Yesterday brought plenty of dispiriting news, with Alberta’s budget announcement, a speech from the Bank of Canada governor, and a profits miss for BMO, the first of the Big Six Canadian banks to report their first-quarter earnings.
But today is a new day, with RBC reporting record earnings this morning and global equity indexes hitting a record high.
In the U.S., all eyes were on Janet Yellen yesterday, who said the U.S. Federal Treasury is taking rate hikes on a “meeting-by-meeting” basis. Yellen’s words are undoubtedly the most closely watched of any central banker in the world, so this subtle change was deemed highly significant. Today, she’s speaking to the House of Representatives.
Despite the doom and gloom about oil prices, Yellen’s words and an easing of the nail-biting Greek bailout crisis have had a buoying effect on global stocks: The FTSE All-Word Index is at an all-time high this morning, and the British FTSE 100 has also reached a record high, topping out the previous peak set in 1999 (here’s a cool graphic). Let’s see if the boost translates to the TSX today: The TSX/S&P Composite Index closed slightly down yesterday, and at 5 a.m. this morning, oil had slipped down to the $49 mark.
Target will also be reporting its earnings today for the quarter in which it announced it would leave Canada after a massive, and rather short-lived, expansion.
RBC reports a boost in quarterly profits. The second of the Big Six banks to report, RBC’s early-morning first-quarter-earnings report looks like a bright one: The bank’s profits were up by 17 per cent from the year before, to a net $2.46 billion for the quarter, a boost the bank said was driven by non-institutional banking, and it increased the dividend by three cents. The report could ease worries that the banks have had an underwhelming quarter, as borrowing costs decreased and oil companies cut back on services. BMO’s earnings report, yesterday, was less optimistic: It reported $1 billion in net profits for the first quarter, a six per cent decrease from the previous year, pushing shares lower, despite the CEO’s insistence he had an “encouraging view” of the year ahead.
The rate cut and breathing room for the economy. That was the gist of Bank of Canada Governor Stephen Poloz’s speech at Western University yesterday, where he also said the oil shock was of “uncertain size.” The cut “buys us some time” to see how the economy responds, Poloz said, providing a cushion amid the declines in jobs and the increase in debt the shock is certain to bring. Poloz also noted that inflation rates are likely to stay lower longer, as the Canadian population ages. Amid speculation that the BoC could announce another rate cut in its monetary policy meeting next week, the governor’s careful wording seems to be bringing out skepticism that another cut is in the making.
Another day of Yellen-watching. Perhaps the words of no other woman in the world are so closely watched as those of Fed chair Janet Yellen. Looking for signs of when a rate increase will occur, investors were parsing her phrasing for clear signals, as she addressed the Senate banking committee yesterday. While she declared the decision would be taken on a “meeting-by-meeting” basis, she didn’t remove the “patient” wording she had used before. There are people who claim to know exactly what month a rate hike could come, based on this wording, but I would hesitate to believe them: Yellen’s discussion of the U.S. economy was mixed, noting strong job growth but still-lagging inflation. Today, she’s talking to the House of Representatives.
HSBC execs have been summoned to Westminster. Stuart Gulliver, the bank’s chief exec, and the chairman have been summoned to appear in front of British MPs today, to give evidence to a treasury committee. The bank is in the midst of a massive scandal over its efforts to help clients dodge tax rules, partly using secret Swiss accounts, for which it has apologized. The scandal expanded over the weekend, when it was revealed that Gulliver had used a combination of a Panamanian shell company, a Swiss account and a special U.K. tax status (which puts his legal residence in Hong Kong) to hold his own multi-million-pound bonuses. That news came on the eve of the bank’s earnings announcement on Monday, which had also taken a hit from fines due to its part in a scandal in which foreign exchange traders in London colluded to rig exchange rates.
A sex discrimination trial in the tech industry. Here’s one to watch: A high-profile trial began this week that could have greater ramifications for claims that the tech industry treats many women poorly and stalls their careers. The specifics of the case involve a civil suit from a former employee of a prominent venture-capital company, Kleiner Perkins Caufield & Byers, which allege she was wrongfully dismissed after complaining of retaliation after she broke off an affair with a male colleague. The trial has taken centre place in a larger debate about diversity and sexism in the tech industry. The New York Times notes a report that says women partners at VC firms have actually declined since 1999—to six per cent. Male execs at companies such as Snapchat and Tinder have also been caught out in suits or leaked emails that suggest they said lots and lots of horrible things about women.
Need to know:
TSX: 15,164.97 (-35.29), Tuesday
Loonie: 80.03 (+0.49 cents), Tuesday
Oil (WTI): $49.53, Wednesday (7:30 a.m.)