of last year, measures of inflation came in higher than expected to start 2024, driving Federal Reserve policymakers to push back expectations for when they’ll be able to pivot to interest rate cuts.

U.S. Treasury yields ticked lower after the modest downward revision to inflation in the first quarter, and equity index futures pared losses ahead of the opening bell on Wall Street.

The downward revision to GDP brings the first-quarter’s growth rate to the lowest since the second quarter of 2022, when the economy contracted, and leaves output below the 1.8 per cent rate that officials at the Fed see as its longer-run, noninflationary potential.

The soft start to the year is not expected to have persisted into the current second quarter, however, thanks in part to continued strength in the job market.

The number of Americans filing new claims for unemployment benefits ticked higher last week, the Labor Department said also on Thursday, but underlying strength in the labor market still shows signs of persisting and should continue to support the economy.

Initial claims for state unemployment benefits rose 3,000 to a seasonally adjusted 219,000 for the week ended May 25. Economists polled by Reuters had forecast 218,000 claims.

The so-called continuing claims tracking those who collect benefits beyond the first week rose 4,000 to a seasonally adjusted 1.791 million during the week ending May 18, the claims report showed.

The labor market is steadily rebalancing in the wake of 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 to slow demand in the overall economy.