First Look With Surveillance: China Eases, Banks Brace
Tiff Macklem will be taking centre stage when he delivers the Bank of Canada’s final rate decision of 2022 at 10 a.m. EST. Markets are basically unanimously expecting the central bank to hike for the seventh time this year, but the question boils down to exactly how large of an increase we’re looking at. If you peek at the average economist expectations, odds are narrowly tilted toward a half percentage point hike. The swaps market (somewhat) disagrees, pricing in something of a coin flip, but with odds biased ever so slightly to a more modest quarter point. Uncertainty aside, either outcome would bring the Bank of Canada’s benchmark rate to four per cent or higher, levels not seen since the early months of 2008. We’ll keep you up to date throughout the morning – our own Kumutha Ramanathan is on the ground in Ottawa for the decision, and we’ve lined up a sterling guest lineup featuring BMO’s Earl Davis, former finance minister John Manley and CIBC currency strategist Bipan Rai to break down the implications for the domestic economy during the 10 a.m. hour.
DOLLARAMA HIKES FORECAST AS SALES SURGE
Speaking of inflation and how it’s playing out for the Canadian consumer, you won’t find many better barometers than discount chain Dollarama. Sales at stores open at least a year surged 10.8 per cent in the third quarter, easily topping expectations. The company says an increase in demand for consumables – food and the like – rather than more discretionary items was a big contributor to the increase. Average transaction size was relatively flat – up 0.4 per cent – but the actual number of transactions was up 10.3 per cent in the quarter, indicating an increase in foot traffic at its stores. All those factors are expected to continue, leading Dollarama to increase its full-year 2023 same-store sales growth projection to a range of 9.5-10.5 per cent, up from its prior view of 6.5-7.5 per cent growth.
MOSAIC CURTAILS OUTPUT AT SASKATCHEWAN MINE
Mosaic is temporarily curtailing potash production at its Colonsay mine in Saskatchewan as demand slumps. Mosaic says that given slower-than-expected demand through the back half of the year, the company has enough inventory on hand to meet the market’s needs. Colonsay is an interesting project – it’s been operating at 1.3 million tonnes of output this year, and there are plans to increase that to two million by the end of 2023, but the project was just restarted in 2021 after being idled for two years due to, you guessed it, weak market conditions. Worth keeping an eye on whether there’s some reaction in shares of rival Nutrien today – already we’re seeing some weakness in the European-traded fertilizer names on this news, with K+S down about three per cent.
EQUITY MARKETS EXTEND SLIDE
It’s not looking like equity market investors are going to get much relief when the opening bells ring at 9:30 a.m. EST. U.S. futures are pointing to a broadly negative open – most notably the Nasdaq, down some 0.7 per cent at last check – as weak Chinese trade data is compounding concerns over the state of the global economic recovery. Beijing reported early this morning that exports and imports both contracted at a sharper pace than expected in November, an ominous sign for the world’s second-largest economy. Back to the markets for a moment – the S&P 500 has closed in the red each the last four sessions, and is plumbing its lowest level in a month.
OTHER NOTABLE STORIES
- The Caisse de dépôt et placement du Québec is investing a further $150 million into construction firm Pomerleau, doubling down on the initial $50 million stake in took in the company back in 2018.
- Tamarack Valley Energy is planning to ramp up spending in 2023, announcing a capital budget of as much as $475 million, a significant increase from 2022’s range of $250-$275 million.
- Notable data: Bank of Canada Policy Announcement, U.S. Productivity, U.S. Consumer Credit
- Notable earnings: Descartes Systems Group, Dollarama, Gamestop, Campbell Soup