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• TD Bank pleaded guilty in a criminal money laundering case and agreed to pay a whopping $3 billion in fines and other penalties to the Department of Justice and federal financial regulators to settle a probe over its failure to monitor money laundering by drug cartels.
• TD Bank is also set to accept limits on its growth as part of the settlement.
• The restrictions on TD Bank’s growth would be similar to those imposed by the Federal Reserve on Wells Fargo in 2018.

https://www.cnbc.com/2024/10/10/td-bank-3-billion-fine-doj-settle-money-laundering-drug-cartel.html

• The producer price index was flat for the month and up 1.8% from a year ago. Economists surveyed by Dow Jones had been looking for a monthly gain of 0.1%.
• Excluding food and energy, the PPI rose 0.2%, meeting expectations.
• A 0.2% decline in final demand goods prices offset a 0.2% increase in services.

https://www.cnbc.com/2024/10/11/producer-price-index-september-2024-.html

Canadian employment rebounded in September and the unemployment rate ticked lower, forcing investors to trim their bets that the Bank of Canada will deliver a larger interest-rate cut later this month.

After four months of little change, employment jumped by nearly 47,000 in September, easily outpacing analyst expectations of a 27,000 gain, Statistics Canada said Friday in a report. The unemployment rate edged lower to 6.5 per cent from 6.6 per cent. Analysts were expecting the jobless rate to rise to 6.7 per cent.

Despite the increase in hiring, the employment rate has been sliding for much of the past two years, given the population is growing at a far quicker pace than jobs are being created.

The labour market has been going through a tough stretch as employers cope with higher interest rates and weaker consumer spending. Over the past year, the economy had added a net 313,000 positions, compared to 542,000 in the previous 12-month period.

Bank of Canada Governor Tiff Macklem has said he wants to see a pickup in hiring and economic activity, flagging concerns that inflation could drift below the central bank’s 2-per-cent target. The annual inflation rate ebbed to 2 per cent in August and has undershot the central bank’s expectations this year.

The BoC has delivered three consecutive quarter-point rate cuts since the summer, taking its policy rate to 4.25 per cent from 5 per cent. Because of some weak data of late, many economists and investors are predicting the bank will opt for a larger half-point cut on Oct. 23.

However, investors pared back their bets for a larger cut on Friday. Shortly after the release of Statscan’s numbers, financial markets were pricing in a 32-per-cent chance of a half-point cut, down from 53 per cent earlier on Friday morning, according to Bloomberg data.

The details of Statscan’s report were mixed. The entirety of the job gains were concentrated in the private sector and in full-time positions. Average hourly wages rose by an annual 4.6 per cent, down from 5 per cent in August – an encouraging sign for the Bank of Canada as it looks to tame price growth.

On the downside, total hours worked fell 0.4 per cent in September. Labour force participation also declined during the month, which contributed to a lower unemployment rate.

“Over all, the mixed report isn’t enough to make a [half-point] cut a sure thing in October,” Katherine Judge, an economist at CIBC Capital Markets, said in a note to clients.

Statscan will release its consumer price index for September on Tuesday, the last major economic release before the central bank’s decision.

Bank of Montreal chief economist Doug Porter said in a note that “one of the strongest arguments in favour a bigger rate move was the previously steady softening in the job market. With jobs delivering at least a one-month wonder of strength – and offering a tantalizing glimmer of hope that the economy may be pulling out of its funk –the case for an even more aggressive BoC just took a big step back.”

Toronto-Dominion Bank’s TD-T +0.61%increase retail banking growth in the United States will be constrained by an asset cap, adding to TD’s financialpenalties from U.S. regulators and law enforcement for anti-money laundering failures, executives were told on a conference call Wednesday evening.

TD has already set aside $4-billion to cover financial penalties from three different regulators and the U.S. Department of Justice, but investors have been bracing for details of non-financial penalties that could limit how quickly the bank can keep growing in the United States.

At 7 p.m. on Wednesday, TD held a call with senior executives to say details had been finalized, and they include growth limitations on its U.S. retail banking business, according to someone familiar with the conversation.

The Globe and Mail is not identifying the source because they were not authorized to speak publicly.

The limitation comes in the form of an asset cap, preventing TD from expanding its balance sheet by adding new loans, for instance, because loans are considered assets. However, the asset cap will apply to the U.S. retail banking division, meaning other units, such as TD Securities, will still be able to expand their own balance sheets and lend to large corporate clients.

TD has been hampered by the money-laundering scandal since early 2023, when the bank disclosed it may not get regulatory approval for a proposed US$13.4-billion takeover of First Horizon Corp. Over the year and a half since, the bank killed the takeover because it could not get regulators’ blessings; set aside the $4-billion to cover expected financial penalties; and named a new chief executive officer.

In September, TD named Raymond Chun, a relatively unknown insider, as its next CEO. Mr. Chun will become chief operating officer effective Nov. 1 and then take over at the bank’s next annual general meeting in April. Mr. Chun is currently the head of Canadian personal banking, which is TD’s most profitable division.

