The Bank of Canada has tamed inflation, Ottawa’s new plans to clamp down on immigration are raising economic alarms, and Tesla’s earnings have driven expectations high for tech giants reporting over the next few days. Today, we cast ahead from this week’s news. But first:
In the news
Destroyed: Trucks and machinery tied to waste-management giant GFL Environmental Inc. were set on fire at three locations before two executives’ houses were shot at in October, police say.
Deleted: Magna International has removed references to Frank Stronach from its website as the company’s founder faces sex-crime charges.
Downgraded: Moody’s has lowered Toronto-Dominion Bank’s long-term credit ratings, questioning the effectiveness of the bank’s governance amid anti-money-laundering failures.
Happening today
- Statistics Canada reports August’s retail sales, an important indicator of consumer spending, and the New Housing Price Index for September.
- In the U.S., markets will be watching durable goods orders and the University of Michigan’s consumer sentiment index, both key indicators of the country’s economic health.
- Vital signs: Earnings include French pharmaceutical giant Sanofi S.A. and HCA Healthcare.
A Tesla Cybertruck is displayed at the Paris Auto Show. More people are angling to buy these things, Elon Musk says.Reuters
In focus
Four things we learned this week
1. Prices are still a problem
The Bank of Canada says its fight against inflation is nearing an end. After cutting its benchmark lending rate by half a percentage point to 3.75 per cent this week, Governor Tiff Macklem said Canadians “can breathe a sigh of relief” after a “long road from the high inflation we experienced coming out of the pandemic.”
If inflation has fallen below the bank’s 2-per-cent target, why does this relief still feel so heavy? For one thing, prices are still higher than they were in the Before Times. (See: Police in Guelph, Ont., said this week they are investigating several “large-scale” butter thefts from grocery stores in recent months.)
Another factor, The Globe’s Jason Kirby reports, is the growing phenomenon of “tip-flation.”
“Powered by the twin forces of guilt and technology,” Kirby writes, higher tips at restaurants became more standardized as restrictions were lifted but traffic was still slow. And the option to add a gratuity is becoming more accepted outside of the service industry: small businesses, fast-food chains, clothing retailers.
Tipping alone isn’t driving inflation, Kirby notes, but given the growing size of gratuities on offer at payment terminals – sometimes upward of 30 per cent! – it’s easy to see how consumers might still be holding their breath at the checkout line.
2. Canada is facing labour pains
Ottawa’s plans to implement a major reduction in the number of permanent residents it allows to settle in Canada have drawn criticism from migrant-rights advocates and the business community.
Polls show support for current immigration levels is falling in general among Canadians. But reducing the number of permanent residents could have implications for staffing Canada’s health services, construction industry and other sectors, The Globe’s Marie Woolf reports.
“High levels of permanent immigration is crucial to offset demographic decline, sustain public services, and support future economic growth,” wrote Lisa Lalande, chief executive of the Century Initiative, an influential non-profit think tank, in a statement.
And the Canadian Chamber of Commerce said businesses are increasingly concerned about the “abrupt” changes to immigration policy “and their potential repercussions on labour supply and economic growth.”
3. Canadian tech companies would rather keep things private
Dye & Durham Ltd. this week became the latest in a series of Canadian tech companies to consider selling after weathering a rough few years in the sector.
The legal software company was among a burst of 20 tech IPOs on the TSX during the pandemic. What looked then like a much-needed win for the sector and for Canada’s economy now looks like a flash in the pan: Nine of those companies have already gone private, or are going through the process now. And at least two others are exploring their options.
- Toronto-based Payfare has launched a strategic review after its stock crashed on news the payment company had lost Door Dash, its biggest client.
- Lightspeed Commerce, a Montreal-based point-of-sale and e-commerce software provider, is also considering an exit from public markets. It went public in 2019.
News of D&D’s exploration is a reminder of how tough the tech market has been since valuations cratered across the sector nearly three years ago. It also underscores how Canada lacks a strong framework for nurturing junior companies through Canadian stock markets – and why those companies are instead looking for foreign investors and buyers.
4. The Magnificent Seven race has a new competitor
Also known also the Mag 7, these are the tech giants with the highest value in terms of market cap on the S&P 500. Membership in the club usually means your brand is recognized worldwide: Among them are Google-owner Alphabet Inc., Microsoft Corporation, Meta Platforms, Inc., which all report next week. And of course Tesla, Inc., which knocked earnings out of the park on Thursday but still left some investors unsatisfied; the robotaxi event earlier this month is evidently hard to shake.
Enter Broadcom Inc, a Paul Alto-based company that makes hardware and software. Unless you work in the hardware and software space, you might not have heard of it. Armed with lucrative chip deals with the likes of Alphabet and Meta, the company is benefiting from a boom in spending on AI hyperscalers — and has pulled ahead of Tesla at several points in recent months:
That upward trajectory has been shared by most AI giants in recent weeks, after investors became allergic to tech stocks over the summer. As the race for the highly coveted position of last place in the Magnificent 7 plays out, this week will serve as a key test of that newfound faith.
The lookout
On our radar and reading list
On the strip: GQ reports on how Las Vegas became the weirdest, wildest, and most futuristic city in America.
In her suit: Hailey Bieber has endorsed Yves Saint Laurent’s boardroom-adjacent vision for fall fashion.
Addressing homelessness: A “tiny-home village” is set to open next week in a Halifax suburb as part of Nova Scotia’s plan to address homelessness.
Morning markets
Global stocks were mixed amid investor caution ahead of Japan’s weekend election, crucial U.S. economic data and corporate earnings next week and the U.S. presidential election. Wall Street futures edged higher, while TSX futures were little changed.
Overseas, the pan-European STOXX 600 was down 0.11 per cent in morning trading. Britain’s FTSE 100 slid 0.25 per cent, Germany’s DAX was little changed and France’s CAC 40 dipped 0.26 per cent.
In Asia, Japan’s Nikkei closed 0.6 per cent lower, while Hong Kong’s Hang Seng rose 0.49 per cent.
The Canadian dollar traded at 72.20 U.S. cents.