Will Stephen Poloz find it difficult to stay dovish?

The top financial news for Sept. 3


Top of the Morning

In a new post, pseudonymous blogger YVR Housing examines demographic trends in British Columbia and reaches one particularly fascinating conclusion:

The population of the 20-24 age group — the group most likely to be attending post-secondary institutions — is projected to drop [for the next eight years]. This will mean significant pressure on post-secondary institutions’ budgets, so much that the government is, in my view, forced to buttress the shortfall by way of international students. The ramifications of not doing this would be underutilized capital, layoffs, and falling tax revenue. Alongside this, though, we can expect further budget cutbacks to post-secondary institutions for the rest of the decade.

On the Homefront

TSX 60 futures are moving higher after the composite index suffered a slight loss on Tuesday.


The loonie rose overnight ahead of communiqués from North American central banks to trade at 0.917 against the greenback this morning.


Will Stephen Poloz find it difficult to stay dovish? At 10:00am (EDT), the Bank of Canada will release its latest interest rate statement. Monetary policymakers are widely expected to maintain the overnight rate at 1 percent and reiterate their neutral, data-dependent stance. As this statement will not be followed by a press conference with governor Poloz and senior deputy governor Wilkins, it is unlikely that there will be any major tweaks to the language. However, the Bank may acknowledge the rebound in U.S. economic growth in the second quarter, but affirm that downside risks to global growth — and Canadian exports — remain prominent due to the poor performance of European economies. For more, see our preview.

UPDATE: As expected, the Bank of Canada left the overnight rate at one per cent and kept most of its key language intact.


Canadian convenience store giant to release quarterly results. Alimentation Couche-Tard (ATD.B), which operates over 6,000 stores in North American and more than 2,000 in Europe, is scheduled to publish its Q1 results for fiscal 2015 on Wednesday. Analysts are looking for adjusted earnings per share of $0.44 on revenues of just over $9.3 billion for the quarter. This will be the company’s final earnings report with long-time president and CEO Alain Bouchard at the helm; on September 24, COO Brian Hannasch will assume those roles. Shares of Couche-Tard are up 25 per cent year-to-date.

UPDATE: Couche-Tard beat on the bottom line, missed on revenues, and hiked its quarterly dividend by 12.5 per cent.


Major gold producer reports problems at its Mexican mine. After the market closed on Tuesday, Goldcorp (G) reported pit wall instability at its El Sauzal mine in Mexico, which is in the final year of its active mine life. As such, it has halted operations at this site pending an assessment from a geotechnical survey team. This development may cause the miner to fall short of its production targets for the year. Shares of Goldcorp got slammed on Tuesday, falling 4.2 per cent as the price of the underlying commodity slumped.


Energy company announces acquisition, share offering. On Tuesday, Crescent Point Energy (CPG) revealed plans to buy conventional oil assets located in southeast Saskatchewan and Manitoba from Lightstream Resources (LTS) for $378 million. In light of this deal, management hiked its full-year guidance for production and capital spending. To help pay for these Lightstream assets, others it has purchased recently, and the capital expenditures associated with the projects, Crescent Point is raising up to $863 million from a bought-deal share offering.


Ontario-based cloud-printing company bought by Samsung. PrinterOn, which enables people to access printers on their smartphones via the cloud, has been purchased by South Korean technology powerhouse Samsung. According to the press release, this acquisition will reinforce Samsung’s mobile ecosystem (especially for its business-to-business customers) and bolster its leadership in the mobile printing space. Financial terms of this deal were not released.

Daily Dispatches

Geopolitical tensions appear to be fading as Ukraine and Russia work towards a ceasefire, though some fear that this is merely a chess move from Putin that serves to spare the Russian economy from another round of sanctions.


The Australian economy grew 0.5 per cent quarter-over-quarter in Q2, slightly above the consensus estimate. In a speech delivered soon after this print was published, Reserve Bank of Australia Governor Glenn Stevens referred to growth in the first half of 2014 as “moderate.”


Tuesday’s surprisingly strong U.S. manufacturing data bodes well for the economy at large — and, in turn, the U.S. dollar, says IG chief market strategist Chris Weston. “Betting against the USD is ill-advised and, when you see the new orders sub-component on the U.S. manufacturing ISM expanding with such gusto (the index printed 66.7, the highest since 2004), it suggests there are upside risks to the consensus US Q3 GDP at three per cent,” he writes in a note to clients. “There is a startling correlation between the new orders component and GDP – something we’ve seen for many years.”


The Federal Reserve’s Beige Book is slated to be released at 2:00pm (EDT). Bank of Montreal senior economist Michael Gregory notes that this publication “could show better business conditions across the country,” and writes that investors will be keeping a close eye on commentary pertaining to credit creation, the housing market, and wage growth.


Another day, another abysmal piece of data out of Europe. Eurostat reports that the volume of retail sales dipped by 0.4 per cent month-over-month in July. Notably, sales fell by 1.1 per cent in Germany on a monthly basis, suggesting that the eurozone’s more reliable economic engine may be starting to sputter.


China’s services sector continued to fare well in August, with both the “official” purchasing managers’ index and HSBC PMI rising from July, suggesting that this sector’s rate of growth picked up steam. However, it’s still far too early for Chinese policymakers to claim victory on their quest to rebalance growth towards consumer spending.