Today’s top headlines
Impact Assessment Act ruling could reset policy landscape in favour of energy development: CAPP
The head of an oil and gas lobby group says last week’s ruling by the Supreme Court of Canada against large portions of the federal government’s impact assessment law could reset the policy landscape in this country in favour of energy development.
Canadian Association of Petroleum Producers chief executive Lisa Baiton said in a panel discussion in Calgary today that Canada’s oil and gas industry has been subjected to layer upon layer of federal regulation in recent years.
She said federal policies such as the promised emissions cap for the oil and gas sector and the proposed clean electricity regulations have scared away investment and harmed the industry.
Baiton said the federal impact assessment law, formerly known as Bill C-69, contributed to what she called a “pancake-ing” of regulation on industry.
But last Friday, the Supreme Court ruled that legislation, which lays out the process for federal assessment of the environmental impacts of major projects, is largely unconstitutional.
Baiton said while the oil and gas industry is watching closely to see how the federal government responds to the Supreme Court ruling, she believes the decision marks the start of a “significant shift” in energy sector regulation in Canada.
The Canadian Press
Market close: TSX down 242 points, U.S. markets also fall
Canada’s main stock index lost more than one per cent amid broad-based losses led by industrials, utilities and base metals, while U.S. markets also fell.
The S&P/TSX composite index closed down 242.10 points at 19,450.70.
In New York, the Dow Jones industrial average was down 332.57 points at 33,665.08. The S&P 500 index was down 58.60 points at 4,314.60, while the Nasdaq composite was down 219.44 points at 13,314.30.
The Canadian dollar traded for 73.07 cents U.S. compared with 73.28 cents U.S. on Tuesday.
The December crude contract was up 18 cents U.S. at US$85.44 per barrel and the November natural gas contract was down three cents at US$3.08 per mmBTU.
The December gold contract was up US$1.40 at US$1,935.70 an ounce and the December copper contract was down less than a penny at US$3.58 a pound.
The Canadian Press
Air Miles partners with Expedia for hotel and vacation rentals
Loyalty program operator Air Miles has announced an exclusive partnership for hotels and vacation rentals with Expedia Group Inc. as part of its of newly launched travel booking platform.
The U.S.-based travel company says the partnership will allow Air Miles customers to access its 700,000 hotels and vacation rentals worldwide.
The deal is part of a number of improvements to Air Miles since being bought by Bank of Montreal earlier this year.
When it acquired Air Miles, BMO said it would look to expand the program with new ways to earn and redeem miles.
Alfonso Paredes, senior vice-president of private label solutions at Expedia, says the travel company has already seen strong booking interest during its soft launch.
Air Miles has nearly 10 million active collector accounts in Canada.
The Canadian Press
Air Canada stock hits one-year low amid higher fuel costs, interest rates
Air Canada’s share price hit a one-year low as the airline navigates higher fuel costs, competition and interest rates.
The company’s stock slipped nearly three percentage points to $17.29 by midday, marking its lowest price since mid-October last year and a one-third drop from its recent peak in July — part of a pattern seen across the North American airline sector.
On Monday, Raymond James analyst Savanthi Syth lowered her earnings forecast for the Montreal-based company due to the run-up in jet fuel prices over the past three months.
She noted steeper competition with Porter Airlines Inc., Flair Airlines Ltd. and Lynx Air on domestic, cross-border and sun destination routes, but pointed to Air Canada’s loyalty program and fuel-efficient planes as an advantage.
ATB Capital Markets analyst Chris Murray said worries also persist over consumers’ willingness to keep spending on travel amid higher interest rates and inflation.
Nonetheless, he says Air Canada looks well-placed in the medium term after the airline roared back to profitability in the spring and early summer, when revenues hit a second-quarter record that topped $5.4 billion.
The Canadian Press
Trudeau vows to defend stability of CPP, criticizes Smith for Alberta pension exit debate
Prime Minister Justin Trudeau says the Liberal government would fight any actions that threaten the stability of the Canada Pension Plan.
Alberta Premier Danielle Smith’s United Conservative government has launched a provincial debate on quitting the CPP and creating an Alberta-only pension plan.
Smith says Albertans are paying in more than they’re getting out the federal plan and a report the province commissioned says Alberta is entitled to more than half the assets of the $575-billion fund.
