Mar 22, 2023
The Daily Chase: Awaiting U.S. Fed rate decision; Quebec cuts income taxes
First Look With Surveillance: Fed Decision, UBS Bond Buyback, Nike Profit Lag
Investors are sitting on the sidelines as we await the latest rate decision out of the U.S. Federal Reserve. Equity market futures are essentially flat to start the day ahead of the latest policy decision from Jay Powell & Co., where it’s widely expected the world’s most influential central bank will increase its benchmark rate by a further quarter point. It’s a delicate balancing act for Powell, even moreso than it was just a couple weeks ago before higher rates helped spark a crisis of confidence in the banking sector with SVB’s collapse – making sure the bank is still on its path to quash inflation without causing further instability in the banking sector has to be top of mind in the deliberations this week.
A BIT MORE INSIGHT FROM THE BANK OF CANADA
Speaking of central banks, we’re poised to get a bit more insight into the Bank of Canada’s decision to pause on rate increases when the bank releases its summary of deliberations today at 1:30 p.m. EDT. Based on the first summary of deliberations (this is a relatively new initiative the bank has undertaken for transparency’s sake), it won’t be the most detailed document, but it should offer some clues as to how the BoC viewed its decision to potentially diverge from the Fed in this rate-hiking cycle. Now, the Bank of Canada has said it’s comfortable forging its own path and is fine with some degree of divergence, but there are inflationary implications, given the potential for a weaker Canadian dollar relative to the greenback and the volume of goods we import from south of the border.
ACTIVIST TARGETS PARKLAND CORP.
Looks like gas station operator Parkland Corp. has an activist campaign on its hands. U.S. hedge fund Engine Capital is calling on the company to launch a review of strategic alternatives, including a potential sale of its refining and fuel distribution business in order to become a pure-play gas station and convenience store operator. Barring a sale of those assets, Engine Capital is advocating for them to be spun out into a new publicly-traded entity, and says that outside of those options, Parkland should explore selling itself to a private equity entity. Engine says it currently owns approximately two per cent of Parkland’s outstanding shares.
QUEBEC TRIMS TAXES, BRACES FOR ECONOMIC UNCERTAINTY
Quebec is looking to get ahead of the curve with some darkening economic clouds forming on the horizon. The province is cutting income taxes on the lowest two tax brackets by one per cent, a move that will reduce provincial revenue by about $9.2 billion over the next five years. The province plans to offset that shortfall by making smaller payments to its Generations Fund, which was put in place to meet Quebec’s long-term debt load. As for the budgetary balance itself, we’re looking at a $4-billion shortfall this coming fiscal year, with a view to balance in fiscal 2027-28.
OTHER NOTABLE STORIES
- Shares of GameStop are soaring in the premarket – up as much as 54 per cent – after the company posted its first profit in two years in its latest quarter.
- Bit of a mixed view out of Nike with its latest quarter – a beat on the top and bottom lines, but clearing its inventory glut has come at the cost of margins, which missed expectations.
- A new report from RBC Economics says that without a significant increase of purpose-built rental stock, the shortage of rentals in Canada could quadruple by 2026
- Notable earnings: AGF Management, Winnebago Industries, KB Home, ECN Capital
- 1330: Bank of Canada Summary of Deliberations for the Mar. 8 policy decision
- 1400: FOMC Announcement and Summary of Economic Projections
- 1430: Fed Chair Powell’s Press Briefing
- Saskatchewan Budget