Wall Street futures were narrowly mixed early Wednesday as traders await the Federal Reserve’s rate decision later in the day. Major European markets were up. TSX futures were positive.
S&P and Nasdaq futures were higher in the early premarket period, while Dow futures wavered around break even. All three finished Tuesday’s session up with the Nasdaq and S&P 500 managing their best levels since last spring during the trading day. Canada’s S&P/TSX Composite Index finished yesterday up 0.35 per cent to mark its best closing level in a week.
Wednesday afternoon will see the release of the Fed’s rate decision. Markets have now priced in a 90-per-cent chance the central bank will keep rates steady after ten consecutive hikes. On Tuesday, signs of easing inflation in the U.S. economy helped underscore expectations. New figures showed the annual rate of U.S. inflation slowed to 4 per cent in May from 4.9 per cent in April.
“The Fed’s decision for today is considered as done and dusted with a no rate hike,” Swissquote senior analyst Ipek Ozkardeskaya said.
“But the chances are that Fed Chair Jerome Powell will sound sufficiently hawkish to let investors know that the war is not won just yet.”
She noted that core inflation in the U.S. remains well above the Fed’s 2-per-cent target, the U.S. jobs market is still strong and equity valuations point to an overly optimistic market.
“At the current levels, the S&P 500 trades at around 18 times its earnings forecast over the next year, and these levels are typically associated with times of healthy economic growth and rising corporate profits,” she said. “But we are now in a period of looming recession odds, and falling profits.”
The Fed’s decision is due at 2 p.m. and will be followed by a news conference with Fed chair Jerome Powell. Last week, the Bank of Canada surprised markets by raising rates after moving to the sidelines earlier in the year.
On the corporate side, Aurora Cannabis said early Wednesday that net revenue in the latest quarter totalled $64-million, up from $50.4-million in the same quarter last year. Adjusted earnings before interest, taxes, depreciation and amortization came in at $310,000 for the quarter ended March 31 compared with a loss of $10-million a year earlier.
Elsewhere, The Canadian Press reports that Air Canada pilots have kickstarted the bargaining process in the wake of WestJet pilots ratifying their new collective agreement. Representing about 4,500 employees, the Air Line Pilots Association’s Air Canada contingent said it has provided a bargaining notice to company management, the first step toward hashing out a new deal. Key issues include job security and the widening wage gap between pilots in U.S. and Canada, the news service said.
Overseas, the pan-European STOXX 600 was up 0.45 per cent in morning trading. Britain’s FTSE 100 rose 0.19 per cent. Germany’s DAX and France’s CAC 40 advanced 0.45 per cent and 0.72 per cent, respectively.
In Asia, Japan’s Nikkei added 1.47 per cent. Hong Kong’s Hang Seng slid 0.58 per cent.
Commodities
Crude prices added to the previous session’s gains in early trading while markets await the Fed’s rate decision later in the session.
The day range on Brent was US$73.94 to US$75.27 in the early premarket period. The range on West Texas Intermediate was US$69.07 to US$70.24.
Both both benchmarks added about 3 per cent on Tuesday and were up more than 1 per cent early Wednesday morning.
“Risk markets remain supported ahead of the widely expected Fed pause and the generally held view that inflation will continue to ebb through the summer,” Stephen Innes, managing partner with SPI Asset management, said in a note.
“But the main problem for the everything-else catch-up rotation trade to set in and broaden the rally from a one-trick AI pony show is that inflation is still running at 2.5 times the Fed target.”
He said pulling inflation back below 3 per cent could require additional rate hikes or, at minimum, a lengthy pause well into next year.
Meanwhile, the International Energy Agency said early Wednesday that the boost to oil demand growth from the post-pandemic recovery is set to end this year, with economic challenges and the transition to cleaner fuels slowing growth from 2024, according to Reuters.
In its monthly report, the IEA said it expects global oil demand will grow by 2.4 million barrels per day in 2023 to a record 102.3 million bpd. However, the agency also says economic headwinds will likely reduce growth to 860,000 bpd next year and increasing use of electric vehicles to help cut that to 400,000 bpd in 2028 for overall demand of 105.7 million bpd, the news agency reported.
Later Wednesday morning, markets will get weekly inventory figures from the U.S. Energy Information Administration. On Tuesday, weekly figures from the American Petroleum Institute showed crude stocks rose by about 1 million barrels in the week ended June 9. Analysts had been expecting a decline.
Meanwhile, pot gold rose 0.4 per cent to US$1,950.09 per ounce by early Wednesday morning. U.S. gold futures rose 0.2 per cent to US$1,962.90.
Currencies
The Canadian dollar was higher in early trading, supported by improved crude prices, while its U.S. counterpart slid against world currencies as markets anticipate the Fed foregoing a rate hike later in the day.
The day range on the loonie was 75.06 US cents to 75.28 US cents in the early premarket period. The Canadian dollar has gained nearly 2 per cent against the greenback for the year to date.
On world markets, the dollar index – which measures the performance of the U.S. currency against six others – was flat at 103.20, after touching its lowest since May 22 overnight at 103.04, according to figures from Reuters.
The euro was last flat at US$1.0787. The European Central Bank makes its next rate decision on Thursday and is expected to hike borrowing costs by a quarter percentage point.
In bonds, the yield on the U.S. 10-year note was lower at 3.80 per cent in the predawn period.
More company news
Shell will ramp up its dividend and share buybacks while keeping oil output steady into 2030, it said on Wednesday, as CEO Wael Sawan moved to regain investor confidence that wavered over its energy transition plan. In a new financial framework announced ahead of an investor conference in New York starting at 1230 GMT, Shell said it will increase overall shareholder distribution to 30% to 40% of cash flow from operations from 20% to 30% previously. That includes a 15% dividend boost and an increase in the rate of its share buyback program from the second quarter to $5-billion from $4-billion in recent quarters. -Reuters
Alphabet’s Google was charged by EU antitrust regulators with anti-competitive practices in its digital advertising business on Wednesday and may have to sell part of this business to address their concerns. The European Commission set out its charges in a statement of objections, two years after it opened an investigation into the case. “The Commission takes issue with Google favouring its own online display advertising technology services to the detriment of competing providers of advertising technology services, advertisers and online publishers,” the EU competition enforcer said in a statement. –Reuters
Economic news
(8:30 a.m. ET) Canadian national balance sheet accounts for Q1.
(8:30 a.m. ET) U.S. PPI for May.
(2 p.m. ET) U.S. Fed announcement and summary of economic projections with chair Jerome Powell’s press conference to follow.
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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