Canada facing downdraft from inflation, slowing U.S. economy: IMF’s Daniel Leigh
Canada’s economy has dodged the contraction that economists feared. While it’s nothing to uncork champagne over, gross domestic product was unchanged in May; the median estimate was for a drop of 0.2 per cent in the month. And the flash estimate suggests the economy expanded 0.1 per cent in June. We’ll have insight on the outlook for the economy throughout the day, including perspective on when the pain from all those rate hikes will rattle GDP figures.
BIG TECH SHINES
Just a few days after its primary brick-and-mortar rival was forced to slash its profit forecast for the second time in a few months, Amazon.com Inc. is still reveling in a sales boom. It beat expectations in the second quarter and said it expects sales to rise as much as 17 per cent in the third quarter. While most of the haul is coming from e-commerce, we’re being reminded that AWS is the major growth driver (and profitable). And Apple bucked macroeconomic worries by posting record fiscal third-quarter revenue as iPhone sales climbed to US$40.7 billion. Encouragingly, CEO Tim Cook said supply constraints weren’t as bad as the company had feared. Thanks to those two heavyweights, it’s no surprise to see U.S. futures pointing to a higher open. We’ll point out here the Nasdaq Composite Index and Nasdaq 100 have rallied 14 per cent off their mid-June lows through the close of trading yesterday.
EVEN PREM WATSA’S PORTFOLIO GOT WALLOPED
Watsa’s Fairfax Financing Holdings swung to a loss in the second quarter as market turmoil ravaged the conglomerate’s investment portfolio, resulting in a net investing loss of US$1.5 billion. To be clear: that’s on the back of US$1.8 billion in unrealized paper losses. But still, it’s a sign that even the guru known as Canada’s Warren Buffett got swept up by the turbulence.
The well-documented problems at Canada’s airports have apparently compelled about one-third of Canadian travellers to change their plans, a new survey suggests. The Leger data, which was collected for BNN Bloomberg and RATESDOTCA, shows 35 per cent of respondents have altered their plans; meanwhile, a rising number of Canadians are purchasing travel insurance to protect themselves. We’ve got all the details at BNNBloomberg.ca, and watch for a deeper dive with RATESDOTCA Managing Editor John Shmuel at 4:15 p.m. ET.
OTHER NOTABLE STORIES
- For a second consecutive day, there’s big news about Canada’s liquefied natural gas ambitions. Enbridge is taking a 30 per cent stake in the $5.1-billion Woodfibre LNG — that’s the export facility earmarked for Squamish, British Columbia. Pacific Energy will hang on to the other 70 per cent. The two parties will make pro-rate contributions along the way, they said in a release. Separately, Enbridge reaffirmed its full-year financial forecasts this morning.
- Aecon Group shares tumbled at the start of trading after the Canadian construction swung to a net loss and missed adjusted profit expectations. In a note to clients, Maxim Sytchev from National Bank of Canada Financial Markets said his “risk fears (have) come to fruition” and highlighted that Aecon said there was a negative margin adjustment on an unidentified LRT project. Sytchev said he reckons that’s the Eglinton Crosstown project that midtown Torontonians know all too well about.
- We’ll have eyes on Bausch Health Companies today as regular trading is set to resume after the stock was halved and halted yesterday due to an unfavourable initial patent ruling in the U.S. Bausch said late in the afternoon it will appeal if the final court order matches the oral ruling.
- Transat is tapping the Large Employer Emergency Financing Facility again. The airline announced this morning it has secured an additional $100 million via the emergency program that was set up during the pandemic. Transat also said it secured some covenant relief from its lenders. Transat first availed itself of the LEEFF program in April 2021.
- Magna International swung to a loss in the second quarter, in part due to impairment charges and paper losses on some of its equity investments. It also missed expectations on an adjusted basis. On the upside, the auto parts maker raised its sales forecast range for the year.
- Imperial Oil said its full-year production forecast for the Kearl oil sands project has been adjusted to 245,000 barrels per day. At its investor day in March, Imperial was anticipating up to 270,000 bpd this year from Kearl; however, setbacks piled up amid extreme cold in the first quarter and turnaround in the second quarter. As for second-quarter financials: cash flows more than tripled to almost $2.7 billion.
- Sleep Country Canada didn’t succumb to the misery afflicting so many retailers lately. The mattress seller’s second-quarter revenue jumped 18 per cent, and its adjusted per-share profit soared almost 44 per cent. We’ve got its chief executive booked for an interview at 1p.m. ET.
- TMX Group’s breadth of business, which extends way beyond the stock market trading and listings operations it’s best known for, really paid off in the latest quarter. Revenue was essentially flat in capital formation as well as equities and fixed income trading. Meanwhile, revenue from derivatives trading and clearing surged 89 per cent. Overall adjusted earnings per share beat expectations in the quarter at $1.88 versus $1.74.
- Denison Mining confirmed this morning that it made a confidential proposal to buy UEX, and that it has been deemed superior to the existing takeover arrangement that the Saskatchewan-focused uranium explorer has with Uranium Energy Corp.
- Intel took a hatchet to its full-year revenue and profit forecasts after it fell way short of expectations in the second quarter as revenue sank 22 per cent. CEO Pat Gelsinger didn't bother trying to spin position: "The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues," he said in the press release.
- We’ll watch TFI International shares today after the Montreal-based trucking and logistics firm trounced profit expectations as second-quarter revenue jumped about 32 per cent. It also announced plans to expands its share buyback program.
- Enerplus is making good on its early plan to divest itself from Canada, announcing the sale of certain assets in Alberta to Journey Energy for $140 million in cash and stock. Enerplus added that it’s still “advancing opportunities” to sell the rest of its assets in Alberta and Saskatchewan.
- Canfor announced it’s planning to spend US$210 million to build a sawmill in Alabama. It also reported second-quarter adjusted profit that beat expectations despite a sharp downturn in North American lumber prices as inflation and higher rates chewed into demand.
- Notable data: Canadian GDP (May), U.S. personal income, spending and PCE core deflator
- Notable earnings: Enbridge, Imperial Oil, Magna International, Aecon, George Weston, Exxon Mobil, Chevron, Procter & Gamble, Colgate Palmolive
- 830: Fairfax Financial quarterly conference call