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Canada's economic growth misses estimates, boosting chances of rate cut – Yahoo Canada Finance

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By Promit Mukherjee and Ismail Shakil

OTTAWA (Reuters) -Canada’s economy likely weakened in the first quarter, data from Statistics Canada showed on Tuesday, bolstering expectations that the Canadian central bank would have more reason to cut interest rates in June.

Canada’s gross domestic product (GDP) rose 0.2% in February, less than analysts’ estimates, while growth in March likely remained muted, Statistics Canada said.

The economic slowdown combined with cooling inflation could add to the evidence the Bank of Canada (BoC) is looking for to start lowering its key interest rate from nearly a 23-year high of 5%.

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The loss of economic momentum into the quarter “puts additional pressure on the BoC to begin cutting as soon as June,” said Benjamin Reitzes, managing director and Canadian rates and macro strategist at BMO Capital Markets.

Analysts polled by Reuters had forecast 0.3% GDP growth in the month.

In a preliminary estimate for March, Statscan said GDP was likely unchanged from February as increases in the utilities and real estate, rental and leasing categories were offset by decreases in manufacturing and retail trade.

Growth in January was downwardly revised to 0.5% from 0.6%, it said, and considering March estimates, the economy is likely to have expanded at a 2.5% annualized rate in the first quarter, the fastest growth rate since the first quarter of 2023.

The monthly GDP report is based on Canada’s industrial output while quarterly figures, which will be released next month, are based on an alternate calculation.

The BoC expects growth in the first quarter of 2.8% and 1.5% in the second quarter, it had said in its last monetary policy report earlier this month.

Economic growth stalled in the second half of last year and the rebound in January had eased pressure on the central bank to lower rates to avoid a downturn. The chances of a first rate cut happening any time soon were further complicated by strong U.S. data, which has pushed chances of a rate cut by the Federal Reserve deep into the second half.

“We continue to see the Bank of Canada beginning a rate cutting cycle in June,” Royce Mendes, head of macro strategy for Desjardins Group, wrote in a note.

Traders and economists had expected Canada’s GDP to weaken as January’s rebound was largely driven by one-off factors.

Money markets slightly increased the odds of a rate cut in June to close to 60% from 56% before the release of the data, while a cut in July is fully priced in.

The Canadian dollar slightly weakened after the GDP data, with the local currency trading 0.51% lower at C$1.3730 per dollar, or 72.89 U.S. cents. The yield on the two-year Canadian government bond rose 2.7 basis points to 4.427%.

The BoC, which had ratcheted up rates to curb a surge in prices, said earlier this month that a reduction in borrowing costs in June was possible if the recent cooling trend in inflation is sustained. Headline inflation came in at 2.9% in March, roughly in line with the central bank’s expectations.

GDP growth in February was driven by a second consecutive monthly rise in the services-producing industries, Statscan said. Transportation and warehousing increased 1.4% in February, the largest monthly growth rate since January 2023, the agency said.

Overall, Canada’s goods-producing sector was unchanged on a month-over-month basis, while the services sector posted a 0.2% increase.

(Additional reporting by Dale Smith; Editing by Louise Heavens and Paul Simao)

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Japan’s SoftBank returns to profit after gains at Vision Fund and other investments

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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.

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Trump campaign promises unlikely to harm entrepreneurship: Shopify CFO

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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.

Companies in this story: (TSX:SHOP)

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RioCan cuts nearly 10 per cent staff in efficiency push as condo market slows

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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.

Companies in this story: (TSX:REI.UN)

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