Category: Uncategorized

Published: 11/14/2023 12:20 PM ET

The Canadian market is up sharply on Tuesday with stocks across the board gaining significant ground in positive territory thanks to strong buying interest. Softer than expected U.S. inflation data, and higher commodity prices are aiding sentiment.

Real estate, materials, utilities, healthcare, financials and communications stocks are up sharply. Several stocks from consumer discretionary, technology and industrials sectors are also up with impressive gains.

The benchmark S&P/TSX Composite Index is up 325.47 points or 1.65% at 20,034.62 a few minutes past noon.

Softer than expected inflation data from U.S. has eased concerns about the outlook for interest rates. The Labor Department said U.S. consumer price index was unchanged in October after climbing by 0.4% in September. Economists had expected consumer prices to inch up by 0.1%. Core consumer prices edged up by 0.2% in October after rising by 0.3% in September. Core prices were expected to rise by another 0.3%.

The report also said the annual rate of consumer price growth slowed to 3.2% in October from 3.7% in September. Economists had expected the pace of growth to decelerate to 3.3%.

The Real Estate Capped Index has surged about 4.5%. The Materials Capped Index is climbing nearly 3% and the Utilities index is up 2.5%.

The indices tracking the movements of stocks from financials, communications, consumer discretionary and information technology sectors are up 1.7 to 1.5%.

Docebo Inc (DCBO.TO) is soaring 8.5%. BRP Inc (DOO.TO) is gaining 7%, while Colliers International (CIGI.TO), FirstService Corporation (FSV.TO), West Fraser Timber (WFG.TO) and Shopify Inc (SHOP.TO) are up 4 to 5.2%.

Cargojet (CJT.TO), TFI International (TFII.TO), Kinaxis Inc (KXS.TO), Franco-Nevada Corporation (FNV.TO), Waste Connections (WCN.TO), WSP Global (WSP.TO) and Canadian Tire Corporation (CTC.A.TO) are gaining 2 to 3.5%.

Teck Resources Limited (TECK.A.TO) is up 2.3%. Glencore Plc announced its binding agreement to acquire a 77% effective interest in Teck Resources’ steelmaking coal business, Elk Valley Resources or EVR, for $6.93 billion in cash.

Premium Brands Holdings Corporation (PBH.TO) reported adjusted earnings of $56.4 million in the third-quarter of the current financial year, compared to adjusted earnings of $61.3 million in the year-ago quarter.

Data released by Statistics Canada this morning showed car registrations in Canada increased to 163,279 units in September from 158,531 units in August.

First Quantum (FM-T) has this week started reducing operations at its Cobre Panama mine in the face of escalating protests.

The Canadian miner is caught in a perfect storm of environmental, social and governance (ESG) issues that threatens to derail one of the world’s biggest and newest copper mines.

Panama has a long mining history but Cobre Panama is the first major new investment this century. The mine started up in 2019 and produced 350,000 metric tons of contained copper last year, contributing 1% to global copper production and 5% to Panama’s gross domestic product.

However, it has also generated a protest movement that has spread beyond environmental groups to trade unions, students and large swaths of the general public.

There are now calls not just for the Cobre Panama mine to be closed but for Panama to shun all future mining as well.

How First Quantum’s $10 billion copper mine went from promised economic boom to cause of mass popular unrest is a story peculiar to Panama but one that has a moral for the global mining industry.

TROUBLED PAST

Environmentalists were opposed to the Cobre Panama mine even before First Quantum bought the property in 2013 and started construction work a year later.

The Center for Environmental Impact, also known by its Spanish acronym CIAM, brought a lawsuit before Panama’s Supreme Court of Justice in 2009, claiming the original award of the concession in 1997 was illegal since there had been no public tender.

The Supreme Court agreed in a 2017 ruling, at which point environment and governance issues become intertwined.

Neither government nor company appear to have been in a rush to negotiate the new contract required by the court’s ruling. A bill largely reaffirming the old contract was thrown out by lawmakers in 2019, at which stage Cobre Panama was making its first shipments of copper concentrates.

By the time detailed negotiations on a new contract started in 2021, the mine was already ramping up to full production.

It took over two years to get a final text, the government at one stage blocking export shipments from the mine and the company threatening international arbitration in retaliation.

Lawmakers were supposed to sign the new contract into law in September but suspended debate to allow for further revisions. It was finally passed in October, but by then small protests of largely environmental groups had morphed into much bigger and broader demonstrations against the government.

