Author: Consultant

ublished: 3/27/2024 4:51 PM ET | 

The Canadian market ended on a firm note on Wednesday thanks to sustained buying at several counters in healthcare and materials sectors. Real estate, consumer discretionary, utilities, industrials and energy stocks were among the other notable gainers.

The mood remained positive amid optimism several central banks will start cutting rates from the second half of the year.

The benchmark S&P/TSX Composite Index ended up by 194.56 points or 0.89% at 22,107.08, the day’s high.

The Healthcare Capped Index climbed nearly 4%. Tilray Inc (TLRY.TO) and Bausch Health Companies (BHC.TO) gained 7.7% and 6.2%,

respectively. Chartwell Retirement Residences (CSH.UN.TO) gained 1.65% and Sienna Senior Living (SIA.TO) ended higher by 1.1%.

MAG Silver Corp (MAG.TO), up 9.5%, was the top gainer in the Materials Index. New Gold (NGD.TO), Alamos Gold (AGI.TO), First Quantum Minerals (FM.TO), Torex Gold Resources (TXG.TO) and First Majestic Silver Corp (FR.TO) gained 6 to 7.5%.

Endeavour Mining Inc (EDV.TO) climbed nearly 7%. The company reported adjusted net earnings of $42 million or $0.17 per share for the fourth quarter, compared to prior year’s $14 million or $0.06 per share.

Energy stocks Vermilion Energy (VET.TO), Pason Systems (PSI.TO), Mattr Corp (MATR.TO), Tourmaline Oil Corp (TOU.TO), Arc Resources (ARX.TO), Birchcliff Energy (BIR.TO) and Prairiesky Royalty (PSK.TO) gained 2 to 4.1%.

Real estate stocks Dream Industrial (DIR.UN.TO), First Capital (FCR.UN.TO), Granite Real Estate (GRT.UN.TO) and Colliers International (CIGI.TO) gained 2.2 to 3.3%.

Among consumer discretionary stocks, Canada Goose Holdings (GOOS.TO) climbed nearly 5%. Linamar Corp (LNR.TO), Brp Inc (DOO.TO) and Aritzia Inc (ATZ.TO) gained 2.2 to 2.5%.

Utilities shares Algonquin Power & Utilities (AQN.TO), Innergex Renewable (INE.TO), Northland Power (NPI.TO) and Boralex (BLX.TO) ended sharply higher.

Finning International (FTT.TO), Ballard Power Systems (BLDP.TO), Gfl Environmental (GFL.TO), Brookfield Business Partners (BBU.TO) and Cargojet (CJT.TO) gained 3 to 5%

The S&P 500 rose Wednesday, closing at a record as the index heads for its best first quarter since 2019.

The broader market index gained 0.86% to close at 5,248.49, while the Dow Jones Industrial Average advanced 477.75 points, or 1.22%, to end at 39,760.08. Both indexes snapped three-day losing streaks. The Nasdaq Composite rose 0.51%, closing at 16,399.52.

Stocks rose in a broad rally Wednesday, with all 11 sectors of the S&P 500 registering gains. Utilities led the index higher, posting a nearly 2.8% jump. Real estate followed with a 2.4% advance, and industrials added 1.6%.

“Look at the S&P 500: Leadership’s coming from the losers,” said Art Hogan, chief market strategist with B. Riley Wealth. “So it really feels like a quarter-end rebalance and certainly more enthusiasm for equities, in what otherwise would be a quiet week, if not for the end of the quarter.”

The major averages are poised to end the first quarter of 2024 on a strong note. The S&P 500 is tracking for a 10% advance, pacing for its best first-quarter gain since 2019 when it added 13.1%. The 30-stock Dow is up about 5.5%, and on pace for its best first-quarter gain since 2021, when it added 7.4%. The Nasdaq is up roughly 9.3% over the quarter.

March has also proven powerful, with the three major averages on pace for a fifth straight winning month. As of Wednesday’s close, the S&P 500 is up about 3%. Both the Nasdaq and the Dow are up roughly 1.9% month to date.