Trudeau’s comments in a letter to Smith come a day after the Canada Pension Plan’s board asserted Alberta’s messaging and public opinion survey on leaving the CPP are biased, unfair and manipulative.
Trudeau also takes Smith to task for introducing the idea of quitting the CPP at a time of great stress, including geopolitical events and existential threats such as climate change.
Trudeau says leaders have a duty to help Canadians deal with problems and not, in his words, “introduce even more uncertainty and instability.”
The Canadian Press
Read more: What the Canada Pension Plan might look like without Alberta
Ex-Bank of Canada governor Poloz among finalists for National Business Book Award
The former governor of the Bank of Canada and several top Bay Street names are among the three finalists for the National Business Book Award 2023.
Stephen Poloz, who served as a governor of the central bank from 2013 to 2020, has been nominated for a book called “The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future,” which talks about how the Bank of Canada works and why it does what it does.
A compilation of first-person essays on leadership during the pandemic also garnered a position among the finalists.
The book, “Unprecedented — Canada’s Top CEOs on Leadership During COVID-19,” was edited by Globe and Mail columnist Andrew Willis and Greenhill Canada investment banker Steve Mayer.
A memoir by Wes Hall, who is the founder of BlackNorth Initiative, is also among the top three contenders for the prize.
The winner of the annual literary award, which is scheduled to be announced on Nov. 8, will receive a $30,000 prize for Canadian business-related writing.
The Canadian Press
Midday markets: TSX down 150 points, U.S. stock markets also lower
Canada’s main stock index was down 150 points in late-morning trading as losses in the base metal stocks helped lead the way lower, while U.S. stock markets also fell.
The S&P/TSX composite index was down 150.94 points at 19,541.86.
In New York, the Dow Jones industrial average was down 165.61 points at 33,832.04. The S&P 500 index was down 29.96 points at 4,343.24, while the Nasdaq composite was down 110.70 points at 13,423.05.
The Canadian dollar traded for 73.03 cents U.S. compared with 73.28 cents U.S.
The December crude contract was up US$1.74 at US$87.18 per barrel and the November natural gas contract was up five cents at US$3.13 per mmBTU.
The December gold contract was up US$24.00 at US$1,959.70 an ounce and the December copper contract was up less than a penny at US$3.58 a pound.
The Canadian Press
Crane count signals Toronto bucking construction slowdown
Toronto is one of just two North American cities to report an increase in fixed cranes on building sites since January, a signal that it is bucking the construction slowdown.
Boston claimed top position by adding 11 cranes during that time, according to construction consulting firm Rider Levett Bucknall’s RLB Crane Index.
Toronto added only two cranes, gaining seven in residential construction but losing them in other sectors.
RLB’s biannual crane index monitors the count of operational tower cranes in 14 prominent North American cities. Crane use was down 10 per cent in the third quarter, with a decline of 20 per cent in some cities.
Toronto, however, has seen a significant amount of new construction. Over the past six months, more than 50 new projects have used cranes, including 41 residential, seven commercial and three institutional ventures.
Shantaé Campbell, Financial Post
RBC cuts price targets on Big Three telecoms
RBC Capital Markets has trimmed its price targets on Canada’s Big Three telecom companies in the wake of their relative underperformance to the broader S&P/TSX composite index so far this year.
RBC analyst Drew McReynolds said higher bond yields had sapped some of the demand for rate-sensitive names such as the telecoms, prompting the decrease in his view of returns over the next 12 months.
“We attribute the underperformance mainly to the increase in the (Government of Canada) 10-year (yield) with elevated concerns around competition, regulation and the economy contributing to the more challenged backdrop in 2023,” he said in a note to clients on Oct. 18.
Telecoms typically underperform the market during a rising rate environment due to their capital-intensive nature since the higher underlying cost of borrowing flows through to their businesses, which rely on constant investment in network upgrades. The S&P/TSX telecom index is down about 10 per cent year to date, while the overall composite is up about three per cent.
The Government of Canada’s benchmark 10-year bond yield now stands at about 4.08 per cent, up nearly 24 per cent year to date.
McReynolds lowered his price target on BCE Inc. to $59 from $63, Telus Corp. to $29 from $31 and Rogers Communications Inc. to $69 from $72. While lower, those figures still represent between 13 and 31 per cent upside for the stocks over the next 12 months.
