First Look With Surveillance: S&P 500, Kwarteng, Banks
After yesterday's inflation scare in the U.S. and ensuing wild ride in markets, today the focus swings to corporate fundamentals. JPMorgan Chase & Co. is the star attraction and the story looks like one of resilience, thanks to those central bank rate hikes that are causing so much macro concern. The big U.S. bank said its net interest income soared 34 per cent year-over-year in the third quarter. Excluding its markets division, net interest income was up 51 per cent. Some other notable nuggets: Commercial banking loans rose 13 per cent, total revenue spiked 10 per cent, and fixed income markets revenue soared 22 per cent year-over-year. Naturally, it wasn’t entirely smooth sailing as US$1.5 billion in credit provisions were booked, and revenue from investment banking and equity markets fell substantially. But investors seem to like what they’ve seen, as JPM shares have been up about two per cent in pre-market trading.
The reception for Morgan Stanley's results hasn’t been as warm. Its shares fell in early trading after the Wall Street firm reported a drop in third-quarter profit and revenue as its investment banking and equity trading units slumped.
ON SECOND THOUGHT…
Chancellor Kwasi Kwarteng has been ousted as U.K. Prime Minister Liz Truss attempts to undo some of the turmoil her economic plan sparked a few weeks ago. Her strategy includes walking back the freeze on corporate taxes that was announced last month. Instead, the rate will go up to 25 per cent next year from 19 per cent. This all comes the same day the Bank of England’s emergency intervention in the bond market is scheduled to conclude. Kwarteng, who just the other day told Sky News it would be “a matter for the governor (Andrew Bailey)” to deal with any aftershocks from the end of the BoE’s gilt operations, indicated in his resignation letter that he stepped aside at Truss’s request.
BIRCHCLIFF SPECIAL DIVIDEND
It's no secret that this has been in the works for a while; yet the announcement from Birchcliff Energy that it's going to pay a special dividend of $0.20 per share later this month is likely vindication for a natural gas producer whose shares were in penny-stock territory near the onset of the pandemic and whose dividend was taken down to half a cent shortly thereafter. But now the debt is way lower, free cash is booming, and the goal of having an annual dividend at $0.80 per share (10x the current level) is still in place for next year. We're hoping to speak with CEO Jeff Tonken today about the payout, Birchcliff's updated capital spending plans, and how future excess cash will be deployed.
OTHER NOTABLE STORIES
- Beyond Meat slashed its full-year revenue outlook this morning and announced it's cutting 19 per cent of its headcount (ie, about 200 jobs) as the plant-based protein market continues to struggle after hyped-up launches. In its release, Beyond Meat blamed sector-wide weakness, increased competition, and inflation that's compelling some shoppers to trade down into meat products.
- Deal-hungry Dye & Durham is in a rough patch. After watching its takeover of Link Administration Holdings crumble a few weeks ago, now the Toronto-based software consolidator is planning to sell TM Group barely a year after it acquired the real-estate services platform for $156 million. The move to sell TMG was prompted by a U.K. regulatory decision.
- Notable data: Canadian manufacturing sales, wholesale trade, and existing home sales; U.S. retail sales and University of Michigan consumer sentiment index
- Notable earnings: JPMorgan Chase & Co., Morgan Stanley, Citigroup, Wells Fargo
- 830: Canada Pension Plan Investment Board President and CEO John Graham keynote and Q&A at Canadian Chamber of Commerce annual meeting
- 1150: Canadian Association of Petroleum Producers President and CEO Lisa Baiton Q&A at Canadian Chamber of Commerce annual meeting
- 1400: U.S. Ambassador to Canada David Cohen addresses Canadian Chamber of Commerce annual meeting.
- Goodfood Market no longer has pandemic momentum on its side. After enjoying an unexpected growth surge as COVID-19 drove demand for meal-kit and grocery delivery services, the Montreal-based company announced today it’s shutting all of its micro fulfillment centres, and will take up to a $50-million impairment charge in the fourth quarter. Goodfood also disclosed a covenant breach and is thus facing restrictions with its lenders.
- Yesterday’s speculation has turned into today’s reality as Kroger announced it’s buying Albertsons in a deal that will combine to giants of America’s supermarket industry.