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What Wall Street had to say about the U.S. Fed’s rate hike

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Wall Street widely expected the Federal Reserve to raise interest rates by 25 basis points, which is exactly what happened. But equity investors debated conflicting messages: the policy guidance shifted from “ongoing” rate increases to “some additional” policy firming, though Chair Jerome Powell said that the Fed’s hands aren’t tied.

Stocks gained in the immediate aftermath and then sank. Treasuries and the dollar fell. Investors pouring over the Fed’s Summary of Economic Projections didn’t get much help there, since the Fed’s expectations for unemployment and inflation were little changed.

While Chair Powell said in his news conference that the policymakers had weighed a pause in rate hikes ahead of their meeting, the Fed remained focused on the risks of high inflation even as it watched developments in the banking system. “If we need to raise rates higher, we will,” he said.

“This is about as hawkish as the Fed can be given the banking sector stresses that are ongoing,” said Win Thin, global head of currency strategy at BBH. “To me, the statement is similar to what the ECB said. That is, once we get past the banking sector stresses, the tightening cycle likely remains intact.”

Here’s what others on Wall Street had to say:

Sonia Meskin, head of US macro at BNY Mellon:

“This is slightly hawkish, yes, though the market so far appears to give it a dovish read, which possibly makes sense given that Powell’s most recent pronouncement before the blackout period opened the door to a 50 bps hike and a more material tightening that the March SEP actually reflects.”

Joe Gilbert, portfolio manager at Integrity Asset Management: 

“Powell is trying to have it both ways. He is trying to appease both the hawks and the doves. This ultimately may be the last rate hike this year but Powell has to make the market believe that it isn’t because that would loosen financial conditions too much. The softening to come in the economy from the banking collapses has yet to be felt and the Fed knows this but they can not be alarmists.”

Seema Shah, chief global strategist at Principal Asset Management:

“The past roller coaster month has seen Powell go from dovish, to hawkish, and presumably back to dovish, with market expectations following this volatile ride. Policymakers will be desperately hopeful that inflation plays ball and the deceleration trend reasserts itself soon, validating today’s decision. If not, April and May could be potentially even more exhausting months.”

Matthew Hornbach, global head of macro strategy at Morgan Stanley, on Bloomberg TV:

“What strikes me is how they have balanced financial stability concerns against concerns about sticky inflation. The way they have done it is they have told us they are going to hike less but cut later. That seems like a pretty rational decision. I think the market should feel comfortable. The bond market is going to have a very difficult time taking out these rate cuts that are priced in through the balance of this year.”

Scott Ladner, chief investment officer at Horizon Investments: 

“For as much consternation as there was about how the dots might change and the probable hike, this is a pretty on-the-screws event. They hiked the predicted 25bps, didn’t really change anything meaningful in the dots or SEP, and just lightly acknowledged that the banking stresses over the past two weeks may impact credit creation and therefor economic growth.”

Oscar Munoz, US Macro strategist at TD Securities:

“The SEP growth and UE rate projections were kept basically the same. That’s despite having a UE rate at 3.6 per cent now and Q1 growth running fairly strong in Q1. This means that they’re clearly expecting significant slowing before the end of the year and into 2024.”

Omair Sharif, founder of Inflation Insights:

“You’d only need two people to move up from 5.125 per cent for a half-hike and three to move up to get another full 25 bps. That doesn’t seem like a high bar given that we’ve got a long way to year-end and if the banking stress resolves soon enough, they may revert back to focusing more closely on inflation.”

“Add in the fact that the statement indicated that ‘some additional policy firming may be appropriate’ and I don’t think you want to bank on the fact that 5.1 per cent will be the terminal rate.”

Vincent Reinhart, chief economist at Dreyfus and Mellon: 

“The basic question is should you deflect the path of policy from design purely for maximum employment and stable prices because of a concern about stability risks. Right now, I think Chair Powell isn’t accepting that as an argument, and really is adopting what I’ve always called the ‘separation principle,’ which is if you do banking supervision, regulation and crisis management, you have a freehanded monetary policy.”

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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