TD Bank’s dirty laundry

On top of pulling Canada’s second-largest financial institution out of its U.S. regulatory crisis, Mr. Chun will have to restore morale because TD has also suffered from a cultural erosion that stifled financial performance, The Globe and Mail reported in August. Inside the bank, conservatism took hold and dense layers of bureaucracy hindered decision-making. Frustration over this, coupled with a U.S. regulatory crisis that kept snowballing, contributed to a number of respected leaders leaving the bank.

When financial institutions fall into the crosshairs of law enforcement, asset caps are typically reserved for the most severe cases. In the U.S., the asset cap imposed on Wells Fargo & Co. in 2018, which limited its balance sheet to US$1.95-trillion in assets, is often held up as one of the more extreme examples.

Beyond the growth limitations, asset caps can be difficult for banks because there often are no specific end dates, and lenders have to apply to regulators to get them lifted. Six years on at Wells Fargo, the bank is still limited by its own cap.

On Wednesday, the Wall Street Journal reported that TD’s $4-billion in total fines (US$3-billion) will be split between multiple bodies. The Justice Department will receive around US$1.8-billion and FinCEN will get US$1.3-billion.

In a statement in September, Bharat Masrani, TD’s outgoing CEO, addressed the anti-money-laundering woes that have plagued the bank. “The anti-money laundering challenges we face took place on my watch as CEO and I take full responsibility,” he said in a statement.

“In the coming months, I will continue to advance and direct the critical remediation program required to meet our obligations and responsibilities and strengthen our risk and control foundation.”

TD declined to comment for this story.

Oil prices slumped by more than 4% early on Tuesday as traders have yet to see an actual supply disruption in the Middle East while focusing on China’s underwhelming demand again.

Both benchmarks, WTI Crude and Brent Crude, were down by about 3% as of 9:30 a.m. EDT on Tuesday. The U.S. benchmark fell below $75 per barrel, and the Brent price was down to the $78 a barrel handle, after breaking above $80 on Monday in an 11% total gain in oil prices since Iran fired missiles on Israel a week ago.

The war premium has started to evaporate, especially after the recent rally and the return of business in China after the Golden Week holiday.

As China returned from the holiday, the authorities said they were confident that growth in the world’s second-largest economy would hit their forecasts this year. The officials, however, refrained from unveiling additional measures to prop up the economy and oil demand, which disappointed traders and speculators.

“China’s National Development and Reforms Commission (NDRC) failed to announce any new supportive measures. Without policy support, an economic slowdown could keep China’s oil demand subdued in the short to medium term,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note on Tuesday.

The return of Libya’s oil production and exports after more than a month of hiatus due to the political stalemate has also weighed on the prices.

“Oil can keep ascending only for so long purely based on perceptions and not actual supply disruption,” oil brokerage PMV said in a Tuesday note.

“The geopolitical risk premium has an obscure and unforeseeable expiry date. When that point arrives and is not replaced by genuine and supportive fundamental factors, in the case of the Middle East conflict by a palpable supply shortage, the move higher will not be sustainable.”

By Charles Kennedy for Oilprice.com

CALGARY, AB, Oct. 4, 2024 /CNW/ – Enbridge Inc. (TSX: ENB) (NYSE: ENB) (Enbridge or the Company) will host a conference call and webcast to provide a business update and review 2024 third quarter results on November 1, 2024, at 7 a.m. MT (9 a.m. ET).

Read more at newswire.ca

Monday October 7

China markets closed

Euro zone retail sales

Germany factory orders

(2 p.m. ET) U.S. budget balance for September.

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

—

Tuesday October 8

China aggregate yuan financing and new yuan loans

Japan real cash earnings, household spending and current account surplus

Germany industrial production

(6 p.m. ET) U.S. NFIB Small Business Economic Trends Survey for September.

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

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

Earnings include: PepsiCo Inc.

—

Wednesday October 9

Japan machine tool orders

Germany trade surplus

(10 a.m. ET) U.S. wholesale inventories for August.

(2 p.m. ET) U.S. Fed minutes from Sept. 17-18 meeting are released.

—

Thursday October 10

Japan bank lending

Germany retail sales

(8:30 a.m. ET) U.S. initial jobless claims for week of Oct. 5. Estimate is 235,000, up 10,000 from the previous week.

(8:30 a.m. ET) U.S. CPI for September. The Street is projecting a rise of 0.1 per cent from August and up 2.3 per cent year-over-year.

Earnings include: Aritzia Inc.; Delta Air Lines Inc.; Domino’s Pizza Inc.; Progressive Corp.; Richelieu Hardware Ltd.

—

Friday October 11

Germany CPI

(8:30 a.m. ET) Canadian employment for September. The Street expects a gain of 0.2 per cent, or 31,500 jobs, from August with the unemployment rate rising 0.1 per cent to 6.7 per cent.

(8:30 a.m. ET) Canadian building permits for August. Estimate is a month-over-month decline of 10.0 per cent.

(8:30 a.m. ET) U.S. PPI Final Demand for September. Consensus is a rise of 0.1 per cent from August and up 1.8 per cent year-over-year.

