Business

Goldilocks hopes return to Wall St after benign inflation report

Published

10 months ago

November 14, 2023

NEW YORK, Nov 14 (Reuters) – A benign U.S. inflation report is bolstering hopes that the Federal Reserve can bring down consumer prices without hurting the economy, a so-called Goldilocks environment that investors believe will benefit stocks and bonds.

Both asset classes have ripped higher in November following a months-long wobble, fueled by hopes that the Fed was unlikely to deliver any more of the rate increases that have spurred volatility throughout markets since early last year.

Inflation data released on Tuesday supported the view that a turning point is near: consumer prices were unchanged on a monthly basis for October, the first such reading in more than a year and a softer figure than analysts were expecting.

At the same time, there have been few indications that tighter monetary policy is severely hurting the economy, backing the idea that prices can cool further without damaging growth.

“The broader market has been challenged with this consensus negative view about both a recession and inflation,” said Eric Kuby, chief investment officer at North Star Investment Management Corp. “Reality is telling a different story. This does feel like a Goldilocks moment for the entire market.”

The data fueled a powerful rally in stocks and bonds. The benchmark S&P 500 (.SPX) ended up 1.9% on the day, its biggest one-day rise since late April. The S&P 500 is up 9% from its October lows, putting its year-to-date gain at 17%. The benchmark 10-year yield , which moves inversely to bond prices, was at its lowest level since late September – having fallen over 50 basis points from a 16-year high set last month.

The jump in stock prices was accompanied by a wave of bullish bets in the U.S. equity options markets, as traders ramped up wagers on more gains and threw in the towel on bearish positions.

Call options, which benefit from rising prices, outnumbered bearish puts by their biggest margin in three and half months, according to Trade Alert data.

Meanwhile, investors scrambled to cover bearish bets – especially on the high growth and technology stocks that have struggled amid elevated interest rates.

The Thomson Reuters United States Most Shorted Index (.TRXUSPMSHRT) rose 6.5%, its largest one-day gain in a year.

“Crowded short names are also up a lot … that to me is a lot of chasing and covering,” said Daniel Kirsch, head of options at Piper Sandler.

Some parts of the market that have underperformed this year, such as the small-caps focused iShares Russell 2000 ETF (IWM.P), drew heavy bullish options activity on Tuesday, said Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets.

The Russell 2000 (.RUT), which the ETF tracks, was up 5.4% on Tuesday, its biggest daily gain in a year. The index is up 2.1% this year.

DOVISH EXPECTATIONS

Higher rates have been a worry for investors since the Fed started its hiking cycle in March of 2022. Rising rates tend to slow economic growth by raising the cost of borrowing for companies and consumers. They also dull the attractiveness of equities by driving up bond yields and making fixed income and other yield-bearing investments more competitive with stocks.

However, in the wake of the inflation data, Fed funds futures traders on Tuesday expected the Fed to forgo any more hikes and enact about 100 basis points of interest rate cuts in 2024, compared to 75 basis points of cuts before the CPI report.

That tallied with expectations heading into the data. According to BofA Global Research’s monthly survey out Tuesday, 76% of fund managers were convinced the Fed had finished its rate hike cycle, up from 60% in October and the highest level since the survey began tracking the topic in May.

The CPI data is “telling us that the Fed is done, there’s nothing left for it to do here,” said Thomas Hayes, chairman at hedge fund Great Hill Capital.

Still, some investors believed it was too early to call a victory in the fight against inflation.

“Inflation is still too high and the labor market still too tight for the Fed to … announce an end to the rate-hiking cycle,” wrote Brian Rose, senior US economist at UBS Global Wealth Management. “Such an announcement is likely to be at least three months away unless the data takes a sudden turn toward the weaker side.”

Others were wary that the Fed could risk hurting the economy by keeping monetary policy too tight for too long.

“The question now for the Fed is whether they continue to believe that slowing the economy into recession is needed to completely conquer inflation,” said Jamie Cox, managing partner for Harris Financial Group. “I certainly hope not.”

Reporting by Lewis Krauskopf and Saqib Iqbal Ahmed; additional reporting by Davide Barbuscia in New York and Ankika Biswas in Bengaluru; Editing by Nick Zieminski and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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Business

Canada Goose to get into eyewear through deal with Marchon

Published

4 hours ago

September 19, 2024

Anne Joseph

TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.

The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.

The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.

Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.

Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.

Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GOOS)

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Business

A timeline of events in the bread price-fixing scandal

Published

6 hours ago

September 19, 2024

Anne Joseph

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

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Business

TD CEO to retire next year, takes responsibility for money laundering failures

Published

9 hours ago

September 19, 2024

Anne Joseph

TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.

Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.

The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.

As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.

TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.

TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:TD)

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