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Noah Zivitz

Managing Editor, BNN Bloomberg

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CANADIANS’ CONFIDENCE SHAKEN

Canadians’ view of the economy and their own situation is souring. The latest Bloomberg Nanos Canadian Confidence Index sank to 54.3 last week (from 56.2), putting it at the lowest level since December 2020 when COVID-19 had a firm grip on the economy. We know that most roads for Canada’s economy lead through housing; on that front, the survey shows 54.45 per cent of respondents expect prices to continue rising, down from 58.94 per in the previous week. A couple other nuggets this morning: housing starts rose more than expected last month; and the drop in existing home sales wasn’t quite as deep as feared, with activity falling 12.6 per cent in April (according to the Canadian Real Estate Association), the median estimate was for a plunge of 23 per cent.

LOCKDOWNS RAVAGE CHINA'S ECONOMY 

It’s shaping up to be a messy start to the trading week after Friday’s relief rally. The overnight data dump out of the world’s second-largest economy delivered a whole lot of disappointment, and isn’t helping market sentiment. Industrial production, fixed-asset investment, and retail sales in China all slowed (or shrank) even more than economists anticipated last month. The impact of the country’s attempt to contain COVID was most evident in consumer spending, as retail sales collapsed 11.1 per cent year-over-year in April — almost double the median estimate. The magnitude of the downturn will inevitably lead to questions about policymakers’ response to bolster the economy.

GEARING UP FOR BANK EARNINGS

Previews from Bay Street analysts are piling up. Today, it’s Gabriel Dechaine at National Bank of Canada Financial Markets who’s out with a primer. Unlike John Aiken at Barclays, Dechaine isn’t quite calling for a “bonanza” of dividends. He’s predicting only half of Canada’s eight largest banks will raise their quarterly payouts when they report results. Dechaine also takes a cautious view of the group’s shares (saying there are trading opportunities “but that’s it for now”) and predicts Canada’s housing slowdown will be most acute for the banks’ mortgage books in the second half of this year.    

INFLATION PUTS BIG BUSINESS IN THE CROSSHAIRS

And Jeff Bezos is having none of it. “Raising corp taxes is fine to discuss. Taming inflation is critical to discuss. Mushing them together is just misdirection,” the Amazon.com founder tweeted late Friday night in response to U.S. President Joe Biden suggesting prices can be wrestled down if “the wealthiest corporations pay their fair share.” A similar view that taxes can help solve inflation was recently expressed by NDP Leader Jagmeet Singh. There’s room for a conversation about whether politicians should tread carefully in thinking higher/tougher corporate taxes are the solution to soaring consumer prices.

OTHER NOTABLE STORIES

  • McDonald’s is throwing in the towel on Russia. Long after the stampede of companies that distanced themselves from the country amid the invasion of Ukraine, McDonald’s said this morning it will exit Russia and has launched a process to sell the business to a local buyer. It warned that it’s expecting a charge of up to US$1.4 billion as a result of the exit.
  • Shares in Spirit Airlines are surging in pre-market trading after JetBlue Airways announced it’s taking a US$30-per-share takeover offer directly to investors in the budget airline, while urging them to vote against Spirit’s friendly cash-and-stock deal with Frontier Airlines. JetBlue added today that it could raise its offer back to the originally proposed US$33 if Spirit engages in “good faith” negotiations. Spirit has thus far balked at JetBlue’s approach, based on concern it wouldn’t pass regulatory muster.

NOTABLE RELEASES/EVENTS

  • Notable data: Canadian housing starts, manufacturing sales, wholesale trade, and existing home sales; China retail sales, industrial production, and fixed-asset investment
  • 1110: Environment and Climate Change Minister Steven Guilbeault holds news conference on next steps in National Adaptation Strategy
  • 1300: Alberta Premier Jason Kenney holds media roundtable about trip to Washington, D.C. (13F filing deadline in U.S. for large institutional investors