The federal government’s fiscal and economic update was light on major new policy initiatives, with Finance Minister Chrystia Freeland setting the scene for a more robust budget next year as the focus for now remains on containing COVID-19 (which prompted the prime minister to speak with premiers about possible travel restrictions last night). The update includes a $4.5-billion provision for dealing with Omicron, as well as several billion dollars for procurement of therapeutics and rapid tests. Overall, the deficit projections throughout the forecast horizon were trimmed as the government’s haul from taxing individuals and corporations boosts the revenue outlook. Items conspicuously absent from the update and presumably punted to the budget: the planned surtax on major banks and insurers, as well as new measures to address housing affordability. We’ll have analysis and reaction throughout the day, and BNNBloomberg.ca has plenty of coverage of the highlights for individuals and business owners.
INFLATION WATCH
As expected, Canada’s consumer price index rose 4.7 per cent year-over-year last month – matching October’s rate of growth and keeping inflation at the highest level since February of 2003. Gasoline was the primary driver, as prices at the pumps surged 43.6 per cent compared to a year earlier. Statistics Canada noted that furniture prices rose almost nine per cent due to higher shipping costs, while the cost of groceries rose at the fastest pace since January of 2015.
FED DAY
The U.S. Federal Reserve will deliver a policy announcement today against the backdrop of resurgent COVID cases and (don't call it transitory) inflation that’s at the highest level since 1982 in that country. We'll be watching for any change to the taper timeline; recall that in November, the Fed started paring the pace of its asset purchases by US$15 billion per month – setting itself up to buy US$60 billion in Treasury securities and US$30 billion in mortgage-backed securities this month. The Fed will also release updated projections today, including the dot plots which most recently suggested the central bank's decision makers was evenly split about whether there would be a single rate hike next year. One problem that the Fed doesn’t have to worry about for now: the U.S. debt ceiling, after lawmakers voted yesterday to raise it by US$2.5 trillion.
CINEPLEX PREVAILS IN COURT FIGHT OVER FAILED DEAL
The Canadian movie theatre operator announced last evening that the Ontario Superior Court of Justice ordered Cineworld to pay $1.24 billion in damages stemming from their failed takeover arrangement. Long story short: Cineworld agreed to buy Cineplex in December 2019 for $34 per share. Then the pandemic happened. Cineworld nixed the deal in mid-2020, claiming Cineplex didn’t abide by its obligations as COVID-19 ravaged the industry. Cineplex disagreed and accused Cineworld of dragging its feet in seeking regulatory approval. Now here we are, with Cineworld saying it plans to appeal the ruling and doesn’t expect to have to pay the damages while that appeal plays out. Its shares sank as much as 40 per cent this morning in London. Meanwhile, an analyst at Canaccord is wondering if Cineplex might have to go to a U.K. court to seek enforcement of the ruling considering “sizeable leverage” on Cineworld’s balance sheet.
OTHER NOTABLE STORIES
- Royal LePage is forecasting aggregate home price growth of 10.5 per cent next year as pent-up demand, household formation, and immigration drive buying activity. The headline number masks especially hot markets like Toronto (where the aggregate price is expected to rise 11 per cent to $1.26 million).
- The Bank of Canada has a new second-in-command as of today. This is scheduled to be Carolyn Rogers’ first day as the central bank’s senior deputy governor.
- Parkland said last night it’s ramping up its Burnaby, B.C. refinery now that oil is flowing again in the Trans Mountain pipeline. It also warned that due to the service disruption caused by flooding, it’s now expecting this year’s adjusted EBITDA will be close to the midpoint of its previously stated target (ie, $1.25 billion). The Burnaby refinery supplies approximately 25 per cent of Vancouver’s gasoline supply.
- Quarterhill is on our radar after the company replaced its chief executive officer and said it’s launching a strategic review of its WiLAN patent-licensing business as it focuses on intelligent transportation systems.
- Tamarack Valley Energy announced this morning it’s buying Crestwynd Exploration for $184.7 million in cash and stock. According to the release, Crestwynd is expected to produce 4,500 barrels of oil equivalent per day next year. Tamarack said the deal will boost free funds flow nine per cent next year.
- Canopy Growth is selling its German C3 Cannabinoid Compound business to Dermapharm for an upfront payment of 80 million euros ($116 million).
- CI Financial is doing another U.S. deal. This time it’s buying Columbia Pacific Wealth Management, which has US$6.4 billion in assets. CI is also buying a minority stake in Columbia Pacific Advisors, which is described as an alternative asset management firm with US$3.5 billion in assets. As usual with CI’s U.S. deal announcements, terms were not disclosed.
NOTABLE RELEASES/EVENTS
- Notable data: Canadian CPI, existing home sales, housing starts, and manufacturing sales; U.S. retail sales; China retail sales, industrial production, and fixed-asset investment
- 9:00: Ontario Energy Minister Todd Smith makes announcement about nuclear energy sector investment in Cambridge
- 12:00: Bank of Canada Governor Tiff Macklem addresses Empire Club of Canada (plus 13:15 media avail)
- 14:00: U.S. Federal Reserve releases interest rate decision and updated forecasts (plus 14:30 news conference)
- 14:00: Ontario Premier Doug Ford leads announcement regarding COVID-19 vaccine booster strategy
- 14:30: CEOs of United Airlines, Southwest Airlines, and American Airlines address U.S. Senate Commerce, Science, and Transportation Committee hearing on oversight of the airline industry
- 16:45: Prime Minister Justin Trudeau leads announcement on early learning and child care
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