Today’s top headlines
Market close: Bond yields fall on signs Federal Reserve is in ‘sweet spot’
The rally that’s driving global bonds to their best month since 2008 gained further traction, with Treasuries climbing on bets the United States Federal Reserve will start cutting interest rates in the first half of 2024.
Hopes for a Fed pivot intensified after economic data emboldened the so-called Goldilocks scenario. Two-year yields dropped 10 basis points to 4.64 per cent. Fed swaps priced in a quarter-point rate cut by May.
The S&P 500 wavered near “overbought” levels. Nvidia Corp. joined gains in chipmakers, Tesla Inc. whipsawed in the run-up to its Cybertruck event and Microsoft Corp. fell. Oil climbed ahead of a high-stakes OPEC+ meeting.
Gross domestic product rose at the fastest pace in nearly two years, while consumer spending advanced at a less-robust rate. The Fed’s preferred inflation metric — the personal consumption expenditures price index — was revised lower. U.S. economic activity slowed in recent weeks as consumers pulled back on discretionary spending, the Fed said in its “Beige Book.”
Bonds extended their November rally on speculation the Fed is done with its aggressive hiking cycle. A Bloomberg gauge of global sovereign and corporate debt has returned about five per cent this month, heading for its best performance since the depths of the recession in December 2008 — when the Fed cut rates to as low as zero and pledged to boost lending to the financial sector following the collapse of Lehman Brothers Holdings Inc.
In New York, the Dow Jones industrial average was up 13.44 points at 35,430.42. The S&P 500 index was down 4.31 points at 4,550.58, while the Nasdaq composite was down 23.27 points at 14,258.49.
The S&P/TSX composite index closed up 79.43 points at 20,116.20.
Labour shortages cost small businesses $38 billion in lost sales in 2022: CFIB
Small businesses lost more than $38 billion in revenue opportunities last year because of labour shortages, according to estimates from the Canadian Federation of Independent Business.
CFIB economist Laure-Anne Bomal says staffing shortages led to some employers working more hours, reducing their hours of operation and refusing services or contracts.
Bomal says while the number doesn’t indicate the Canadian economy lost billions of dollars, it is still a significant amount of revenue that small businesses could have benefitted from.
The report says small businesses in the construction sector saw the biggest loss in potential business opportunities, estimated to top $9.6 billion last year, followed by the retail sector losing out on an estimated $3.8 billion and social services with a $3.3 billion loss.
Regionally, small businesses in Ontario posted the highest potential revenue opportunity losses in 2022, estimated at $16 billion, followed by Quebec and Alberta.
CFIB offered solutions in its report including work-integrated learning in high school for youth, labour mobility of core workers aged 24-64 and tax credits for career extensions among other policy suggestions.
The Canadian Press
Google to pay $100 million a year to Canadian news publishers in deal with Ottawa
Alphabet Inc.’s Google is set to contribute $100 million a year to Canadian news publishers, in a deal that has the Liberal government bending to the tech giant’s demands after it threatened to remove news from its platform.
Canadian Heritage Minister Pascale St-Onge announced today that the federal government has reached a deal with Google that will benefit the news sector.
Ottawa has agreed to set a $100-million yearly cap on payments the company will be required to make to media companies when the Online News Act takes effect at the end of the year.
The law will compel tech giants to enter into agreements with news publishers to pay them for the news content that appears on their sites, if that content contributes to revenues.
The amount announced today is what Google said it expected to pay, and the figure is 41 per cent lower than the amount that would’ve been required under a formula in the government’s draft regulations.
The deal also allows Google to pay into a single collective bargaining group that will serve as a media fund.
The Canadian Press
Bank of Canada survey participants largely oppose creating a digital loonie
The Bank of Canada’s public consultations on the creation of a digital Canadian dollar reveal most respondents are opposed to it.
The central bank released its findings today, which show that more than 80 per cent of respondents strongly oppose the Bank of Canada researching and building the capability to issue a digital dollar.
The vast majority of respondents also say they do not trust the Bank of Canada to issue a secure digital currency.
Among the top concerns of respondents was privacy, with the questionnaire revealing low levels of trust in institutions to protect their personal data.
The Bank of Canada notes the findings do not necessarily reflect the views of the overall public because participants self-selected to respond to the questionnaire.
While the public consultations aimed to gauge interest in a digital currency, the central bank says the decision to create a digital dollar is for Parliament to make. Find out more.
The Canadian Press
Ottawa to select Boeing military plane in sole-source deal, bypassing Bombardier: sources
The federal government is expected to announce as early as Thursday that it has selected Boeing Co. to replace the military’s aging patrol planes in a multibillion-dollar deal, according to three sources familiar with the matter.
The decision to go with a sole-source contract would close the door on Quebec-based business jet maker Bombardier Inc., which has been pushing for an open bid.
