First Look With Surveillance: Fed's Path, BOE Hike
North American equity markets appear poised to open in negative territory, extending yesterday’s losses as attention remains squarely on the potential for higher rates and slowing economic growth. Futures contracts on the three main indices south of the border are down a little more than a quarter of a per cent, as investors continue to asses U.S. Federal Reserve Chair Jay Powell’s commentary before Congress, where he restated the central bank’s battle to get inflation back to the two per cent target is far from over, and that rates may be somewhat higher by the end of the year.
BANK OF ENGLAND UNLEASHES SUPERSIZED HIKE
Speaking of that higher rates picture, the Bank of England surprised markets with a supersized rate increase this morning – going a full half a per cent to bring the benchmark rate to five per cent – underscoring that this fight to quell inflation is a global one, rather than localized on this side of the pond. It wasn’t unanimous – the nine member committee voted 7-2 to go the full 50 basis points – but it’s still something of a surprise, as markets had only priced in a 40 per cent chance of an increase of this magnitude. And the BoE says it may not be finished yet, warning that if price pressures persist (you’ll remember we were told inflation held firm at 8.7 per cent just yesterday), there could be more increases in the offing.
FIRST-TIME HOMEBUYERS FRET OVER AFFORDABILITY
A new report from Royal LePage says there’s increasing anxiety among first-time homebuyers about their ability to purchase the home they desire. The number of first-time buyers surveyed that said they were worried about having an insufficient down payment increased to 67 per cent (from 62 per cent), with those figures rising in the nation’s priciest housing markets (Toronto was about 74 per cent, Vancouver 71 per cent.) Not a new trend, but of note anyway: those younger buyers are turning to the Bank of Mom and Dad, with 35 per cent saying they had received support in the form of a lump-sum payment, and a quarter of respondents saying they’ve received financial help with their monthly mortgage payments.
OTHER NOTABLE STORIES
- Sportico is reporting Larry Tanenbaum is planning to sell a portion of his stake in Maple Leaf Sports & Entertainment (owner of the Maple Leafs, Raptors and Toronto FC) in a deal that would value the holding company at more than US$8 billion. (Standard disclosure – BCE, the parent company of this network, owns a 37.5 per cent stake in MLSE.)
- Bakery giant Canada Bread has been fined $50 million for its role in that wide-ranging bread price fixing scandal, the largest price-fixing fine in Canadian history. We’re looking forward to hearing from Competition Commissioner Matthew Boswell today on the Street for more.
- Sobeys parent Empire Co. topped fourth quarter adjusted profit estimates and is increasing its quarterly dividend 10.6 per cent to $0.1825 per share.
- Notable data: U.S. Initial Jobless Claims, U.S. Current Account, U.S. Existing Home Sales, U.S. Leading Indicators
- Notable earnings: Empire Co., Darden Restaurants
- 1100: Algoma Steel conference call to discuss earnings
- 1130: Empire Co. conference call to discuss earnings