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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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With Twitter deal on hold, Musk says a lower sale price isn't 'out of the question’ – Engadget

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Billionaire Elon Musk is continuing to clash with Twitter over the accuracy of its bot count, and hinted today that he may try to renegotiate the $44 billion deal. Musk told attendees at a Miami conference that a deal at a lower price wasn’t “out of the question,” reported Bloomberg. Musk’s potential bid for a lower price is an unexpected twist, given that the SpaceX exec agreed to pay a 38 percent premium on Twitter when he reached a deal with the company’s board back in April.

“Currently what I’m being told is that there’s just no way to know the number of bots,” Musk said at the conference. “It’s like, as unknowable as the human soul.”

Musk’s potential bid for a lower price is an unexpected twist, given that the SpaceX exec agreed to pay a 38 percent premium on Twitter when he reached a deal with the company’s board back in April. 

Last Friday, Musk had announced that a buyout of Twitter was “temporarily on hold” due to concerns that the number of bots on the platform was much higher than the company estimated. The billionaire tweeted that his team would do an independent analysis on bot count and also tried to crowdsource bot estimates from his own followers. Musk was later reprimanded by Twitter’s legal team for revealing — in a tweet, of course — the company’s methodology for estimating the proportion of bot accounts across the platform.

Earlier today, Twitter CEO Parag Agrawal explained in a series of tweets that external estimates of bots are likely wrong, since the platform includes private data in its count.

“Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share),” tweeted Agrawal.

Musk responded to Agrawal’s explanation with a series of his own tweets, one that included a single poop emoji. Musk also suggested that Twitter verify whether users are human or not by calling them on the phone.

Tesla expert Dan Ives — an analyst at financial advisory firm Wedbush Securities — put the chances of Musk going through with the deal at under 50 percent. If Musk chooses to walk away, he’ll be subject to a $1 billion “kill fee”. But according to legal experts who spoke to The Washington Post, Twitter could sue Musk for the financial damages inflicted on the company due to the hasty reversal of the deal.

All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.

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Did Elon Musk violate Twitter's NDA agreement? Former SEC Chair Jay Clayton weighs in – CNBC Television

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Ukraine war: McDonald's to sell its Russian business – CTV News

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More than three decades after it became the first American fast food restaurant to open in the Soviet Union, McDonald’s said Monday that it has started the process of selling its business in Russia, another symbol of the country’s increasing isolation over its war in Ukraine.

The company, which has 850 restaurants in Russia that employ 62,000 people, pointed to the humanitarian crisis caused by the war, saying holding on to its business in Russia “is no longer tenable, nor is it consistent with McDonald’s values.”

The Chicago-based fast food giant said in early March that it was temporarily closing its stores in Russia but would continue to pay its employees. Without naming a prospective Russian buyer, McDonald’s said Monday that it would seek one to hire its workers and pay them until the sale closes.

CEO Chris Kempczinski said the “dedication and loyalty to McDonald’s” of employees and hundreds of Russian suppliers made it a difficult decision to leave.

“However, we have a commitment to our global community and must remain steadfast in our values,” Kempczinski said in a statement, “and our commitment to our values means that we can no longer keep the arches shining there.”

As it tries to sell its restaurants, McDonald’s said it plans to start removing golden arches and other symbols and signs with the company’s name. It said it will keep its trademarks in Russia.

Western companies have wrestled with extricating themselves from Russia, enduring the hit to their bottom lines from pausing or closing operations in the face of sanctions. Others have stayed in Russia at least partially, with some facing blowback.

French carmaker Renault said Monday that it would sell its majority stake in Russian car company Avtovaz and a factory in Moscow to the state — the first major nationalization of a foreign business since the war began.

For McDonald’s, its first restaurant in Russia opened in the middle of Moscow more than three decades ago, shortly after the fall of the Berlin Wall. It was a powerful symbol of the easing of Cold War tensions between the United States and Soviet Union, which would collapse in 1991.

Now, the company’s exit is proving symbolic of a new era, analysts say.

“Its departure represents a new isolationism in Russia, which must now look inward for investment and consumer brand development,” said Neil Saunders, managing director of GlobalData, a corporate analytics company.

He said McDonald’s owns most of its restaurants in Russia, but because it won’t license its brand, the sale price likely won’t be close to the value of the business before the invasion. Russia and Ukraine combined accounted for about 9% of McDonald’s revenue and 3% of operating income before the war, Saunders said.

McDonald’s said it expects to record a charge against earnings of between US$1.2 billion and $1.4 billion over leaving Russia.

Its restaurants in Ukraine are closed, but the company said it is continuing to pay full salaries for its employees there.

McDonald’s has more than 39,000 locations across more than 100 countries. Most are owned by franchisees — only about 5% are owned and operated by the company.

McDonald’s said exiting Russia will not change its forecast of adding a net 1,300 restaurants this year, which will contribute about 1.5% to companywide sales growth.

Last month, McDonald’s reported that it earned $1.1 billion in the first quarter, down from more than $1.5 billion a year earlier. Revenue was nearly $5.7 billion.

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