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

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Equities

U.S. stock futures signalled steep losses early Thursday as the rising number of cases of the coronavirus around the globe continues to fuel market volatility even as central banks take action. In Europe, major markets were down sharply in morning trading. On Bay Street, TSX futures were also weaker with crude prices relatively steady as OPEC and its allies await Russian support for a plan to deepen current production cuts.

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So far this week, the Federal Reserve and the Bank of Canada have both cut interest rates by half a percentage point, citing the negative economic impact of the virus. Markets have also priced in a 90-per-cent chance that the European Central Bank will also cut its key rate next week. Although the Dow and S&P rallied more than 5 per cent on Wednesday while the TSX jumped more than 350 points, analysts warn that central bank moves alone won’t ease market concerns.

“It is clear, investors around the world now believe that the monetary policy alone cannot tackle another financial crisis, given that the starting point for the interest rates is already extremely low and rock-bottom interest rates prove to be increasingly inefficient to fuel investment,” Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, said.

U.S. markets drew some additional support on Wednesday after Washington announced an $8-billion spending plan to help fight the spread of the virus. The IMF also announced a $50-billion aid package.

On the corporate side, Canadian Natural Resources raised its quarterly dividend to 42.5 cents a share, from 37.5 cents. The move came as the company reported adjusted earnings of $686-million or 58 cents per diluted share from operations for the quarter compared with an adjusted loss from operations of $255-million or 21 cents per diluted share in the same quarter a year earlier. Analysts on average had expected an adjusted profit of 70 cents per diluted share for the quarter, according to financial markets data firm Refinitiv.

After Wednesday’s close, MEG Energy Corp. reported earnings per share of 9 cents on quarterly revenue of $992-million. Analysts had been looking for earnings of 9 cents on revenue of $817.9-million in the quarter. MEG also said its full-year free cash flow totalled $528-million.

Elsewhere, cannabis producer Canopy Growth Corp. says it will close two greenhouses in British Columbia and lay off 500 employees as it looks to slow its cash burn and bring its production in line with lower-than-expected demand. The moves are expected to result in a pretax charge of between $700-million and $800-million, the company said.

Overseas, major European markets were down in morning trading. The pan-European STOXX 600 fell 1.13 per cent, reversing course after a positive start. Britain’s FTSE 100 was down 1.66 per cent. Germany’s DAX fell 1.28 per cent. France’s CAC 40 lost 1.46 per cent.

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In Asia, major indexes ended higher, taking their cue from Wednesday’s surge on Wall Street. Japan’s Nikkei rose 1.09 per cent. The Shanghai Composite Index gained 1.99 per cent and Hong Kong’s Hang Seng advanced 2.08 per cent.

Commodities

Crude prices steadied as markets await the outcome of a meeting of OPEC and its allies aimed at considering further production cuts to offset the impact of the spread of the coronavirus on demand.

The day range on Brent so far is US$50.71 to US$52.04. The range on West Texas Intermediate is US$46.42 to US$47.57.

Early Thursday, Iran’s oil minister confirmed that OPEC ministers had agreed an extra 1.5 million barrel per day cut in oil production and that Iran was still exempt from the reduction. However, Russia, the biggest of the non-OPEC producers in the OPEC+ group, has yet to give its backing to the move.

Russia’s energy minister returned to Moscow on Wednesday for consultations but was due back in Vienna for the broader OPEC+ meeting on Friday, according to Reuters. So far Russia has been reluctant to support calls for deeper cuts.

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Russia’s energy minister returned to Moscow on Wednesday for consultations but was due back in Vienna for the broader OPEC+ meeting on Friday, according to Reuters. So far Russia has been reluctant to support calls for deeper cuts.

“Crude oil prices are starting to give back early gains as it becomes apparent that there are differences of opinion about the level of production cuts at today’s OPEC+ meeting,” Michael Hewson, chief market analyst with CMC Markets U.K., said early Thursday.

AxiCorp strategist Stephen Innes says Russia appears to favour limiting the OPEC+ response to keeping current production cuts in place.

“The enormous glaring issue is that while cuts will help normalize oil demand and inventories later this year, they can’t prevent an already-started considerable oil inventory accumulation in both the U.S. and China,” Mr. Innes said.

Gold prices, meanwhile, edged higher as investors again shifted to ward safer holdings.

Spot gold was up 0.2 per cent at US$1,637.89 per ounce. U.S. gold futures were down 0.3 per cent at US$1,638.70.

