First Look With Surveillance: Banks Report, Biden Defends
It's inflation day in Canada, when we've been reminded that the cost of living is rising at an astonishing rate. Statistics Canada’s consumer price index rose 4.8 per cent year-over-year in December. That matched the median estimate, marked a modest acceleration from November, and pushed the headline number to the highest level since Nirvana’s Nevermind was released in September of 1991. The data confirm what we experience every day; the big question will be what it means for the timing of liftoff at the Bank of Canada. On that note, market data show there’s a 77 per cent chance of a rate hike next week. And Scotiabank’s economics team is out with a call today for the central bank’s benchmark rate to hit two per cent by the end of this year, which would be a sharp tightening from the current level of 0.25 per cent.
Futures are pointing to a muted open in New York after yesterday’s instalment in the ongoing tech rout dragged the Nasdaq down another 2.6 per cent and weighed on TSX-listed names including Shopify and Lightspeed. In the bond market, yields are continuing to march higher as investors prepare for rate hikes from central banks. The 10-year U.S. treasury yield broke through 1.9 per cent this morning, and the yield on 10-year Government of Canada bonds isn’t far behind. The most interesting move might be in Germany, where after years of investors essentially paying the government to take their money, the yield on 10-year bonds broke into positive territory for the first time since 2019.
‘PALPABLE’ RELIEF COMING FOR CANADIAN BANKS
That’s the call this morning by veteran analyst John Aiken at Barclays, who raised his price targets on the Big Five as the payoff from central bank rate hikes looms. He also upgraded Bank of Montreal to overweight as he looks ahead to the benefit of buying Bank of the West. We’ll pivot here to point out another batch of U.S. bank earnings this morning. Bank of America reported a 28 per cent surge in fourth quarter profit as revenue growth outpaced expenses. Looks like its bread and butter retail banking business benefitted handsomely from higher net interest income while fees from investment banking climbed to an all-time high.
LOTS OF HOUSING TALK, WHAT ABOUT SOLUTIONS?
The Ontario government is hosting a housing affordability summit today, where the problems are unmistakable. Like the dearth of supply (to wit: 3,232 homes were up for sale in the Greater Toronto Area at the end of December), and prices that are way beyond the reach of so many would-be homebuyers. When will all the talk give way to actual solutions? We’re expecting to catch up with the province’s housing minister this afternoon.
OTHER NOTABLE STORIES
- Parkland Corp. is branching out, announcing late yesterday it’s paying $322 million to acquire M&M Food Market. We’ll learn more about the strategy in loading up on pork loins and pot roasts when Parkland CEO Bob Espey joins us shortly after 10 a.m.
- We’re watching shares of Hexo today after the pot producer, whose shares have been crushed over the last year, announced details about a restructuring that will see it sell non-core assets and slash selling, general and administrative expenses 30 per cent by the end of its 2023 fiscal year.
- Linamar announced Chief Executive Officer Linda Hasenfratz will succeed her recently deceased father, Frank Hasenfratz, as the company’s executive chair. It also cautioned that supply chain and labour problems “have further deteriorated” and caused a “material” hit to revenue and margins.
- Blackstone announced after yesterday's closing bell that it's buying a 35 per cent stake in Phoenix Tower International from Manulife Investment Management. According to the release, PTI operates 14,000 cell towers in 18 countries. I've lost track of how many investment professionals on BNN Bloomberg have touted American cell tower operators as attractive investment opportunities.
- Enbridge announced some management changes this morning triggered by the upcoming retirement of Bill Yardley, the company’s president of gas transmission and midstream. He’ll be succeeded by Cynthia Hansen, who is currently president of gas distribution and storage.
- Notable data: Canadian CPI, wholesale trade, and Teranet/National Bank home price index; U.S. building permits and housing starts
- Notable earnings: Bank of America, Morgan Stanley, Charles Schwab, Procter & Gamble, Alcoa, United Airlines
- 800: Ontario Housing Affordability Summit (Premier Doug Ford delivers remarks at 1145; closing remarks by Housing Minister Steve Clark at 1230)
- 900: Parliamentary Budget Officer releases report “Economic and Fiscal Update 2021: Issues for Parliamentarians”
- 1030: Deputy Premier and Minister of Health Christine Elliott will be joined by Chief Medical Officer of Health Dr. Kieran Moore to provide an update on the COVID-19 situation.
- 1130: Prime Minister Justin Trudeau holds news conference on COVID-19 situation alongside Health Minister Jean-Yves Duclos.
- 1300: Tourism Minister Randy Boissonnault and Minister Responsible for Prairies Economic Development Daniel Vandal announce support for Alberta's clean technology industry. Cenovus CEO Alex Pourbaix participates in announcement.
- 1600: U.S. President Joe Biden holds news conference at the White House