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Before the Bell: What every Canadian investor needs to know today – The Globe and Mail

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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 Corp beat 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.

(830 am ET) U.S. housing starts for June.

(830 am ET) U.S. building permits for June.

With Reuters and The Canadian Press

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RBC warns house price correction could be deepest in decades | CTV News – CTV News Toronto

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A housing correction, which has already led to four consecutive months of price declines in the previously overheated Greater Toronto Area market, could end up becoming “one of the deepest of the past half a century,” a new report from RBC warns.

New data released by the Toronto Regional Real Estate Board (TRREB) last week revealed that the average benchmark price for a home in the GTA fell six per cent month-over-month in July to $1,074,754.

Sales were also down a staggering 47 per cent from July, 2021.

In a report published on Aug. 4, RBC Senior Economist Robert Hogue said recent data from real estate boards underlines that higher interest rates are beginning to take a “huge toll” on the market.

Hogue said that with further hikes to come, prices will likely continue to slide in the coming months.

That prediction, it should be noted, goes against a report from Royal LePage last month which painted a rosier forecast for sellers in which values would more or less holding for the rest of the year following some declines in the second quarter.

“Our expectations for further hikes by the Bank of Canada—another 75 basis points to go in the overnight rate by the fall— will keep chilling the market in the months ahead,” Hogue said. “We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while ascertaining the impact of higher lending rates. Canada’s least affordable markets Vancouver and Toronto, and their surrounding regions, are most at risk in light of their excessively stretched affordability and outsized price gains during the pandemic.”

The Bank of Canada has hiked the overnight lending rate by 225 basis points since March and has warned that further hikes will be necessary given that inflation remains at a near 40-year high.

In his report, Hogue pointed out that the housing correction “now runs far and wide across Canada” but he said that it is particularly pronounced in the costlier markets of Toronto and Vancouver.

In fact, Hogue said that housing resale activity in Toronto is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.

The stockpile of available homes is also up 58 per cent from a year ago, he noted.

“With more options to choose from and higher interest rates shrinking their purchasing budgets, buyers are able to extract meaningful price concessions from sellers,” he said, pointing out that the average price of a home in the GTA is down 13 per cent from March. “We expect buyers to remain on the defensive in the months ahead as they deal with rising interest rates and poor affordability.”

While Hogue did say that condos in the City of Toronto are likely to remain “relatively more resilient” he said that prices elsewhere will continue to fall for the time being, especially in the 905 belt “where property values soared during the pandemic.”

The July data from TRREB suggested that the average price of a home in the GTA was still up one per cent from July, 2021.

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Commuters face GO transit cancellations, possible strike – CityNews

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Canada Revenue Agency plans email blitz to get Canadians to cash outstanding cheques worth $1.4-billion – The Globe and Mail

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The Canada Revenue Agency (CRA) is planning a massive e-mail notification campaign to reach Canadians across the country who have uncashed cheques worth a net $1.4-billion.

The e-mail notifications will target recipients of the Canada child benefit and related provincial and territorial programs, as well as recipients of the GST/HST credits and the Alberta Energy Tax Refund.

The CRA said it plans to send approximately 25,000 e-mails in August, another 25,000 in November and a further 25,000 e-mails by May, 2023.

However, even without receiving an e-mail notification, the agency said a taxpayer can check if they have a cheque by logging into My Account, a secure portal on its website to check if they have an uncashed cheque over a period of six months. It added that representatives can also view uncashed cheques of their clients.

Each year, the CRA said it issues millions of payments to Canadian taxpayers in the form of refund benefits. These payments are issued by either direct deposit or by cheque.

“Over time, payments can remain uncashed for various reasons, such as the taxpayer misplacing the cheque or even a change of address which did not allow for delivery,” the agency said in a statement.

The CRA said since the e-mail notification initiative was first launched in February, 2020, about two million uncashed cheques valued at $802-million were redeemed by May 31, 2022.

The average amount per uncashed cheque is $158 with some of them dating as far back as 1998, the agency said.

As of May, 2022, there were an estimated 8.9 million uncashed cheques with the CRA. In May, 2019, about five million Canadians had an estimated 7.6 million uncashed cheques.

“As government cheques never expire or stale date, the CRA cannot void the original cheque and re-issue a new one unless requested by the taxpayer,” the statement read. “These upcoming e-notifications are to encourage taxpayers to cash any cheques they have in their possession.”

The agency said taxpayers can register for the direct deposit option on its website to receive payments directly into their bank accounts.

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