(10 a.m. ET) U.S. University of Michigan Consumer Sentiment Survey for October (preliminary reading).

(10:30 a.m. ET) Bank of Canada Business Outlook Survey and Survey of Consumer Expectations for Q3 is released.

Earnings include: Bank of New York Mellon; JPMorgan Chase & Co.; Wells Fargo & Co.

BRP Inc.DOO-T -0.83%decreaseDOO-T -0.83%decrease has deeply slashed its profit forecast for the year as the Canadian maker of Ski-Doo snowmobiles and Can-Am off-road vehicles grapples with softer consumer demand and heightened competition.

Its shares fell 4.5 per cent to $85.30 in Friday trading on the Toronto Stock Exchange.

Valcourt, Que.-based BRP reported net income of $7.2-million or 9 cents a share for its second quarter ended July 31. On an adjusted basis and not including restructuring costs, it generated normalized diluted earnings of $0.61 a share compared with the $0.35 analysts had predicted. Revenue came in at $1.84-billion, in step with the $1.88-billion analysts expected.

But the company cut its earnings guidance for the full year by 54 per cent, saying it now expects earnings per share to come in between $2.75 and $3.25. That’s down from a previous forecast of $6 to $7. The manufacturer also lowered its revenue forecast for the year to between $7.8-billion and $8-billion, down from $8.6-billion to $8.9-billion.

“Our results were in line with expectations and reflect our ongoing focus on reducing network inventory to maintain our dealer value proposition. We have made great strides on that front, but the retail environment is more challenging with the economic context pressuring consumer demand,” BRP chief executive José Boisjoli said in a statement. “As such, our priority is to continue to proactively manage production and inventory levels, which leads us to revise our year-end guidance.”

Investor sentiment on BRP was quite bearish heading into the results release, with most expecting a guidance cut, Desjardins analyst Benoît Poirier said in a research note. But he said the magnitude of the cut is “significantly worse than expected.”

The revision represents a stunning turn of events in a short period of time. A year ago, expectations for BRP’s earnings per share for fiscal 2025 were about $14. Now they’re barely a quarter of that amount.

“Unfortunately, this extreme volatility could spook investors, resulting in lower valuation multiples,” Stifel analyst Martin Landry said in a note Friday. BRP has had to boost its promotional activity in the face of softer demand and to compete with the discounts rivals are offering, he said.

Powersports vehicles are considered to be highly discretionary and are often the first thing that gets cut when consumers are watching their spending or lose their jobs. As a result, dealers are offering sweeter deals to stoke sales and get inventory out the door.

Sales as measured in individual vehicles fell by high single-digits during the last quarter in North America. BRP’s unit sales were down 18 per cent, suggesting it lost market share.

“We believe that difficult industry conditions could be present next year as well as it may take time for consumer demand to return and for the excess inventory to clear,” Mr. Landry said.

In the United States, the biggest market for powersports vehicles, consumers reported higher optimism and a greater willingness to spend in the third quarter as confidence in their household finances grew, according to McKinsey & Co.’s latest sentiment survey. But the consultancy warned emerging economic indicators could dampen this newfound optimism.

“The next few months may be turbulent,” McKinsey’s ConsumerWise team said in a report published late last month. “Market uncertainty, the upcoming US general election, and ongoing geopolitical conflicts may test US consumers’ faith in the economy.”

BRP is controlled by Bombardier Inc.’s founding family and Bain Capital, which together held roughly 56 per cent of the total voting power as of April this year. Caisse de dépôt et placement du Québec is also a major shareholder.

U.S. private payrolls increased more than expected in September, further evidence that labour market conditions were not deteriorating.

Private payrolls increased by 143,000 jobs last month after rising by an upwardly revised 103,000 in August, the ADP National Employment Report showed on Wednesday.

Economists polled by Reuters had forecast private employment increasing by 120,000 positions after a previously reported gain of 99,000 in August.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of Friday’s more comprehensive and closely watched employment report for September from the Labor Department’s Bureau of Labor Statistics.

There is not much correlation between the ADP and BLS employment report. Initial ADP prints have mostly understated private payroll growth this year.

Government data on Tuesday showed the labour market continues to hum along, with 1.13 job openings for every unemployed person in August compared to 1.08 in July. Sluggish hiring against the backdrop of an immigration-driven surge in labour supply is behind the labour market slowdown.

The Federal Reserve last month cut its benchmark interest rate by an unusually large 50 basis points to the 4.75 per cent-5.00 per cent range, the first reduction in borrowing costs since 2020, in a nod to rising concerns over the labour market’s health.

The U.S. central bank is expected to cut interest rates again in November and December.

Private payrolls likely increased by 125,000 in September after rising by 118,000 in August, a Reuters survey of economists showed. With solid gains in government employment expected, nonfarm payrolls are forecast to have increased by 140,000 last month after advancing by 142,000 in August The unemployment rate is forecast unchanged at 4.2 per cent. It has increased from 3.4 per cent in April 2023.