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Bank of Canada likely to raise rates again Wednesday — but should it?

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The Bank of Canada is widely expected to raise its trend-setting interest rate this week by a quarter of a percentage point, which would bring it to 4.5 per cent.

If it happens, it’ll be the eighth time in a row that the bank has opted to hike its benchmark rate, which makes borrowing money more expensive for consumers and businesses.

But for the first time in almost a year, there isn’t a solid consensus among those who watch the central bank that another hike is in the cards — or even whether one should be.

The bank is locked in a battle to wrestle inflation into submission, and it believes rate hikes are the best weapon at its disposal to win that war.

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It’s a war that’s racked up a lot of collateral damage, including in the housing market, where average prices are down by 20 per cent since February. Other forms of consumer debt, such as credit cards, is also rising to record levels as Canadians struggle to adjust to higher prices for just about everything.

Even so, the rate hikes have so far only succeeded in bringing inflation down from a 40-year high above eight per cent last summer to 6.3 per cent last month.

That’s still twice as high as the upper limit of the range the bank likes to see, which is why a majority of economists think another hike is in the offing. But Pablo Villanueva, an economist with Swiss Bank UBS is among those who thinks the best thing the Bank of Canada could do might just be nothing at all.

“The data since December has shown an economy that is weakening,” he said, noting that Canada’s GDP likely only grew by about one per cent in the fourth quarter of 2022. That’s well down from the three per cent average for the rest of the year. Wage gains and the employment numbers paint a similar picture.

A pair of the bank’s own reports from earlier this month are also singing from the same songbook, with a majority of consumers and businesses telling the central bank they now expect the economy to go into recession this year.

Villaneuva says the recent data points on Canada’s GDP and the recent surge of layoffs add up to make a pretty compelling case to stand on the sidelines for a while.

“We think that this weaker outlook for the economy and inflation should give the Bank of Canada confidence that it can hold off on further hikes at least in the near term,” he said.

A major reason to stand pat is that it typically takes between six months to a year and a half for the full impact of rate hikes to be felt anyway.

“We recognize that we have raised interest rates rapidly and that their effects are working their way through the economy,” Sharon Kozicki, deputy governor of the Bank of Canada, told a Montreal business audience last month.

“In other words, we are moving from how much to raise interest rates to whether to raise interest rates,” she said.

Karyne Charbonneau, an economist with CIBC, thinks the bank is likely to raise again on Wednesday, but she’s among those who thinks there probably isn’t another hike coming after that.

“If central banks are wise enough to recognize the lagged impacts of what they’ve already done, they won’t have that many more rate hikes to deliver,” she said.

The case for standing pat

While the headline inflation number continues to go up at an eye-watering pace, beneath the surface it’s not hard to find goods and services that are actually cheaper now than they used to be.

Almost two dozen of the 300-odd subcategories that Statistics Canada tracks are now in negative territory for the year, including books, computer and digital equipment, children’s clothes and shoes.

Slightly cheaper medicine and parking fees may be cold comfort to anyone who tried to fill up a gas tank lately — or a grocery cart. But as demand wanes for goods and services, more and more items will move into that negative range, dragging the overall inflation rate down with them.

So if the bank is looking for excuses to take a pause, it’s not hard to find them.

Stephen Gordon, a professor of economics at l’Université Laval in Ste-Foy, Que., has been tracking the shorter term inflation trends for more than a year now online. He notes that the annualized inflation rate over the past three months is now down to below four per cent. A year ago, it was more than three times that.

Investors, too, seem less confident than they’ve been all year that the bank is poised to hike again. Trading in investments known as swaps on Monday imply the market thinks there’s about a three-in-four chance of a hike on Wednesday — but that means there’s a one-in-four chance that there won’t be one.

That’s the first time that figure has been anything less than a sure thing since the bank started hiking last February, and a sign that investors are betting real dollars that winds of monetary policy could be blowing in a different direction soon.

Regardless of what happens this week Gordon says the real test for inflation will be in the February numbers, since that will be one year since Russia invaded Ukraine, which kicked already-underway inflation into high gear.

