Mar 28, 2023
The Daily Chase: Awaiting Federal Budget; Markets point to muted open
Federal budget should have direct, but selective response to U.S. IRA: C. D. Howe’s Glen Hodgson
We’re turning our attention to Parliament Hill today as Finance Minister Chrystia Freeland prepares to table the Federal budget. Freeland has been banging the drum on the need for fiscal responsibility this time around, after a series of deep deficits meant to bridge the gaping financial hole wrought by the pandemic. It’s a delicate balancing act. We’re expecting the usual talk of fiscal anchors, including a declining debt-to-GDP ratio, but there are outside pressures. Namely, our Bloomberg partners are reporting Freeland plans to expand investment subsidies to the energy sector, in particular to encourage carbon capture, and we’re looking for further health care spending and support for lower-income Canadians stung by the current hot inflationary environment. We’ll have the minute-by-minute action starting at 3:30 p.m. EST (12:30 p.m. PT) with Jon Erlichman on our Budget 2023 special.
CRESCENT POINT MAKES $1.7B SPLASH IN THE MONTNEY
Crescent Point Energy is back on the acquisition trail, announcing plans to snap up Spartan Delta’s assets in the Albertan Montney play for $1.7 billion in cash. The company says that as a result of the deal, adjusted funds flow and excess free cash flow per share should increase by about 20 per cent, and will add approximately 38,000 barrels of oil equivalent per day to production. As for Spartan Delta, its refocusing on the Deep Basin field, and will deliver the bulk of the cash from the deal straight to shareholders through a $9.50 per share special dividend. It’s also forming a new spin-co called Logan Energy, in which each shareholder will receive one share per Spartan share held.
MARKETS MUTED AS BANKING FEARS EASE
It’s looking like there’s some calm returning to the markets, with futures south of the border little changed ahead of the opening bells. Those fears of bank contagion are on the back-burner for the moment, with the likes of First Republic extending some of yesterday’s gains, albeit at a far more muted pace. Now it seems like we’re looking ahead to some more Fed speak for direction – you’ve got Boston Fed President Susan Collins and Richmond Fed head Thomas Barkin speaking Thursday, which should give a degree of insight as to how the central bank is viewing risks to the economy and what that ultimately means for the rate path going forward.
LUNDIN BUYS MAJORITY STAKE IN CHILEAN MINE
Lundin Mining is doubling down on South America, agreeing to pay US$950-million to beef up its presence in Chile. The company is buying a 51 per cent stake in the company that operates the Caserones mine in Chile from Japan’s JX Nippon, comprised of US$800 million upfront and a further US$150 million over the six years following the transaction’s completion. The deal also includes an option for Lundin to buy an additional 19 per cent stake in the mine for US$350 million, so long as that option is exercised within five years of the deal’s completion. Lundin says the Caserones deal will boost its copper output by about 50 per cent from 2022 levels, and it’s not Lundin’s first foray into Chile – Caserones is about 160 kilometres from Lundin’s Candelaria mine in the country.
SOME (MODEST) RELIEF FOR COTTAGE-COUNTRY BUYERS
The pandemic-fuelled boom in recreational home prices is expected to ease this year, according to a new report from Royal LePage. The real estate firm says it expects recreational home prices to fall 4.5 per cent this year as economic uncertainty and a lack of available housing stock weigh on the market. The steepest declines are expected in Ontario and Quebec – down five and eight per cent, respectively, while Alberta’s recreational market is seen as the only place where prices are set to rise this year. Now, all that being said, affordability is still far from where it was before Canadians stuck at home due to COVID restrictions began eyeing cottage country – even with those declines, Royal LePage says the national aggregate price would remain 32 per cent above 2020 levels.
OTHER NOTABLE STORIES
- Alibaba is planning to split its US$220-billion business into six separate units, each of which may explore fundraising options including potential IPOs down the line.
- Disney has begun the first wave of its planned 7,000 job cuts, with the Wall Street Journal reporting the metaverse division unit was among the first to go, eliminating all 50 positions in the division.
- Lyft has named David Risher as its new CEO, replacing co-founder Logan Green.
- Notable data: Federal Budget, U.S. Advance Economic Indicators Report, S&P CoreLogic CaseShiller Home Price Index, U.S. Conference Board Consumer Confidence Index
- Notable earnings: Micron Technology, Lululemon Athletica, Walgreens Boots Alliance, Dave & Buster’s Entertainment