Some of those protesters have been blocking the mine’s Punta Rincon port, impacting supplies to the power plant, which is why First Quantum has started reducing processing activities.

Both sides of the stand-off are now waiting for the country’s top court to rule on a number of legal challenges to the contract. There is a distinct possibility the contract will be voided.

Either way, it’s unlikely to be the last chapter in this Panamanian copper saga, given next year’s looming elections.

WHAT WENT WRONG

This all started with the “E” in “ESG”. Cobre Panama, located in primary rainforest, was something of an environmental cause célèbre even before the first shovel hit the ground.

When Canada was negotiating a free-trade agreement with Panama in 2010, MiningWatch Canada cited the project as an example of the “existing threats to Indigenous peoples and the environment” in testimony to lawmakers.

Although First Quantum is keen to stress its green mining credentials – replanting deforested area, for example – both it and the government have evidently failed to win the broader argument with environmental activists over the ensuing decade.

Governance of the project became a problem as soon as the country’s top court ruled against the original contract in 2017. But it took four years and a failed attempt to appeal before the government and company sat down to thrash out a new contract.

The simple fact is one of the world’s top copper mines has been operating without a legal contract ever since it hauled its first ore.

The subsequent protracted talks have pitted company against government with little or no reference to the people of Panama.

The lack of transparency around the negotiations has itself become a major grievance and one that has coalesced with broader dissatisfaction with the government.

By failing to address environmental and governance issues, the Cobre Panama mine is now at risk of losing its social licence to operate, whatever the court judges might say.

NO MINING?

Indeed, such is the anti-mining mood in Panama right now, there is a real possibility the country might ban all future projects.

In a sop to protesters, the government has already put a moratorium on all new mine concession approvals.

If Panama were to ban all mining activity, it wouldn’t be the first. El Salvador did so in 2017 after a similar escalation of protests against a planned gold mine.

Rising social opposition to new mines isn’t just a Central American thing.

Europe is desperately seeking its own supplies of battery metals such as lithium. The biggest lithium resource on European soil is the Jadar project in Serbia but it’s on indefinite hold after large-scale, often violent protests across the country.

This too is a story of environmental opposition snowballing into broader issues of governance and government.

The mining industry is still struggling to adjust to the new reality that if you don’t get the “ESG” right, you don’t get to mine.

The tale of Cobre Panama is an object lesson in getting it wrong.

The Swedish Sámi Association, representing an Indigenous people living across the northern part of Scandinavia and Russia, last week called on the European Union to guarantee the right of Free, Prior and Informed Consent (FPIC) under U.N. charter for any new critical mineral projects.

It’s a shame that at no stage in the 26 years since awarding the Cobre Panama concession did the Panamanian government think it worth seeking such consent from its own population.

It may still seek to do so – but it may be too late.

CAE Inc. CAE-T -2.85%decrease reported its second-quarter profit and revenue rose compared with a year ago.

The flight simulator company says it earned net income attributable to equity holders of $58.4-million or 18 cents per share for the quarter ended Sept. 30.

The result compared with a profit of $44.5-million or 14 cents per diluted share in the same quarter last year.

Revenue for the three-month period totalled $1.09-billion, up from $993.2-million.

On an adjusted basis, CAE says it earned 27 cents per share, up from an adjusted profit of 19 cents per share a year earlier.

Last month, CAE announced a deal to sell its health-care business to U.S. company Madison Industries for $311-million.

Inflation in the United States slowed last month in a sign that the Federal Reserve’s interest rate hikes are continuing to cool the consumer price spikes that have bedevilled consumers for the past two years.

Tuesday’s report from the Labor Department showed that lower gas prices helped cool overall inflation, which was unchanged from September to October, down from the 0.4 per cent jump the previous month. Compared with a year ago, consumer prices rose 3.2 per cent in October, down from 3.7 per cent in September.

Excluding volatile food and energy prices, so-called core prices also weakened unexpectedly. They rose just 0.2 per cent from September to October, slightly below the pace of the previous two months. Economists closely track core prices, which are thought to provide a good sign of inflation’s future path. Measured year over year, core prices rose 4 per cent in October, down from 4.1 per cent in September.

The latest price figures arrive as Fed officials, led by Chair Jerome Powell, are considering whether their benchmark interest rate is high enough to quell inflation or if they need to impose another rate hike in coming months. Powell said last week that Fed officials were “not confident” that rates were high enough to tame inflation. The Fed has raised its benchmark interest rate 11 times in the past year and a half, to about 5.4 per cent, the highest level in 22 years.

