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Kenney vows new law to protect ‘critical infrastructure’

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Politicians, environmentalists and Metis leaders were among those reacting to the bombshell news Sunday night that mining giant Teck Resources was withdrawing its application for a $20-billion oilsands mine.

That included Alberta Premier Jason Kenney, who said on Monday that his government would introduce legislation to protect what he calls “critical infrastructure” in the province, including railways.

Bill 1 would enact “new stiff penalties for anyone who riots on or who tries to impair critical infrastructure in the province of Alberta,” he said.

“The government of Alberta is prepared to do whatever it takes to ensure our economic future, including a future of natural resource development. We will not back down.”

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Kenney also said that while his government believes in free market solutions, it would look at ways to directly invest in the energy sector due to “existential threats.”

He did not provide details.

“We will, as a government, be assessing in which ways we may need to ensure future investment in the Canadian energy sector to ensure an economic future for this province. There will be news in that sense to come.”

The Teck Frontier mine had become a focal point of national debate around climate change and the economy, and its chief executive cited that nexus as one of the reasons the company was stepping aside.

Don Lindsay wrote in a letter to Canada’s environment minister that he hoped stepping away from Frontier would help Canada have a much-needed conversation.

He reiterated that sentiment Monday morning at an investors conference in Florida and said it became clear in the “past few days” that there was no clear path forward for the project.

Lindsay also pointed to the blockades that have sprung up across the country, jamming national rail networks in protest against a natural gas pipeline in B.C., as having a significant impact on the company.

“As a result of these illegal blockades, there has been some deep concern expressed across the country, in particular with relation to the safety of railway employees, to the safety of the public and the protesters and the effects they’re having on the Canadian economy and individual Canadians,” said Lindsay.

“As Canada’s largest railway shipper, the blockades have had a significant impact on our steelmaking coal business. Together with the severe weather in January, the blockades have reduced our steelmaking coal shipments by over one million tons in the first quarter of 2020.”

 

Teck’s Frontier oilsands project was planned for northern Alberta. The company pulled its application for the project on Sunday. (CBC News)

 

He told the investors’ conference that Teck has no timeline for a possible resubmission of the project for approval and will focus on its priority projects, including a copper mine in Chile.

A portion of his presentation also focused on the company’s plans to be carbon neutral by 2050, in alignment with the goals of the federal government.

“Teck has set out an initial roadmap to achieve carbon neutrality by first avoiding emissions and then eliminating or minimizing emissions,” read one of Lindsay’s presentation slides.

Frontier becomes flashpoint

Frontier was recently thrust into the role as both saviour of the Alberta economy and death knell of Canada’s climate action, depending on who was doing the talking.

A group of Conservative MPs even linked its approval to Alberta’s willingness to stay in confederation as part of their Buffalo Declaration.

That view was echoed by Kenney on Sunday night.

“The factors that led to today’s decision further weaken national unity.… We did our part, but the federal government’s inability to convey a clear or unified position let us, and Teck, down,” Kenney said.

Kenney was scheduled to hold a press conference at 2 p.m. MT (4 p.m. ET) today to address the withdrawal and an anticipated ruling from the Alberta Court of Appeal on the province’s challenge to the federal carbon tax.

At the federal level, outgoing Conservative Leader Andrew Scheer accused Prime Minister Justin Trudeau of driving away investment due to his “weakness and fear” in dealing with opponents of oilsands development.

Trudeau, for his part, said Teck’s decision and the reasoning behind it show support for the actions of his government.

“Teck said clearly we support strong actions to enable the transition to a low carbon future,” said Trudeau in question period on Monday. “Teck is also a strong supporter of Canada’s action on climate pricing and other climate policies such as legislated caps on oilsands emissions.

“It is the Conservative Party polarizing the debate on climate change that is putting our economy at risk.”

Notley urges Kenney to ‘step up’

In Alberta, NDP Leader Rachel Notley blamed Kenney for making the project a “political football” and said his aggressive approach to supporting the province’s oil and gas sector is to blame for the end of Frontier.

