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Canada’s main stock index fell in early going Wednesday, hit by a sharp drop in crude prices and a higher-than-forecast reading on inflation. South of the border, key indexes were also weaker at the open with Fed chair Jerome Powell’s testimony before Congress in focus.
At 9:33 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was down 348.41 points, or 1.81 per cent, at 18,908.88.
The Dow Jones Industrial Average fell 177.68 points, or 0.58 per cent, at the open to 30,352.57.
The S&P 500 opened lower by 30.90 points, or 0.82 per cent, at 3,733.89, while the Nasdaq Composite dropped 127.35 points, or 1.15 per cent, to 10,941.95 at the opening bell.
On Wednesday, markets will have a close eye on an appearance by Mr. Powell on Capitol Hill, looking for indications of how aggressive the Fed will be in hiking rates as it looks to temper high inflation. In initial remarks, Mr. Powell said the Fed remains committed to bringing inflation under control.
“Jerome Powell’s semiannual testimony could turn the market mood sour again as the Fed chief is expected to reiterate his strong commitment to fighting inflation even if it means slower economy and a softer jobs market,” Swissquote senior analyst Ipek Ozkardeskaya said in an early note.
“Yesterday’s rally in stocks could be another dead cat bounce, and we may see the market painted in red in the following sessions,” she said.
In this country, inflation is front and centre with the release of the May consumer price index figures from Statistics Canada ahead of the start of trading.
The agency says the annual rate of inflation spiked to 7.7 per cent in May, the fastest pace since 1983. Economists had been expecting an increase, but most were looking for a number closer to 7.4 per cent. Statscan says higher gasoline prices were behind much of the increase although price pressures continued to be broad-based.
Economists are increasingly expecting the Bank of Canada to hike rates at its next policy meeting by 75 basis points following a similar move recently by the Fed.
“Inflation was already running well ahead of the Bank of Canada’s April projections prior to today’s release, and is now even further ahead,” CIBC senior economist Andrew Grantham said.
“The higher than expected inflation figure will have markets pricing an even greater probability of a 75-basis-point hike in July.”
On the corporate side, Canadian investors got results from Sobeys-parent Empire Co. Ltd. ahead of the start of trading. Empire Company Ltd. reported net earnings of $178.5-million or 68 cents per share in the quarter, compared to $171.9-million or 64 cents per share in the same period last year. The company announced a 10-per-cent increase to its quarterly dividend paid to shareholders, to 16.5 cents per share.
Overseas, the pan-European STOXX 600 fell 1.28 per cent just before midday. Britain’s FTSE 100 was down 1.11 per cent. Germany’s DAX and France’s CAC 40 were off 1.76 per cent and 1.58 per cent, respectively.
In Asia, Japan’s Nikkei finished down 0.37 per cent. Hong Kong’s Hang Seng dropped 2.56 per cent on weakness in tech stocks.
Crude prices fell in early going with an expected move by U.S. President Joe Biden to ease costs for drivers tempering sentiment.
The day range on Brent is US$108.62 to US$114.45. The range on West Texas Intermediate is US$103.20 to US$109.76. Both benchmarks were down more than 4 per cent in the predawn period.
“There is a distinct lack of drivers behind this move, and certainly no headlines to justify it,” OANDA senior analyst Jeffrey Halley said.
“I surmise that President Biden’s expected announcement of a temporary suspension of Federal fuel taxes [on Wednesday] has prompted the selling, and I do note the U.S.-centric WTI contract is leading the charge lower.”
Later in the day, Mr. Biden is expected to call for a temporary suspension of the U.S. federal tax on gasoline, according to a report by Reuters. The move is aimed at addressing high costs for consumers and soaring inflationary pressures.
Later Wednesday, traders will also got the first of two weekly U.S. inventory reports, with new figures from the American Petroleum Institute. More official government figures will follow on Thursday morning.
In other commodities, gold prices slid alongside a firmer U.S. dollar.
