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Economy

Asia stocks go guarded ahead of U.S. inflation test

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Asian share markets were mixed on Monday as risk assets found support from the upbeat U.S. October payrolls report, but faced another test later in the week from a reading on U.S. inflation that could spook the rate horses.

The congressional passage of a long-delayed U.S. $1 trillion infrastructure bill cheered investors, though a broader social safety net plan remains elusive.

Data out over the weekend also showed China’s exports beat forecasts in October to deliver a record trade surplus, although a miss on imports added to evidence of a slowing in domestic demand.

Moves were modest with MSCI’s broadest index of Asia-Pacific shares outside Japan off 0.2%. Japan’s Nikkei lost early gains to dip 0.1%, short of a recent five-week peak.

Chinese blue chips dithered either side of flat, stuck in a range that has held for almost four months.

Nasdaq futures were off 0.4%, after 10 straight sessions of gains which left the index looking overextended. S&P 500 futures dipped 0.2%, while EUROSTOXX 50 futures eased 0.1% and FTSE futures were flat.

Friday’s robust U.S. payrolls report included upward revisions to the previous couple of months and another strong reading on wages.

Tightness in the labour market combined with dislocation in global supply chains should result in another high reading for U.S. consumer prices due on Wednesday, with any upside surprise likely to rekindle talk of an earlier Federal Reserve hike.

Analysts note an alternative measure of core trimmed mean inflation has already picked up markedly to an annual 3.6%.

“Another acceleration in the monthly annualised trimmed CPI will reinforce our view that the Fed is behind the curve,” said Kim Mundy, a senior economist & currency strategist at CBA.

“The longer the FOMC waits to tighten monetary policy, the greater the risk the FOMC tightens more to bring inflation back under control.”

No less than six Fed officials are speaking on Monday, with the most attention likely on Vice Chair Richard Clarida who is talking on Fed and ECB policy.

After some wild swings, Treasuries still managed to end last week with a rally, thanks partly to a huge drop in UK bond yields where short-dated debt enjoyed its best week since 2009 after the Bank of England skipped a chance to hike.

That led the market to push out the likely timing and pace of tightening not just there, but in Europe and the United States too. Fed Funds now have a rate rise fully priced by September 2022, instead of July, a second not until February 2023 instead of December 2022.

Yields on 10-year Treasuries dived 10 basis points on the week and were last at 1.47%.

The drop took a little steam out of the dollar, which had hit a more than one-year high after the payrolls data. The dollar index was holding at 94.331, from a top of 94.634.

Still, the BoE’s shock decision left sterling down 1.4% over last week and trading at $1.3473, while the euro touched a 16-month trough before steadying at $1.1556.

The dollar was also trying to sustain its bull run on the Japanese yen at 113.54, above support around 113.25.

The retreat in bond yields was a boon for gold, which offers no fixed return, and lifted it to $1,818 an ounce.

Oil prices firmed after OPEC+ producers rebuffed a U.S. call to accelerate output increases even as demand nears pre-pandemic levels. [O/R]

Saudi Aramco also raised its official selling price of crude to all buyers across the globe.

Brent rose another $1.01 to $83.75 a barrel, while U.S. crude gained $1.07 to $82.34.

 

(Reporting by Wayne Cole; Editing by Himani Sarkar and Richard Pullin)

Economy

Bank of Canada trying to figure out how AI might affect inflation, Macklem says

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OTTAWA – Bank of Canada governor Tiff Macklem says there is a lot of uncertainty around how artificial intelligence could affect the economy moving forward, including the labour market and price growth.

In a speech in Toronto at the Economics of Artificial Intelligence Conference, the governor said Friday that the central bank is approaching the issue cautiously to get a better understanding of how AI could affect its job of keeping inflation low and stable.

“Be wary of anyone who claims to know where AI will take us. There is too much uncertainty to be confident,” Macklem said in prepared remarks.

“We don’t know how quickly AI will continue to advance. And we don’t know the timing and extent of its economic and social impacts.”

The governor said AI has the potential of increasing labour productivity, which would raise living standards and grow the economy without boosting inflation.

In the short-term, he said investment in AI is adding to demand and could be inflationary.

However, Macklem also highlighted more pessimistic scenarios, where AI could destroy more jobs than it creates or lead to less competition rather than more.

The governor called on academics and businesses to work together to shed more light on the potential effects of AI on the economy.

“When you enter a dark room, you don’t go charging in. You cautiously feel your way around. And you try to find the light switch. That is what we are doing. What we central bankers need is more light,” he said.

This report by The Canadian Press was first published Sept. 20, 2024.

The Canadian Press. All rights reserved.

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Business

A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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