Wall Street futures were lower Tuesday as traders weigh results from more big U.S. banks. Major European markets were down. TSX futures were weaker with fresh inflation data released this morning.
In the early premarket period, Dow, S&P and Nasdaq futures were all underwater. U.S. markets were closed on Monday. Canada’s S&P/TSX Composite Index finished yesterday up 0.34 per cent.
“I sense that the first quarter of this year will be marked by the realization that it’s too early for the central banks to cut the interest rates unless something really bad – like another bank crisis, or a real estate crisis, or another debt crisis hits the fan,” Swissquote senior analyst Ipek Ozkardeskaya said in a morning note.
In Canada, investors got December inflation data before the start of trading. Statistics Canada says the annual rate of inflation ticked up to 3.4 per cent in December, from 3.1 per cent a month earlier. The increase matched market forecasts. Month-over-month, the consumer price index fell 0.3 per cent in December after a 0.1-per-cent gain in November, Statscan said.
“The Bank of Canada’s preferred core measures, CPI-trim and CPI-median failed to fall, with trim accelerating by two ticks to 3.7 per cent and median remaining at 3.6 per cent (from an upwardly revised prior month reading that was previously 3.4%),” CIBC economist Katherine Judge said.
“Those measures also accelerated in three-month and six-month annualized change terms, measures that the Bank of Canada will need to see more progress in before considering rate cuts.”
The Globe’s Mark Rendell reports that a pair of Bank of Canada surveys released Monday suggested high interest rates are bringing down inflation expectations and slowing the pace that businesses are raising prices, while also creating considerable financial hardship for household. The surveys bolstered market expectations that the central bank will keep interest rates steady at its Jan. 24 meeting before starting to cut borrowing costs later in the year.
On Wall Street, bank earnings continue to roll in with results due today from Goldman Sachs and Morgan Stanley. Four big U.S. banks – including JPMorgan and Citigroup – posted mixed results on Friday.
Ahead of the opening bell, Goldman reported a profit of US$2.01-billion, or US$5.48 per share, for the latest quarter, compared with US$1.33 billion, or US$3.32 per share, a year earlier. Morgan Stanley’s net income fell to US$1.5-billion, or 85 US cents per diluted share, in the three months ended Dec. 31, compared with US$2.2-billion, or US$1.26 per diluted share, last year. Morgan Stanley’s profit was hit in the most recent quarter by by one-time charges related to a Federal Deposit Insurance Corporation’s special assessment, according to Reuters.
Overseas, the pan-European STOXX 600 was down 0.27 per cent by midday. Britain’s FTSE 100 slid 0.27 per cent. Germany’s DAX and France’s CAC 40 lost 0.32 per cent and 0.21 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.79 per cent while Hong Kong’s Hang Seng dropped 2.16 per cent.
Commodities
Crude prices were mixed with economic concerns weighing on sentiment offset by continuing uncertainty in the Middle East.
The day range on Brent was US$77.85 to US$78.69 in the early premarket period. The range on West Texas Intermediate was US$71.23 to US$72.98.
“Oil prices remain very choppy amid the uncertainty in the Middle East following the U.S. and U.K. attacks on Houthi targets,” OANDA senior analyst Craig Erlam said.
“We haven’t seen a significant increase in the price of oil on the back of the attacks but the brief spikes we’ve seen have highlighted the sensitivity in the market to events around the Red Sea.”
Reuters reported Yemen’s Houthi movement will expand its targets in the Red Sea region to include U.S. ships, an official from the Iran-allied group said on Monday, as it vowed to keep up attacks after U.S. and British strikes on its sites in Yemen. Meanwhile, more tankers continue to avoid the region.
In other commodities, spot gold was down 0.3 per cent at US$2,048.70 per ounce by early Tuesday morning. U.S. gold futures rose 0.1 per cent to US$2,053.00.
“The yellow metal remains buoyed by very aggressive rate-cutting expectations, particularly in the U.S., but at the same time, it is struggling to generate fresh momentum around the prior record highs, near US$2,070,” Mr. Erlam said.
“We obviously saw a spike in early December well above this but the timing of the move and the speed with which it reversed it suggests the market was never fully behind it, so the prior highs continue to look like a significant psychological threshold.”
Currencies
The Canadian dollar fell while its U.S. counterpart touched a one-month high in early trading as markets turned cautious on the timing of rate cuts.
The day range on the loonie was 74.06 US cents to 74.50 US cents in the early premarket period. For the year to date, the Canadian dollar has is down about 1.9 per cent against the greenback.
On world markets, the U.S. dollar index jumped 0.78 per cent to 103.20 in the predawn period.
“The hawkish ECB commentaries last night have fuelled concerns that market pricing for the Fed rate path may also be aggressive,” said Charu Chanana, head of currency strategy at Saxo in Singapore.
On Monday, the ECB’s Joachim Nagel suggested it was too early to talk about cutting interest rates while ECB Governing Council member Robert Holzmann suggested investors expecting a rate cut this spring were likely to be disappointed and that he “may even foresee no cut at all this year.”
The euro slumped 0.61 per cent to US$1.0886. Britain’s pound was down 0.68 per cent to US$1.2640 by early this morning.
In bonds, the yield on the U.S. 10-year note was higher at 4.007 per cent ahead of the North American opening bell.
More company news
The Globe’s Susan Krashinsky Robertson reports this morning that the parent company of Tim Hortons is buying its largest Burger King franchisee in the United States, a US$1-billion deal intended to accelerate its turnaround plan for the chain. Toronto-based Restaurant Brands International Inc. announced on Tuesday that it had agreed to acquire Carrols Restaurant Group, Inc., a publicly-traded company that operates 1,022 Burger King locations in the U.S., mostly in the northeastern states. Carrols is also a franchisee for 60 locations in RBI’s Popeyes chain.
British energy major Shellhas agreed to sell its Nigerian onshore oil and gas subsidiary in Nigeria to a consortium of five mostly local companies for up to $2.4 billion, after nearly a century of operations there. Active in the West African country since the 1930s, Shell has struggled for years with hundreds of oil spills at its onshore operations as a result of theft, sabotage and operational issues that led to costly repairs and high-profile lawsuits. It has sought to sell its Nigerian oil and gas business since 2021, but will remain active in Nigeria’s more lucrative and less problematic offshore sector. –Reuters
The Globe’sStefanie Marotta reports Royal Bank of Canadasaid late Monday that it expects to close its $13.5-billion takeover of HSBC Holdings PLC’s Canadian subsidiary in March, clinching the biggest domestic banking deal on record. Canada’s largest lender said in a statement that it plans to close its proposed acquisition of HSBC Bank Canada on March 28, less than half a year later than its initial timeline. The deal received its final stamp of approval from Ottawa in December after RBC faced opposition from stakeholder groups and federal opposition parties in recent months.
Economic news
(8:15 a.m. ET) Canadian housing starts for December.
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.
