Feb 25, 2020
The Daily Chase: Virus fears weigh on stocks; capital markets growth fuels banks
By Noah Zivitz
The Big Three: Coronavirus roils markets, rail service to continue after arrests, Scotia and BMO beat expectations
VIDEO SIGN OUT
It was a cautious start to today’s trading session in North America after yesterday’s selloff, but after briefing popping into positive territory, stocks slumped into the red by mid-morning. Investors continue to face a relentless flow of news tied to the rapidly-spreading coronavirus; including the likes of Mastercard, United Airlines and Quebec City-based Exfo that all warned on the outbreak’s impact since yesterday’s closing bell. And, indeed, Exfo is among the lead laggards this morning on the TSX. We’ll continue tracking developments.
CAPITAL MARKETS POWERING THE BANKS
A clear theme is emerging this earnings season for Canada’s largest banks, as their trading floors take the spotlight as profit drivers. Bank of Montreal and Bank of Nova Scotia reported first-quarter earnings that outpaced the average estimates this morning. Both posted Capital Markets profit growth of more than 30 per cent, landing in the same realm as RBC’s numbers from last week. The common themes extended beyond their trading floors, as Scotia and BMO also booked significantly higher credit loss provisions. And both banks also saw sharp profit declines in their non-Canadian banking operations.
BLOCKADE AFTERMATH
We were expecting to have a can’t-miss interview this afternoon with the chief executive officer of Canadian National Railway. Unfortunately, our conversation with Jean-Jacques Ruest has been postponed because of the fluidity of the situation as CN aims to bounce back from the now-dismantled blockade near Belleville, Ont. while dealing with other interruptions that popped up overnight. We hope to bring you that interview with CN’s CEO soon. Today, however, we’re checking in with CTV News’s Heather Wright for updates from Tyendinaga.
KENNEY PULLS A DRAGHI
Mario Draghi made his mark on central banking with an infamous 2012 declaration to do “whatever it takes” to defend the euro. Yesterday, Alberta Premier Jason Kenney borrowed from that playbook in the aftermath of Teck’s decision to pull the plug on Frontier and the lingering impact of rail blockades. “The government of Alberta is prepared to do whatever it takes to ensure our economic future … we will not back down,” he said after saying he’s spoken with “major investors” who have “cancelled, frozen, and suspended” projects because of the “appearance of anarchy” in parts of Canada. He also said his government is prepared to invest directly to support companies as needed. We’ll dig into that today.
OTHER NOTABLE STORIES
-GFL Environmental is taking another stab at going public, filing for an initial public offering of 73.17 million (including 1.52m being offered by CEO Patrick Dovigi) subordinate voting shares at a range of US$20.00 to US$21.00 apiece. Recall GFL scrapped its planned US$2-billion IPO in early November.
-Thomson Reuters confirmed today that ex-Nielsen executive Steve Hasker will become its next CEO as of March 15. The company also narrowly exceeded fourth-quarter profit expectations and nudged up its quarterly dividend.
-We have an interview with Equitable Group CEO Andrew Moor this afternoon to discuss the alternative lender’s latest quarter (which included record earnings, a big increase in loan loss provisions for the full year, and a richer dividend). And perhaps also some discussion about the upcoming modifications to mortgage stress tests. EQB was one of the TSX’s star performers last year, with its shares rallying 85% in 2019.
- Mondelez has struck a deal to buy a majority stake in Toronto-based Give & Go Prepared Foods Corp., the maker of two-bite brownies.
NOTABLE RELEASES/EVENTS
-Notable earnings: Bank of Nova Scotia, Bank of Montreal, George Weston, Thomson Reuters, Aimia, Element Fleet Management, Acreage Holdings, Home Depot, Macy's, SmileDirectClub
-8:00 a.m. ET: JPMorgan Chase & Co. holds investor day
-9:00 a.m. ET: Parliamentary Budget Officer releases report “Labour Market Assessment”
-12:30 p.m. ET: Bank of Canada Deputy Governor Timothy Lane delivers speech on "Future of Money" in Montreal (remarks on Bank’s site at 12:15 p.m. ET)
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
