Here are five things you need to know this morning:
TSX poised to see red: Canada’s benchmark stock exchange was closed for a holiday long weekend yesterday, which means Canadian investors were spared from the carnage that swept over global markets on Monday. But the piper must be paid, so we’re expecting a lot of red numbers on Bay Street this morning. Monday’s rout actually ended up not being quite as bad as things seemed early in the morning, with most indices paring some losses in the afternoon. But there was essentially nowhere to hide, as the Bank of Japan’s decision to ever so slightly raise lending rates prompted a rapid unwinding of a yen carry trade that then reverberated around the world. At one point, major New York stock groupings like the Dow and S&P were down by more than five per cent before rallying somewhat to close down about three per cent. Futures are mildly positive on Wall Street this morning, so it’s unclear what level, precisely, the TSX will be catching up to, but it’s safe to say the colour palette will contain a lot more red than green. The Canadian earnings calendar gets a little more interesting later on in the week with household names like Air Canada, Canadian Tire, Tim Hortons owner Restaurant Brands and Shopify reporting numbers in the coming days. But for now, expect the trading in Toronto to be based more on sentiment than data.
Labour Minister leads talks to avert strike at CP and CN Rail: Negotiations to avoid a strike at Canada’s railway duopoly will resume tomorrow; a hopeful breakthrough after being log-jammed for months. Leaders from Canadian National Railway and Canadian Pacific Kansas City met with union leaders and Canada’s newly minted Labour Minister Steve KacKinnon on Monday. While talks between the rail companies and the Teamsters union that represents workers have been in a stand-off for months, CP Rail head Keith Creel reminded the market of the dire situation last week when he said a work stoppage was “most probable” as soon as this month as the two sides remain far apart. The three parties met with MacKinnon on Monday, and the minister put out a statement following, calling the meetings “frank” and “collective discussions.” It’s hard to understate just how key the rail companies are to Canada’s economy, as they collectively move more than $400 billion worth of goods annually. The earliest time a strike could happen would be next week, as the Canada Industrial Relations Board first has to rule on what shipments must continue during any stoppage. That’s expected to happen by Friday and by the rules, a strike could happen as soon as 72 hours after that.
Judge rules against Google in landmark antitrust suit: A U.S. federal judge has seemingly handed the government its biggest antitrust win in more than two decades after ruling that Google illegally and unfairly monopolized the online search and advertising market for years. Federal court judge Amit Mehta has ruled that Google’s US$26 billion in payments to make its search engine the default option on phones and other web browsers effectively made it impossible for other companies to succeed in the market. That’s led to Google being allowed to raise the price of online advertising without having to suffer the consequence of losing business to competitors, Mehta said. While the case is now likely to be mired in the appeals process, it is nonetheless a major win for the U.S. Justice Department that has increasingly been targeting Big Tech firms on anti-competitive grounds. U.S. Attorney General Merrick Garland called the ruling a “historic win for the American people.” We’ll see how investors react to the news on a day where trading in shares of Google-parent Alphabet was already going to be volatile.
U.K. refuses to rule out increase to capital gains tax: The U.K.’s Chancellor of the Exchequer – the equivalent of the Finance Minister in Canada – declined to rule out increasing the capital gains tax in an interview with Bloomberg this morning. Rachel Reeves told Bloomberg that difficult decisions will have to be made as the new Labour administration tries to balance the government’s books, which include a $28 billion annual deficit. The new government is slated to unveil its inaugural budget at the end of October, and is faced with trying to thread the needle of balancing the government’s books while also stimulating investment. Reeves has ruled out increases to things like income tax and adding any new value-added taxes at the consumer level, leading to speculation that the government is going to have to find new unconventional ways of raising money. “I want to bring that tax burden down because I want to make Britain the best place to start and grow a business and I want working people to keep more of their own money in their pockets,” she said.
Toronto house prices inch higher in July, even as sales and listing decline: The Toronto Region Real Estate Board (TRREB) put out new market numbers for July this morning, and the data shows the benchmark price for a home in the city inched up 0.1 per cent to just over $1.09 million. The increase came despite a 1.7 per cent decline in the number of homes for sale, and a 0.8 per cent decrease in the number of new listings. The decline in listings is especially interesting since it’s the first decline after three months of gains. Canada’s largest housing market has been in wait and see mode for months now in anticipation of Bank of Canada rate cuts. Now that the central bank has started cutting and is signalling more to come, it will be interesting to see if the wide gulf between expectations of buyers and sellers starts to meet in the middle somewhere. “As more buyers take advantage of more affordable mortgage payments in the months ahead, they will benefit from the substantial build-up in inventory,” TRREB Chief Market Analyst Jason Mercer said in the statement.