Despite the lower price targets, McReynolds said he remains constructive on the sector, describing the current environment as an attractive entry point for investors.
Ian Vandaelle, Financial Post
Pace of home construction picks up in Canada
Builders are breaking ground on new homes in Canada at a “very strong pace” despite the challenges of higher interest rates and construction costs.
Canada Mortgage and Housing Corp. said the annual pace of housing starts in September rose eight per cent compared with August.
That leaves starts running more than 20 per cent above pre-pandemic levels on a trend basis, said Toronto-Dominion Bank economist Rishi Sondhi.
For the third quarter, housing starts increased four per cent, which Sondhi says will help support gross domestic product growth through residential investment.
The annual pace of urban housing starts rose nine per cent in September with multi-unit urban starts gaining 10 per cent.
Opening Bell: stocks slump in early trade
Markets are dipping into the red in early trading as worries about the war in the Middle East drag on sentiment. The S&P 500 was 0.5 per cent lower after the bell. The Dow fell 69 points, and the Nasdaq composite was down 0.7 per cent. The TSX was down 74 points.
Scotiabank cutting 3% of global workforce
Bank of Nova Scotia will cut three per cent of its employees and take a writedown on its investment in a Chinese bank, leading to a $590-million hit to earnings in the fourth quarter.
The reductions amount to about 2,700 jobs, based on the Canadian bank’s total staff of 91,013 employees as of July 31. Scotiabank said today the impact on its common equity tier 1 ratio will be about 10 basis points.
The restructuring charges also include the cost of exiting real estate and other contracts. The impact on earnings equals about 49 cents per share in the quarter ending Oct. 31.
New chief executive Scott Thomson has promised to unveil an updated strategy soon, and the bank has scheduled an investor day for Dec. 13.
Included in today’s announcement are impairment charges of $280 million, after taxes, related to the bank’s investment in Bank of Xi’an Co. Ltd., “whose market value has remained below the bank’s carrying value for a prolonged period,” as well as impairment of intangible assets including software.
“The move is consistent with our expectations for more restructurings at Canadian banks in an effort to speed cost cuts and achieve operating leverage,” Bloomberg Intelligence analyst Paul Gulberg said in a note.
Christine Dobby, Bloomberg
A&W Revenue Royalties Income Fund profit rises
A&W Revenue Royalties Income Fund says it earned $10.6 million in net income in its third quarter up from $9.6 million a year earlier.
The fast food income fund says the increase for the quarter ended Sept. 10 came as royalty income rose to $13.7 million compared with $13.2 million in the same quarter last year.
The fund, which earns royalties on the gross sales of restaurants in a royalty pool, says gross sales reported by A&W restaurants in the pool totalled $456.8 million, up from $440.0 million a year earlier.
The number of restaurants in the pool rose to 1,037 compared with 1,015 in the same quarter last year.
Meanwhile, the royalty pool same-store sales growth was 1.1 per cent for the quarter.
The fund’s payout ratio for the quarter was 81.3 per cent compared with 80.3 per cent for the same quarter in 2022.
The Canadian Press
Gold prices surge as Middle East conflict worsens
Gold jumped to a four-week high today as the intensifying conflict in the Middle East bolstered haven demand, with hopes for a diplomatic resolution deteriorating after a deadly explosion in Gaza.
United States President Joe Biden’s visit to Israel and Jordan scheduled for today began to unravel even before he left the ground, after the explosion at a Gaza hospital left hundreds dead and Arab leaders pulled out of a meeting planned for the trip.
Even before the explosion, officials in the U.S. and the region were increasingly worried that they wouldn’t be able to keep the conflict from spreading should Israel go ahead with a ground invasion. Biden has already sent two aircraft carriers to the region and put troops on alert to send a message of deterrence to Iran and its ally Hezbollah, whose thousands of missiles could pose a severe threat to Israel.
Iran’s foreign minister called for a full and immediate boycott of Israel by Muslim countries, and an oil embargo against the country, following the hospital explosion. Shortly after arriving in Tel Aviv, Biden suggested Israel was not responsible for the blast.
