Mar 6, 2020
The Daily Chase: Markets under pressure; Canadian jobs market shows resilience
By Noah Zivitz
It’s shaping up to be another sour day in equity markets, closing out a week of stunning volatility and a rush into safe havens as investors grapple with the relentless news flow tied to COVID-19 (case in point: global confirmed cases now exceed 100,000). The price of gold climbed as high as US$1,690.70 this morning and the 10-year U.S. Treasury yield slipped below 0.8 per cent; meanwhile, European indices are deep in the red and U.S. futures are pointing to selling pressure at the start of trading in New York.
FEBRUARY HIRING SPREE
Not going to call it ho-hum, but it’s unusually difficult to get to excited about this morning’s labour market data considering how much has changed in recent days. But there’s no denying job creation far outpaced expectations in Canada and the U.S. last month. This country added 30,300 positions, according to Statistics Canada, with all the gains in private sector, full-time employment. Wholesale and retail trade was the standout sector, with 22,600 new hires last month. Meanwhile, the U.S. economy churned out 273,00 jobs. All of our coverage today will be through the lens of how virus fears will affect hiring plans.
POLOZ ON MARKETS AND HOUSING
As far as the Bank of Canada governor is concerned, equity markets were due for a correction after what he called a “spectacular” surge. “I'm not dismissing the virus, it matters a great deal to markets. But let's face it: we were in a situation where a correction wouldn’t have surprised any of us for any reason,” Stephen Poloz told Amanda in a wide-ranging exclusive interview yesterday afternoon, in which he shed new light on his central bank’s decision to match the Fed this week, and explained his confidence that the move won’t inflame housing markets. We’ll stress test that. And should point out we’re looking forward to speaking with his fiscal counterpart, Finance Minister Bill Morneau, today during Bloomberg Markets.
VERMILION HEADLINES VIRUS FALLOUT ROUNDUP
Once again, there are countless companies issuing warnings related to the virus. No doubt of most interest to many investors in Canada: Vermilion Energy slashed its monthly dividend in half today, pointing to “reduced global economic prospects following the outbreak.” We’ll discuss the decision, and the latest quarter, with CEO Anthony Marino this afternoon on The Real Economy.
Some other corporate fallout: Starbucks disclosed it expects second-quarter same-store sales in China will sink 50 per cent, and referred to the current situation as “extraordinary dislocation.” Tim Hortons is following in Starbucks’ footsteps, announcing today that for the time being it will not fill reusable cups brought in by customers. eBay apparently wants no part of the opportunistic gouging that’s been spotted for products like hand sanitizer, and so it’s removing and banning listings of items associated with fending off COVID-19. Also a high-profile conference is throwing in the towel, sort of. Collision has decided to go virtual-only, rather than host thousands of attendees in Toronto as previously planned. Details here.
OPEC VERSUS RUSSIA
We should find out today whether Russia will play ball with OPEC’s desire to see non-cartel members participate in a 1.5 bpd production cut designed to mitigate demand destruction caused by the virus. And the suspense around Moscow’s next move is eliciting some fantastic quotes. “OPEC+ has been completely caught with its pants down,” Oanda analyst Jeffrey Halley told Bloomberg News. “If they commit an epic policy failure by not cutting production, I think we can easily see a revisitation of old lows, in and around $26,” industry consultant Bob McNally told Bloomberg. We’ll keep tabs on any news out of Vienna this morning.
TELUS, BELL BLAST FEDS’ WIRELESS STRATEGY
The federal government wants Telus, Bell and Rogers to cut prices on certain data plans by 25 per cent over the next two years and Industry Minister Navdeep Bains warned in an interview on BNN Bloomberg that “everything’s on the table” if they don’t comply. On top of that, the feds announced set-asides for smaller telcos in the crucial 3500MHz spectrum auction. Telus and Bell wasted little time expressing their displeasure. Telus spokesperson Richard Gilhooley described it as “punitive”, warned it “jeopardizes hundreds of thousands of skilled jobs” and said the Liberal government is forcing Telus “to think very carefully” about future investment decisions. Bell spokesperson Marc Choma, meawhile, said the feds’ approach “puts jobs and innovation at risk”. We’ll watch for any market reaction this morning and gather analysis. Standard disclosure: BNN Bloomberg is owned by BCE through its Bell Media division.
OTHER NOTABLE STORIES
-Martinrea International is raising its dividend 10 per cent while reporting fourth-quarter adjusted profit that narrowly beat expectations. The auto parts maker has a couple of facilities in China; executive chairman Rob Wildeboer said in the earnings release Martinrea “believes this situation will resolve itself, but volumes in 2020 may be flat at best in China, Europe and North America.” We’ll speak with Wildeboer at 1020 ET.
-JPMorgan Chase & Co. CEO Jamie Dimon is recovering from emergency heart surgery performed yesterday. For now, the bank’s co-presidents will be in charge during his absence.
NOTABLE RELEASES/EVENTS
-Notable earnings: Vermilion Energy
-Notable data: Canadian labour force survey, Canadian trade balance, U.S. non-farm payrolls, U.S. trade balance
-7:30 a.m. ET: Finance Minister Bill Morneau delivers speech and avail in Toronto
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.
