Business

Stock markets fall as U.S. Fed chair Powell reaffirms plan to keep raising interest rates – CBC News

Published

2 years ago

August 26, 2022

U.S. Federal Reserve Chair Jerome Powell delivered a stark message on Friday: the Fed will likely impose more large interest rate hikes in coming months and is resolutely focused on taming the highest inflation in four decades.

Powell also warned more explicitly than he has in the past that the Fed’s continued tightening of credit will cause pain for many households and businesses, as its higher rates further slow the economy and potentially lead to job losses.

“These are the unfortunate costs of reducing inflation,” he said in a high-profile speech at the Fed’s annual economic symposium in Jackson Hole, Wyo. “But a failure to restore price stability would mean far greater pain.”

Investors had been hoping for a signal that the Fed might moderate its rate increases later this year if inflation were to show further signs of easing. But the Fed chair indicated that that time may not be near.

“I’m not surprised at anything that he had to say,” said David Baskin, founder of Baskin Wealth Management in Toronto. “The biggest fear that the central bankers have is that inflation will get away from them, and by that I mean that everybody will expect inflation to remain high.”

Stocks tumbled after Powell’s speech on Friday, as investors pondered the prospect of higher borrowing costs sticking around for a while.

The Dow Jones Industrial Average was down by 1008 points, or 3 per cent, by the end of the trading day, while the technology-focused Nasdaq Index was off by even more — almost 4 per cent.

The Toronto Stock Exchange’s benchmark index held up comparatively better, off by 299 points, just shy of 1.5 per cent.

“I think the market was hoping for something a little more … mild, saying that, you know, ‘we don’t want to raise interest rates too fast and terrify everybody,'” Baskin added.

The Fed is trying to manage expectations and concerns that come with inflation, like workers and unions potentially seeking higher raises and suppliers hiking prices in the anticipation of rising product costs, he said.

“What the central bankers really need to do is break the cycle of expectation and make people believe that inflation is going to come down and come down quite quickly. And their tool for doing that, of course, is to raise interest rates.”

Fed might slow pace of rate hikes ‘at some point’

After hiking its key short term rate by three-quarters of a point at each of its past two meetings — part of the Fed’s fastest series of rate increases since the early 1980s — Powell said the Fed might ease up on that pace “at some point” — suggesting that any such slowing isn’t near.

Powell said the size of the Fed’s rate increase at its next meeting in late September — whether one-half or three-quarters of a percentage point — will depend on inflation and jobs data. An increase of either size, though, would exceed the Fed’s traditional quarter-point hike, a reflection of how severe inflation has become.

Sal Guatieri, a senior economist at BMO, wrote that economists will be looking for a hike of 50 basis points, with rates peaking between 3.50 per cent and 3.75 per cent, when the next rate increase will be announced on Sept. 21.

Such a move “should be ‘sufficiently restrictive’ to cool demand and gradually lower inflation without tipping the economy into a deep downturn,” Guatieri wrote.

WATCH | What the U.S. Federal Reserve signals might mean:

U.S. central bank keen to drag inflation down

2 months ago

Duration 3:24

CBC News senior business correspondent Peter Armstrong breaks down what the U.S. central bank’s interest rate hike signals for the economy, and what it could mean for Canadians dealing with inflation squeezing their budgets

While lower inflation readings that have been reported for July have been “welcome,” the Fed chair said, “a single month’s improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down.”

Powell noted that the history of high inflation in the 1970s, when the central bank sought to counter high prices with only intermittent rate hikes, shows that the Fed must stay focused.

“The historical record cautions strongly against prematurely” lowering interest rates, he said. “We must keep at it until the job is done.”

Powell’s speech is the marquee event of the the Fed’s annual economic symposium at Jackson Hole, the first time the conference of central bankers is being held in person since 2019, as it went virtual for two years during the COVID-19 pandemic.

Since March, the Fed has implemented its fastest pace of rate increases in decades to try to curb inflation, which has punished households with soaring costs for food, gas, rent and other necessities. The central bank has lifted its benchmark rate by two full percentage points in just four meetings, to a range of 2.25 per cent to 2.5 per cent.

Those hikes have led to higher costs for mortgages, car loans and other consumer and business borrowing. Home sales have been plunging since the Fed first signaled it would raise borrowing costs.

Slowing the economy without triggering a recession

In June, the Fed’s policymakers signaled that they expected to end 2022 with their key rate in a range of 3.25 per cent to 3.5 per cent, and then rise further next year to between 3.75 per cent and 4 per cent. If rates reach projected levels at the end of this year, they would be at their highest point since 2008.

Powell is betting that he can engineer a high-risk outcome: slow the economy enough to ease inflation pressures yet not so much as to trigger a recession.

WATCH | U.S. interest rates will affect Canadians as well:

What the U.S. Federal Reserve’s interest rate hike means for inflation

2 months ago

Duration 1:40

CBC’s senior business correspondent Peter Armstrong helps makes sense of the U.S. Federal Reserve’s interest rate hike — and what it might signal for the Canadian economy.

The Fed chair’s task has been complicated by the U.S. economy’s cloudy picture: On Thursday, the U.S. government said its economy shrank at a 0.6 per cent annual rate in the period between April and June, the second straight quarter of contraction. Yet employers are still hiring rapidly, and the number of people seeking unemployment aid — a measure of layoffs — remains relatively low.

At the same time, inflation is still crushingly high, though it has shown some signs of easing, notably in the form of declining gas prices.

At its meeting in July, Fed policymakers expressed two competing concerns that highlighted their delicate task.

According to minutes from that meeting, the officials — who aren’t identified by name — have prioritized their inflation fight. Still, some officials said there was a risk that the Fed would raise borrowing costs more than necessary, risking a recession. If inflation were to fall closer to the Fed’s two per cent target and the economy weakened further, those diverging views could become hard to reconcile.

Adblock test (Why?)

Source link

Business

Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

Published

1 day ago

November 8, 2024

Anne Joseph

Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

Source link

Business

TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

Published

3 days ago

November 7, 2024

Anne Joseph

CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

Source link

Business

BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

Published

3 days ago

November 7, 2024

Anne Joseph

BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

Source link