The costs of many services, notably rents, travel and health care, are still rising faster than before the pandemic. Services prices typically change more slowly than the cost of goods, because they largely reflect labour costs, which aren’t directly affected by interest rates.

The central bank’s rate hikes have increased the costs of mortgages, auto loans, credit cards and many forms of business borrowing, part of a concerted drive to slow growth and cool inflation pressures. The Fed is trying to achieve a “soft landing” – raising borrowing costs just enough to curb inflation without tipping the economy into a deep recession.

The rate increases have had some impact: Year-over-year inflation has dropped from a peak of 9.1 per cent in June 2022, the highest level in four decades, to 3.7 per cent in September. That figure is forecast to have fallen further in October to 3.3 per cent.

Last week, Powell warned that if inflation didn’t cool fast enough, the Fed “will not hesitate” to raise rates further. Still, the central bank’s policy-makers have left their key short-term rate unchanged since July, and most economists say they think the Fed is done hiking.

Prices first accelerated in 2021 as consumers stepped up spending amid a fading pandemic. Much greater demand ran headlong into snarled supply chains, which led retailers and other companies to quickly jack up prices. Inflation has since eased as supply chains have improved and higher borrowing rates have weakened some industries, notably housing.

But in his remarks last week, Powell said that further reductions in inflation might require a cool-down in spending in addition to further improvements in supply networks – a distinction that potentially points to further hikes.

Economists are keeping a close eye on several inflation metrics, including the cost of rent and housing, health insurance and services such as dining out, entertainment and travel. Starting with Tuesday’s price report, the government is altering how it calculates health insurance costs, and the changes are expected to result in higher overall inflation rates in the coming months.

Many economists say a key reason why most Americans hold a gloomy view of the economy despite very low unemployment and steady hiring is that the costs of things they buy regularly – milk, meat, bread and other groceries – remain so much higher than they were three years ago. Many of these items are still growing more expensive, though more gradually.

Teck Resources Ltd. TECK-B-T +2.74%increase has agreed to sell its coal business to Swiss commodities trading giant Glencore PLC and two Asian steelmakers, in a US$8.9-billion transaction that requires federal approval, and will be closely scrutinized by Ottawa before it can proceed.

Vancouver-based Teck has been fielding offers for its core metallurgical coal business since the spring, when an earlier plan to spin it off was cancelled at the eleventh hour because of insufficient shareholder support.

Founded in 1913, Teck is Canada’s largest diversified mining company, a major employer in British Columbia and one of the oldest miners in the country.

Glencore GLNCY +6.57%increase originally proposed buying all of Teck in April, including the company’s copper and zinc mines, in what would have been a US$23.1-billion cash and stock deal. Teck repeatedly rejected Glencore’s advances, citing a number of risks – some jurisdictional, some related to the deal’s execution and some related to concerns about Glencore’s past bribery and market manipulation settlements with international regulators.

In an interview with The Globe and Mail, Jonathan Price, Teck’s chief executive officer, called the deal to sell the coal business a “very different transaction.”

He pointed to a long list of commitments Glencore has made, including that it will maintain jobs in Canada, make billions in capital expenditures over the next few years and increase spending on research and development.

According to the terms of the transaction, which were set to be unveiled on Tuesday, Glencore has agreed to pay US$6.9-billion for 77 per cent of Teck’s coal business, known as Elk Valley Resources. Japan’s Nippon Steel NPSCY -3.02%decrease will pay US$1.7-billion and swap its interest in one of Teck’s coal operations for 20 per cent of the coal business. South Korea’s POSCO PKX-N +6.24%increase will swap its interests in two of Teck’s coal operations for 3 per cent.

The proposed sale price for the coal business is slightly less than some on Bay Street hadthought the unit was worth. Jefferies analyst Christopher LaFemina said in a note to clients last month that the business had a value of at least US$11-billion.

Unlike Teck’s earlier attempt at restructuring, under which it would have sold its coal unit to shareholders but continued collecting royalties on the business for about a decade, the new proposed transaction would be a clean split.

“Shareholders have told us very clearly that they would like to see a separation of steelmaking coal from base metals,” Mr. Price said, referring to investor concerns about risks related to the environmental impacts of coal. “They’d like to see that done in a simple and direct manner, and that’s exactly what we’ve achieved through this transaction.”

The transactions with Glencore and the steelmakers don’t require a shareholder vote, meaning whether the deal closes will likely depend on the outcome of a review by the federal government. Ottawa has the power to block a foreign takeover of Teck on either national security or net benefit grounds, the latter of which relate to the economic impact of the transaction.

