Jan 25, 2023
The Daily Chase: Bank of Canada to release interest rate decision; Rogers-Shaw appeal dismissed
First Look With Surveillance: ASML Beats, Amazon Strike
It's decision day for Tiff Macklem and the Bank of Canada, with the central bank widely expected to increase its benchmark interest rate for the eighth straight meeting, albeit by a more typical quarter of one per cent. That would bring the key rate to 4.5 per cent – a rather dramatic rise from the pandemic era emergency low of 0.25 per cent just a year ago – though the big question becomes whether Macklem & Co. hit the pause button after this rate increase as signs emerge of price pressures beginning to ease. Communication will be key – striking a tone that sets a pause in stone could lead to speculation of easing financial conditions later in the year, which would be counterproductive to the central bank's rate hiking campaign, so I would expect “data-dependent” to be a buzzword of the day (in particular at the press conference at 11 a.m. EST.)
ROGERS-SHAW CLEARS ANOTHER HURDLE AS COURT DISMISSES APPEAL
Competition Commissioner Matthew Boswell is throwing in the towel in his legal fight against Rogers Communications' planned $20-billion takeover of Shaw Communications after an appeals court quashed his latest attempt to block the deal. The Competition Commissioner says he will not take the battle to a higher judicial body after the latest ruling, which clears yet another hurdle for the consummation of the largest telecom takeover in Canadian history. Now, we're not past the finish line just yet – the deal still needs the approval of Industry Minister Francois-Philippe Champagne, who took to Twitter to say that he will make a decision “in due course”. Also worth noting that there's a House of Commons committee public hearing into the deal later today – while the committee said the deal should not proceed back in March, its recommendations are non-binding.
CN RAIL WARNS WEAKER ECONOMY WILL WEIGH ON GROWTH
One of corporate Canada's economic bellwethers is warning that softer economic conditions will weigh on growth in the year ahead. CN Rail is expecting earnings per share growth to come in at a low-single digit range in fiscal 2023 due to those macroeconomic conditions, though it's worth noting the company did report results that topped analyst estimates in the fourth quarter. To get into those Q4 results briefly – revenues were up 21 per cent as the company got a boost from higher freight rates. Not for nothing, CN also boosted its quarterly dividend eight per cent to $0.79 per share and plans to buy back as much as $4-billion worth of its own shares.
RITCHIE BROS. DISSIDENTS STILL AGAINST IAA DEAL
Dissident investor Luxor Capital Group is digging in its heels in opposition to Ritchie Bros. planned US$7.3 billion takeover of rival IAA, in spite of the amended terms of the deal. In a statement, Luxor said its concerns were not assuaged by Ritchie Bros. plan to increase the cash portion of the deal (with the support of a $500 million investment from Starboard Value), saying the reduction in share capital being deployed in the deal is outweighed by the “extravagant terms offered to Starboard” as part of the transaction. Luxor, which owns 3.6 per cent of the outstanding shares of Ritchie Bros., has argued the deal for IAA could wipe out billions of dollars' worth of shareholder capital.
OTHER NOTABLE STORIES
- International trade minister Mary Ng says she's disappointed the U.S. is pressing ahead with “unjustified” duties on Canadian lumber after the U.S. Department of Commerce outlined higher preliminary duty rates for the likes of West Fraser and Canfor.
- Shares of Microsoft are lower in the premarket – down about three per cent – after the company warned revenue in its cloud-computing division will slow in coming months.
- Panamanian Minister of Commerce Federico Alfaro Boyd says the Central American country is prepared to face arbitration with First Quantum Minerals in the tax dispute over the miner's Cobre Panama mine.
- Notable earnings: Abbott Laboratories, Boeing, AT&T, Kimberly-Clark Corp., AGF Management, Celestica, CSX Corp., Tesla, Freeport-McMoRan
- 0920 Prime Minister Justin Trudeau to deliver remarks at Federal Cabinet retreat in Hamilton
- 1000: Bank of Canada Policy Announcement
- 1000: Bank of Canada Monetary Policy Report
- 1100: Bank of Canada Press Conference to discuss Monetary Policy Report
- The House of Common's industry and technology committee will re-examine Rogers Communications proposed takeover of Shaw Communications