Making sense of the markets this week: March 24, 2024

Decrease inflation clears runway for fee cuts

Canadians dreading their spring and summer season mortgage renewals acquired some excellent news this week, as Canada’s annualized inflation fee dropped to 2.8%.

The Statistics Canada report acknowledged that the slower progress of mobile phone service charges, groceries, and web payments had been key the explanation why the shopper value index (CPI) quantity got here in considerably decrease than the three.1% economists had reported.

The principle takeaways from Tuesday’s StatCan report are:

  • Lease and mortgage prices are nonetheless the principle drivers of inflation. Excluding shelter prices, the CPI is up solely 1.3% from a yr in the past.
  • Fuel costs rose 4% in February from January, and had been a significant purpose for the three.1% economist inflation predictions. If costs return to a decline (as has been the pattern), it could proceed to be disinflationary.
  • Notably, mobile phone plans had been down an astounding 26.5% from final February.
  • Whereas grocery costs have risen by 22% over the previous three years, it seems we’re lastly reaching an equilibrium. February was the primary time in two years that grocery CPI was decrease than total CPI headline.
  • Restaurant meals, property taxes and electrical energy had been outliers above the three% CPI mark.
  • The popular metrics of core inflation for the Financial institution of Canada (BoC) are additionally subsiding, and are right down to 2.2% annualized over the past three months.

If we use interest-rate swaps to guage the chance of an rate of interest minimize, there may be roughly an 80% likelihood (up from 50% earlier than the CPI numbers got here in), that the BoC will minimize charges in June. (Rate of interest swaps are principally a method for the free market to take a position or guess on what rates of interest can be at a selected cut-off date.)

In a associated observe, because the possibilities of interest-rate cuts improve, the worth of the Canadian Greenback falls. The CAD hit a 3-month low on Tuesday. General, that’s excellent news for mortgage holders, dangerous information for USD-paying snowbirds.

By comparability, Japan raised its rates of interest for the primary time in 17 years this week, ending the world’s final damaging rate of interest coverage. The Eurozone additionally launched its inflation knowledge this week, and in a sample fairly just like Canada’s, it additionally stunned to the draw back, as inflation fell to 2.8% from 3.1%.

This week, each the U.S. Federal Reserve and the Financial institution of Canada reiterated plans for fee cuts later within the yr.

Tender earnings for Energy Corp and Alimentation Couche-Tard 

It wasn’t precisely a banner week for Canadian heavyweights Energy Corp and Alimentation Couche-Tard.

Canadian earnings highlights of the week

Whereas Energy Corp studies in CAD, Couche-Tard studies in USD.

  • Energy Company of Canada (POW/TSX): Earnings per share of $0.89 (versus $1.08 predicted). Income for the quarter was not offered by Energy Corp at press time.
  • Alimentation Couche-Tard (ATD/TSX): Earnings per share of USD$0.65 (versus USD$0.84 predicted). Income of USD$19.62 billion (versus USD$20.85 predicted).

Shares of Couche-Tard had been down 4.2% on Thursday after its earnings launch. ATD president and CEO Brian Hannasch acknowledged that the lower-than-expected earnings had been primarily as a consequence of lowered buyer site visitors and decreased gross gasoline margin within the US. He went on to speak about how the combination of the TotalEnergies acquisition goes easily and that the corporate is happy about including 4 new nations and a couple of,175 shops to Couche-Tard’s community of comfort shops.

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