First Look With Surveillance: Japan Growth, Sunak Seeks
We're continuing to track the reverberations from the Bank of Canada's decision to hop off the sidelines with yesterday's quarter-point interest rate increase. There's a lot at play here, but the main point that comes to mind is, what does this signal in terms of a true endpoint for rates this cycle? Not that the world usually cares much about Canadian rates, but it was the second somewhat surprising hike of the week, after the Reserve Bank of Australia led the way (admittedly, two economies that are relatively similar in composition – heavy reliance on housing and natural resources, be it oil here, or iron ore down under.) As for what happens next, well, we'll be looking for any clues when BoC Deputy Governor Paul Beaudry delivers remarks later today at about 3:15 pm EDT. For what it's worth, the swaps market is now pricing in another hike by the end of the summer.
WILDFIRES CONTINUE TO RAGE
There's little relief in sight as Canada's worst wildfire season on record continues. More than 400 fires are burning across the country, with the blazes in Ontario and Quebec posing a major problem for the financial capital of the world, as New York City remains under a thick blanket of smoke. That's prompted yet another shutdown of flights to LaGuardia, and the likes of Google have instructed employees to work from home rather than to brave the hazardous conditions. As for the Canadian business impact, it remains mostly isolated to shutdowns at a handful of mining facilities in close proximity to the fires.
TRANSAT BOOSTS FORECAST AS TRAVEL DEMAND RETURNS
Doesn't appear Canadians are letting up on scratching that itch to travel any time soon, if leisure carrier Transat is any indication. Adjusted operating income in the company's fiscal second quarter came in nearly 40 per cent higher than the same period of 2019, and Transat figures that based on the booking trends it's seeing, that sort of robust demand should continue. That high volume of demand is jacking up prices – there are only so many seats – prompting the firm to raise its target for adjusted operating income margins to a range of 5.5 to seven per cent, up from the prior four to six per cent range.
AIMIA PLANS POISON PILL DEFENCE AGAINST MITHAQ
Far from the largest companies at play here, but this Bay Street brawl is intensifying. Aimia's adopting a shareholder rights plan (better known as a poison pill) in order to protect against what it calls “creeping” bids in the face of activist Mithaq, which Aimia says is trying to acquire effective control of the company through incremental share purchases (Mithaq now owns ~31 per cent of shares outstanding). The whole affair is fascinating – Aimia's become one of the more perplexing publicly-traded Canadian companies since it was squeezed into selling Aeroplan to Air Canada back in 2018, becoming a holding company of some eclectic assets. So far, it's bought an Indian marine netting company and an Italian specialty chemical maker, prompting Mithaq to declare it has lost confidence in the board most recently saying the company had a “stubborn commitment to a misaligned investment strategy.
OTHER NOTABLE STORIES
- Sales at Roots slipped in the fiscal first quarter, down about four per cent to $41.5 million as weakness in demand for those fleece sweatpants offset higher demand for activewear. (Worth noting Q1 is the seasonally weak quarter for Roots, accounting for only 15 per cent of sales.)
- Shares of GameStop are plunging in the premarket – down about 19 per cent – after the company fired CEO Matt Furlong and said activist Ryan Cohen will step into the Executive Chair role.
- Notable data: U.S. Initial Jobless Claims, U.S. Wholesale Trade
- Notable earnings: Neighbourly Pharmacy, Vail Resorts, Saputo
- 1520: Bank of Canada Deputy Governor Paul Beaudry delivers the Economic Progress Report in Victoria, BC (Remarks will be published on the Bank's website at 15:10 ET)