Noah Zivitz

Managing Editor, BNN Bloomberg

Archive

Today's main event landed with a thud for investors as U.S. inflation didn’t slow as much as expected last month. America’s consumer price index rose 8.2 per cent year-over-year, a tick more than the median estimate; the sequential change from August doubled the estimate at 0.4 per cent. And that caused a whoosh in equity markets as U.S. futures instantaneously flipped from being solidly in the green to being deep in the red as investors anticipate ongoing aggressive rate hikes by the U.S. Federal Reserve.

We’ll have plenty of reaction today, while being mindful of minutes from the central bank’s last meeting, which yesterday revealed that “several” participants spoke up in September about needing to “mitigate the risk of significant adverse effects on the economic outlook” as rates have been jacked up.

BLAME GAME IN THE U.K.

Fingers are being pointed in every direction and nobody seems quite sure if, or who, someone in a position of power will blink in the face of market turmoil. Most incredibly, when asked about what happens after tomorrow when the Bank of England is scheduled to wrap its bond-buying program, Chancellor Kwasi Kwarteng told Sky News it will be “a matter for the governor (Andrew Bailey, of the Bank of England).” Our Bloomberg partners have some thorough reporting on how margin call-fuelled selling by U.K. pension funds is rippling across global trading desks. And, earlier this morning, Bloomberg reported government officials are talking about how they can reverse Prime Minister Liz Truss’s unfunded tax-cut plan that triggered the chaos a few weeks ago.

CANADA ON TRACK FOR MUCH SMALLER DEFICIT: WATCHDOG

Whoa! The Parliamentary Budget Officer this morning estimated Canada is on track for a deficit this year that’s less than half of the government’s projection. The watchdog said that, under status quo policies, Canada could post a $25.8-billion deficit in 2022-23. In April, the government called for a $52.8-billion deficit this fiscal year, with gradually decreasing shortfalls over the forecast horizon. A quick reminder that just yesterday, the International Monetary Fund urged the feds (and provincial governments) to save any revenue windfalls, and said “the trajectory of deficit reduction from next year's budget onward could also be made more ambitious, helping not only to rein in inflation but also to bring debt down more quickly.” Also notable that the PBO said it expects the Bank of Canada will start cutting its main policy rate late next year.

PRIMED FOR 'SHARP INCREASE' IN HOME SALES

That’s the belief espoused by Royal LePage President and Chief Executive Phil Soper in a release this morning, as he insists that the conditions are right for activity to pick up “at the first indication that interest rates have ended their climb and prices have stabilized.” But even the real estate firm’s own forecast suggests it’ll be a long wait for that turnaround: it is now expecting the country’s aggregate home price will be 0.5 per cent lower in the fourth quarter than a year earlier. That’s down from its previous call for a five per cent increase.

OTHER NOTABLE STORIES

• Aritzia just reported another blowout quarter. Huge revenue growth, big profit beat, a hike to the full-year revenue outlook. But it's not perfect. Profit margins shrank 2.7 points, in part due to higher costs and "normalized" markdowns compared to a year earlier when inventory was lower. And about that: Aritzia said its inventory was 150 per cent higher at quarter-end as compared to the same time in 2022 for a variety of reasons. We'll parse through that and assess whether Aritzia can dodge an inventory headache in the holiday season.
• Barrick Gold reaffirmed its full-year production forecast range, albeit with gold output likely to be at the low end after a slowdown in the third quarter.
• More evidence that airlines are feeling increasingly confident: Air Canada this morning announced new international routes and also said it will resume some service to Tokyo and Osaka.
• And Delta Air Lines shares are rallying in pre-market trading after that carrier reported record revenue in the third quarter and forecast fourth-quarter earnings per share that would be miles ahead of the average estimate — in part thanks to what the company’s president described as improving corporate travel.

NOTABLE RELEASES/EVENTS

• Notable data: U.S. CPI and initial jobless claims
• Notable earnings: Delta Air Lines, Walgreens Boots Alliance, BlackRock
• 900: Parliamentary Budget Officer releases report Economic and Fiscal Outlook – October 2022”
• 1000: Canada Mortgage and Housing Corporation releases report “The Road Ahead for the Economy and Housing”
• 1200: Prime Minister Justin Trudeau discusses investments in clean innovation in Ontario’s Golden Horseshoe Region alongside Innovation, Science and Industry Minister François-Philippe Champagne
• 1345: G20 finance ministers and central bank governors hold news conference in Washington, D.C.