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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.
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.