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“(The virus) has spread to over 80 countries and tensions are escalating day-by-day; investors don’t know what will happen next and they prefer investing in gold because of its safe-haven appeal,” Hareesh V, head of commodity research at Geojit Financial Services, told Reuters.

Currencies

The Canadian dollar was down in early going after the Bank of Canada cut interest rates by a half percentage point and signalled it was prepared to go further is the coronavirus crisis deepens.

The day range on the loonie so far is 74.57 US cents to 74.72 US cents.

In Wednesday’s policy announcement, the central bank cited “a material negative shock” to the Canadian and global outlooks as a result of the spread of the virus.

“As it stands, the CAD has weathered the rate cut with a fair degree of civility,” Shawn Osborne, chief FX strategist for Scotiabank, said in a note issued after the central bank’s announcement.

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He said, given that weaker growth and lower energy prices had markets already leaning toward the idea of a rate cut, the only big question going into Wednesday’s policy announcement was how big the central bank’s move would be.

“But with about 40-45 basis points of a 50-basis-point cut priced in ahead of decision time, even that was not a great surprise,” he said. “A dovish policy statement leaves the door wide open to another cut in the next few weeks, we think.”

On Thursday afternoon, Bank of Canada governor Stephen Poloz delivers the bank’s economic progress report during remarks in Toronto. The speech will be followed by a news conference, with markets paying close attention for hints about the bank’s likely moves in the future.

On global markets, the U.S. dollar struggled as traders price in more moves by the Federal Reserve. That central bank made reference to the virus more than 40 times in its Beige Book, released Wednesday afternoon.

Money markets were pricing in another 25-basis-point cut at the next Fed meeting on March 18-19 and a 50 basis point cut by April.

The U.S. dollar remained close to the two-month low of 1.1214 it reached against the euro on Tuesday, last trading 0.4 per cent lower at 1.1175. The dollar was also down against the yen, falling 0.7 per cent to 106.81 , a five-month low.

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In bonds, the yield on the U.S. 10-year note again slipped back below 1 per cent. The yield on the note was at 0.963 per cent just before 6 a.m. ET.

More company news

HP Inc on Thursday rejected Xerox Holdings Corp’s raised bid of about US$35-billion, saying that the offer still undervalued the personal computer maker. The U.S. printer maker had increased its offer last month by US$2 to US$24 per share, following rejections of its previous buyout offers by the PC maker. “Our message to HP shareholders is clear: the Xerox offer undervalues HP and disproportionately benefits Xerox shareholders at the expense of HP shareholders,” Chip Bergh, chair of HP’s board, said on Thursday.

German fashion house Hugo Boss warned that the coronavirus will have a significant impact on its first-quarter results, with sales falling particularly in Asia, but also in other key markets. Hugo Boss said it expects a gradual normalization by the middle of the year and forecast that currency-adjusted sales will rise from zero to 2 per cent for the full year, including a single digit decline in Asia/Pacific.

Economic news

(8:30 a.m. ET) U.S. initial jobless claims for week of Feb. 29. Estimate is 215,000, down 4,000 from the previous week.

(8:30 a.m. ET) U.S. productivity for Q4. Consensus is an annualized rate rise of 1.3 per cent.

(10 a.m. ET) U.S. factory orders for January. Consensus is a decline of 0.2 per cent from December.

(12:45 p.m. ET) Bank of Canada Governor Stephen Poloz presents the Economic Progress Report in Toronto.

With Reuters and The Canadian Press

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Canada's job vacancies reached one million in April and these sectors have the most openings – Economic Times

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Employers in Canada were actively seeking to fill about one million vacant positions at the beginning of April, up 44.4 per cent from the same period of the previous year, Statistics Canada said on Friday.

There was an average of 1.1 unemployed people for each job vacancy in April, down from 1.2 in March, and down from 2.4 one year earlier, the national statistical office said, adding that labor shortage trends continue in Canada with record-high job vacancies in many sectors.

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The number of job vacancies in the construction sector reached a new high of 89,900 in April, up 15.4 percent from March and up 43.3 percent from April 2021.

Job vacancies also increased to a record high in April in professional, scientific and technical services; transportation and warehousing; finance and insurance; arts, entertainment and recreation; and real estate and rental and leasing, the agency said.

In manufacturing, there were 90,400 vacant positions in April, up 7.3 percent from March and up 30.7 percent from April 2021. In accommodation and food services, employers were actively seeking to fill 153,000 vacant positions in April, little changed from the previous month.