The sources, who were not authorized to speak publicly on the matter, say that last week cabinet green-lit the purchase of 16 P-8A Poseidon surveillance aircraft to replace the half-century-old CP-140 Auroras.
They say the Treasury Board held a special meeting last night and approved the contract, which a U.S. agency has listed at $US5.9 billion.
The procurement department has stated that Boeing’s off-the-shelf reconnaissance plane is the only one available that meets Royal Canadian Air Force requirements, particularly around submarine-hunting technology.
Bombardier has argued that its alternative — currently a prototype — would offer a cheaper and more high-tech aircraft that’s made in Canada.
The Canadian Press
Midday markets: Treasury yields slide on Federal Reserve bets as stocks wobble
The rally that’s driving global bonds to their best month since 2008 gained further traction, with Treasuries climbing on bets the United States Federal Reserve will be able to start cutting rates in the first half of 2024.
Hopes for a Fed pivot intensified after economic data emboldened the so-called Goldilocks scenario. Two-year yields dropped seven basis points to 4.67 per cent. Fed swaps priced in a quarter-point rate cut by May.
The S&P 500 wavered after an advance that drove the gauge toward one of its biggest November rallies on record. Megacaps were mixed, with Nvidia Corp. leading gains in chipmakers and Microsoft Corp. sliding. Oil rose ahead of a high-stakes OPEC+ meeting.
Multiple block trades supported a steepening of the U.S. curve, with yields on short-dated Treasuries falling more than those on longer securities. Such trades are set to benefit as the U.S. moves closer to rate cuts.
In New York, the Dow Jones industrial average was up 9.20 points at 35,426.18. The S&P 500 index was up 3.07 points at 4,557.96, while the Nasdaq composite was up 3.97 points at 14,285.73.
In Toronto, The S&P/TSX composite index was up 40.36 points at 20,077.13.
Alberta oil executives head to COP28 climate summit
Executives and senior leaders from Canada’s oil and gas sector are heading to Dubai for the upcoming United Nations COP28 climate talks.
The Pathways Alliance consortium of oilsands companies and the Canadian Association of Petroleum Producers are among the groups who will be at the climate summit representing this country’s fossil fuel industry.
The Pathways Alliance says it is going to the summit because it recognizes the oilsands is a significant emitter of greenhouse gases.
The group says it wants to tell the world it is committed to being part of the solution. It says it’s eager to talk about some of its emissions reduction plans, including a proposal to spend $16.5 billion to build a massive carbon capture and storage network in northern Alberta.
Janetta McKenzie of clean energy think-tank the Pembina Institute says there’s a growing recognition by the oil and gas sector that it must do more to combat emissions if it wishes to remain competitive in the future.
But she says observers of COP28 need to be on the lookout for greenwashing, as many oil and gas companies have so far made a lot of climate promises but have yet to invest the tens of billions of dollars it will take to see those promises through.
The Canadian Press
Ottawa reaches deal with Google over controversial Online News Act
The federal Liberal government has reached a deal with Google over the Online News Act, following threats from the digital giant that it would remove news from its search platform in Canada.
A government official confirmed that news to The Canadian Press under condition of anonymity, because they were not authorized to speak publicly about the deal.
CBC News is reporting, citing an unnamed source, that the agreement would see Canadian news continue to be shared on Google’s platforms in return for the company making annual payments to news companies in the range of $100 million.
A formula in the government’s draft regulations for the bill would have seen Google contributing up to $172 million to news organizations — but Google had said it was expecting a figure closer to $100 million based on a previous estimate.
The legislation, which comes into effect at the end of the year, requires tech giants to enter into agreements with news publishers to pay them for news content that appears on their sites, if it helps the tech giants generate money.
Google had warned that it would block news from its search engine in Canada over the legislation, as Meta Platforms Inc. has already done on Instagram and Facebook.
The Canadian Press
AbCellera, company that helped develop COVID-19 treatment, to lay off 10 per cent of workforce
The Vancouver-based company that helped develop the first antibody therapy treatment for COVID-19 has announced layoffs amounting to 10 per cent of its workforce.
AbCellera Biologics Inc., announced the cuts in a filing to the United States Securities and Exchange Commission.
The filing says the layoffs and reorganization will help it “focus its efforts toward the clinical development of new antibody medicines for patients.”
In May, AbCellera announced a $701-million infrastructure project to boost the overall scope of its Vancouver manufacturing plant.
The company said the plan, backed by more than $375 million in federal and British Columbia funding, also included clinical trials.
AbCellera’s statement to the SEC says it estimates it will incur approximately US$2.5 million in cash expense related to the layoffs but, with more than US$1 billion in available liquidity, it says it has sufficient capital to “execute on its strategy” beyond the next three years.