In a statement, Teck said it doesn’t expect the deal with Glencore to close until the third quarter of next year, in large part because of the expected length of that government review.

Earlier in the year, several federal ministers expressed reservations about Glencore, a foreign miner, buying all of Teck. “We need companies like Teck here in Canada,” said an April letter to the Greater Vancouver Board of Trade from Industry Minister François-Philippe Champagne, Natural Resources Minister Jonathan Wilkinson and Deputy Prime Minister Chrystia Freeland.

British Columbia Premier David Eby said in June that he had concerns about Glencore buying Teck’s coal operations because ofGlencore’spast regulatory offences related to bribery and corruption. While Mr. Eby doesn’t have the authority to block a Glencore bid for Teck, he has suggested he would petition Ottawa to do so.

“Nobody has given us an assurance that the deal will go through,” Gary Nagle, Glencore’s CEO, said in an interview.

But he said he was confident the deal would be allowed. He noted Glencore’s already large footprint in Canadian mining, and the new commitments it has made. Glencore employs roughly 9,000 people in Canada. The bulk of its operations here are a result of its 2013 acquisition of fellow Swiss miner Xstrata PLC, which bought former Canadian mining giant Falconbridge Ltd. in the mid-2000s.

If the deal is approved, Teck will become a much smaller company in terms of revenue and market value, with a narrower focus on copper and zinc, both of which are critical minerals. Last year, coal accounted for 60 per cent of Teck’s revenue and 75 per cent of its profit. Earlier this year, the company put a large copper mine, called QB2, into production in Chile. The operation has been plagued by cost overruns.

Despite generating billions in free cash flow every year, Teck’s coal business has weighed down its valuation, because few investors are now willing to hold coal stocks in their portfolios, owing to concerns about the detrimental impact the fossil fuel has on the environment. By selling its coal business,Teck hopes to gain a higher valuation in the market over time.

If Glencore ends up acquiring Teck’s coal business, it plans to eventually split itself in two, creating a giant coal company that holds its thermal coal assets and Teck’s metallurgical coal assets, and another company to hold its metals mines and energy trading assets.

Mr. Price said Glencore has signed a two-year “standstill” agreement, which will come into effect after the completion of the coal transaction. The agreement means Glencore can’t make another takeover bid for Teck until the standstill expires.

Teck’s controlling shareholder, Norman B. Keevil, said earlier in the year that he was opposed to Glencore buying all of Teck. He told The Globe at the time that “Canada is not for sale.” Mr. Keevil later softened his stance, saying that if Teck’s management, its board and its shareholders were in favour of a deal with Glencore, he would not exercise his veto power.

In a statement, Mr. Keevil said the new transaction positions Teck for continued growth as a major Canada-based producer of copper and future-oriented metals, while preserving jobs and operations at the coal mines in B.C’s Elk Valley.

With reports from Eric Reguly and Andrew Willis

• Moody’s Investors Service lowered its ratings outlook on the United States’ government to negative from stable, pointing to rising risks to the nation’s fiscal strength.
• The ratings agency has affirmed the long-term issuer and senior unsecured ratings of the U.S. at Aaa.
• Moody’s move to cut its outlook arrives as Congress faces the looming threat of a government shutdown once more. The government is funded through next Friday.
• Newly elected House Speaker Mike Johnson said he plans to release a Republican government funding plan on Saturday.

https://www.cnbc.com/2023/11/10/moodys-cuts-usa-outlook-to-negative-citing-higher-interest-rates-and-deficits.html

WASHINGTON — House Republicans on Saturday unveiled their stopgap funding bill to avert a government shutdown set to begin next weekend. But with just five legislative days left until the deadline, Congress has little room for error.

Just two and a half weeks into the job, Speaker Mike Johnson, R-La., opted to go with a two-step continuing resolution, or CR, over a more typical funding extension covering the entire federal government. The untested funding approach is aimed at appeasing far-right agitators in his GOP conference who despise CRs.

The House is expected to vote as early as Tuesday to give members 72 hours to read the text of the bill, according to two people familiar with matter. The plan does not include budget cuts or aid for Israel.

Under the two-step strategy — which Johnson and others have dubbed a “laddered CR” but which others have likened to a step stool — several spending bills needed to keep the government open would be extended until Jan. 19, while the remaining bills would go on a CR until Feb. 2.

GOP hardliners had been pushing Johnson to include budget cuts as part of his two-tiered CR plan, a source involved in discussions told NBC News. One House Republican, Rep. Chip Roy of Texas, quickly voiced his opposition to the bill shortly after it was released.

