The Daily Chase: Canadians’ confidence shaken; Lockdowns disrupt China’s economy
CANADIANS CONFIDENCE STARTS
The perception that Canadians have of the economy and of their own situation is deteriorating. The latest Canadian Bloomberg Nanos Confidence Index fell to 54.3 last week (from 56.2), putting it at the lowest level since December 2020, when COVID-19 had a firm grip on the economy. We know that most of the roads to the Canadian economy go through housing; On that front, the survey shows that 54.45% of respondents expect prices to continue rising, up from 58.94% the previous week. A few other nuggets this morning: housing starts rose more than expected last month; and the decline in existing home sales was not as deep as expected, with activity down 12.6% in April (according to the Canadian Real Estate Association), the median estimate was d a drop of 23%.
LOCKDOWNS RAVAGE CHINA’S ECONOMY
It’s shaping up to be a messy start to the week after Friday’s relief rally. The overnight data dump from the world’s second largest economy has caused much disappointment and is not helping market sentiment. Industrial production, capital investment and retail sales in China all slowed (or fell) even more than economists had expected last month. The impact of the country’s bid to contain COVID was most evident in consumer spending, as retail sales slumped 11.1% year-on-year in April, nearly double the median estimate. The scale of the recession will inevitably raise questions about the response of policy makers to support the economy.
PREPARING FOR BANK INCOME
Insights from Bay Street analysts are piling up. Today, Gabriel Dechaine of the National Bank of Canada Financial Markets gives us an introduction. Unlike John Aiken at Barclays, Dechaine isn’t exactly calling for a dividend “windfall”. He predicts that only half of Canada’s eight largest banks will increase their quarterly payouts when they release their results. Dechaine also takes a cautious view of the group’s shares (saying there are trading opportunities “but that’s all for now”) and predicts Canada’s housing downturn will be most acute for banks’ mortgage portfolios. in the second half of this year.
INFLATION PUT BIG CORPORATIONS IN THE MIDDLE
And Jeff Bezos has none of that. “Increasing corporate taxes is a good thing to discuss. It is essential to discuss the control of inflation. Putting them together is just a misdirection,” the Amazon.com founder said. tweeted late Friday night in response to US President Joe Biden to suggest prices can be reduced if “the wealthiest companies pay their fair share”. A similar view that taxes can help solve inflation has recently been Express by NDP Leader Jagmeet Singh. There is room for conversation about whether politicians should err on the side of caution that higher/tougher corporate taxes are the solution to soaring consumer prices.
OTHER NOTABLE STORIES
- McDonald’s throws in the towel on Russia. Long after the rush of businesses fleeing the country amid the invasion of Ukraine, McDonald’s announced this morning that it would leave Russia and began a process of selling the business to a local buyer. He warned that he expects a charge of up to US$1.4 billion following the exit.
- Spirit Airlines shares rise in premarket trading after JetBlue Airways announced it was accepting a $30 per share tender offer directly to investors in the low-cost airline, while urging them to vote against Spirit’s cash and stock friendly settlement with Frontier Airlines. JetBlue added today that it could raise its offer to the original US$33 if Spirit engages in “good faith” negotiations. Spirit has so far balked at JetBlue’s approach, fearing it will pass regulatory review.
NEWS RELEASES / NOTABLE EVENTS
- Notable data: Housing starts, manufacturing sales, wholesale trade and existing home sales in Canada; Retail sales, industrial production and capital investment in China
- 11:10 a.m.: Minister of Environment and Climate Change, Steven Guilbeault, holds a press conference on the next steps of the National Adaptation Strategy
- 1:00 p.m.: Alberta Premier Jason Kenney hosts a media roundtable on his trip to Washington, DC (US 13F filing deadline for large institutional investors)