“A soft landing for the US economy is now widely expected, and markets have dialed back their expectations for interest rate cuts,” wrote UBS Wealth Management strategists in a note.

“Looking ahead to the second quarter, we see the next stage of two primary market drivers playing out: the start of rate-cutting cycles by major central banks, and the broadening-out of AI adoption and implementation across a wider range of companies,” they added.

Later this week, investors will watch for data on jobless claims, gross domestic product and consumer sentiment. While the market is closed on Good Friday, attention will be on economic releases tied to personal income, consumer spending and the personal consumption expenditures expected in the mornin

BRP Inc. DOO-T +5.64%increase raised its dividend as it reported its fourth-quarter profit and revenue fell compared with a year earlier and said its results for its 2025 financial year are expected to be down compared with the year it just completed.

The Ski-Doo and Sea-Doo maker says it will now pay a quarterly dividend of 21 cents per share, up from 18 cents per share.

BRP says it earned $188.2-million or $2.46 per diluted share for the quarter ended Jan. 31, down from $365.1-million or $4.54 per diluted share a year earlier.

Revenue for the quarter totalled $2.69-billion, down from $3.08-billion.

On an normalized basis, BRP says it earned $2.46 per diluted share in its latest quarter compared with a normalized profit of $3.85 per diluted share a year earlier.

In its outlook for its 2025 financial year, BRP says it expects revenue in a range of $9.1-billion to $9.5-billion, down from $10.37-billion it recorded for its 2024 financial year. Normalized diluted earnings per share for 2025 are expected in a range of $7.25 to $8.25, down from $11.11 in 2024.

Canada’s gross domestic product in January increased 0.6 per cent, the fastest growth rate in a year and higher than forecasts, and the economy likely expanded 0.4 per cent in February, data showed on Thursday.

Analysts polled by Reuters had forecast a GDP growth of 0.4 per cent in the month. December GDP was revised to a 0.1 per cent contraction from zero growth initially reported.

January’s rise, the fastest since the 0.7 per cent growth in January 2023, was helped by a rebound in educational services as public sector strikes ended in Quebec, Statistics Canada said.

Thursday’s data shows the Canadian economy started 2024 strongly after growth stalled in the second half of last year; GDP was flat or negative on a monthly basis in four out of the last six months of 2023.

The strong rebound could allow the Bank of Canada more time to assess whether inflation is slowing sufficiently without risking a severe downturn, though the bank has said it does not want to stay on hold longer than needed.

Money markets trimmed their bets for a June rate cut to 65 per cent from just over 70 per cent after the GDP numbers were released. They widely expect the BoC to hold its key overnight rate at the same level in April.

The Canadian dollar pared losses after the numbers, with the loonie weaker by 0.09 per cent to 1.3579 against the greenback at 12:40 GMT. The two-year government bond yields also rose by 4.6 basis points to 4.188 per cent.

The central bank has maintained its key policy rate at a 22-year high of 5 per cent since July, but BoC’s Governing Council in March agreed that conditions for rate cuts should materialize this year if the economy evolves in line with its projections.

The bank in January forecast a growth rate of 0.5 per cent in the first quarter, and Thursday’s data keeps the economy on a path of small growth in the first three months of 2024. The BoC will release new projections along with its rate announcement on April 10.

Growth in January was broad-based, with 18 out of 20 sectors expanding output in the month, Statscan said. Real estate and rental and leasing grew for the third consecutive month, as activity at the offices of real estate agents and brokers drove the gain in January, it said.

Overall, the services-producing industries grew 0.7 per cent, while the goods-producing expanded 0.2 per cent.

In a preliminary estimate for February, Statscan said GDP was likely up 0.4 per cent, helped by mining, quarrying, and oil and gas extraction, manufacturing, and finance and insurance industries.

The U.S. economy grew at a solid 3.4 per cent annual pace from October through December, the government said Thursday in an upgrade from its previous estimate. The government had previously estimated that the economy expanded at a 3.2 per cent rate last quarter.

