Here are five things you need to know this morning:
Biden news barely registering with investors: Just over a month ago, a sitting U.S. president announcing he has suspended his re-election campaign would have qualified as a stunning political development. But with everything that’s happened in the last few weeks, Biden’s news on Sunday that he won’t be running for president after all has not come as a surprise to investors. A Bloomberg gauge of U.S. dollar strength is down about 0.1 per cent this morning, especially when compared to emerging market currencies like the Mexican peso, while the 10-year Treasury yield dropped two basis points, Bloomberg reports. If anything, the Biden news is being viewed on financial markets as a slight improvement for the Democrats’ chances, but more pertinent for investors this week will be earnings from big tech companies, including Alphabet and Tesla which will be the first of the Magnificent Seven to report results this quarter when they do so on Tuesday.
Air Canada trims outlook: Air Canada has downgraded its earnings guidance for the year, noting premarket this morning that while demand for air travel remains strong, so do cost pressures. The airline said its EBITDA came in at $914 million during the second quarter, down from $1.2 billion a year ago. It anticipates the full year number to come in a range of between $3.1 billion and $3.4 billion, which is below the $3.7 to $4.2 previously forecast.
A&W converts corporate structure: A&W Revenue Royalties Income Fund has some interesting news this morning as the TSX-listed income trust posted quarterly results premarket, but also announced it is blowing up its corporate structure to transform itself back into a corporation. The fund, which distributes income from sales at A&W restaurants into distributions for unitholders, says it plans to combine with A&W Food Services Canada Inc., which operates the underlying restaurant business. Currently, the trust units are mostly a play on same-store sales growth and the subsequent royalties, but the company says converting the two sides of the business into one public company will unlock upside value and allow it to compete more directly with other companies in the quick-service restaurant space. Unitholders can either accept $37 cash – a 30 per cent premium to what the units were worth before the news – or take a share in the new company in the deal that’s expected to close in October.
Fairfax to buy Sleep Country Canada: Mattress seller Sleep Country Canada says it has agreed to sell itself to a subsidiary of Fairfax Financial Holdings for $1.7 billion. Under the terms of the deal announced Monday morning and expected to be completed by the end of the year, a holding company owned by Fairfax will acquired all outstanding common shares of Sleep Country for $35. That’s about a 30 per cent premium to what the shares were trading at last week, and a level they haven’t touched since 2022. It’s also the second time in Sleep Country’s history that it has been take private after going public on the TSX.
Attention focused on BOC as rate cut expected Wednesday: The biggest event on the Canadian economic calendar this week is the Bank of Canada’s next interest rate decision. Just before 10 a.m. on Wednesday morning, the central bank is widely expected to lower its benchmark lending rate by another 25 basis points to 4.5 per cent. After soft inflation numbers and downright weak retail sales data last week, most economists polled by Bloomberg are expecting a cut, and investors are even more confident, with trading on the overnight index swaps market implying a better than 90 per cent chance.
