We could see US$100 oil by the end of this year: Eric Nuttall
On a day when markets are again laser-focused on inflation, we begin with the domestic component – and an unusually candid call to action. “We need rapid action this spring as a series of rate increases to address [permanent sustained inflation],” Royal Bank of Canada Chief Executive Dave McKay told our Bloomberg News partners. Currently, the market is pricing in five rate hikes by the Bank of Canada this year, which begs all sorts of questions about the potential ripple effect, chiefly as we look to the country’s housing markets and highly indebted households. It also forces us to consider the messaging we should expect from the central bank and its governor when its next rate decision and monetary policy report land on January 26.
Meanwhile, America’s consumer price index landed exactly as expected, with a year-over-year gain of 7.0 per cent in December. That's the hottest figure since June of 1982.
And in China, the producer and consumer price indices for December rose less than expected at 10.3 per cent and 1.5 per cent, respectively.
OIL AT TWO-MONTH HIGH
West Texas Intermediate crude rose as high as US$81.99 early this morning, building on yesterday’s gains for familiar reasons. Bloomberg is reporting the American Petroleum Institute’s latest data show U.S. stockpiles fell by approximately 1 million barrels last week. The benchmark oil price has surged 24 per cent since bottoming out near US$65 per barrel as the Omicron variant of COVID-19 triggered demand fears last year. If you missed it, check out Ninepoint Partners Senior Portfolio Manager’s US$100-WTI thesis.
LUXURY HOUSING WATCH
Even the wealthiest Canadians aren’t immune to this country’s housing supply crunch. In a new report on luxury home sales, Sotheby’s International Realty described Vancouver as facing “monumental constraints” that contributed to “frenetic bidding wars” in the second half of 2021. Looking at the highest end of the market, Sotheby’s says 24 homes priced at $10 million or higher were sold in Vancouver last year; just one-third of those sales occurred in the second half of the year. And let there be no doubt that homes are viewed as much more than simply shelter. “The fact that real estate is now a preferred asset class … also fueled local demand,” Sotheby’s said about the Greater Toronto Area in particular.
OTHER NOTABLE STORIES
- We have another seemingly abrupt leadership departure in the materials sector. Iamgold announced this morning its board is conducting a search for a new chief executive after Gordon Stothart resigned from the role and from the company’s board of directors. Chief Financial Officer Daniella Dimitrov will cover the duties on an interim basis. In a separate operational update, the miner forecast all-in sustaining costs that could be as high as US$1,690 per ounce next year, compared to as much as US$1,435 this year.
- Shaw Communications’ chief executive today reiterated the company’s commitment to closing its sale to Rogers Communications. That deal still requires regulatory approval. The biggest question on that front is whether Rogers will be forced to divest Shaw’s wireless business. And so it’s worth pointing out Shaw added 36,100 net new postpaid wireless subscribers in its fiscal first quarter, and said its wireless service revenue jumped 11.2 per cent.
- Teck Resources says the union representing 1,048 workers at its Highland Valley copper operations in British Columbia have served 72-hour strike notice. The miner said talks with a mediator are scheduled for Friday.
- Intact Financial is estimating it will book $186 million in catastrophe losses when it reports fourth-quarter financial results. The insurer pointed to B.C. floods and windstorms in Central Canada as significant contributing factors.
- The Globe and Mail is reporting GFL Environmental and BC Partners have signed a deal to buy the paving company run by the Coco siblings, who are also majority owners of troubled private lender Bridging Finance. However, BNN Bloomberg has learned no definitive has been reached. GFL CEO Patrick Dovigi declined to comment when I reached him via email.
- Notable data: U.S. CPI, China CPI and PPI
- Notable earnings: Shaw Communications, Aritzia
- 900: Bausch Health management provides update on business and strategy at J.P. Morgan health care conference
- 1130: Prime Minister Justin Trudeau provides update on COVID-19 along with Health Minister Jean-Yves Duclos, Trade and Small Business Minister Mary Ng, and Public Services and Procurement Minister Filomena Tassi
- 1400: U.S. Federal Reserve releases Beige Book
- 1430: House of Commons Standing Committee on Finance holds meeting “to discuss Canada’s housing inflation crisis”
- 1600: Shaw Communications holds annual meeting