Bank of Canada Governor Stephen Poloz (right) and Finance Minister Bill Morneau (left) speak during a news conference on Parliament Hill, on March 18, 2020 in Ottawa.
DAVE CHAN/AFP/Getty Images
As Stephen Poloz sat at a podium on Wednesday with Finance Minister Bill Morneau telling reporters about the massive support package that Ottawa unfurled to aid a distressed Canadian economy, perhaps the biggest surprise of the entire spectacle is something the Bank of Canada’s Governor didn’t say.
Mr. Poloz talked about the range of pretty arcane financial market measures that the central bank has put into action in the past few days to keep “credit channels” well-greased and keep bank lending flowing to increasingly needy businesses and consumers. “Back plumbing,” he called it – the necessary if unglamorous mechanics of keeping the financial system from gumming up while the government wrestles with an economic aid package in the face of the COVID-19 pandemic.
Yet the Governor conspicuously didn’t drop the shoe that the markets very much expected him to drop – the one he dropped the last time he gave a joint news conference with Mr. Morneau, just four days earlier. He did not announce another interest-rate cut. On a day when the federal government unleashed its big guns, Mr. Poloz left his biggest weapon in the holster.
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Okay, so it wasn’t entirely a surprise by the time the news conference began – which itself was surprising. The bank took the extraordinary step of forewarning reporters via e-mail that Mr. Poloz wouldn’t announce a rate cut or any other new measures at the news conference.
Now, the central bank never says what it’s planning to do, or not do, in advance. The fact it felt compelled to do so on Wednesday just speaks to what deeply weird times we are in. At this point, we’re actually starting to get used to the Bank of Canada not doing what we expect when we expect it.
Yet ever since the U.S. Federal Reserve’s massive move last Sunday (Sunday!) that sliced a full percentage point off its key rate and took it down to near-zero, markets have fully expected the Bank of Canada to follow the Fed’s lead and make another cut to its own rate – at least to 0.25 per cent from the current 0.75 per cent. They had assumed Mr. Poloz would be in somewhat of a hurry to do so. It’s now pretty clear that he’s not.
Mr. Poloz signalled on Wednesday that the most important role for the Bank of Canada right now isn’t to stimulate economic activity through still-lower rates – which, frankly, would have minimal effect when big swaths of the economy are effectively shut down. And, even more important, wouldn’t work anyway if the cuts couldn’t be properly transmitted through a misfiring financial system, which has become a legitimate concern.
Rather, the bank’s priority now is to use its might to maintain stability in the financial system, and to keep the credit taps as wide open as possible so that businesses and consumers have access to the funds that will see them through this mess.
Not everyone agrees. Many economists feel that, given the seriousness of the situation, the central bank should cut rates as deeply as it can as soon as it can. Rate cuts take months to work their way through an economy, they argue; the longer you wait, the further you fall behind.
But one statement from Mr. Poloz on Wednesday explains why he’s not subscribing to that argument:
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“We know that this is a temporary thing. We don’t know how long or how big, but it’s temporary.”
If you’re a central bank boss who believes that the shock your economy is experiencing will pass before those rates have a chance to truly sink in, slashing rates further ends up becoming more for show than for impact. Investing your energies in financial system stability, on the other hand, can have a much more immediate impact to address the profound but, hopefully, relatively short-lived fallout from the COVID-19 shock.
Mr. Poloz also talked about the need to be “nimble and adaptable” – which may provide a second clue to his preference against following the Fed’s lead on rates.
Through much of his 6½ years as head of the Bank of Canada, Mr. Poloz has stressed the independence of Canadian interest-rate policy from that of other central banks, especially the Fed. He has always seen a separate path for his policy as an important tool in applying rates to help guide the Canadian economy.
The last thing he would want, especially at a time when policy flexibility is paramount, is for the markets to start believing that the Bank of Canada would follow a rate path that the Fed had laid out for it. An immediate cut in the days after the Fed move would have sent the wrong signal – one that the Bank of Canada would have a very hard time undoing in the coming weeks and months.
But by passing over the obvious opportunity to cut on Wednesday, Mr. Poloz has effectively de-linked Canadian rate policy from the Fed’s rate timetable in the minds of the markets. In doing so, he may be buying himself some crucial room to manoeuvre when he most needs it.
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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.
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.
