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Equities
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.
Commodities
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.
Currencies
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.
Economic news
(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.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
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