Canada’s main stock index opened down Tuesday with financial stocks under pressure as bank earnings roll in. On Wall Street, key indexes were also in the red in early trading amid expectations interest rates will continue rising.
At 9:36 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 97.89 points, or 0.48 per cent, at 20,162.24.
The Dow Jones Industrial Average fell 15.62 points, or 0.05 per cent, at the open to 32,873.47. The S&P 500 opened lower by 5.05 points, or 0.13 per cent, at 3,977.19, while the Nasdaq Composite dropped 15.93 points, or 0.14 per cent, to 11,451.05 at the opening bell.
In Canada, Bank of Montreal and Bank of Nova Scotia both reported results before the start of trading.
On an adjusted basis, Bank of Montreal reported a net income of $2.27-billion, or $3.22 per share, for the three months ended Jan. 31, compared with $2.58-billion, or $3.89 per share, a year earlier. By that measure, analysts had been forecasting earnings per share of $3.18 in the most recent quarter. Provisions for credit losses came in at $217-million for the quarter, compared with a recovery of PCLs of $99-million a year earlier. BMO’s shares fell more than 1 per cent in early trading.
Scotiabank’s net income, excluding one-off items, came in at $2.37-billion, or $1.85 a share, in the three months ended Jan. 31, compared with $2.76-billion, or $2.15 a share, a year earlier. Analysts had been looking for adjusted earnings per share of $2.02 in the latest quarter. Shares were down about 6 per cent shortly after the opening bell in Toronto.
Royal Bank of Canada and National Bank of Canada are scheduled to report their results on Wednesday and TD Bank Group is expected to release its results on Thursday. CIBC reported last week. That bank topped analysts forecasts in the latest quarter but posted a slightly lower profit compared with las year as loan growth cooled and more money was set aside for loan-loss provisions.
On the economic side, Canadians got a weaker-than-expected reading on growth in the broader economy at year’s end. Statistics Canada says growth contracted by 0.1 per cent in December from a month earlier. Economists had been expecting a flat reading. The agency also said growth for the the fourth quarter was essentially unchanged. Economists had been expecting growth at an annual rate of 1.5 per cent in the quarter.
Statscan also offered an early look at January growth, suggesting GDP advanced by 0.3 per cent that month. That number is subject to revisions.
“Although the BoC probably feels vindicated in its policy rate pause given today’s weak topline print, it will still be closely watching the evolution of incoming data, which have surprised higher to start 2023,” TD senior economist James Orlando said in a note.
South of the border, Target Corp posted a surprise rise in holiday-quarter sales helped by increased traffic in stores, although it also warned on earnings for the year, citing an uncertain economy. Target forecast full-year earnings of US$7.75 to US$8.75 per share, below analysts’ estimates of US$9.23, according to Refinitiv data. Shares were up in premarket trading. Shares rose about 3 per cent Tuesday morning in New York.
Overseas, the pan-European STOXX 600 was up 0.09 per cent by midday after starting the session in the red.
Britain’s FTSE 100 fell 0.45 per cent. Germany’s DAX and France’s CAC 40 were up 0.18 per cent and 0.12 per cent, respectively.
In Asia, Japan’s Nikkei closed up 0.08 per cent. Hong Kong’s Hang Seng slid 0.79 per cent.
Commodities
Crude prices advanced, helped by continued optimism over demand growth in China, offset somewhat by concerns about the future direction of interest rates.
The day range on Brent was US$82.19 to US$83.20 in the early premarket period. The range on West Texas Intermediate was US$75.55 to US$76.65. Both benchmarks are on track for monthly declines. Brent is off more than 2 per cent in February so far while WTI is down more than 3 per cent.
“Oil prices remain very choppy with gains today largely offsetting losses at the start of the week,” OANDA’s Craig Erlam said.
“We may have to wait for more hard-hitting economic data next week before we see the upper or lower ranges tested as the uncertainty appears to be preventing a serious move in either direction.”
Prices have been supported by expectations of demand growth after China eased its strict COVID-19 policies.
“China’s economic recovery will drive its demand for commodities higher with oil positioned to benefit the most,” JPMorgan analysts said in a note.
However, continued concern about rising interest rates and the impact on the global economy has offered a counterbalance. Fed funds futures show traders are pricing in a third 25-basis-point hike this year and see U.S. rates peaking at 5.4 per cent by September.
Later in the session, traders will get weekly U.S. inventory figures from the American Petroleum Institute. More official government numbers follow on Wednesday morning.
A preliminary Reuters poll showed analysts expect crude stocks grew by 400,000 barrels in the week to Feb. 24.
In other commodities, spot gold was down 0.3 per cent at US$1,812.20 by early Tuesday morning, having earlier hit its lowest since late December at US$1,804.20. U.S. gold futures slipped 0.4 per cent to US$1,817.70.
Currencies
The Canadian dollar was down while its U.S. counterpart held steady and looked set for its first monthly gain since September.
The day range on the loonie was 73.49 US cents to 73.71 US cents in the early premarket period. The Canadian dollar tumbled immediately after the release of the latest GDP report. The loonie is down more than 2 per cent for the month.
Meanwhile, the U.S. dollar index, which measures the currency against a basket of peers, was flat at 104.64, but was still set for a February gain of 2.6 per cent, its first monthly increase since September, according to figures from Reuters.
Elsewhere, Britain’s pound added to the previous session’s advance, rising 0.2 per cent to US$1.2082. The pound jumped 1 per cent on Monday after Britain and the European Union announced a new deal for post-Brexit trading arrangements for Northern Ireland.
The euro was flat at US$1.0611, having risen 0.6% in the previous session.
In bonds, the yield on the U.S. 10-year note was up slightly at 3.941 per cent in the predawn period.
More company news
Calgary-based Baytex Energy Corp said on Tuesday that it would buy U.S. peer Ranger Oil Corp for US$2.5-billion including debt, as the Canadian company looks to boost its presence in South Texas’ Eagle Ford shale basin. The Eagle Ford has seen rising deal activity in recent months. Its proximity to other major energy hubs, including the U.S. Gulf coast, makes it an attractive location. The basin is home to a number of smaller producers, which makes it easier for them to be absorbed by strategic players. –Reuters
Laurentian Bank of Canadareported its first-quarter profit fell compared with a year ago as its provisions for credit losses ticked higher. The Montreal-based bank says it earned $51.9-million or $1.09 per diluted share for the quarter ended Jan. 31 compared with a profit of $55.5-million or $1.17 per diluted share a year earlier. Revenue totalled $260.1-million for bank’s latest quarter, up from $257.5-million in the same quarter last year. Laurentian says its provision for credit losses for its first quarter was $15.4-million, up from $9.4-million a year earlier. –The Canadian Press
Economic news
(8:30 a.m. ET) Canadian real GDP for Q4.
(8:30 a.m. ET) Canada’s monthly GDP for December.
(8:30 a.m. ET) U.S. goods trade deficit for January.
(8:30 a.m. ET) U.S. wholesale and retail inventories for January.
(9 a.m. ET) U.S. S&P CoreLogic Case-Shiller Home Price Index (20 city) for December.
(9 a.m. ET) U.S. FHFA House Price Index for December.
(9:45 a.m. ET) U.S. Chicago PMI for February.
(10 a.m. ET) U.S. Conference Board Consumer Confidence Index for February.
Also: Alberta and B.C. budgets and Canada’s Capital Expenditures Survey for 2023.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
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