Wall Street futures saw early gains fade Monday morning after regulators stepped in to avoid a possible banking crisis after the collapse of Silicon Valley Bank. European markets were weaker. TSX futures also turned negative.
In the early premarket period, Dow, S&P and Nasdaq futures had initially been higher but quickly slid after posting losses last week. TSX futures had also suggested a bounce at the opening bell only but lost altitude as the start to the trading day neared. Canada’s key stock index posted losses of more than 3 per cent last week.
Early Monday, all eyes were on the banking sector after the failure of the Santa Clara, California-based bank triggered contagion concerns. Early Monday, shares of U.S. regional bank First Republic were down more than 60 pre cent in premarket trading while shares of PacWest Bankcorp slumped more than 20 per cent.
“SVB’s flash crash raised questions that other similar local banks in the U.S. could also experience liquidity issues and may not be able to pay their depositors back, unless they also start selling their probably loss-making portfolios,” Swissquote senior analyst Ipek Ozkardeskaya said in a note.
“The contagion risk remains for small banks with highly rate-sensitive clients, but the U.S. authorities now step in to avoid contagion. They said that SVB depositors could access their money today,” she said.
However, she also noted that concern about the situation could convince the Federal Reserve to change its course on rate hikes. She said it’s now possible the U.S. central bank could pullback on an expected 50-basis-point increase this month or forgo an increase altogether.
Over the weekend, the Federal Reserve, Treasury and Federal Deposit Insurance Corp. announced in a joint statement that “depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.” The agencies also said that they would enact a similar program for Signature Bank, which the government disclosed was closed Sunday by its state chartering authority, according to Reuters.
In this country, Canada’s banking regulator took control of Silicon Valley Bank’s domestic operations on Sunday, as governments, along with tech sector CEOs, spent the weekend scrambling to limit the impact of a leading global technology financer’s sudden collapse, The Globe reports this morning.
In Britain, meanwhile, HSBC said on Monday it is acquiring the U.K’ subsidiary of Silicon Valley Bank for 1 pound. “This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.
Elsewhere, Canadian investors will got household-debt-to-income figures from Statistics Canada.
The agency said, on a seasonally adjusted basis, the household credit market debt as a proportion of household disposable income improved to 180.5 per cent in the fourth quarter from 184.3 per cent in the third quarter, and was down from 184.5 per cent at the end of 2021. In other words, there was $1.81 in credit market debt for every dollar of household disposable income in the fourth quarter of 2022, Statscan said.
Overseas, the pan-European STOXX 600 was down 1.2 per cent in morning trading with bank stocks under pressure. Britain’s FTSE 100 slid 1.06 per cent. Germany’s DAX and France’s CAC 40 were off 1.15 per cent and 1.26 per cent, respectively.
In Asia, Japan’s Nikkei ended down 1.11 per cent. Hong Kong’s Hang Seng rose 1.95 per cent on gains in technology stocks.
Commodities
Crude prices fell in early trading, underpinned by optimism over China’s recover and a softer U.S. dollar but offset by continued worries about the road ahead for U.S. interest rates.
The day range on Brent was US$82.25 to US$83.48 in the early premarket period. The range on West Texas Intermediate was US$76.14 to US$77.47.
“It’s like the battle of surging activity data in the East meets macro malaise in the West”, Stephen Innes, managing partner of SPI Asset Management, said.
“From an oil trader’s perspective, the U.S. dollar should pull back as traders give up on a re-acceleration of Fed hikes; this, in turn, clears a path for more robust Chinese fundamentals to dominate commodity trading,” Mr. Innes said.
Reuters reported that comments over the weekend from Saudi Aramco CEO Amin Nasser on crude demand from China also offered some support.
“If you considered China opening up and a pick up in jet fuels and very limited spare capacity, we are talking 2 million barrels, so as I said we are cautiously optimistic in the short to midterm and the market will remain tightly balanced,” he said.
In other commodities, gold prices rose as investors sought out safe-haven assets amid concern over the collapse of Silicon Valley Bank.
Spot gold was up 0.6 per cent at US$1,878.54 per ounce by early Monday morning. Earlier in the session, bullion hit its highest since Feb. 3 at US$1,893.96.
U.S. gold futures gained 0.9 per cent to US$1,884.30.
Currencies
The Canadian dollar was up early Monday morning as its U.S. counterpart fell against a group of world currencies on speculation the collapse of Silicon Valley Bank could move the Fed to pause rate hikes.
The day range on the loonie was 72.15 US cents to 72.93 US cents in the predawn period.
“The CAD is trading a little firmer against a generally soft USD but it has edged off earlier highs,” Shaun Osborne, chief FX strategist with Scotiabank, said.
“Canada’s jobs report Friday may not move the needle for the BoC at the moment but the strong report—in pretty much all aspects—does tilt risks towards the BoC having to return to tightening down the road.”
The U.S. dollar index, which measures the U.S. currency against six rivals, fell 0.55 per cent to near one-month lows of 103.67 after Goldman Sachs said it no longer expects the Fed to deliver a rate hike at its March 22 meeting, Reuters reports. The index was last at 103.85.
The euro was up 0.72 per cent at US$1.072, hovering near the one-month high of US$1.0737. Sterling was last trading at US$1.2114, up 0.71 per cent.
In bonds, the yield on the U.S. 10-year note was down at 3.602 per cent.
More company news
Pfizer will spend US$43-billion to buy Seagen and deepen its reach into treating cancer. The pharmaceutical giant said Monday that it will pay US$229 per Seagen share. “Together, Pfizer and Seagen seek to accelerate the next generation of cancer breakthroughs and bring new solutions to patients by combining the power of Seagen’s antibody-drug conjugate (ADC) technology with the scale and strength of Pfizer’s capabilities and expertise,” Pfizer Chairman and CEO Dr. Albert Bourla said in a statement.
Economic news
(8:30 a.m. ET) Canada’s national balance sheet and financial flow accounts for Q4.
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
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