“I can see a case for giving a pause,” he said in an interview with CBC News on Monday. “But we’re still in wait and see mode about the data.”

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India’s Adani firms lose $65bn in value – Al Jazeera English

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Most Adani Group shares fell sharply on Monday as the Indian conglomerate’s rebuttal of a US short seller’s criticism failed to pacify investors, deepening a market rout that has now led to losses of $65bn in the group’s stock values.

Led by Asia’s richest man Gautam Adani, the Indian group has locked horns with Hindenburg Research and on Sunday hit back at the short seller’s report of last week that flagged concerns about its debt levels and the use of tax havens.

Adani said it complied with all local laws and had made the necessary regulatory disclosures.

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Adani Transmission, Adani Total Gas, Adani Green Energy, Adani Power and Adani Wilmar fell between 5 percent and 20 percent on Monday.

Flagship Adani Enterprises, which is facing a crucial test this week with a follow-on share offering, swung between gains and losses before settling 4.8 percent higher. It stayed well below the offer price of the issue, which if successful will be the largest such share offering ever in India.

Adani Enterprises’ $2.5bn secondary share sale closed its second day amid weak investor sentiment. The stock closed at 2,892.85 rupees ($35.47), 7 percent below the 3,112 rupees ($38.17) lower end of the offer price band. The upper band is 3,276 rupees ($40.17).

Data from stock exchanges on Monday showed Adani has now received bids for 1.4 million shares, or just over 3 percent, of the 45.5 million shares on offer. The deal closes on Tuesday.

Foreign and domestic institutional investors, as well as mutual funds, have made no bids so far, according to the data.

“Retail participation is likely to have a shortfall with current market prices still trailing the offer price and sentiment taking a hit due to the Hindenburg controversy,” said Hemang Jani, equity strategist at Motilal Oswal Financial Services.

“While there is a risk that the share sale does not go through, it will be crucial today to wait and see how institutional investors participate.”

Abu Dhabi conglomerate International Holding Company said on Monday that it would invest 1.4 billion dirhams ($381.17m) in the offering.

Share sale on schedule

The Adani Group told Reuters in a statement on Saturday that the sale remained on schedule at the planned issue price, even as sources said bankers of the country’s largest secondary share sale were considering extending the timeline beyond January 31, or tweaking the price due to the fall in its share price.

India’s rules stipulate that the share offering must receive a minimum subscription of 90 percent, and if it does not, the issuer must refund the entire amount. Maybank Securities and Abu Dhabi Investment Authority are among investors who bid for the anchor portion of the issue.

Maybank said in a statement that “there is no financial impact” on it as the subscription to Adani’s offer was fully funded by client funds.

India’s state-run insurance behemoth Life Insurance Corporation (LIC) told Reuters on Monday that it was reviewing the Adani Group’s response to Hindenburg’s report and would hold talks with the management within days.

LIC took 5 percent of the $734m anchor portion. It already holds a 4.23 percent stake in the flagship Adani firm, while its other exposures include a 9.14 percent stake in Adani Ports and 5.96 percent in Adani Total Gas.

“Since we are a large investor we have the right to ask relevant questions,” LIC Managing Director Raj Kumar said.

Trading lower

US dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall into a second week, with the bond maturing in August 2027 down 5 cents to 73.03 cents, the lowest since June 2020. Other dollar-denominated bonds of the group were also trading lower.

Index provider MSCI has said it was seeking feedback from market participants on Adani and was monitoring the factors that “may impact the eligibility of those relevant securities” in MSCI indexes.

In its response on Sunday, Adani highlighted its relationships with local and international banks and its access to diverse funding sources and structures, listing US banks Citigroup and JPMorgan Chase & Co, as well as other lenders including BNP Paribas, Credit Suisse, Deutsche Bank, Barclays and Standard Chartered.

The stock market meltdown is a dramatic setback for 60-year-old Adani. The school dropout’s stunning rise came with over 1,500 percent gains in some of his group stocks over three years, making him the world’s third-richest man before he slipped to rank eighth on the Forbes list on Monday.