Spot gold fell 0.3 per cent to US$1,826.41 per ounce by early Wednesday morning, extending losses to a fourth straight session. U.S. gold futures dropped 0.6 per cent to US$1,827.40.
“Although gold’s interminable range-trading continued overnight, the falls of the past three sessions hint that any upward momentum for the yellow metal is doing an Elvis and is leaving the building,” Mr. Halley said.
“Gold has been grinding lower, even as U.S. yields and the U.S. dollar trade sideways,” Mr. Halley said.
The Canadian dollar was weaker, hit by uncertain risk sentiment and lower commodities prices, while its U.S. counterpart advanced against a basket of world currencies.
The day range on the loonie is 76.94 US cents to 77.43 US cents.
“The CAD has softened overnight, with price action driven by the weaker risk backdrop and a slump in energy prices,” Shaun Osborne, chief FX strategist with Scotiabank, said. “The CAD retains an unfortunately strong, negative correlation with US equities (-83 per cent by our measure) so the gravitational pull of sliding S&P 500 futures is hard to escape from.”
Canadian investors will get inflation figures ahead of the start of trading with economists expecting to see another spike in price pressures.
On world markets, the U.S. dollar index, which weighs the greenback against a group of currencies, was up 0.33 per cent at 104.8, according to figures from Reuters.
The euro fell 0.4 per cent to US$1.0497.
The yen slid 0.3 per cent to 136.3 per U.S. dollar, having hit 136.71 in early trade, its lowest since October 1998, Reuters reports.
Other commodities-linked currencies were also lower. The Norwegian krone fell 1.3 per cent against the U.S. dollar. The Australian dollar slid 1.1 per cent to US$0.6898 by early Wednesday.
In bonds, the yield on the U.S. 10-year note was lower at 3.222 per cent.
More company news
The Globe’s Susan Krashinsky Robertson reports that Canada’s largest retailer is getting into the increasingly competitive rapid grocery-delivery field through a partnership with San Francisco-based DoorDash Inc. Starting in August, Loblaw Cos. Ltd. will offer customers delivery in roughly 30 minutes or less, beginning in Toronto and Winnipeg before expanding to 10 locations across the country within that month. Within a few years, Loblaw expects to have 40 to 50 PC Express Rapid Delivery locations.
Brookfield Asset Management said on Wednesday it had raised $15-billion for its Brookfield Global Transition Fund, a fund focused on investments in the decarbonization technology space.
Boeing expects supply chain problems to persist almost until the end of 2023, led by labour shortages at mid-tier and smaller suppliers, partly due to the faster-than-expected return of demand, its chief executive said on Wednesday. Boeing said last month that production of its 737 aircraft had been slowed by shortages of a single type of wiring connector, while some of its airline customers had been forced to cancel flights due to a lack of staff in the post-pandemic recovery. “The shift from demand to now supply issues … is remarkable, the speed with which it happened,” Boeing Chief Executive David Calhoun said at Bloomberg’s Qatar Economic Forum in Doha.
(8:30 a.m. ET) Canada’s CPI for May.
(9:30 a.m. ET) U.S. Fed Chair Jerome Powell testifies to the Senate Banking Committee.
With Reuters and The Canadian Press
U.S. inflation shows signs of having peaked as rate eases to 8.5% in July – CBC News
The torrid increase in the cost of living showed signs of finally easing last month, with the U.S. inflation rate cooling to 8.5 per cent.
The U.S. Bureau of Labour Statistics reported Wednesday that the annual inflation rate eased from a 40-year high of 9.1 per cent in June to 8.5 in July.
Economists had been expected the rate to ease off, but the 8.5 per cent figure was softer than the 8.7 per cent they were expecting.
“The July CPI report might be the first clear indication that consumers are pushing back against high inflation in response to tighter monetary policy,” Sal Guatieri, an economist with BMO Markets, wrote in a note to investors. “It’s a sign that inflation is close to peaking, though the climb down the mountain will be slow due to rising wages and rents.”