“My message to the premier is this: yelling at other people does not create jobs, except maybe for Tom Olsen,” she said, taking a shot at the chief executive officer of the Canadian Energy Centre.

“In this case, it cost us jobs, at least 7,000. Albertans cannot afford more of this. Step up before our province gets left behind.”

She said international investors are looking for strong climate strategies that offer clarity to industry.

One of the groups impacted by the death of the project is the Fort McKay Métis, which stood to reap economic rewards and employment from the mine. It supported Teck’s application.

Fort McKay reaction

Ron Quintal, president of the Fort McKay Métis, said he was shocked when an executive vice-president of Teck called him to alert him to the news.

Teck Resources has withdrawn the application for its new Frontier oilsands mine. The federal government was supposed to decide on the $20-billion project this week.  2:42

“I had anticipated that perhaps the phone call was to meet in Ottawa ahead of the decision,” he said.

He’s not sure what’s next for his group, and said they’re in “damage control mode.” He acknowledged that even if Teck resubmitted the project, it could be years before anything came of it.

“I think that there needs to be some work around policy, there needs to be some work with the federal and provincial governments to try to find a different path forward in terms of how we get our energy to market,” said Quintal.

“And from my perspective, we’re not cutting the mustard at this point and something’s got to give.”

‘Market-based decision’

Environmentalists, meanwhile, were applauding the death of the project as a win for climate change efforts.

Julia Levin, climate and energy program manager with Environmental Defence, said the decision is the inevitable result of a shift away from fossil fuels.

“This was a market-based decision. Teck couldn’t find financial partners willing to take on a high-cost, high-emission, long-duration oilsands mine, because markets are realizing that projects like the Frontier mine are high-risk and uneconomical,” she said in an emailed statement.

“This project only offered a false promise to workers in Alberta concerned about their futures — especially in a world moving away from oil. Now is the time to invest in projects that provide jobs and create clean energy and clean growth.”

The Alberta Chamber of Commerce said the loss of the project will hurt an already fragile provincial economy.

“If approved, the Frontier project would have generated 7,000 jobs and $70 billion in tax and royalty revenue, providing a significant boost to our provincial and national economies,” said a statement from the organization.

“This was an example of a project done responsibly, which was demonstrated by the strong support of all 14 nearby First Nations.”

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India’s Adani Group loses $48bn in stocks over fraud claims

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Hindenburg Research claimed Adani Group had committed ‘brazen’ corporate fraud but Adani Group dismissed the report.

Shares of Asia’s richest man Gautam Adani’s business empire plunged, leading to losses of $48bn after a US investment firm claimed it had committed “brazen” corporate fraud.

Seven listed companies of the Adani conglomerate lost a combined $48bn in market capitalisation after Hindenburg Research flagged concerns in a January 24 report about debt levels and the use of tax havens.

Adani who was the world’s third-richest person at the start of the week is now ranked number seven on Forbes’ billionaires tracker after a $22.6bn hit to his fortune in Friday’s trade.

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Adani Enterprises, the group’s flagship company, plunged nearly 20 percent over the day’s trading in Mumbai, briefly triggering an automatic trading halt, before recovering slightly to close 18.52 percent lower.

Five other group companies hit their own stock exchange circuit breakers, with shares in Adani Total Gas, Adani Green Energy and Adani Transmission falling 20 percent apiece.

“Obviously, this is panic-selling,” JM Financials equity research chief Ashish Chaturmohta told AFP, adding that traders were creating new short-sell positions to protect earlier bullish bets on Adani stocks.

Hindenburg Research said in its report that Adani Group had used undisclosed related-party transactions and earnings manipulation to “maintain the appearance of financial health and solvency” of its listed business units.

Adani Group dismissed the report as baseless and that it was the victim of a “maliciously mischievous” reputational attack by Hindenburg.

Legal chief Jatin Jalundhwala said Adani was exploring considering taking legal action against the New York-based research advisory in US and Indian courts.