The Commerce Department’s revised measure of the nation’s gross domestic product – the total output of goods and services – confirmed that the economy decelerated from its sizzling 4.9 per cent rate of expansion in the July-September quarter.

But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports and business investment in buildings and software. It marked the sixth straight quarter in which the economy has grown at an annual rate above 2 per cent.

For all of 2023, the U.S. economy – the world’s biggest – grew 2.5 per cent, up from 1.9 per cent in 2022. In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1 per cent annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.

Thursday’s GDP report also suggested that inflation pressures were continuing to ease. The Federal Reserve’s favoured measure of prices – called the personal consumption expenditures price index – rose at a 1.8 per cent annual rate in the fourth quarter. That was down from 2.6 per cent in the third quarter, and it was the smallest rise since 2020, when COVID-19 triggered a recession and sent prices falling.

Stripping out volatile food and energy prices, so-called core inflation amounted to 2 per cent from October through December, unchanged from the third quarter.

The economy’s resilience over the past two years has repeatedly defied predictions that the ever-higher borrowing rates the Fed engineered to fight inflation would lead to waves of layoffs and probably a recession. Beginning in March 2022, the Fed jacked up its benchmark rate 11 times, to a 23-year high, making borrowing much more expensive for businesses and households.

Yet the economy has kept growing, and employers have kept hiring – at a robust average of 251,000 added jobs a month last year and 265,000 a month from December through February.

At the same time, inflation has steadily cooled: After peaking at 9.1 per cent in June 2022, it has dropped to 3.2 per cent, though it remains above the Fed’s 2 per cent target. The combination of sturdy growth and easing inflation has raised hopes that the Fed can manage to achieve a “soft landing” by fully conquering inflation without triggering a recession.

Thursday’s report was the Commerce Department’s third and final estimate of fourth-quarter GDP growth. It will release its first estimate of January-March growth on April 25.

Oil prices will gain some momentum this year as demand picks up and output curbs by the OPEC+ producer group continue to squeeze supply that is already being pressured by military conflicts, a Reuters poll showed on Thursday.

A survey of 46 economists and analysts forecast that Brent crude would average $82.33 a barrel in 2024, up from the $81.13 consensus projection in February. U.S. crude expectations were raised to $78.09, up from the $76.54 forecast last month.

This was the first upward revision in 2024 consensus forecasts since the October poll.

“We see the oil price rally going further until the summer months,” said Florian Grunberger, senior analyst at data and analytics firm Kpler. “This is due to the geopolitical risk premium and the interests of OPEC+ members, coupled with increasing demand in China.”

Oil prices have added more than 12 per cent in the quarter so far, fuelled by geopolitical tensions in the Middle East, Houthi attacks on Red Sea shipping and recent Ukrainian drone attacks on Russian refineries. [O/R] On the demand side, the overall consensus was roughly in line with the 1.3 million barrel per day (bpd) rise for 2024 projected by the International Energy Agency.

The IEA’s forecast was far less bullish than that of OPEC, which expects demand growth at 2.25 million bpd this year and said the 2024 and 2025 growth trajectories of India, China and the United States could exceed current expectations.

“Traders have now fully absorbed the implications of the OPEC+ supply cut extensions at a time when demand is proving more robust than expected,” said Matthew Sherwood, lead commodities analyst at the Economist Intelligence Unit.

OPEC+ members led by Saudi Arabia and Russia are unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters.

“Convincing OPEC+ members to underproduce as a group to maintain oil prices above a certain level is not going to be easy,” said Suvro Sarkar, energy sector team lead at DBS Bank, pointing to rising surplus capacity and the loss of OPEC+ market share to non-OPEC+ producers such as the United States.

Calgary-based Enbridge Inc. ENB-T -0.82%decrease is joining forces with I Squared Capital and pipeline firms WhiteWater and MPLX MPLX-N +0.47%increase to connect natural gas supplies from the Permian Basin to the U.S. Gulf Coast.

