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It’s the Bank of Canada’s big rate decision day

March 4: The Bank of Canada keeps the benchmark rate steady. Plus, Target owes money to itself, and the U.S. is running out of room for their oil


 

MORNING-PLAYBOOK-STORY

The day you’ve been waiting for is finally here.

Speculation over the Bank of Canada has been heating up over the last couple of weeks – will they cut the rate or won’t they? – after the surprise rate cut to 0.75 per cent at the last meeting. But there was no need: Stephen Poloz announced this morning that the rate will stay as is. We’ll talk about this more tomorrow. 

Today is a heady week for Big Tech, with the Mobile World Congress continuing today, a day after the NASDAQ climbed over 5,000 for the first time in 15 years, surpassing the height of the dot-com bubble. But in Canada, markets were looking less springy, with the TSX/S&P Composite Index dropping more than 100 points at closing yesterday, after Scotiabank’s profits failed to meet analyst expectations. This despite news from Statistics Canada that growth in the fourth quarter was better than expected, with 0.6 per cent growth in the quarter – a 2.4 cent annualized rate. GDP was just one of a spate of data released yesterday, including strong auto sales – in February, the Canadian auto market pushed to just short of two consecutive years of growth, and the strongest February for sales in seven years.

East of Canada, there are also plenty of releases this morning, particularly PMI services numbers, which measure the growth of the services sector, from China, Japan, the U.K. and the eurozone. In other central bank news, today India cut their benchmark rate, and the Bank of England begins a two-day meeting monetary policy meeting today, while Brazil’s central bank wraps up their own meeting.

Target creditors are worried. As the chain attempts to wrap up its failed expansion into Canada, suppliers are worried about a new claim to the credit pool – from a company it created. The property company owes their Target parent company $1.9 billion for the operation of stores, while suppliers of products are looking to receive $400-million, after the chain filed for bankruptcy in January. A quote from a lawyer in Marina Strauss’ story in the Globe says it best: “It takes $1.9-billion of recoveries that otherwise would go to creditors and it shifts it to a Target affiliate,” Mr. Goldman said in an interview. “Target should show the calculations supporting this claim to give creditors proper assurance this is not a contrived debt.” The parent company has its own problems: Target also announced they would cut “thousands” of jobs in the U.S. and India in order to cut costs by $2 billion in two years.

The services industry around the world. Today, many countries are releasing both their services PMI, which measures growth in the services sector. The HSBC Markit PMI index, released today for China, saw the services industry bump up to 52, but the overall trend has remained for slowing growth, as investors worry over what’s next for the Chinese economy. In Japan, the industry weakened, slipping from growth to 48.5 per cent. While manufacturing is key for China – that number came in on Monday – in the U.K., services are the largest industry, and the numbers indicate the industry  is still growing fast at 56.7, despite a slight fall from the previous month.

A surprise rate cut from India. The country’s central bank suddenly cut the benchmark rate by a quarter of a percentage this morning, the second time since the year began that the bank has moved to lower the rate, which at 7.5 per cent remains far higher than the rate in most Western countries. A cut was widely expected to come – but not so soon. The cut was seen as likely to come in April, to give a bit of breathing time to a new plan to lower the country’s inflation rate. Over the weekend, the People’s Bank of China also reduced their benchmark interest rate by a quarter of a percentage.

The U.S. is running out of places to store all their oil. The U.S. is producing about a million barrels of oil more than they need a day, with crude supplies at an eighty year high, according to the Energy Department, fuelling worries the price could collapse still further as room tightens.  The price of oil has fallen by more than half since last June – today it’s between $50 and $51 so far –  and OPEC have pledged to keep their target production at 30 million barrels a day, despite complaints from oil-producing countries in the group who have seen income plummet. This morning, the Saudi oil minister said the price was a result of “market realities” and reiterated that they would not agree to change the target.

More gadgets from the Mobile World Congress. In tech this week it’s all about curved screens and smart watches, but some other products are also getting attention: including eye-activated phones, smart-bicycles, an IKEA lamp with a wireless charging port, and phones that claim to offer secure texting and calls – in an era when even large sim-card makers get hacked by national intelligence services.

Need to know:
TSX: 15,133.85 (-130.20), Monday
Loonie: 80.06 cents (+0.28), Monday
Oil (WTI): $50.76, Tuesday morning (10 a.m.)


 

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