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Meanwhile, in the health care and social assistance sector, the number of job vacancies decreased 15.1 percent to 125,200 in April from its peak of 147,500 reached in March 2022, but was 21.3 percent higher than in April 2021. There were 97,800 job vacancies in retail trade in April, down 7.1 percent from March, but 27.9 percent higher than in April 2021, Statistics Canada said.

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New B.C. sales tax rules go into effect July 1 for online marketplaces like Amazon, eBay – Vancouver Sun

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Online marketplaces with annual gross revenues of more than $10,000 — hello, Facebook and Amazon — will be required to collect the provincial sales tax on goods and services sold on their sites

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Starting July 1, British Columbians could be paying more for goods they buy through online marketplaces such as Facebook and Amazon.

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That’s because the B.C. government has made changes that require these online marketplaces that have annual gross revenues of more than $10,000 to collect the provincial sales tax on goods and services sold on their sites.

It shifts the responsibility to companies like eBay and Amazon to collect the PST, rather than the small businesses that may use a marketplace facilitator site to sell their products, according to the B.C. finance ministry.

In addition, these marketplaces are also being required by the province to charge PST to individual sellers for use of their services, such as help with listing the sales of goods, advertising, warehousing and payment collection.

It’s the latest move by the province to create a more even playing field for online operations that continue to increase their share of the economy.

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The B.C. government expects the PST rule changes will generate an additional $100 million in revenues this fiscal year and $120 million the following year.

The Retail Council of Canada, which has offices in B.C., says the move to treat online marketplaces the same as brick-and-mortar stores makes sense because it puts businesses on an equal footing.

But the addition of the PST for services purchased by sellers in B.C., often small businesses, will simply add costs for consumers here and make local sellers uncompetitive as other jurisdictions in Canada have not introduced a similar measure, said Karl Littler, senior vice-president of public affairs for the Retail Council of Canada.

“It doesn’t exist anywhere else. It’s a new tax between a marketplace facilitator, like an Amazon or like a Best Buy or like a Facebook, and somebody who’s selling goods,” said Littler.

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The council is concerned that small B.C. merchants will be paying seven per cent on these online marketplace services, irrespective of whether the end-customer is in B.C. or elsewhere. This will make them less competitive versus other businesses operating in other North American jurisdictions.

In B.C., people who buy goods and services through online marketplaces will be charged the PST on top of the now higher-priced goods themselves, a sort form of double taxation, argued the retail council.

As well, the changes serve as a disincentive to marketplace services to locate facilities, and thus jobs, in B.C., says the retail council.

In a written response, finance ministry officials said the application of the PST to marketplace services attempts to keep pace with the changing digital economy.

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There is no explicit breakout for the tax on services from online marketplace facilitators, but in an email the ministry said it expects it to account for less than 10 per cent of the estimated additional $100 million in tax revenue that will be collected.

Werner Antweiler, a professor in the Sauder School of Business at the University of B.C., said having online marketplaces collect the PST on goods and services closes a loophole in taxation and helps collect tax from sellers abroad.

What’s different about B.C.’s approach is the inclusion of the PST on online marketplaces services provided to online marketplace sellers, said Antweiler.

It may be that other provinces or the federal government will follow suit, but this new rule may disadvantage online facilitators setting up in B.C., as B.C. would be hard pressed to enforce tax collection outside its own jurisdiction, even in another province.

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“There is a trade-off. While the economic rationale to tax all services, including online marketplace services provided to sellers, is sound, B.C. going this alone puts B.C. at a disadvantage,” said Antweiler.

In 2020, the B.C. government introduced new rules that required sellers of software and telecommunications services, such as Netflix, had to collect the PST.

That measure was expected to generate $11 million in new tax revenues in 2020-21 and $16 million in 2021-2022.

ghoekstra@postmedia.com

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The U.S. wants to ban Juul. Where is Canada on regulating e-cigarettes? – Yahoo News Canada

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The vaping company Juul has been ordered to remove its products from the U.S. market.  (Tony Dejak/The Associated Press - image credit)

The vaping company Juul has been ordered to remove its products from the U.S. market. (Tony Dejak/The Associated Press – image credit)

Earlier this week, regulators in the United States ordered Juul to pull its vaping products from the market, dealing a major blow to one of the most powerful players in the industry.

The company is appealing the decision by the U.S. Food and Drug Administration (FDA), asking a federal court to block a government order to stop selling its electronic cigarettes.

While the attempted ban in the U.S. doesn’t directly affect Canada, some health advocates say it raises questions about the slow pace of regulation in this country.

Here’s a closer look at the FDA’s decision and what’s happening in Canada.