The Canadian Press
Markets open: Stocks rise as ‘Goldilocks narrative continues’
Stocks extended one of their biggest November rallies on record amid bets the Unites States Federal Reserve will pull off a soft landing as the economy remains fairly strong and inflation shows signs of cooling.
All major groups in the S&P 500 advanced, with the gauge approaching 4,600 and heading toward its highest since July.
Gross domestic product rose at an upwardly revised 5.2 per cent annualized pace in the third quarter, the fastest in nearly two years. Consumer spending advanced at a less-robust 3.6 per cent rate. The Fed’s preferred inflation metric — the personal consumption expenditures price index — was revised down to a 2.8 per cent annual rate in the third quarter. Excluding food and energy, the gauge was also marked lower to 2.3 per cent.
To John Leiper at Titan Asset Management, the data highlighted the strength of the economy. Meantime, the drop in the core PCE price index will be interpreted by Fed officials as a sign their strategy remains on track and they may well achieve a soft landing scenario. “The Goldilocks narrative continues for now,” he said.
On Wall Street, the S&P 500 was up 0.39 per cent at 4,572.64. The Dow Jones Industrial Average was up 0.06 per cent at 35,435.12 while the Nasdaq composite was up 0.37. per cent at 14,334.60.
In Toronto, the S&P/TSX composite index was up 0.21 per cent at 20,078.35. Read more.
U.S. economy grows at fastest rate in two years
Shrugging off higher interest rates, America’s consumers spent enough to help drive the economy to a brisk 5.2 per cent annual pace from July through September, the government reported Wednesday in an upgrade from its previous estimate.
The government had previously estimated that the economy grew at a 4.9 per cent annual rate last quarter.
Wednesday’s second estimate of growth for the July-September quarter confirmed that the economy sharply accelerated from its 2.1 per cent rate from April through June. It showed that the U.S. gross domestic product — the total output of goods and services — grew at its fastest quarterly rate in nearly two years.
The Associated Press
Enbridge to boost dividend
Enbridge Inc. is raising its dividend as it expects its business to continue to grow next year.
The company also reaffirmed its full year guidance for 2023 for earnings before interest, income taxes and depreciation and distributable cash flow.
Enbridge says it will pay a quarterly dividend of 91.5 cents per share, effective with the dividend payable on March 1, 2024, up from 88.75 cents per share.
The increased payment to shareholders will come as the company expects 2024 adjusted EBITDA on its base business to total $16.6 billion to $17.2 billion. Distributable cash flow per share is expected between $5.40 and $5.80.
Enbridge says the ranges for 2024 represents growth of four per cent for its base business EBITDA and three per cent for its distributable cash flow compared with the midpoint of its 2023 guidance.
The guidance does not include the impact of the U.S. gas utility acquisitions announced in September that are expected to close during 2024.
The Canadian Press
OECD warns world headed for deepening slowdown
The world’s advanced economies are heading into a deepening slowdown as markedly higher interest rates take a hefty toll on activity that could still become more acute, the OECD warned.
Growth is losing momentum in many countries and won’t edge up until 2025, when real incomes recover from the inflation shock and central banks will have begun cutting borrowing costs, the Paris-based organization said.
It forecasts global gross domestic product to expand only 2.7 per cent next year after an already weak 2.9 per cent in 2023. The pace will only pick up to 3 per cent in 2025, according to the assessment.
Moreover, the OECD said the risks to the forecast are tilted downwards amid heightened geopolitical tensions, an uncertain outlook for trade, and the risk that tight monetary policy could hurt firms, consumer spending and employment more than expected.
It expects interest rate cuts in the United States will only begin in the second half of 2024, and not until the spring of 2025 in the euro area. That contrasts starkly with the expectations of markets, which are currently pricing the Federal Reserve and the European Central Bank will ease policy as soon as the first half of next year.
Stock markets before the opening bell
Stocks are rising this morning on expectations that the Federal Reserve is done with policy tightening and may start cutting interest rates next year.
The optimism comes after Fed Governor Christopher Waller suggested the central bank is well positioned to push inflation to a 2 per cent target. Billionaire investor Bill Ackman also said Tuesday he’s betting Fed cuts could come as soon as the first quarter — earlier than market pricing is suggesting.
Oil climbed for a second day as traders awaited a high-stakes OPEC+ meeting on supply. Gold extended gains to its highest level since May, also buoyed by hopes of a Fed policy shift.
What to watch today
Ottawa will hold a briefing on Canada’s priorities and objectives for the United Nations Climate Change Conference, taking place in Dubai, United Arab Emirates, from Nov. 30 to Dec. 12.
In data out today, the United States gets a reading on gross domestic product and the release of the Federal Reserve beige book.
In Canada it’s the current account balance.
Panama says it will shut down First Quantum mine
Cybertruck is already a production nightmare for Tesla
Need a refresher on yesterday’s top headlines? Get caught up here.
Additional reporting by The Canadian Press, Associated Press and Bloomberg