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Equities
Wall Street futures were higher early Tuesday as traders await late-day results from Netflix Inc. Major European markets steadied as the session progressed. TSX futures were modestly positive.
In the early premarket period, futures linked to the Dow, S&P 500 and Nasdaq were all above water. A day earlier, all three closed lower despite strength early in the session. The S&P/TSX Composite Index bucked the trend, finishing Monday’s session up 1.09 per cent.
Tuesday will see continued results from big U.S. companies, notably earnings from Netflix after the close of trading. Investors will be carefully watching the streaming giant’s subscriber numbers after a disappointing showing in the previous quarter.
“The implosion in Netflix share price has been something to behold on the last few months,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“Since the heady heights of US$700 in November last year, we’ve seen a collapse in confidence that has returned the shares to levels last seen in 2017.”
He said subscriber growth, which had been the main driver for gains in 2020, came to a halt in the first quarter of this year, with investors questioning whether Netflix had peaked.
“The main fear for Netflix shareholders over the past few years was how would the business cope once its deeper pocketed rivals started to cotton on to the streaming model that Netflix had helped shape over the last ten years,” he said. “It appears we are starting to see the answer to that question, with the emergence of Disney+ as its main new rival, while Amazon is also spending big on new content, with a new Lord of the Rings series called Ring of Power.”
In the first quarter, Netflix surprised markets by reporting its first quarterly decline in subscribers in a decade. The company has said it expects to lose another 2 million subscribers in the second quarter, although it also forecast revenue growth of about 10 per cent year-over-year, Mr. Hewson said in a note.
“This appears optimistic and the stronger US dollar certainly isn’t helping. Netflix said its currently producing films and TV in more than 50 countries, with three out of its six most popular TV seasons using non-English language titles, and yet refuses to hedge its FX exposure,” he said.
In this country, The Globe’s Emma Graney and Marieke Walsh report the federal government says it plans to implement its oil and gas emissions cap through a new carbon pricing system, leaving the sector worried it will be charged more for greenhouse gas emissions than other heavy industries. And Canada’s largest oil-producing province says it won’t accept any federal plan that would harm its ability to produce fossil fuels.
Reuters, citing unnamed sources, says private equity firm CVC Capital and wood panel manufacturer Kronospan have submitted a joint expression of interest to acquire Canada’s West Fraser Timber Co. U.S.-listed shares of West Fraser were up nearly 25 per cent in premarket trading.
Overseas, the pan-European STOXX was up 0.03 per cent by midday. Britain’s FTSE 100 gained 0.32 per cent. Germany’s DAX advanced 0.12 per cent while France’s CAC 40 slid 0.08 per cent. Reuters, citing sources, reported Tuesday that European Central Bank policymakers will discuss whether to raise rates by a bigger-than-expected 50 basis points at the bank’s policy meeting this week. The rate decision is due Thursday.
In Asia, Japan’s Nikkei gained 0.65 per cent. Hong Kong’s Hang Seng fell 0.89 per cent.
Commodities
Crude prices fell in early going after the previous session’s strong showing fuelled by continued supply concerns.
The day range on Brent is US$105.16 to US$106.98. The range on West Texas Intermediate is US$101.71 to US$103.40. Both benchmarks jumped by roughly 5 per cent on Monday.
“Oil prices may have peaked, but they certainly don’t look like they’re going materially lower from here unless we get a huge surprise from OPEC+,” OANDA senior analyst Jeffrey Halley said.
“Stubbornly firm economic data from the U.S. and improving data from China are other supportive factors. Risks remained skewed to the upside if Russian gas does not start flowing back to Europe at the end of this week.”
Later in the session, traders will get the first of two weekly U.S. inventory reports with fresh figures from the American Petroleum Institute. That report will be followed Wednesday morning with more official U.S. government numbers.
A Reuters poll suggests that analysts are expecting to see a rise in crude and distillate supplies while gasoline stocks are seen declining.
In other commodities, gold steadied on Tuesday, helped by a pullback in the U.S. dollar.
Spot gold traded around US$1,708.35 per ounce early Tuesday morning. U.S. gold futures eased 0.3 per cent to US$1,704.80.
Currencies
The Canadian dollar gained as its U.S. counterpart continued to pullback against a group of world currencies.
The day range on the loonie is 76.98 US cents to 77.31 US cents.
“So-so risk appetite may be restraining the CAD to some extent while crude prices are a little softer,” Shaun Osborne, chief FX strategist with Bank of Nova Scotia, said.
Investors are now awaiting the release on Wednesday of June inflation figures, which are expected to show the annual rate of inflation topped 8 per cent last month.
On world markets, the U.S. dollar index fell 0.8 per cent to 106.64. That was below Monday’s low of 106.88 but also well back from the high of 109.29 last week, a level not seen since September 2002, according to Reuters.
The euro, meanwhile, gained on a Reuters report that ECB policymakers are weighing hiking rates by a surprise half percentage point when they meet on Thursday.
The euro rose as high as US$1.0254, up more than 1 per cent to its best level since early July.
Britain’s pound rose 0.6 per cent to US$1.2017, near Monday’s one-week high of US$1.2032.
More company news
BHP says it is working to bring its Jansen potash mine into operation sooner than expected. The company says it is working to bring forward Stage 1 first production at the Saskatchewan mine to 2026. When BHP announced last year that it was going ahead with the project, the company said it wouldn’t come into operation until 2027. However, in an operational review released Tuesday, the company says the project is tracking to plan and it is working to begin production ahead of its initial schedule.
Johnson & Johnson on Tuesday posted a 23.3-per-cent fall in quarterly profit and cut its full-year adjusted profit forecast as a stronger U.S. dollar dragged on its sales outside the United States. The company now expects a full-year adjusted profit of US$10.00 to US$10.10 per share, from its prior forecast of US$10.15 to US$10.35.
Twitter Inc’s showdown with Elon Musk over his US$44-billion takeover faces its first test on Tuesday, when a judge will weigh the company’s bid for a fast-tracked trial which it says it needs to ensure deal financing doesn’t come unraveled. The San Francisco-based company is seeking to resolve months of uncertainty for its business as Musk tries to walk away from the deal over what he says are Twitter’s “spam” accounts that he says are fundamental to its value.
Hasbro Inc reported a 10-per-cent rise in quarterly adjusted earnings, helped by demand for the toy maker’s tabletop game “Magic: The Gathering” and an increase in prices. The Monopoly maker reported adjusted net earnings of US$160.6-million in the second quarter ended June 26, compared with US$145.4-million a year earlier.
Apple Inc plans to slow hiring and spending growth next year in some units to cope with a potential economic downturn, Bloomberg News reported on Monday, citing people with knowledge of the matter. The potential move would see Apple – the world’s most valuable company – join a growing pool of American corporations including Meta Platforms and Tesla Inc in slowing hiring.
IT hardware and services company IBM Corpbeat quarterly revenue expectations on Monday but warned that the hit from forex for the year could be about US$3.5-billion due to a strong U.S. dollar. IBM now expects a foreign exchange hit to revenue of about 6 per cent this year, Chief Financial Officer James Kavanaugh told Reuters. It had previously forecast a 3 per cent to 4 per cent hit. The results were released after Monday’s close.
Chinese authorities are preparing to impose a fine of more than US$1-billion on ride-hailing firm Didi Global that could bring an end to a probe into the company’s cybersecurity practices, the Wall Street Journal reported on Tuesday.
Economic news
Euro area consumer price index for June. UK releases employment numbers.
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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