Here are five things you need to know this morning:
Off switch: Markets are in a risk-off mood sparked by tepid economic data out of China, higher inflation in the U.K. and pushback on rate expectations by the European Central Bank’s Christine Lagarde. While China hit its official growth target of five per cent for 2023, the details were troubling. Property prices fell the most since 2015 and retail sales growth hit a four-month low. Birth rates in China are hitting record lows and death rates are hitting their highest levels since 1974. Across the pond, U.K. inflation surprised investors by picking up for the first time in 10 months. Signs of stickier inflation not just in the U.K., but in Canada and U.S. are making investors nervous about their rate cut bets. Indeed, this morning European Central Bank President Christine Lagarde said rate cuts are likely this summer, but she pushed back on rate cut bets as early as April. For investors who believe in seasonality and the “January effect,” North American indices are all red for the month. This morning we got retail sales in the U.S. that came in stronger across the board, so the consumer remains strong.
No love: U.S. financials are weaker this morning for a litany of reasons. First, a bunch of regional banks reported, including Charles Schwab, Citizens Financial and U.S. Bancorp. All beat expectations, but profit is lower across the board compared to last year. Most are getting no love pre-market. Meanwhile, the new CEO at Morgan Stanley is getting a cold reception from analysts. One day after reporting earnings, analysts at JP Morgan and KBW are downgrading the stock which is poised to extend its five-session slump this morning. Then you have long-time bank analyst Dick Bove at Odeon reversing his buy rating on Bank of America following its results on Friday. He upgraded the stock a month ago but is now telling clients that Friday’s results showed disappointing performance, saying the outlook “isn’t good.”
Dirty laundry: The board at Gildan Activewear is “spilling the tea,” as the kids say. Instead of backing down in the face of investor pressure over the firing of former CEO Glenn Chamandy, the board put out a letter saying Chamandy rarely came to the office and sent “no more than a handful of work emails a day.” It’s the kind of drama we almost never see spill out into the public view in corporate Canada. “The board’s latest release barely warrants a response,” Chamandy said in a response yesterday. “It continues to reflect an approach that is misguided … prioritizing the obsession of board members with their own reputations above all else.” The saga continues.
New flyer: NFI Group is trimming its profit forecast for 2024. The Winnipeg-based maker of electric buses has reduced the top end of its expected profit range by $20 million. While the company's sales outlook is holding steady, NFI says rising costs and labour inefficiencies are hurting its bottom line.
Weird Barbie: Mattel’s fortunes seem to be going the way of Weird Barbie this morning. If you haven’t seen the movie, Weird Barbie is that doll that all little girls have. The doll that has her hair cut into sharp pointy jags, is missing limbs and has marker all over her face. Since the release of the movie, Mattel shares have fallen nearly 13 per cent – making it more weird than stereotypical. This morning, Morgan Stanley is downgrading the stock, saying 2024 doesn’t look good. With no blockbuster movie to buffet things, the analyst says there are limited growth drivers. While Mattel isn’t down as much as Hasbro over the same period, I’m reminded of that old saying: “you can’t eat relative performance.”