Briefing highlights
- Pump prices on the rise
- Canola and the Canadian dollar
- An Ontario pot scene I’d love to see
- Stocks, loonie, oil at a glance
- Telecom complaints on the rise
- Muted returns for Teachers
- Global trade growth to slow: WTO
- Required Reading
Why pump prices are rising
No, it’s not just the April 1 carbon tax in Ontario, Manitoba, New Brunswick and Saskatchewan.
What’s really driving prices higher is the sharp rise in global oil prices, Bank of Montreal says.
“There’s a much greater force at work on pump prices rumbling away - the spirited comeback in world oil prices,” said BMO chief economist Douglas Porter, noting Monday’s jump above US$61 a barrel in West Texas intermediate, the U.S. crude benchmark.
“And, because of only a limited response in the Canadian dollar to the rebound in oil, WTI expressed in [Canadian dollar] terms is now close to C$82/barrel,” Mr. Porter said.
“Gasoline prices can sometimes be bumped around temporarily by other factors (seasonality, competition, and, yes, taxes), but oil prices are a solid anchor,” he added.
“And, the rebound since the turn of the year has lifted Canadian pump prices by 20 per cent from the early year lows - even before the carbon tax. Still, prices are a snick below levels prevailing a year ago.”
The strength continues today.
“Oil prices are slightly on the rise again, with WTI crossing US$62 for the first time since early November last year and Brent crossing US$69, which takes us back to mid-November levels,” said Derek Holt, Bank of Nova Scotia’s head of capital markets economics, noting, too, that the benchmark Western Canada Select is at its strongest since mid-July.
Read more
- Oil hits 2019 high on OPEC cuts, concerns over demand ease
- Shawn McCarthy: Ontario, Manitoba, N.B. and Saskatchewan may see spike in pump prices Monday as climate-change levy takes effect
Canola and the loonie
China’s “crackdown” on Canadian canola exports could sink an already troubled Canadian dollar, CIBC World Market says.
This comes as the loonie’s outlook is already hampered, for a few reasons but largely because the Bank of Canada is holding interest rates steady, with no timeline for raising its benchmark at this point.
As The Globe and Mail’s Alexandra Posadzki and Eric Atkins report, China’s expanded ban, which comes amid a heated dispute between Beijing and Ottawa since Canada’s arrest of Huawei’s chief financial officer, has sent farmers in search of other buyers.
Now, said CIBC senior economist Royce Mendes and analyst Taylor Rochwerg, there’s a threat to Canada’s trade balance and, thus, risks for the loonie.
“China’s crackdown on Canadian canola could add to the fall in crop product exports, which were down 25 per cent in January’s trade data after soybean shipments to the country declined,” said Mr. Mendes and Ms. Rochwerg.
“Last year, Canada exported $4.4-billion worth of canola products to China, the largest vegetable oil consumer in the world,” they added in a report.
“Exports to China have been helping diversify Canada’s export base, with growth to that nation outrunning increases in shipments to the U.S. However, if tensions persist and China continues to block imports from Canadian canola producers, the frictions could show up as a drag on the trade balance, as prices would likely fall even if producers sold the products to other destinations.”
This would ripple through the trade sector, as Canada is trying to boost its non-oil exports, which is how it gets to the loonie.
“The canola crackdown will help drive down the Canadian dollar, as there will be lower demand for Canadian exports,” Ms. Rochwerg said.
Read more
- Canadian dollar faces period of ‘broad and sustained depreciation’
- Eric Atkins: Canada plans to send delegation to China over canola clash
- Alexandra Posadzki, Eric Atkins: Canola prices tumble, Canadian farmers scramble to find new buyers amid Chinese trade tensions
- Ann Hui: Farmers in Prairies single out Trudeau for canola crisis
- ‘When it comes to the loonie, sell strength at every opportunity’: Analysts cut their Canadian dollar forecasts
- How the Canadian dollar bulls got crushed
A scene I’d love to see
Photo illustration
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Markets at a glance
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Ticker
Telecom complaints rise
The fast pace of growth at Freedom Mobile has contributed to a spike in customers complaining about the regional wireless provider to Canada’s telecom ombudsman, Christine Dobby reports.
Muted returns for Teachers
Ontario Teachers’ Pension Plan posted a return of 2.5 per cent for 2018, joining other larger Canadian plans that posted muted returns last year as global markets suffered the worst year since the financial crisis, David Milstead writes.
Trade to suffer
Global trade faces “strong headwinds” again this year and next after slower-than-expected growth in 2018, the World Trade Organization said today, forecasting 2019 will see volumes slow to a pace of 2.6 per cent from 2018’s 3 per cent. Said director-general Roberto Azevêdo: "With trade tensions running high, no one should be surprised by this outlook. Trade cannot play its full role in driving growth when we see such high levels of uncertainty. It is increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in today’s economy – such as the technological revolution and the imperative of creating jobs and boosting development.”
Analysts expect China’s central bank to act
Analysts expect the People’s Bank of China to soon cut the key cash reserve requirements among commercial banks, again, to support the financial system, Reuters reports.
Required Reading
Callidus sees deep loss
Lending firm Callidus Capital Corp. reported another deep quarterly loss and said its net worth had fallen below zero, due partly to the weak financial performance of a number of companies it has acquired. Jeffrey Jones reports.
Brexit woes
As Britain’s Parliament struggles to find a Brexit solution, the chaos surrounding the country’s departure from the European Union has begun to wreak havoc on the economy. Several car plants have begun temporary shutdowns to cope with potential disruptions and one of Europe’s largest discount airlines, EasyJet, said consumers have started holding back on buying tickets. Europe correspondent Paul Waldie looks at the troubles.
‘Price matters’
The flat yield curve everyone in finance is talking about these days is a gift to Canada’s newest online bank. Motusbank, brought to you by Ontario-based Meridian Credit Union, is a virtual bank that charges nothing for chequing accounts, pays a good rate on savings and has a unique offer on mortgages: All terms from one to five years have the same interest rate. Personal finance columnist Rob Carrick looks at the new bank.