Hindenburg responded that Adani had ducked the issues its research had raised and instead resorted to “bluster and threats”.

“If Adani is serious, it should also file suit in the US,” the firm said in a statement. “We have a long list of documents we would demand in a legal discovery process.”

Adani, with a net worth of $96.6bn, is considered a close supporter of Prime Minister Narendra Modi. India’s main opposition Congress party has often accused Adani, and other billionaires, of getting favourable policy treatment from Modi’s administration, allegations the billionaire has denied.

The Adani Group was established in 1988, beginning with commodities trading. The conglomerate’s business interests now extend from ports and airports to mining and renewable power.

The report said a pattern of “government leniency towards the group” stretching back decades had left investors, journalists, citizens and politicians unwilling to challenge the group’s conduct “for fear of reprisal”.

“The signal is that because the Adanis are very close to the powers that be today, therefore nobody would challenge them,” economist Arun Kumar told AFP.

“Those who earlier criticised Adani, those who tried to do some investigation, Adani’s launched big [legal] cases against them, so they have scared off a lot of people,” he added.

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Rapidly cooling housing market helps to quell Canadian inflation

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Housing costs, and Canada’s unique way of capturing them in inflation, suggest that consumer price gains may slow rapidly in coming months.

As the largest expense for most households, shelter makes up 30 per cent of Canada’s consumer price index — a similar proportion to the U.S. But unlike its southern neighbor, Canada’s inflation metrics capture these costs in a way that’s more sensitive to changes in interest rates and home prices.

That means Canadian inflation measures are influenced by both the rise in mortgage costs as the Bank of Canada aggressively raises rates and by the resulting slowdown in the housing market.

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While inflation was still 6.3 per cent in December, price pressures in Canada are expected to lose momentum thanks to base effects and continued cooling in the Canadian real estate market, which features shorter-duration mortgages than the U.S. and a higher share of variable-rate home loans.

Those differences are one reason economists say the Bank of Canada — which said this week it intends to pause its tightening campaign — won’t have to raise borrowing costs as high as the Federal Reserve.

“One way Canada actually stands out from a lot of other countries is that when the Bank of Canada raises interest rates, there’s a temporary boost to inflation because of this mortgage interest rate effect,” Stephen Brown, an economist at Capital Economics, said by phone.

CROSS-BORDER DIFFERENCES

The U.S. calculates housing inflation using owners’ equivalent rent, or the price a property owner would have to pay to rent to live there. Canada calculates it through a formula that includes mortgage interest, replacement cost, property taxes and maintenance.

Shelter has been a major driver of Canadian inflation in recent months, and was up 7 per cent in December. The mortgage interest and rent sub-indexes saw year-over-year jumps of 18 per cent and 5.8 per cent, respectively.

But with rates now on hold, Brown expects mortgage interest costs to peak before dropping sharply in the second half of this year. Other inflation inputs, such as commissions on home sales, are already easing.

His forecast is for increases in the shelter component of CPI to fall to 3.5 per cent by June and to 1.5 per cent by December. With energy, food and goods prices also expected to fall sharply, Brown said the Bank of Canada may be “underestimating how quickly overall inflation will decline.”

Macklem’s rapid interest-rate hikes, to 4.5 per cent from an emergency pandemic low of 0.25 per cent in March, have dramatically cooled the real estate market. Prices have fallen more than 13 per cent since their peak last year. Higher mortgage costs are also squeezing some of the world’s most indebted households, forcing them to tighten their purse strings.

“The bank might be feeling like they’ve done enough on housing, and that the effect is going to unravel over the coming months,” said Rishi Mishra, an analyst at Futures First Canada Inc. “They don’t want to press down too hard, just because how large the exposure is to housing market in Canada.”

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Stock market news live updates: Stocks rally, Intel craters, as inflation data cools

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U.S. stocks rallied on Friday, after slipping earlier at the open, as investors weigh in on fresh economic data including consumer spending data, a closely watched measure by the Federal Reserve.

