Markets have a dreary look to them this morning. That’s no surprise, considering just a few reasons for cautiousness: 1) The Bank of England today expanded the scope of its bond-buying program, citing market “dysfunction” and the “prospect of self-reinforcing ‘fire sale dynamics.’” 2) Earnings season is about to get started in the United States, with JPMorgan Chase & Co. and several other major banks bookending the week. 3) Two pieces of U.S. inflation data loom, with the producer price index on Wednesday and the consumer price index on Thursday. 4) Russia escalated its war on Ukraine after what President Vladimir Putin described as a terrorist attack on the bridge connecting his country to Crimea. Group of Seven leaders are holding a virtual meeting this morning to discuss the escalation.
All that said, U.S. futures pared earlier losses as of 8 a.m. EDT and the 10-year U.S. treasury yield pulled back to 3.9 per cent after topping four per cent. David Rosenberg shared his world view with us at 9 a.m. EDT, just as the International Monetary Fund (IMF) shaved its global growth estimate for next year, cut its expectations for Canada this year and next, and slashed its 2022 U.S. GDP estimate to 1.6 per cent from 2.3. “In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the IMF stated while citing the usual suspects of Russia-Ukraine, China’s slowdown, and inflationary pressures are to blame.
MARKET INTELLIGENCE
An analyst at Scotiabank has cut his price targets on almost every transportation and aerospace stock in his coverage universe as he weighs the risk of a recession. Kumutha will report on the details, and why the analyst is sticking with Air Canada as his top pick. Separately, an analyst at Piper Sandler upgraded Lululemon to overweight and hiked her price target to US$350 from US$320 thanks in part to its “stable promotional intensity.”
ABOUT THE PAIN FROM RATE HIKES…
Bank of Canada Governor Tiff Macklem hasn’t been quite as declarative about the prospect for pain as U.S. Fed Chair Jerome Powell has been in his recent remarks. Others, however, aren’t mincing words. John Pasalis, the president of Realosophy Realty and one of our go-to voices on housing, stated in a tweet last night he thinks “the over leveraged are in for serious pain.” Meanwhile, Steve Saretsky – one of our frequent guests on the Vancouver housing market – recirculated some video purporting to show B.C. homeowners protesting interest rate hikes.
HOCKEY CANADA CLEANS HOUSE
The governing organization finally bowed to relentless pressure from politicians, the public, and its sponsors over the handling of years-old sexual assault allegations against male athletes. In a brief statement, Hockey Canada announced Chief Executive Scott Smith has departed and its entire board of directors stepped down. We’ll see how sponsors respond.
OTHER NOTABLE STORIES
- WSP Global balked at getting into a bidding war for RPS Global. That's the environmental consulting firm WSP agreed to buy in August, only to see it lured away by another suitor. And so, WSP announced this morning it won't revise its offer.
- Westshore Terminals announced the end of a three-week strike yesterday after it reached a tentative labour agreement with union representatives. The company said its annual volume throughput will be as much as 3.5 million tonnes less than previously anticipated due to the strike as well as “less than expected performance” by Burlington Northern Santa Fe.
- Cineplex said it generated $23 million in box office revenue last month, representing 52 per cent of 2019 pre-pandemic levels for the month.
- Conifex Timber announced a two-week curtailment at its Mackenzie, B.C., sawmill because of lower lumber prices as well as what it implied to be punitive provincial policies.
- Of note form yesterday: Bloomberg News reported Exxon Mobil is considering acquiring Denbury, an oil and gas producer with prized CO2 infrastructure.
NOTABLE RELEASES/EVENTS
- 800: G7 leaders hold virtual meeting
- 900: International Monetary Fund releases World Economic Outlook
- 1030: IMF releases Global Financial Stability Report
- 1300: Mark Zuckerberg delivers keynote at Meta Connect developer conference
- 1515: Prime Minister Justin Trudeau makes announcement and holds avail after visiting Rio Tinto facility in Sorel-Tracy, Que.
- 1600: Alberta Premier-designate Danielle Smith holds media avail in Edmonton after cabinet meeting
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