Responding to Adani’s rebuttal, Hindenburg said the company’s “response largely confirmed our findings and ignored our key questions”.

Hindenburg in its report said Adani companies had “substantial debt” and that shares in seven Adani-listed companies have an 85 percent downside due to what it called “sky-high valuations”.

Adani’s response stated that over the past decade, its group companies have “consistently de-levered”.

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Ford to cut prices of Mustang Mach-E, following Tesla's lead – Reuters

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Jan 30 (Reuters) – Ford Motor Co (F.N) on Monday cut prices of its electric crossover SUV Mustang Mach-E by as much as $5,900 per vehicle, weeks after rival Tesla Inc (TSLA.O) slashed prices globally on its electric vehicles by as much as 20%.

Shares of Ford closed down 2.9% in above average trading to $12.89. Tesla fell 6.3%.

The move comes as electric vehicle manufacturers are feeling pressure from Tesla’s price cut to respond.

“Ford just cut Mustang EV prices in response to Tesla’s price cut. Mini price war about to begin with EVs in the US with Tesla’s shot across the bow on price cuts,” said Dan Ives, an analyst at Wedbush Securities, on Twitter.

The move will make at least one additional version of the Mach-E again eligible for a $7,500 federal tax credit, which requires the Ford EV to have a suggested retail price of no more than $55,000 to be eligible.

Ford had already planned to increase Mach-E production this year at its plant in Mexico to 130,000 vehicles from 78,000 in 2022, and said in November it was accelerating Mustang Mach-E production and targeting global annual production rate of 270,000 by the end of 2023 including its China production.

Ford builds the Mach-E in Mexico and China.

“Tesla’s price cut was a major blow to the prospects of competing EV models and the Mustang Mach-E directly competes with Tesla’s Model Y,” said Garrett Nelson, an analyst at CFRA Research.

Ford is cutting prices by up to 8% on various versions of the Mach-E, as well as cutting the price of the extended range battery by about 19%. The lowest-price models are getting smaller $600 to $900 price cuts. The Ford price cuts only impact North American prices.

Ford Chief Executive Jim Farley said on Twitter, “scaling will shorten customer wait times. And with higher production, we’re reducing costs, which allows us to share these savings with customers.”

Ford sold 39,458 Mach-Es in the United States last year, up from 27,140 in 2021.

General Motors (GM.N) said Monday it had no plans to adjust prices in response to others. The Detroit automaker in June cut prices on the Bolt by around $6,000 and by as much as 18% for the lowest-price version and earlier this month the vehicle became eligible for the $7,500 federal tax credit.

Ford said existing Mustang Mach-E customers awaiting delivery of vehicles will automatically receive the price cut.

Reporting by David Shepardson in Washington, Joseph White in Detroit and Aishwarya Nair and Nathan Gomes in Bengaluru; Editing by Krishna Chandra Eluri, Nick Zieminski and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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Nike sues Lululemon for infringement of footwear patents – CBC.ca

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Nike Inc. sued Lululemon Athletica Inc. on Monday, saying that at least four of the Canadian athletic apparel company’s footwear products infringe its patents.

In a complaint filed in the U.S. federal court in Manhattan, New York, Nike said it has suffered economic harm and irreparable injury from Lululemon’s sale of its Blissfeel, Chargefeel Low, Chargefeel Mid and Strongfeel footwear.

Nike, based in Beaverton, Ore., said the three patents at issue concern textile and other elements, including one addressing how the footwear will perform when force is applied.

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Nike is seeking unspecified damages. 

Lululemon, based in Vancouver, did not immediately respond to requests for comment.

This wasn’t the first time Nike has sued Lululemon for patent infringement — on Jan. 5, 2022, it accused the athleisure brand of making and selling the Mirror Home Gym and related mobile apps without authorization.

Nike accused its smaller rival of infringing six patents, including technology that enables users to target specific levels of exertion, compete with other users and record their own performance.

Nike has sought triple damages for Lululemon’s alleged willful infringement and a variety of other remedies regarding the Mirror Home Gym and related mobile apps.

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