The S&P 500 (^GSPC) added 0.2%, while the Dow Jones Industrial Average (^DJI) ticked up 0.08%. The technology-heavy Nasdaq Composite (^IXIC) was up roughly 1%, closing out its best week since November.

The biggest mover on Friday were shares of Intel (INTC), which fell as much as 10% on Friday after the company’s bleak outlook disappointed.

Intel reported a quarterly earnings miss after the close Thursday, adjusted earnings per share coming in at $0.10 against the $0.19 expected by the Street. Revenue totaled $14.04 billion, below estimates for $14.5 billion.

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In the first quarter, Intel expects revenues to come in between $10.5-$11.5 billion, with losses totaling $0.80 per share. In delivering these results, CEO Pat Gelsinger cited “economic and market headwinds,” adding the company, “will continue to navigate the short-term challenges while striving to meet our long-term commitments.”

Elsewhere in markets, Tesla (TSLA) stock has become hot. The shares rose above 10% in Friday trading, eyeing its best week since May 10, 2013. The company’s latest earnings has prompted a boost for the shares. Separately, CEO Elon Musk is being investigated by US regulators in his role shaping the carmaker’s self-driving car claims, Bloomberg reported.

Lucid (LCID) stock surged Friday on reports that a Saudi Arabia’s Public Investment Fund could be planning a takeover and buying shares the EV maker doesn’t already own.

The yield on the benchmark 10-year U.S. Treasury note ticked up to 3.52% from 3.497% on Thursday. The dollar index was little changed. WTI crude oil sank 2% to trade at $79.41 a barrel.

U.S. core personal-consumption expenditures price index (PCE), excluding energy and food, rose 0.3% month-over-month, while the annual rate fell to a one-year low of 4.4% in December from 4.7% the prior month, in line with consensus forecasts.

Pending home sales increased 2.5% in December, ending a sixth month slide, according to the National Association of Realtors.

Meanwhile, consumers remain optimistic. The consumer sentiment index rose to 64.9, a slight increase from 64.6 reading two weeks ago, according to preliminary results from the University of Michigan’s consumer survey. Economists surveyed were expecting a reading of 64.6.

Stocks rallied on Thursday as investors digested other data that showed the U.S. economy ended the year on a solid foot despite higher interest rates and recessionary fears looming.

Gross Domestic Product (GDP) — the sum of all goods and services – expanded at a 2.9% annual pace in the final quarter of 2022. For the full year, GDP grew 2.1%.

Durable-goods orders in December increased by 5.6% topping expectations for 2.4%, the sharpest gain since July 2020. Meanwhile, the resilience of the U.S. job market has been a major surprise. Initial jobless claims fell again to 187,000, the lowest level since April 2022.

“Markets deciphered a lot of mixed clues [on Thursday] and, after some cause for concerns, decided that it was easier to shrug it all off and drive equities to fresh 2023 highs,” Jim Reid and colleagues at Deutsche Bank wrote in an early morning note Friday morning. “Earnings also helped the mood, to be fair.”

Visa (V) shares were higher Friday after the company reported results late Thursday. Revenue increased to $7.94 billion compared to expectations of $7.69 billion. And adjusted earnings per share came in at $2.18 versus estimates of $2.00. The company announced that Ryan McInerney will be stepping in as chief executive officer starting February 1st.

Hasbro (HAS) also joined the wave of company layoffs announcing it will cut its workforce by 15 percent, or 1,000 employees, effective in the coming weeks. The move comes as the toymaker seeks to save around $250 million and $300 million annually by the end of 2025.

Also in stock moves, Chevron (CVX) shares were down after reporting fourth quarter profit of $6.4 billion, down from the $11.2 billion in the third quarter. Ahead of Friday’s report Chevron, announced it was hiking its dividend by 6% along with massive $75 billion share repurchase plan.

Shares of American Express (AXP) rose after the credit card company reported fourth quarter net income of $1.57 billion. On a per-share basis, it had a profit of $2.07. American Express expects full-year earnings to be $11 to $11.40 per share.

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