Here are five things you need to know this morning:
Today’s the day for TD: We’ll finally get some details and perhaps some closure on TD Bank’s money-laundering overhang today, as regulators and the bank are set to announce an agreement that will see the lender pay US$3 billion in fines and agree to a cap on the growth of its U.S. business. The Wall Street Journal was first to report the news this morning citing anonymous sources, but we will learn more details today. TD is hosting a conference call later on an undisclosed subject and timing. The bank has been facing a phalanx of investigations in the U.S. over its failure to detect and report money laundering breaches in New York, New Jersey and Florida. The story has been a black cloud over the bank for more than a year now, ever since a deal to buy a smaller regional bank fell apart under regulatory scrutiny. The dollar figure of $3 billion does not come as much of a surprise as TD has already announced it has set aside that much to settle outstanding issues tied to the saga. But depending on how big it is, a cap on its business and assets in the U.S. will make it hard for the bank to meet growth targets, since it has leaned on the U.S. market heavily. Investors seem to agree, as the shares are down about six per cent in the premarket.
U.S. inflation comes in at 2.4%: The U.S. inflation rate surprised to the upside this morning, with the headline rate hitting 2.4 per cent. That’s down from the previous month’s pace but higher than the 2.3 per cent that analysts were hoping to see. The core rate, which strips out volatile items, increased to 3.3 per cent. That’s the biggest uptick in that metric in a year. While it’s fair to describe the numbers as mixed, overall, the slightly stronger than expected inflation print adds up to an increased likelihood that the Fed will cut by 25 points next policy meeting, not 50 like it did last time.
7-Eleven owner splitting itself in two to fend off Couche-Tard: The Japanese owner of 7-Eleven has announced a major overhaul of its business, effectively splitting itself in two in a bid to fend off a takeover from Canada’s Couche-Tard and convince investors it has a plan to maximize value. In his first public comments since Couche-Tard proposed buying them in August, Seven & i Holdings CEO Ryuichi Isaka told Bloomberg today that the company has a plan to “bring out our strengths and achieve greater growth.” The plan essentially boils down to splitting the company in two: one unit that will contain nothing but 7-Eleven, gas stations and convenience stores, while the other unit will contain everything else; a collection of other retail and finance assets that will either partner up with someone or potentially be spun off as its own company. The company will also rename itself 7-Eleven Corp. in a nod to its focus, while the other unit will be called York Holdings Co. Couche-Tard originally offered US$39 billion for the entire company before upping that to $47 billion this week. Two things are still very much unclear: how much higher Couche-Tard might be willing to go, and whether or not the plan announced today will be enough to convince 7-Eleven shareholders to trust the stewards of the underperforming company.
Swedish for recession? It’s hard to think of a better gauge of the mood of global consumers than their appetite to spend money at IKEA, so new numbers from the company today are worth poring over – possibly while sitting in a discounted Poang lounger. The retailer with operations in 63 countries and more than 200,000 employees said its global sales came in at US$49.3 billion for fiscal 2024. That’s a four per cent decline from 2023’s record level. The company says it actually grew its market share and saw higher foot traffic in its stores and an uptick in web traffic, but that’s mostly because it cut prices to win over customers. After increasing them due to inflation in 2023, IKEA cut prices by an average of 10 per cent this year. That may have led to higher sales, but still less money in the till. “When we lower the prices, the business model works,” CEO Jon Abrahamsson Ring said. “It’s when we increase prices that there’s a risk for the business model.”
Florida avoids ‘worst-case’ Milton scenario: Hurricane Milton has landed in Florida and is battering everything in its path, and while it is still far too early to assess the damage, it seems clear the state has avoided some of the more dire predictions. Governor Ron DeSantis said the state has avoided “the worst-case scenario” they were planning for, but 3.3 million people are still without power. One group of people breathing a sigh of relief are investors in so-called catastrophe bonds, who by some estimates were facing a loss of about 15 per cent if the high end of insured damage ranges came to pass. The storm ended up tracking farther south than expected, taking it easier on some very expensive real estate north of Tampa. Overall insured losses are now expected to come in at around US$60 billion, Bloomberg reports, which means cat-bond investors are probably looking at a loss of up to four per cent.