The joint venture, announced Tuesday, underscores Enbridge’s focus on various markets south of the border – particularly as Canadian liquefied natural gas projects face delays while global appetite for the fuel continues to grow. Enbridge will have a 19-per-cent stake in the new venture, WhiteWater and I Squared a combined 50.6-per-cent stake, while MPLX will hold 30.4 per cent. The transaction is expected to close in the second quarter of 2024.

The venture will include a 100-per-cent interest in Enbridge’s Rio Bravo pipeline, which connects to NextDecade’s Rio Grande LNG project in Brownsville, Tex., and the Whistler pipeline, which transports natural gas from the Permian to Agua Dulce, Tex., near the starting point of the Rio Bravo pipeline. It will also have a 70-per-cent interest in the proposed ADCC pipeline, which would connect to Cheniere Energy’s LNG-N -0.21%decrease Corpus Christi LNG export facility, and a 50-per-cent interest in the Waha Gas Storage facilities.

A Scotiabank research note Tuesday said the joint venture would extend the reach of Enbridge’s natural gas infrastructure into the Permian and, in the longer term, “could yield future growth opportunities.”

Since Enbridge chief executive officer Greg Ebel took the reins last year, the company’s focus has shifted from pumping oil across the continent to becoming an energy infrastructure giant that operates in multiple sectors.

In September, for example, Enbridge set out to become North America’s largest natural gas distributor by spending US$9.4-billion to acquire three gas utilities with facilities in Ohio, North Carolina, Utah, Idaho and Wyoming. If the deal closes as expected this year, Enbridge will move 20 per cent of all the natural gas consumed in the U.S.

Mr. Ebel’s move to reorient Enbridge toward natural gas is a bet that the fuel will play a crucial role in the world’s lower-carbon energy future, and the company has disclosed plans to expand its capacity into the Permian, which is the largest shale oil patch in the U.S.

The U.S. was the world’s largest exporter of liquefied natural gas in 2023. A recent decision by the Biden administration to pause new export permits for LNG, citing climate concerns, has driven an intense legal fight in the country, with a coalition of Republican-led states arguing that the clampdown is unlawful.

In January, U.S. Energy Secretary Jennifer Granholm said the pause would not affect already-authorized export projects. And it would not immediately affect U.S. supplies to Europe or Asia, she said, since seven LNG terminals are currently in operation, with several more expected to come online in the next few years.

Mr. Ebel has often said Canada isn’t taking full advantage of its abundant supply of natural gas and needs to fix a regulatory system that impedes action, slows development and erodes investor confidence.

Indeed, dreams in British Columbia of becoming a major LNG player have faded. Ten years ago, there were more than 20 proposals in the province to export LNG.

Today, despite much hype, only four B.C. projects are actively seeking to ship LNG to markets in Asia: Cedar LNG in Kitimat; Ksi Lisims LNG on Pearse Island; Woodfibre LNG near Squamish; and FortisBC’s expansion plans at its Tilbury LNG site in Delta.

The Shell-led LNG Canada joint venture in Kitimat is 88-per-cent complete, according to Fluor Corp., which along with JGC Holdings Corp. serves as the project’s prime contractor.

With a report from Reuters

Manulife Financial MFC-T +1.30%increase said on Monday it has agreed to reinsure $5.8-billion of reserves of Canadian Universal Life block, as the country’s top insurer looks to de-risk its business and improve shareholder returns.

The deal with RGA Life Reinsurance Company of Canada is expected to generate $800-million of capital, which Manulife intends to use to buy back shares, it said.

CEO Roy Gori said the insurer has released $11-billion of capital since 2018 and improved the core return on equity (ROE) by about 5 per cent since 2017.

Manulife has been seeking to cut risk in its insurance portfolio and focus on profitable areas for growth. In December, it signed a $13-billion deal to reinsure its long-term care business reserves.

“We remain highly focused on exploring additional organic and inorganic actions to deliver value to shareholders,” Gori added.

