Briefing highlights
- What to expect in GDP numbers
- Barrick launches Newmont bid
- Stocks, loonie, oil at a glance
- What to watch for this week
- GE sells biopharma business
- From today’s Globe and Mail
Winter of our discontent
Statistics Canada's quarterly look at GDP this week will show an economic chill and help explain why the central bank is in a "deep freeze."
Economists expect Friday's report to show gross domestic product expanded in the fourth quarter at an annual pace of between just 0.8 and 1.2 per cent.
That would be frostier than the third quarter’s 2 per cent. And the current quarter isn’t expected to be that much better.
Remember, the economy contracted mildly in November, and Friday's measure is forecast to show no growth, and possibly even another modest pullback, in December alone.
“By most indications it was a rough end to the year for Canada’s economy,” said CIBC World Markets senior economist Royce Mendes.
Consumer spending, housing, cuts in oil patch production and sluggish trade are all believed to have taken a toll.
“After a very strong run in the prior year, domestic spending cooled broadly late last year, with both of the big wheels of consumer spending and housing braking hard,” said Bank of Montreal chief economist Douglas Porter.
“The long-awaited transition of the economy to depending more on exports and investment is happening, but unfortunately the baton has been passed to a much slower runner (and comes at a time when global growth is fading),” he added in a lookahead to this week’s report.
"Government spending is also expected to add modestly to growth in Q4 and in 2019, although restraint at the provincial level (especially in Ontario) will partially offset increases at the federal level."
Mr. Porter's calculations would put economic growth at a "mild" 2 per cent in 2018, a percentage point softer than in 2017.
While Bank of Canada governor Stephen Poloz signalled last week that he’s still looking at further interest rate increases down the road, observers don’t expect to see that anytime soon, not until the second half the year, at any rate.
Bank of Canada governor Stephen PolozChris Wattie/Reuters
Statistics Canada also is expected Wednesday to report that annual inflation cooled in January to below 1.5 per cent from December's 2 per cent.
Add that to the GDP reading, Mr. Porter said, and you've got Bank of Canada policy "in the deep freeze for an extended period ... just like most of Canada."
Read more
- Barrie McKenna: Bank of Canada’s path back to neutral interest rates ‘highly uncertain,’ Poloz says
- ‘It wouldn’t take too much to tip the economy over’: 13 (or more) signs of woe
- Consumers are bummed, businesses are bummed, David Rosenberg is bummed
- David Parkinson: How much is the economy really slowing?
- Delinquencies on Canadian lines of credit tell an intriguing tale
- More Canadians are going bust, and it could get worse
- Canada’s economy contracts in November, hit by postal strike, factory weakness
- David Parkinson: Jerome Powell takes a page from Stephen Poloz’s playbook
- David Parkinson: Bank of Canada’s gloomy outlook suggests the days of the consumer-driven economy are gone
- David Parkinson: Weak exports lead to Canada’s widest trade deficit in six months
Barrick launches Newmont bid
Barrick Gold Corp. came out with guns blazing today, launching an all-stock takeover bid for Newmont Mining Corp. and slamming its target’s deal with Goldcorp.
“The combination of Barrick and Newmont will create what is clearly the world’s best gold company, with the largest portfolio of Tier One gold assets and the highest level of free cash flow to drive future growth and support sustainable shareholder returns, run by a management team with an unparalleled record of delivering value,” Barrick chief executive officer Mark Bristow said in a statement, adding his proposed marriage “is expected to unlock more than US$7-billion net present value (pre-tax) or real synergies.”
Barrick is offering 2.5694 a share for each Newmont share, which it said would give Newmont stockholders about 44 per cent of a combined company, The Globe and Mail’s Niall McGee reports.
Most important in a proposed marriage, Mr. Bristow said, would be the ability “to consider our Nevada assets as one complex, which will result in better mine planning and fully realize the state’s enormous geological potential for all stakeholders.”
Barrick also said its unsolicited bid is a “significantly superior alternative” to Newmont’s proposed takeover of Goldcorp.
“The market reaction to date to your Goldcorp transaction suggests that investors do not endorse your rationale for the transaction and have concerns about the condition of Goldcorp’s asset base,” Mr. Bristow and Barrick executive chairman John Thornton said in a letter to the Newmont board.
“On the day of announcement, your market capitalization dropped by more than the estimated present value of the synergies you announced.”
Newmont responded by citing its “proven track record,” and noting Barrick’s proposed “negative premium” based on market prices.
“Newmont has a long history of evaluating potential transactions, and undertakes robust analysis and diligence on a continuous basis of acquisition opportunities in the interests of creating long-term shareholder value,” it said.
“Newmont has previously reviewed and rejected potential combinations with each of Barrick and Randgold Resources Ltd., prior to their merger. Newmont’s proposed combination with Goldcorp represents the best opportunity to create optimal value for Newmont’s shareholders and other stakeholders.”