The threat of escalation continues to provide support for bullion, which has gained about 6 per cent since Hamas’s surprise attack on Israel earlier this month.
Spot gold climbed 1.1 per cent to US$1,943.57 an ounce as of 11:14 a.m. in London.
Stock markets before the opening bell
Oil prices are up and U.S. futures down this morning after an explosion at a Gaza hospital complicated diplomatic efforts to rein in conflict in the Middle East. Gold prices rose as investors snapped up haven assets.
West Texas Intermediate jumped US$1.66 to US$88.32 per barrel.
Tuesday’s top 3 performers on the TSX
The S&P/TSX composite index went its own way on Oct. 17, closing higher after September inflation numbers showed the consumer price index is decelerating.
South of the border, however, stock markets slipped after retail sales came in higher than expected, raising fears the United States Federal Reserve would need to keep interest rates high to cool the economy and inflation.
Economists in Canada now generally believe the Bank of Canada will not hike rates again this year.
The composite index closed up 0.37 per cent at 19,692.8 as most of the major sectors posted gains: materials rose the most — 1.89 per cent — followed by information technology, up 0.88 per cent, consumer staples at 0.48 per cent, energy at 0.17 per cent and financials at 0.12 per cent.
There were 144 gainers and 81 losers on the day.
Here are the top three performers on the index for Oct. 17:
Bausch Health Cos. Inc.
One-day change: 5.37 per cent
Year-to-date change: 24.7 per cent
Laval, Que.-based Bausch’s shares have risen and fallen this year as its fight against Norwich Pharmaceuticals Inc.’s introduction of a generic version of Xifaxan, which treats irritable bowel syndrome, winds its way through the courts.
Bausch’s Salix Pharmaceuticals Inc. unit was in a District of Columbia court last week arguing for a 30-month delay on the sale of Norwich’s generic drug.
Analysts currently have one buy, five holds and one sell on the stock, and an average 12-month price target of $13.10, according to Bloomberg.
Bausch Health closed at $10.60.
First Majestic Silver Corp.
One-day change: 5.3 per cent
Year-to-date change: -31.29 per cent
Shares of First Majestic appear to be riding a wave that started Oct. 13 when the price of gold rose above US$1,900 on worries about the Israel-Hamas war.
The Vancouver-based miner, which produces silver and gold at facilities in Mexico and Nevada, just came off its year-to-date low in late September.
But it still lags peers such as Endeavour Silver Corp., New Gold Inc. and Wheaton Precious Metals on the year. For example, Wheaton Precious Metals and New Gold are up approximately 11 per cent and 12 per cent, respectively.
Analysts currently have two buys, four holds and no sells on First Majestic, and an average 12-month price target of $11.48, according to Bloomberg.
First Majestic closed at $7.75.
Wesdome Gold Mines Ltd.
One-day change: 4.61 per cent
Year-to-date change: 3.07 per cent
Shares of Toronto-based Wesdome, which has underground gold mines in various stages of development in Canada, have risen well past their lows earlier this year after the company missed production guidance.
The stock peaked in May after reaffirming its full-year production forecast. But on Oct. 16, National Bank of Canada noted that Wesdome’s third-quarter production of 27,800 ounces of gold missed the bank’s estimate. Despite the miss, Wesdome said it was on track to meet the mid-point of its 2023 production target.
National Bank has an outperform rating and a price target of $11 on Wesdome’s stock.
Analysts currently have four buys, six holds and no sells on the stock, and an average 12-month price target of $9.71, according to Bloomberg.
Wesdome closed Oct. 17 at $7.71.
Gigi Suhanic, Financial Post
What economists say about the latest inflation numbers
Ottawa forcing banks to use OBSI to resolve complaints
What to watch today
Goldy Hyder, president and CEO of the Business Council of Canada, and Annette Verschuren, chair and CEO of NRStor Inc., will speak at the Canadian Club in Toronto on economic growth
Some heavyweights weigh in with earnings today, including Procter & Gamble, Morgan Stanley, Netflix, Tesla, and Kinder Morgan.
Investors will also get a reading on eurozone inflation and a look at the U.S. economy when the Federal Reserve issues the Beige Book economic survey.
Need a refresher on yesterday’s top headlines? Get caught up here.
Additional reporting by The Canadian Press, Associated Press and Bloomberg