Why was Juul banned?

As part of the FDA’s review process, companies had to demonstrate that their e-cigarettes benefit public health. In practice, that means proving that adult smokers who use them are likely to quit or reduce their smoking, while teens are unlikely to get hooked on them.

In its decision, the FDA said that some of the biggest e-cigarette sellers like Juul may have played a “disproportionate” role in the rise in teen vaping. The agency said that Juul’s application didn’t have enough evidence to show that marketing its products “would be appropriate for the protection of the public health.”

On Friday, the e-cigarette maker asked the court to pause what it called an “extraordinary and unlawful action” by the FDA that would require it to immediately halt its business. The company filed an emergency motion with the U.S. Court of Appeals in Washington as it prepares to appeal the FDA’s decision.

That dispute is far from over.

Marshall Ritzel/Associated PressMarshall Ritzel/Associated Press

Marshall Ritzel/Associated Press

What about in Canada?

Juul’s vaping products, as well as those sold by other companies, remain available in Canada.

Health Canada proposed a ban on flavoured vaping products last June. At the time, it cited research indicating that flavoured vaping products are “highly appealing to youth, and that youth are especially susceptible to the negative effects of nicotine – including altered brain development, which can cause challenges with memory and concentration.”

But after a round of consultations last year, that proposed ban still hasn’t been put into effect.

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Several provinces and territories have put in place their own limits on flavoured vaping products, citing their appeal to teenagers.

(Juul voluntarily stopped selling many of its flavoured cartridges in 2020 following criticism they were designed to entice youth.)

David Hammond, a public health professor at the University of Waterloo who researches vaping in youth, said banning Juul products in the U.S. won’t necessarily have a significant impact on the industry as a whole, given its declining market share and the variety of products available.

“You know, it’s like a tube of toothpaste. If you press at one point, you just kind of squeeze it to a different spot,” he said.

What does Health Canada say?

“Health Canada has no plans to remove any vaping products from the Canadian market that comply with the Tobacco and Vaping Products Act and the Canada Consumer Product Safety Act,” the agency told CBC News in an email.

The government has recently put in place new restrictions on the sector, including limits on advertising for e-cigarettes and the amount of nicotine in the products. It’s also undergoing a review of the legislation for vaping products that went into effect in 2018.

On its website, Health Canada warns of the risks of e-cigarettes, saying “the potential long-term health effects of vaping remain unknown” and the government continues to investigate “severe pulmonary illness associated with vaping.”

Last week, Health Canada announced another set of proposed regulations that would require vaping companies to disclose information about “sales and ingredients used in vaping products,” to help the government “keep pace with the rapidly evolving vaping market.”

How popular is vaping?

Vaping is popular among young people, with 14 per cent of Canadians between the ages of 15 and 19 having vaped in the last month of 2020, up from six per cent from the same month in 2017, according to the results of the Canadian Tobacco and Nicotine Survey.

Vaping is less popular for adults over the age of 25, with just three per cent reporting that they vaped within the last month in 2020.

Robert Schwartz, a senior scientist at Toronto’s Centre for Addiction and Mental Health, said the regulatory challenge is to strike a balance between making these products available to adults as an alternative to cigarettes, while at the same time limiting their appeal to younger non-smokers.

“We definitely are finding that young people who would not otherwise become cigarette smokers have started to use e-cigarettes and they fairly quickly develop a dependence on them,” said Schwartz.

“Our research is also demonstrating that some adults are able to quit by … using these cigarettes.”

What’s the holdup?

Like Schwartz, Hammond said vaping products could be a useful tool in helping wean smokers off cigarettes. He said it doesn’t make sense to put strict limits on vaping products if cigarettes, which are thought to be more harmful, are still available in corner stores.

Craig Chivers/CBCCraig Chivers/CBC

Craig Chivers/CBC

“I don’t think the answer lies just with how they are regulated,” he said. “I think it lies with the industry and reframing these products as something that a 50-year-old uses to quit smoking and not a 15-year-old grabs on the way to a party.”

Hammond, who sits on Health Canada’s advisory board for vaping products, said the agency could stand to move more quickly given the stakes.

“There’s no doubt these are difficult questions and the market shifts rapidly. But it’s not an area where slow, plodding regulation is a good fit,” he said.

Cynthia Callard, executive director of the advocacy group Physicians for a Smoke-Free Canada, said that, while the context is different in Canada, the FDA decision “is a reminder that governments can and should bar market access to products which cannot be shown to benefit public health.”

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