Gasoline prices have eased significantly, which was a major contributor to the slowdown.
Guatieri also pointed to price reductions in airfare, hotels and car rentals.
“With many travellers now exhausting earlier pent-up demand, fewer people are willing to face hassles at the airport or pay the well-above pre-pandemic cost of flying, rooming at a hotel or renting a car.”
Food prices, meanwhile, continued to rise at a faster pace than the overall rate, with costs increasing by 10.9 per cent in the past year.
Statistics Canada is expected to report its inflation numbers on Aug. 16.
Commercial fishers and wild salmon advocates cheer large returns to B.C. waters
VICTORIA — The summer of 2022 is shaping up to be a bumper season for both pink and sockeye salmon in British Columbia rivers, with one veteran Indigenous fisherman reporting the biggest catches of sockeye in decades.
Mitch Dudoward has worked in the salmon industry for more than 40 years, and says fishing on the Skeena River in northwest B.C. has never been better.
“This is the best season I can recall in my lifetime with the numbers we are catching,” said Dudoward, who recently completely a big sockeye haul aboard his gillnetter Irenda.
Bob Chamberlin, chairman of the Indigenous-led First Nations Wild Salmon Alliance, meanwhile said that thousands of pink salmon are in Central Coast rivers after years of minimal returns.
The strong run comes two years after the closure of two open-net Atlantic salmon farms in the area.
“We had targeted those farms,” said Chamberlin, whose group wants open-net farms removed from B.C.’s waters. “We got them removed and two years later we went from 200 fish in the river to where we have several thousand to date. In our mind and knowledge that is a really clear indicator.”
Fisheries and Oceans Canada spokeswoman Lara Sloan said departmental observations indicated big returns of sockeye to the Skeena River.
“Test fisheries currently indicate that Skeena sockeye returns are tracking at the upper end of the forecast, with an in-season estimate of approximately four million sockeye,” said Sloan in a statement. “Sockeye populations returning to a number of areas in British Columbia, Washington and Alaska are returning better than forecast in 2022.”
The five-year average return of sockeye to the Skeena is 1.4 million and the 10-year average is 1.7 million, Sloan said.
Dudoward said the Skeena sockeye season ended this week, but it could have gone on longer.
“We should be fishing until the end of August when the sockeye stop running,” he said. “There’s plenty of them to take.”
But Sloan said the Fisheries Department was being careful about salmon stocks.
“For 2022, the department is taking a more precautionary approach toward managing impacts of commercial fisheries on stocks of conservation concern including smaller wild sockeye populations, chum and steelhead returning to the Skeena River,” she said.
The Fisheries Department also expects a large sockeye run to the Fraser River this summer, but returns of chinook, coho and chum to northern and Central Coast rivers and streams are expected to be low.
“The forecast range for Fraser River sockeye in 2022 is 2.3 million to 41.7 million, with a median forecast of 9.7 million,” said Sloan. “The median forecast means there is a 50 per cent chance returns will come in below that level.”
That is well above the estimated 2.5 million sockeye returns in 2021, according to Fisheries and Oceans Canada data.
The strong returns come amid debate over the future of open-net salmon farming in B.C. waters.
In 2018, the B.C. government, First Nations and the salmon farming industry reached an agreement to phase out 17 open-net farms in the Broughton Archipelago between 2019 and 2023.
The agreement was negotiated to establish a farm-free migration corridor to help reduce harm to wild salmon.
In June, federal Fisheries Minister Joyce Murray said the government will consult with First Nations communities and salmon farm operators in the Discovery Islands, near Campbell River on Vancouver Island, about the future of open-net farming in the area.
A final decision on the future of the farms is expected in January 2023, the minister said.
“That is such a key migratory route of all Fraser River salmon, in particular coho and chinook,” Chamberlin said. “If we are going to see Fraser runs return, we need to see removal of impediments.”
This report by The Canadian Press was first published Aug. 10, 2022.
