Barclays' Cau on Navigating the Bear Market
Cameco is making a US$2.2-billion bet on the resilience of demand for nuclear energy in the global transition movement, as it teams up with Brookfield Renewable Partners to buy Westinghouse Electric Company from another branch of the Brookfield empire. The deal is worth US$4.5 billion (or almost US$7.9 billion when debt is taken into account) and will see Cameco emerge with a 49 per cent stake in the nuclear services company. We’ll address the motivation and the market reaction, which hasn’t been pretty for Cameco thus far; its NYSE-listed shares have been down about 10 per cent in extended trading (should be noted Cameco announced a US$650-million bought-deal share sale priced at a steep discount to yesterday’s closing price).
POILIEVRE HAS EDGE ON INFLATION: SURVEY
A new Nanos Research Group survey for our Bloomberg News partners suggests 30 per cent of Canadians think Conservative Party of Canada Leader Pierre Poilievre is the most trusted inflation fighter. That compares to 22 per cent who sided with Prime Minister Justin Trudeau, and 10 per cent who said the NDP’s Jagmeet Singh is most authoritative on the cost of living. Eighteen per cent of respondents said none of the leaders can be trusted. The possibility of this being a ballot-box issue might have to wait until 2025, when the next federal election is currently anticipated.
MUCH ADO ABOUT THE BANK OF ENGLAND
When the Bank of England announced its intervention in the bond market on Sept. 28, it said the purchases of gilts would wrap up on Oct. 14. When it announced the expansion of its intervention yesterday morning, it reiterated — in language that couldn’t possibly be misunderstood (“the Bank plans to end these operations and cease all gilt purchases”) — the Oct. 14 expiration. And yet Bank of England Governor Andrew Bailey’s underscoring of that timeline in remarks yesterday were blamed for the late-afternoon swoon in North American markets. Somewhere here there’s room for a discussion about moral hazard. We’re planning to stress test the market’s reaction with Lyle Stein in The Street. And we’ll get perspective on the scrutiny facing central bankers when ex-U.S. Federal Reserve Vice-Chair Randal Quarles joins us at 1:10 p.m. EDT.
There are two scheduled potential catalysts on the agenda for markets today. It started at 8:30 a.m. EDT with a sign that the inflation fight is still an uphill battle. The U.S. producer price index rose more than expected in September; up 0.4 per cent sequentially (double the median estimate), and 8.5 per cent year-over-year (a tick higher than anticipated). And minutes from the last Fed meeting will be released at 2 p.m. EDT. As of 8:35 a.m. EDT, futures were off their high by still suggesting North American markets might rise at the start of trading (perhaps helped by PepsiCo soft-launching earnings season by hiking its full-year revenue and profit forecasts). Meanwhile, the S&P/TSX Composite Index enters today on a four-session losing streak that has seen it slump almost six per cent.
BELSKI TAKES SWIPE AT BEARS, STANDS BY 24,000 TSX TARGET (SORT OF)
Brian Belski, who we've previously referred to as the lonely bull, is sticking to his guns. Sort of. The BMO Capital Markets chief investment strategist told us his team is still calling for the S&P/TSX Composite Index to hit 24,000 points at year-end -- "for now." Belski pointed to earnings, balance sheets, and cash flow as the basis for his call. He also directed some zingers at his bearish peers. "Everyone's Negative Nelly ... Everybody wants to make the big call that we're heading into recession. And the market is gonna be down 40 per cent, and thump their chest that they've been right."
OTHER NOTABLE STORIES
- Back to the nuclear space: Uranium Energy Corp. announced it’s buying the Roughrider project in Saskatchewan from Rio Tinto for US$80 million in cash and 17.8 million UEC shares. Based on recent closing prices, the deal is currently valued at US$150 million. (NOTE: We’ll chase UEC’s CEO)
- Linamar warned after markets closed yesterday that the outlook for light vehicle production in Europe has fallen “meaningfully” from its earlier forecast, while its input costs have continued to rise.
- Hydro-Qubec announced a US$2-billion expansion in the United States with the purchase of Great River Hydro LLC, which is currently owned by ArcLight Capital Partners. Great River’s 13 hydropower stations with a total capacity of 589 megawatts operate across New England.
- Notable data: U.S. PPI
- Notable earnings: Aritzia, PepsiCo
- 800: International Monetary Fund releases Fiscal Monitor
- 1145: Prime Minister Justin Trudeau discusses government’s affordability plan and holds media avail in Durham Region, Ont.
- 1400: U.S. Federal Reserve releases minutes from last meeting
- G20 finance ministers and central bank governors open two-day meeting in Washington, D.C.