Read more
- Niall McGee: Barrick goes hostile with $17.8-billion all-stock bid for U.S. rival Newmont
- Niall McGee: Barrick increases pressure on Newmont ahead of possible takeover bid
- Eric Reguly: Barrick may have to pay fat premium for Newmont
- Jeffrey Jones: Bristow looks eager to be the gold sector’s disruptive force, whether it needs one or not
- Niall McGee, Rachelle Younglai: Barrick eyes hostile bid as Newmont set to become No. 1 gold producer
Markets at a glance
Global markets are getting a pop from President Donald Trump’s decision to delay a tariff increase on Chinese imports.
Chinese stocks, in particular, are enjoying the move, with the Shanghai Composite surging 5.6 per cent.
“Chinese markets saw huge gains overnight, as Donald Trump called for a delay to the ramp-up in tariffs on Chinese goods, citing progress on many of the top issues faced by the two sides,” IG analysts said in a research note, referring to the higher penalties that had been set to take effect on Friday.
“No new deadline was set, yet with the president calling for a potential meeting between himself and President Xi Jinping to finale a deal, we appear to be moving into the endgame. This sent the yuan to a new seven-month high against the dollar.”
Read more
- Follow our Inside the Market
- Trump confirms he will delay scheduled increase in China tariffs, citing ‘substantial progress’ in talks
What else to watch for this week
There's much more on tap than just GDP and inflation. Here's what else to watch for:
MONDAY
The earnings parade continues this week, today with Pengrowth Energy Corp.
TUESDAY
Here's where it picks up, with Canadian bank results and Brexit back in the spotlight.
On the earnings front, we'll hear from BMO and Bank of Nova Scotia, George Weston Ltd., Home Depot Inc., Husky Energy Inc. and Thomson Reuters Corp.
On the economic front, the S&P Case-Shiller home price index is expected to show U.S. prices rose 0.4 per cent in December from November.
Watch, too, for Federal Reserve chair Jerome Powell's presentation to the U.S. Senate banking committee, which will be followed a day later by testimony to the House financial services committee.
He’s expected again to outline his patient approach to raising interest rates, and “could even explicitly rule out further rate hikes,” said Nikhil Sanghani of Capital Economics.
Then there's Brexit, with Prime Minister Theresa May speaking to Parliament on where things stand, which is just about nowhere.
Prime Minister Theresa May-/AFP/Getty Images
This is "with a view to getting a majority vote on any amended withdrawal agreement," said CMC Markets chief analyst Michael Hewson.
"In the absence of a new vote, which seems quite likely, we can expect MPs to try and block the option of a no-deal Brexit."
WEDNESDAY
U.S. Trade Representative Robert Lighthizer will update Congress on trade talks between Washington and Beijing.
This is also the day of Statistics Canada's inflation report, as well as the U.S. government's reading of factory orders, which are expected to show a gain of 14 per cent for December.
Earnings: Best Buy Co., Clearwater Seafoods Inc., Laurentian Bank of Canada, National Bank of Canada, Tilray Inc. and TransAlta Corp.
THURSDAY
Economists expect Statistics Canada to report that the country’s account deficit widened in the fourth quarter to about $13-billion or $14-billion, from $10.3-billion in the third, largely on a plunge in oil prices.
The partial U.S. government shutdown will also play a role here because it meant Statistics Canada was missing certain trade figures. Nonetheless, a fatter shortfall is forecast.
"Canada’s current account balance has been firmly in the red since the financial crisis, and another quarter of deficit only adds to the reasons that the loonie will need to trade weaker in the years ahead," said CIBC's Mr. Mendes.
The U.S. government also reports on fourth-quarter economic growth, which is believed to have slowed to an annual pace of about 2.5 per cent, or less, from the third quarter's 3.4 per cent.
CIBC, for example, expects to see 2.1 per cent.
"Despite decelerating, growth of roughly 2 per cent in Q4 is consistent with the U.S. economy running at potential," said CIBC economist Katherine Judge.
"With the effects of higher interest rates expected to materialize more meaningfully in consumption and business investment through 2019, and the labour market approaching full employment, the U.S. economy appears to be on a slower trajectory."
Earnings: Aimia Inc., Calfrac Well Services Ltd., CIBC and Toronto-Dominion Bank, Encana Corp., Maple Leaf Foods Inc., Martinrea International Inc., Seven Generations Energy Ltd. and Transcontinental Inc.
Read more
FRIDAY
Besides Canadian GDP, we'll get jobless numbers from the euro zone and Japan, as well as a look at the state of manufacturing from purchasing managers indexes around the world.
“Global manufacturing PMIs have shown little sign in recent months of suggesting that economic activity is starting to stabilize after several months of declines,” said CMC’s Mr. Hewson.
"Political instability in France appears to have affected economic activity there with the yellow vest protests, while Germany’s manufacturing sector has been grappling with problems in the auto sector," he added.
And “with China manufacturing likely to have been disrupted by the Chinese New Year, it is unlikely that we’ll see much evidence of a pickup in economic activity in these latest February numbers.”
Earnings: GMP Capital and Onex Corp.