Dirk Meissner, The Canadian Press
Montreal-based WSP Global to buy U.K. environmental consulting company in third takeover in just three months – The Globe and Mail
Canadian engineering giant WSP Global Inc. WSP-T is buying British environmental consulting firm RPS Group Plc in a deal worth almost a billion dollars, its third major takeover in just three months.
Montreal-based WSP said it struck a deal Monday to acquire RPS for £2.06 per share in cash for a total enterprise value of £625-million, or $975-million. It is paying 15 times RPS’s adjusted earnings before interest, taxes, depreciation and amortization for the 12 months ended June 30.
“RPS is of utmost value to WSP for its sustainability focus, global presence, expertise and talent,” WSP chief executive Alexandre L’Heureux told analysts on a conference call after markets closed. The takeover of RPS’s 5,000 employees brings additional scale to WSP and advances its efforts to expand its front-end consulting work, he said.
Demand for environmental engineering and consulting services is growing as private-sector companies and governments seek advice on things ranging from climate-change risks to waste management. WSP is beefing up its capabilities in the space as part of a wider growth effort.
This is the company’s third major takeover in as many months. In June, it said it had struck a definitive agreement to acquire a business known as Environment & Infrastructure (E&I) from Aberdeen, Scotland-based Wood for US$1.8-billion, adding another 6,000 employees to its payroll. Earlier this month, WSP said it would buy Capita Plc’s Capita REI and GL Hearn businesses in the U.K. for £60-million in a smaller deal that adds skill in real estate planning.
Once a boutique engineering company, WSP has ballooned in recent years to become a major player in global design consultancy and project management, with a current market capitalization topping $18-billion. Mr. L’Heureux wants to expand the company further. He outlined a three-year strategic plan this March that aims to boost net revenues 30 per cent to well over $10-billion a year and increase adjusted net earnings per share by 50 per cent by 2024.
WSP said it secured a new bank credit facility worth £600-million (about $935-million), including commitments for the full amount of the RPS purchase price, in order to meet British takeover regulations. But it intends to use the proceeds from share sales to fund the takeover.
The company said it will sell $400-million worth of equity in a bought deal with a syndicate of underwriters led by CIBC Capital Markets, National Bank Financial and RBC Capital Markets. It will raise another $400-million in a private placement with three existing WSP shareholders: Singapore sovereign wealth fund GIC, Canadian pension fund manager Caisse de dépôt et placement du Québec and the Canadian Pension Plan Investment Board.
London Stock Exchange-listed RPS generates about two-thirds of its revenue from environmental work and water services and has longstanding relationships with major water utilities in the U.K. and Ireland, Mr. L’Heureux said. It has also developed a deep expertise in oceanic science, which it uses to support offshore wind energy players, he added.
RPS’s board intends to recommend the deal, WSP said. The Canadian company said it has the backing of directors and other shareholders holding about 18 per cent of RPS stock.
WSP is one of the most active companies in Canadian infrastructure megaprojects – involved in the development of 18 of the 20 biggest projects currently under way, according to trade publication ReNew Canada. This latest takeover would bring its total employee count to 70,000 and boost revenue to $10-billion a year on a pro-forma basis.
The engineering firm’s recent contracts illustrate the kind of work it is now bidding on as it tries to reshape itself as one of the world’s top companies with environmental expertise. In Canada, it won a mandate from pension fund PSP Investments to conduct a detailed climate analysis of more than three million hectares of farmland and timberland in its Global Natural Resources Portfolio.
In the United States, WSP was awarded a contract for engineering, procurement and construction management for the underground storage of the Aces Delta project, the largest green hydrogen production and storage facility ever built. WSP says the facility will help decarbonize the Western U.S. power grid by providing seasonal clean energy storage capabilities.
WSP shares rose 0.8 per cent in Monday trading on the Toronto Stock Exchange, closing at $157.58. The stock is down 16 per cent since hitting an all-time high of $187.94 last November.
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