May 26, 2023
The Daily Chase: Glencore reportedly eyes Bunge; Canadian Western Bank misses expectations
First Look With Surveillance: Debt Deal, Turkey Tourism
North American equity market futures are edging higher on hopes U.S. lawmakers are drawing closer to a deal to avert hitting the debt ceiling. Call it between a quarter and a half per cent on the main indices south of the border – so far from a high-conviction trade – but it's something as the clock ticks down to that June 1 deadline to avoid a debt default. Seems there's some renewed urgency in the talks between the White House and congressional Republicans after the ratings agency Fitch warned late Wednesday that it was putting America's sterling triple-A credit rating on rating-watch negative as a result of the impasse, but we're not out of the woods yet. Republican negotiator Patrick McHenry described the talks as being at a “sensitive phase,” which could put investors on edge as we head into the weekend. A curveball here or there makes one nervous to keep money in the market when there's no trading, so we often see late Friday swings with this kind of issue at play.
GLENCORE REPORTEDLY CHASES BUNGE
We've potentially got a major agriculture deal in the works, with our Bloomberg News partners reporting Glencore's hot in pursuit of Bunge, with plans to merge it with the former's Viterra division. The deal – if consummated – would bring together two of the largest agriculture houses on the planet, and has a distinct Canadian connection. Viterra is in large part the old Saskatchewan Wheat Pool, which Glencore acquired about 11 years ago for $6.1 billion, and then folded it into its global agricultural division. It's worth noting that Glencore didn't hold onto the entire asset – in years since, CPPIB and the British Columbia Investment Management Corporation acquired a large stake in the business (the former with a 40 per cent stake, the latter with 10 per cent). There's also the matter of public interest. That Viterra deal was a controversial one at the time, given the crucial nature of Canada's agricultural industry. Longtime BNN viewers may remember then Viterra CEO Mayo Schmidt getting into hot water over his on-air claim the company wasn't in play, only to have Viterra disclose talks hours later when that statement didn't pass muster. (Schmidt later on went to lead Hydro One, among other postings. He also once attended Miami Dolphins training camp as a wide receiver – while not technically pertinent to this discussion, Mayo Schmidt hauling in passes from Dan Marino as opposed to running publicly-traded companies remains one of the great alternate histories of Canadian business.)
CWB ENDS BUSY BANK EARNINGS WEEK
…and it appears to do so with a whimper, not a roar. Adjusted earnings per share missed estimates at $0.74 against a view of $0.77, but it's the outlook that seems rather rougher. The lender says that as a result of lower loan growth, it no longer expects to achieve its pre-tax, pre-provision income and efficiency ratio targets for fiscal 2023, mostly due to macroeconomic headwinds. It's not necessarily a complete aberration this quarter in the whirlwind of bank earnings – loan loss provisions have been on the rise, and based on my ear, an economic slowdown has been a dominant theme in earnings calls – but it's probably the starkest warning about the overall status of the banking industry thus far.
OTHER NOTABLE STORIES
- It's going down to the wire when it comes to the Albertan election – Danielle Smith's United Conservatives and Rachel Notley's New Democrats are in a statistical dead heat ahead of Monday's vote.
- Bit of a mixed bag out of Costco – the company topped estimates on earnings per share in the latest quarter, but total revenue and comparable sales excluding fuel fell short.
- Notable data: Ottawa's Fiscal Monitor, U.S. Personal Income & Consumption, U.S. Advance Economic Indicators Report, U.S. Durable Goods Order, University of Michigan Consumer Sentiment Index
- Notable earnings: Canadian Western Bank
- Notable Guest(s): Chris Fowler, President and CEO, Canadian Western Bank
- Lowe's Cos AGM