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Noah Zivitz

Managing Editor, BNN Bloomberg

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North American stocks are positioned for a higher open at the start of trading this morning, in a continuation of the theme we’ve seen the last couple of days after Monday’s ominous start to the trading week. In hindsight, that sell-almost-everything session appears to have been a one-off, at least for now as the S&P 500 sits just 17 points shy of its record close. The next big test for traders’ resolve is less than a week away, with a U.S. Federal Reserve decision coming up on Wednesday.  

AIR CANADA "TURNING A CORNER"

So says Chief Executive Officer Michael Rousseau in a second-quarter report showing cash burn came in much lower than the company anticipated, with continued improvement anticipated in this quarter. The airline narrowed its loss in the quarter - regardless of whether you're looking at net, operating or EBITDA. As for the hottest consumer-level angle facing the airlines: Air Canada said it dished out $997 million in refunds as of the end of the second quarter, with another $200 million expected to be spent this quarter. We’ll dig into Air Canada’s outlook with Cowen Analyst Helane Becker at 10:10 a.m.

CANADIANS READY TO GO SHOPPING 
Retail sales in this country fell less than expected (2.1 per cent) in May, according to data from Statistics Canada today. The sharpest drop in activity was seen at home furnishing stores, where StatsCan says sales sank 19.2 per cent. As we know though, this is all a COVID story, and with restrictions gradually being loosened, the data agency says it’s estimating retail sales rose 4.4 per last month. 

MAGNA BULKING UP

The Canadian automotive giant has agreed to buy Stockholm-based Veoneer in an all-cash takeover worth US$3.8 billion. Veoneer bills itself as a leader in technologies “on the road towards autonomous vehicles” (basically, software and hardware to help avoid collisions), and has approximately 7,500 employees across the globe. Magna said the deal will push its debt to adjusted profit ratio slightly above its target range.

BRIDGING FINANCE TAKEOVER TALKS

Our Bloomberg News partners are reporting BlackRock and Canaccord Genuity are in advanced talks to buy troubled Bay Street lender Bridging Finance. Bridging was rushed into receivership earlier this year amid an Ontario Securities Commission probe into alleged regulatory infractions. Since then, its chief executive has been fired and the receiver (PricewaterhouseCoopers) has been trying it wrap its arms around the business and its assets. In an update on its work last month, PwC said it was planning to conduct “a rigorous sales and investor solicitation process”.

OTHER NOTABLE STORIES

  • Glass Lewis is recommending shareholders vote against Pembina Pipeline’s takeover of Inter Pipeline. In a report to the investors it serves, Glass Lewis said it views Brookfield Infrastructure’s latest proposal as “superior” and noted that Inter Pipeline still hasn’t provided a formal response to what Brookfield put on the table. Shareholders of Inter Pipe and Pembina are scheduled to vote on the friendly tie-up next week.
  • MEG Energy sprinkled a bunch of news into its quarterly release late yesterday: it’s planning to bring its Christina Lake facility back up to full capacity in the first half of next year, it’s generated $44 million in the latest quarter from the sale of non-core lands near Edmonton, and it’s paying down $125 million in debt. As for the quarter, it looks like hedging didn’t work in its favour: MEG said it took an $87 million hit in the period from “commodity price risk management”.
  • Twitter shares are rallying in pre-market trading after the company reported an 87 per cent surge in second-quarter advertising revenue and forecast third-quarter revenue that would exceed the average analyst estimate. All of that is overshadowing a bumped-up estimate for headcount and associated expenses this year.
  • Intel Chief Executive Officer Pat Gelsinger yesterday declared "there's never been a more exciting time to be in the semiconductor industry", which seems like curious messaging at a time when chip shortages are roiling supply chains. Regardless, Intel raised its full-year outlook while reporting second-quarter profit and revenue that were ahead of estimates. Even so, shares are sagging in early trading. Maybe it's the drop in Q2 data-centre revenue that’s weighing on sentiment. Or third-quarter forecasts that are merely in line with estimates.
  • Shares of Westshore Terminals took off like a rocket in early trading. I’ve seen them up more than 40 per cent. That’s after the company  said it has a deal in place with BHP to service the Jansen potash project in Saskatchewan if it ever gets the full green light. 
  • Kimberly-Clark is today’s case study in base effects. Its shares have been down approximately five per cent this morning after the company warned that higher input costs and a normalized environment for toilet paper demand are taking a toll. As a result, it cut its full-year profit and sales forecasts. 

NOTABLE RELEASES/EVENTS

  • Notable data: Canadian retail sales
  • Notable earnings: Air Canada, Schlumberger, American Express, Honeywell