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Yields Rise, Stocks Mixed After China Rate Puzzles: Markets Wrap

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(Bloomberg) — European stocks climbed in muted trade on Monday as gains in energy companies outweighed concerns over mixed policy signals from China.

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TotalEnergies SE, Shell Plc and BP Plc were among the biggest contributors to Europe’s Stoxx 600 equity benchmark as crude oil rose for a third day and gas prices jumped amid threats of supply disruptions from a potential strike in Australia. Trading volumes were about a third lower than usual. US futures contracts were steady.

A gauge of Asian stocks dropped for the seventh day in the longest losing streak since June 2022. The Hang Seng Index declined as much as 2% and shares in mainland China fell 1.4%.

Confusion over China’s approach to stemming the nation’s property slump strained sentiment. Chinese lenders cut the one-year loan prime rate by 10 basis points and kept the five-year prime loan rates unchanged even after policymakers called for more lending. Traders had expected a 15-basis-point cut on both rates.

Yields climbed across tenors, bringing the 10-year’s back on its path toward the highest level since November 2007 and the 30-year’s near 2011 highs, as a selloff in the Treasury market this month wiped out what was left of year-to-date gains. Wary investors are facing entrenched inflation and the prospect of more policy tightening ahead of the annual Jackson Hole, Wyoming, gathering of central bankers later this week.

Federal Reserve Chairman Jerome Powell is expected to strike “a more balanced tone in Wyoming, hinting at the tightening cycle’s end while underscoring the need to hold rates higher for longer,” according to Anna Wong at Bloomberg Economics.

The mood in equity markets has soured since the start of the month, when traders were pricing in a rosy outlook of peak rates in sight and a resilient US economy pointing to a soft landing. The recent surge in bond yields, combined with still-hawkish rhetoric from central bankers and a deteriorating outlook in China have challenged the optimistic view.

Investors who chased the rally earlier this year are now bulking up on hedges in preparation for risks confronting the market. The put/call ratio spiked to highest since March last week, while volatility has jumped to the most elevated level since May in the US and in Europe.

A gauge of dollar strength traded little changed, following small losses Thursday and Friday that trimmed its five weeks of gains. Meanwhile, the offshore yuan fell against the greenback. The People’s Bank of China had earlier set the daily reference rate for the yuan at a level stronger than the average estimate in a Bloomberg survey.

European natural gas prices soared as workers serving a key export project in Australia prepare for a strike if no deal is reached in pay talks on Wednesday. Benchmark Dutch front-month gas soared as much as 18% on Monday morning as the possibility of supply disruptions in Australia, which may affect 10% of global liquefied natural gas exports keeps European traders on edge.

Oil rose for a third day as signs the physical market is tightening and a stall in the dollar’s rally offset growing demand risks in China and the US.

Key events this week:

  • US existing home sales, Tuesday
  • Chicago Fed’s Austan Goolsbee speaks, Tuesday
  • Eurozone S&P Global Services & Manufacturing PMI, consumer confidence, Wednesday
  • UK S&P Global / CIPS UK Manufacturing PMI, Wednesday
  • US new home sales, S&P Global Manufacturing PM, Wednesday
  • US initial jobless claims, durable goods, Thursday
  • Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
  • Japan Tokyo CPI, Friday
  • US University of Michigan consumer sentiment, Friday
  • Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.3% as of 8:25 a.m. London time
  • S&P 500 futures were little changed
  • Nasdaq 100 futures rose 0.1%
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index fell 0.4%
  • The MSCI Emerging Markets Index fell 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.1% to $1.0886
  • The Japanese yen was little changed at 145.38 per dollar
  • The offshore yuan fell 0.2% to 7.3194 per dollar
  • The British pound was little changed at $1.2741

Cryptocurrencies

  • Bitcoin fell 0.8% to $26,031
  • Ether fell 1.1% to $1,671.35

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.28%
  • Germany’s 10-year yield was little changed at 2.63%
  • Britain’s 10-year yield was little changed at 4.68%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller, Qizi Sun and Ameya Karve.

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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.

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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.

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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.

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