A contract between a reinsurer and an insurer typically reduces the risk for the latter, allowing it to, in some cases, remain solvent by recovering a part of the payout and in others, transfer the risk of the business to create fresh capital.

Manulife’s shares hit a 16-year high in February following strong quarterly results and are up about 21 per cent since the $13-billion reinsurance deal in December.

They rose about 0.8 per cent on Monday, with an 11.5 per cent year-to-date gain outperforming a roughly 7.4 per cent rise in closest rival Sun Life’s shares.

“We believe that this deal indicates that management remains focused on optimizing its profitability and capital deployment,” Jefferies analyst John Aiken said.

The transaction marks the third large reinsurance transaction between Manulife and global reinsurance company RGA, Manulife said.

Under the latest deal, Manulife also expects to sell $600-million in alternative long-duration assets (ALDA) that it had invested in to back the Canadian Universal Life block.

Monday March 25

Japan department store sales

(8:30 a.m. ET) U.S. Chicago Fed National Activity Index for February.

(10 a.m. ET) U.S. new home sales for February. The Street is forecasting an annualized rate of 2.9 per cent.

(10:30 a.m. ET) U.S. Dallas Fed Manufacturing Activity for March.

—

Tuesday March 26

Japan machine tool orders

Germany consumer confidence

(8 a.m. ET) Bank of Canada senior deputy governor Carolyn Rogers speaks in Halifax.

(8:30 a.m. ET) Canadian wholesale trade for February.

(8:30 a.m. ET) U.S. durable and core orders for February. The consensus projections are month-over-month increases of 1.1 per cent and 0.1 per cent, respectively.

(9 a.m. ET) U.S. S&P CoreLogic Case-Shiller Home Price Index (20 city) for January. The Street expects a rise of 0.2 per cent from December and 6.8 per cent year-over-year.

(9 a.m. ET) U.S. FHFA House Price Index for January. Consensus is a rise of 0.3 per cent month-over-month and 6.9 per cent year-over-year.

(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for March.

Also: Ontario budget

Earnings include: Flutter Entertainment PLC; McCormick & Co. Inc.; Sagicor Financial Co. Ltd.

—

Wednesday March 27

China industrial profits

Euro zone economic and consumer confidence

(8:30 a.m. ET) Canada’s population estimates for Q4 are released.

(10 a.m. ET) U.S. revisions to wholesale and inventories.

Earnings include: Carnival Corp.; Cintas Corp.; Endeavour Mining Corp.; MAG Silver Corp.; Paychex Inc.

—

Thursday March 28

China current account surplus

Bank of Japan summary of opinions from March 18-19 meeting

Germany employment

(8:30 a.m. ET) Canada’s monthly real GDP for January. The Street is projecting a month-over-month increase of 0.4 per cent.

(8:30 a.m. ET) Canada’s payroll survey for January.

(8:30 a.m. ET) U.S. initial jobless claims for week of March 23. Estimate is 212,000, up 2,000 from the previous week.

(8:30 a.m. ET) U.S. GDP for Q4. Consensus is an annualized rate rise of 3.2 per cent.

(9:45 a.m. ET) U.S. Chicago PMI for March.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment for March.

(10 a.m. ET) U.S. pending home sales for February. Consensus is a rise of 1.8 per cent from January.

Earnings include: Aya Gold & Silver Inc.; BRP Inc.; Walgreens Boot Alliance Inc.

—

Friday March 29

U.S., Canadian and European markets closed.

Japan CPI, jobless rate, retail sales and industrial production

(8:30 a.m. ET) U.S. personal income and spending for February. Consensus estimates are month-over-month increases of 0.5 per cent and 0.4 per cent, respectively.

(8:30 a.m. ET) U.S. core PCE price index for February. The Street is projecting an increase of 0.3 per cent from January and up 2.8 per cent year-over-year.

(8:30 a.m. ET) U.S. goods trade deficit for February.

(8:30 a.m. ET) U.S. wholesale and retail inventories for February.

(11:30 a.m. ET) U.S. Fed chair Jerome Powell speaks in a moderated discussion