“It’s a 100% clean. And I 100% oppose,” Roy tweeted. “My opposition to the clean CR just announced by the Speaker to the @HouseGOP cannot be overstated. Funding Pelosi level spending & policies for 75 days — for future “promises.”

The plan is designed to avoid a messy showdown right before the holidays and buy Johnson and House Republicans more time to pass individual spending bills, but also create a sense of urgency with staggered funding cliffs. But it remains to be seen if the plan can pass the House, much less the Democratic-controlled Senate, which has dismissed the two-tiered approach.

“This two-step continuing resolution is a necessary bill to place House Republicans in the best position to fight for conservative victories,” Johnson said in a statement after he announced the plan. “The bill will stop the absurd holiday-season omnibus tradition of massive, loaded up spending bills introduced right before the Christmas recess.”

He added: “Separating out the CR from the supplemental funding debates places our conference in the best position to fight for fiscal responsibility, oversight over Ukraine aid, and meaningful policy changes at our Southern border.”

The laddered plan has the backing of Congress’ most conservative members, including Republicans who normally never vote for stopgap bills. If Johnson could get a temporary funding bill passed with only Republican votes, that would help him notch an early win among conservatives.

“I like the ladder approach,” said Rep. Ken Buck, R-Colo., a member of the hard-right House Freedom Caucus. “I think if we try to pass some appropriations bills, we’re doing better than we’ve done in the past.”

https://www.cnbc.com/2023/11/11/house-republicans-unveil-their-plan-to-avert-a-government-shutdown-next-week.html

UPDATED FRI, NOV 10 20234:42 PM EST

Stocks rallied Friday, recovering the ground lost in the previous session, as Treasury yields stabilized.

The Dow Jones Industrial Average advanced 391.16 points, or 1.15% to close at 34,283.10. The S&P 500 climbed 1.56% to finish the session at 4,415.24. The Nasdaq Composite added 2.05% to 13,798.11, notching its best day since May.

All 11 sectors of the S&P 500 were positive Friday, but tech outperformed, rising 2.6%. Microsoft leapt to all-time highs during the session and ended the day higher by 2.5%. Apple, Meta, Tesla and Netflix jumped more than 2% each, while Alphabet gained 1.8%.

Friday’s surge was also enough to lift the three major averages for a second consecutive week of gains. The S&P 500 advanced 1.3%, while the Dow added about 0.7%. The Nasdaq was the outperformer, rising roughly 2.4% on the week.

Stocks staged a rebound as the benchmark 10-year Treasury yield hovered around the flatline.

It was a marked reversal from Thursday’s action in which the rate on the 10-year jumped more than 10 basis points. The spike in yields followed a dismal Treasury Department bond auction and comments from Federal Reserve Chair Jerome Powell that suggested more intervention may be needed to quell inflation.

Thursday’s ensuing sell-off also snapped the longest winning streaks for the S&P 500 and the Nasdaq Composite in two years.

Recent volatility notwithstanding, a resilient economy has helped equities even as investors remain uncertain about the Fed’s timeline around rate policy, according to UBS.

“A continued high level of unfilled job openings and solid private sector balance sheets support our view for a ‘softish’ economic landing,” UBS’ David Lefkowitz wrote in in a Friday note. “Still, economic growth will likely slow in the months ahead and further improvements in inflation will probably be more incremental.”

Correction: An earlier version of this story misstated the Federal Reserve’s stance on monetary policy.

Suncor Energy Inc. says it earned a profit of $1.54 billion in the third quarter of 2023, compared to a net loss of $609 million in the prior year’s quarter.

The Calgary-based energy giant says its earnings work out to $1.19 per share, compared to a loss of 45 cents per common share in the same three months of 2022.

On an adjusted basis, Suncor earned $1.98 billion or $1.52 per common share in the third quarter of 2023, compared to $2.57 billion or $1.88 per common share in the third quarter of 2022.

The company attributed the decrease in adjusted earnings to lower crude prices year-over-year and a weaker business environment, as well as increased royalties and decreased sales volumes due to international asset divestments.

Suncor’s total upstream production was 690,500 barrels of oil equivalent per day, down from 724,100 boe/d in the same period last year.

Refinery throughput was 463,200 barrels per day and refinery utilization was 99 per cent in the third quarter of 2023, compared to 466,600 barrels per day and 100 per cent utilization in the prior year’s quarter.

This report by The Canadian Press was first published Nov. 8, 2023.