Turning home owning into an investment crushes affordability for future generations: Generation Squeeze founder
We’re waiting to see if the tech rout extends into another day in the aftermath of yesterday’s reminder that the U.S. Federal Reserve is preparing for what could be a faster than expected tightening in monetary policy. We learned in those minutes from the last Fed meeting that liftoff could happen “sooner or at a faster pace” than the central bankers previously anticipated. We also learned that some participants at the December meeting said the Fed’s balance sheet might have to be pared “relatively soon” after the initial rate hike. However, the minutes also noted views on balance-sheet management were “diffuse.” Investors responded by sending the Nasdaq Composite Index to its largest single-day drop since last February. Futures are pointing to a muted open and I’ve seen the 10-year U.S. Treasury yield as high as 1.742 per cent this morning.
GOOD LUCK FINDING A HOME IN TORONTO
Just like in Vancouver yesterday, today we're seeing a moderation in the country's other red-hot housing market. But it may be an involuntary moderation as tight inventory remains the story. The Toronto Regional Real Estate Board reported a nearly 16 per cent year-over-drop in December home sales. The sequential slide was even more extreme as sales fell by one-third compared to November. No surprise to see inventory dry up, with active listings plunging 59 per cent. Add it all up, and we're left with an average selling price sitting just shy of the record set in November. We’ll speak with the local real estate board’s chief market analyst shortly after 8 a.m.
BULLISH ON BANKS
RBC Analyst Darko Mihelic is out with a report on the Canadian banks this morning, mapping out his view for why, even after the recent run-up, valuations of the big lenders are still attractive. Part of that thesis brings us back to the Fed, and the prospect of higher rates boosting the banks’ net interest margins.
OTHER NOTABLE STORIES
- It’s looking like extremely challenging days for CannTrust Holdings. The previously scandal-plagued pot producer warned today that it “does not have sufficient liquidity to operate beyond the near term.” It also said it’s in default of a covenant under its debtor-in-possession loan. CannTrust said it’s continuing to explore options with potential investors and strategic partners under the CCAA process.
- We’ve still got uranium stocks on our radar amid unrest in Kazakhstan (the world’s dominant producer of the commodity). Local banks have been shuttered and police said today that some protesters were killed. Bloomberg News is also reporting on a build-up of troops from Russia and its allies.
- Bloomberg News reported late yesterday that TC Energy had resumed service on its Keystone pipeline system after earlier being hampered by extreme cold conditions. The frigid temperatures have certainly also contributed to the recent rally in the price of Western Canada Select crude oil.
- Power Corporation announced an all in the family-type deal last night that it said is another step in simplifying its structure. A flow chart would help here: Mackenzie Investments, a subsidiary of IGM Financial (which is part of Power Corp.), is paying $1.15 billion to Power Corp. to acquire its 13.9 per cent stake in China Asset Management. The transaction will boost Mackenzie’s stake in ChinaAMC to 27.8 per cent. Mackenzie will cover some of the transaction cost by selling 15.2 million shares in Great-West Lifeco (which is part of the Power Corp. empire) to Power Corp.
- Constellation Brands is about to share its booze expertise with Coca-Cola. The alcohol giant (which also owns a big stake in Canopy Growth) announced this morning it’s going to partner with the soft drinks Goliath on a Fresca branded line of ready-to-drink cocktails.
- Stelco Holdings shares tumbled at the start of trading this morning after the steel maker cut its fourth-quarter shipments forecast and warned on first-quarter output, too. It’s blaming various production challenges and the impact of Omicron.
- Alcanna rallied at the opening bell after adjustments were made to its takeover pact with Sundial Growers. The revised terms of the deal now allow for stock and cash, rather than the initial all-stock offer.
- Notable data: Canadian trade balance; U.S. trade balance, ISM services index, and initial jobless claims
- Notable earnings: Walgreens Boots Alliance, Constellation Brands
- 1300ET - St. Louis Federal Reserve President James Bullard delivers speech "U.S. Economy and Monetary Policy"