Too bad for you, because today is yet another big budget day – as Kathleen Wynn announces Ontario’s plan to pare back the deficit, and we continue to parse the impact of the federal budget on Tuesday. From transit to Tax-Free Savings Accounts, expect another day of posturing, politics, and references to pensions.
This morning’s market mover is manufacturing news from China and Japan, both of which came in on a slump – hitting below 50 (which separates growth from contraction), and falling from the previous month. The flash HSBC/Markit PMI for China is at 49.2, down from 49.6, while in Japan the flash Markit/JMMA survey was down to 49.7, after clinging above growth at 50.3 last month. But such is the mood of monetary policy that markets in Shanghai and Tokyo merely took this as a cue that more stimulus must be on its way, and rose on the news. China has been pumping out the stimulus lately, most recently, lowering the banks’ capital reserve requirements by one per cent, while Japan is still running a major quantitative easing program. European indexes are also starting the day up.
Aside from Ontario’s budget, the thing to watch today is the U.S. real GDP numbers, which will be accompanied by its own flash manufacturing PMI and new home sales. Manufacturing and service numbers will also be out for Europe this morning. There will also be some big earnings reports out today, including Microsoft, Amazon, GM, Caterpillar and PepsiCo.
Another budget day – for Ontario. Cutting the deficit, transit investment, and the future of pensions are all on the agenda for the Ontario Liberals’ budget today. As the government pledges to balance the budget within two years, they’re looking to cut $2 billion – with the 2014-15 deficit running at $10.9 billion. Kathleen Wynn’s announcement last week got a lot of press for its plan to break the Beer Store’s monopoly, and eventually bring beer to grocery stores – though grocery stores aren’t uniformly enthusiastic – but the bigger story was the selloff of 60 per cent of Hydro One, in order to produce funds for major transit projects. Expected cuts include layoffs for social services, including health care, payments for disabled workers, and education. Meanwhile, the debate over the federal budget focused on the near doubling of the Tax-Free Savings Account yesterday, after Joe Oliver said that when it comes to problems with the TSFA limit, we should “leave that to Prime Minister Stephen Harper’s granddaughter to solve.” Here’s Kevin Milligan’s take on why the increased contribution limit will be felt much sooner than that – say, 2020, when he says almost no one under 40 will be paying tax on their investment income. Meanwhile, Paul Wells tallies up how long it took for the Harper government to spend three surpluses.
The Petrobras scandal cost $17 billion. Brazil has been rocked by a massive corruption and fraud scandal at the state oil company, which has ensnared top officials – including President Dilma Rousseff – in accusations that funds skimmed off the company were used to line private pocketbooks and pay for elaborate lifestyles. Yesterday brought a chance to tally up the (financial) damage, which resulted in writing off $17 billion in losses, including $2.1 billion in bribes. Auditing the company could result in renewed access to financial markets, but the company’s challenges, include public fury, low oil prices and more than $116 billion in debt.
Building a digital empire doesn’t come cheap. For the first time since 2012, Facebook’s latest profit earnings – announced yesterday – disappointed. The reason? In addition to blaming a strong U.S. dollar, which put a damper on profits, their costs were up 83 per cent in the last quarter, fuelled by a hiring boost, new infrastructure, and the costs of their additional “family of apps,” which include the messaging service WhatsApp, and the photo app Instagram. The Internet.org project, which apparently intends to get the unconnected world on the Internet, also cost them money. (As did, I imagine, the fact that their ads recently papered most of the London tube network, advertising nothing more than Facebook’s ubiquitous presence, even underground.) Chalk it up to the cost of building an empire. Most of the money, instead, was coming in from mobile – with about 73 per cent of ad revenue coming in from phones, a 20 per cent hike from the same quarter last year. Two other companies that know a thing or two about digital-empire building will also report today: Microsoft and Amazon. For Amazon, this quarter will offer the first look at revenue from their cloud services, as well as a potential look at what’s next for their drone delivery program and their grocery delivery business, Amazon Fresh. For Microsoft, it’s also worth watching for the impact of the strong dollar, as well as any growth in its commercial division, which includes selling cloud services to companies.
Less milk, less soda – North American tastes are reshaping the beverage industry. This feature by Maclean’s Anne Kingston takes on a new book by Toronto writer Alissa Hamilton on the privileged place dairy holds in the North American diet – and why it might not deserve to be there. Of course, no-dairy has been the preserve of vegans and lactose intolerants for some time, but Kingston hits on another note about North Americans’ changing tastes: between 1970 and 2011, milk sales dropped about 40 per cent, as packaged cereals, which more or less deliver our milk, have also declined. That’s amid, I would note, the generally changing diets that fast-food producers will tell you are wreaking havoc. It’s also a reflection of the diverse diet of younger North Americans – as the Washington Post notes, it’s younger people who are drinking less milk – mainly because there are so many other drinks (from juices to almond milk to coffees) they can drink instead. So big soda producers, including Coca-Cola, have been hit by some of the same changes, as worries over health and weight mean Americans are drinking less soda, and forcing beverage companies to diversify. (Coincidentally, PepsiCo will report their earnings today.)
Need to know:
TSX: 15,304.77 (-41.67)
Loonie: 81.78 (+0.35)
Oil (WTI): $55.89 (4 a.m.)