It may be a world away and pale in comparison to the human toll, but Russia’s decision to invade Ukrainian territory this week will have many direct and indirect impacts on Canada’s economy.
The most obvious one is on the price of oil. Russia is an energy superpower, and the prospect of Russian exports of energy products like crude oil and natural gas being limited is weighing heavily on markets.
The European oil benchmark, Brent crude, topped $105 a barrel on Thursday, its highest level since 2014. The predominant North American oil blend, West Texas Intermediate, wasn’t far behind, changing hands just shy of $98 a barrel at one point on Thursday.
Short of military intervention, threatening to limit Russian energy exports would be the most powerful weapon that NATO has at its disposal to convince Putin to end his incursion into Ukraine, but because Europe is just as dependent on Russia for oil and gas as Russia is on the revenue from selling it, experts think there’s little chance of that happening.
“The White House has gone to great lengths to convey that it will not target the Russian energy sector and exacerbate an already tight supply situation,” commodity analyst Helima Croft with RBC Capital Markets said in a note to clients early Thursday.
“Though there have been no physical supply disruptions yet, there are serious concerns that Russia could move to restrict commodity exports in response to U.S. sanctions.”
WATCH | Fighting Putin with ‘banks, not tanks:’
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4 hours ago
Duration 6:30
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Russia currently pumps about 10 per cent of the world’s supply of crude oil every day.
Ordinarily, one energy giant turning off the taps would open the door to another opening them, but that’s unlikely to happen with Canada because pipeline and export capacity for oil and natural gas are already stretched to their limit, said Eric Nuttall, a partner and portfolio manager at Toronto-based investment firm Ninepoint.
“That’s an impossibility,” Nuttall said in an interview of the prospect of Canada boosting oil exports to take some leverage away from Putin.
Despite sizeable energy resources in Canada’s oilsands and U.S. shale, Nuttall says the decision years ago to limit pipeline expansions have limited North America’s ability to export as much oil as possible, to the point where both Canada and the U.S. still import oil from overseas.
According to the Canadian Association of Petroleum Producers, Canada imports roughly $550 million worth of crude oil a year from Russia, most of which is consumed in Eastern Canada.
And Nuttall says the U.S. imports even more than that.
“They’re basically contributing $66 million a day into the Russian coffers to empower them to launch cruise missiles into Ukraine when they had a safe and reliable supplier to the north,” he said of the Biden administration’s decision to kill the Keystone XL pipeline once and for all.
Oil prices are headed higher in the short term because of the uncertainty, but a long term military conflict in the region would be a negative for oil prices over the long term because it would slow down the global economy, said Barry Schwartz, chief investment officer at Baskin Financial.
“No one should be giddy about oil,” he said in an interview. “It’s possible that oil prices continue to rise as world events continue to be uncertain, but ultimately if [the] invasion continues, if it worsens, the economies around the world are going to slow dramatically and that is a terrible scenario for oil.”
Higher food prices
Energy may be the most direct impact, but global food markets will be affected, too. Often called the “breadbasket of Europe,” Ukraine is a major global supplier of crops like corn and wheat, and Russia is not far behind.
Combined, the two countries produce about 25 per cent of the world’s supply of wheat, and Croft at RBC says those supplies are now in doubt because of Russian aggression.
“Given the recent Russian Black Sea naval deployments, we think there is a considerable risk that Ukraine’s ports may be inoperable,” Croft said.
As a major wheat exporter, Canada will feel that part of the conflict directly.
“If Europe is not able to get Ukrainian wheat, they’re going to be looking for some somewhere else,” said David Quist, executive director of the Western Canadian Wheat Growers Association, in an interview.
“If Ukraine, which is a major grower exporter, is not producing this year, there’s going to be a global shortage. And so that will cause prices to rise.”
WATCH | How conflict in Ukraine will impact wheat prices in Canada:
Ukraine conflict could cause wheat price to spike, food prof says
8 hours ago
Duration 1:27
With Russia and Ukraine being major exporters of wheat, people can expect the price of wheat to go up and for buyers to shift their purchasing toward other markets, says the University of Saskatchewan’s agricultural economics professor Richard Gray. (Photo credit: Orlin Wagner/The Associated Press) 1:27
They already are. Wheat prices have risen by 15 per cent in the past month alone, on the assumption that two of the world’s biggest wheat crops may be unreliable in the short term at least, and potentially the long term, too.
“If it’s a prolonged war and there it’s disrupted, it could disrupt production for this spring or in coming years,” said Richard Gray, a professor of agricultural economics at the University of Saskatchewan.
Higher prices for wheat may be good news for farmers, but it means consumers in Canada and abroad should brace themselves for even higher food prices to come.
Gray says a loaf of bread may contain only about 40 or 50 cents worth of wheat, “so the impact won’t be very large directly, but indirectly you’re going to see some increase in cereal prices, some increase in other food products.”
Inflation and rate hikes
Higher food prices are one of the biggest factors that have been driving up inflation to multi-decade highs lately, a trend that central banks were on track to imminently tackle by raising their interest rates.
While rate hikes are still expected, the sudden outbreak of war in Ukraine has changed the plans a little, economist Royce Mendes with Desjardins says.
The Bank of Canada is set to announce its latest interest rate decision next Wednesday, and it is widely expected to raise its benchmark rate by at least a quarter of a percentage point, to 0.5 per cent.
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8 hours ago
Duration 1:07
Deputy Prime Minister Chrystia Freeland discusses new sanctions targeting Russian oligarchs. 1:07
“Rock bottom interest rates seem inconsistent with elevated levels of inflation, so we expect the normalization process for interest rates to begin in the next few weeks and actually continue at least gradually throughout the year,” Mendes said in an interview.
“But there are certainly more question marks about that process than there were just a few days ago.”
While expectations of how many hikes are coming and how fast are lower today than they were just 24 hours ago, investors in both Canada and the U.S continue to expect about a half dozen rate hikes in Canada and the U.S. by the end of the year, trading in investments known as swaps suggest.
Not even the shocking prospect of a military conflict in Europe is likely to compel central bankers to deviate from their plans to rein in inflation, but the path forward is still anything but certain — so Canadian consumers should brace themselves for uncertainty from this conflict a world away.
“A conflict that can seem so far away at times for many Canadians might hit home in terms of the prices they’re paying for everyday goods,” Mendes said.
“We should expect that we’re going to see higher prices at the pump and potentially higher prices at the grocery store as a result of this conflict.”
A worker walks along an access platform at the Gazprom facility in Siberia. As a major world supplier of oil and natural gas, the Russian invasion of Ukraine will have a global impact on energy markets. (Andrey Rudakov/Bloomberg)
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.
