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Briefing highlights

  • Luxury home sales picking up
  • Progress in U.S.-China trade talks
  • Stocks, Canadian dollar, oil at a glance
  • Bank of England holds steady
  • Canadian Tire misses revenue estimates
  • Telus raises dividend, profit dips
  • EU forecasts soft growth
  • Canadian Natural adjusted profit slips
  • Quebec fiscal update on tap
  • What analysts are saying today
  • Required Reading

‘Uber-luxury’

Sales of “uber-luxury” homes are picking up in the Greater Toronto Area.

We’re talking here about properties valued at more than $5-million. And, according to Re/Max of Ontario-Atlantic Canada, 102 such properties traded hands between the start of the year and Oct. 31.

Sales of freehold properties, which include singles and semis, far outnumbered those of condominium apartments and townhomes. Here’s how it looks:

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High end housing sales in the GTA

Jan. 1 to Oct. 31

Year Price Freehold Condo Total
2016 $2M+ 2,588 91 2,679
2016 $5M+ 97 3 100
2017 $2M+ 2,983 141 3,124
2017 $5M+ 163 10 173
2018 $2M+ 1,664 145 1,809
2018 $5M+ 88 6 94
2019 $2M+ 1,829 146 1,975
2019 $5M+ 97 5 102

SOURCE: TREB, RE/MAX OF ONTARIO-ATLANTIC CANADA

It’s interesting to note that sales at “both the top and the bottom” of the luxury market, those being the $5-million-plus and $2-million-plus categories, have gained, while those in the middle, between $3-million and $4.99-million, have slipped.

(I’m tempted to joke here about how the “middle” class is lagging, given the federal Liberal focus.)

“Sales of luxury properties between $3- and $5-million are expected to climb in the year ahead as the ripple effect works its way through various price points,” said Christopher Alexander, executive vice-president and regional director at Re/Max of Ontario-Atlantic Canada.

“Sales at lower price points tend to stimulate sales at the next level, as home buyers trade up to larger homes or more desirable neighbourhoods,” he added in releasing the sales numbers.

The year started out on a soft note, Re/Max said, and Toronto proper has had the best showing since things picked up, followed by York Region.

“The top neighbourhoods for homes sales in the $5-million-plus category are Forest Hill and Rosedale, where transactions are on par or ahead of levels reported in 2017,” Re/Max said.

Re/Max also noted the gains in the condo category.

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“Demand for apartments and townhomes at higher price points continues to climb as baby boomers and empty nesters seek to downsize,” the real estate company said.

“Inventory issues have been a major obstacle in recent months, with demand outpacing supply throughout the downtown core, placing upward pressure on prices and, in some instances, creating bidding wars.”

Read more

China says Beijing, U.S. to lift tariff hikes

From The Associated Press:

Beijing and Washington have agreed to reduce some punitive tariffs on each other’s goods as talks on ending their trade war progress, a Chinese spokesman said, removing a possible stumbling block to a settlement.

The agreement came during talks aimed at working out details of a “Phase 1” deal announced Oct. 12. Financial markets were rattled by reports China was pushing for tariffs to be lifted, which raised the possibility of a breakdown in talks.

Negotiators agreed to a “phased cancellation” of tariff hikes if talks progress, said Commerce Ministry spokesman Gao Feng.

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“If the two sides achieve a ‘Phase 1’ agreement, then based on the content of that agreement, tariffs already increased should be cancelled at the same time and by the same rate.”

Read more

Markets at a glance

Read more

BoE stands pat

The Bank of England held its key rate steady at 0.75 per cent amid the wrangling over Brexit, though two dissenters on the panel wanted to trim the benchmark.

“Forecasts for GDP growth were cut, mostly to global economic uncertainty, but the assumption of a smooth Brexit is still the base scenario,” said Bank of Montreal senior economist Jennifer Lee.

“However, with so much hanging in the balance… the Dec. 12 election is first and the outcome will determine what happens on Jan. 31 (should we stay or should we go), it makes complete sense to just do nothing,” she added.

“And note that the next BoE meeting comes a week after the election”

Ticker

Canadian Tire misses revenue estimates

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From Reuters: Canadian Tire Corp. reported quarterly revenue below estimates, hurt by rising competition from Walmart Inc. and Amazon.com. Net income fell to $227.7-million, or $3.20 a share, in the third quarter ended Sept. 28, from $231.3-million or $3.15 a year earlier. Revenue rose marginally to $3.64-billion, but missed the average analyst estimate of $3.73-billion, according to IBES data from Refinitiv. Canadian Tire also raised its dividend 9.6 per cent to $4.55.

Telus raises dividend

From The Canadian Press: Telus Corp. reported its third-quarter profit slipped lower compared a year ago, but the company raised its quarterly dividend. The telecommunications firm said it will now pay a quarterly dividend of 58.25 cents a share, up from 56.25 cents. The increased payment to shareholders came as Telus reported net income of $440-million or 72 cents a share for the quarter, down from $447-million or 74 cents a year earlier. On an adjusted basis, Telus said it earned 76 cents a share for the quarter, up from 74 cents.

EU sees soft growth

From The Associated Press: The European Union’s executive branch has cut its growth forecasts for the 19-country euro zone for this year and next, and warned that conditions could worsen in the face of an array of uncertainties. The European Commission said the bloc is expected to grow 1.1 per cent this year, down 0.1 percentage point from the previous forecast. Next year, growth is expected to be 0.2 of percentage point lower than previously estimated 1.2 per cent. Growth in 2021 is also forecast at 1.2 per cent.

Abe promises to fight threats

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From Reuters: Japanese Prime Minister Shinzo Abe said the government will consider what policy measures it can take to prevent heightening global uncertainties from derailing the export-reliant economic recovery. “We’d like to consider what we can do now, as we need to take macroeconomic policy steps in a timely fashion,” Mr. Abe told a meeting of the Council on Economic and Fiscal Policy, the government’s top economic council.

Canadian Natural adjusted profit slips

From Reuters: Oil and gas producer Canadian Natural Resources Ltd. reported a 9.2-per-cent fall in quarterly adjusted profit, hit by lower natural gas production. The company’s adjusted earnings came in at $1.23-billion, or $1.04 a share, in the third quarter ended Sept. 30, compared with $1.35-billion or $1.11 a year earlier.

Toyota plans buyback

From Reuters: Toyota Motor Corp. plans a US$1.8-billion share buyback, Japan’s biggest auto maker said, after beating quarterly forecasts on higher global vehicle sales and an improved performance in North America. Operating profit rose 14 per cent to ¥662.3-billion for the three months to Sept. 30 as Toyota enjoyed its strongest second quarter since 2015.

Also ...

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What to watch for today

On tap is a fiscal update from Quebec, whose finances should be the envy of the other provinces.

“It’s no secret that its finances may well be in better shape than budgeted last spring, thanks to the impressive vigour of the Quebec economy,” said Matthieu Arseneau, National Bank of Canada’s deputy chief economist.

Bank of Montreal senior economist Robert Kavcic also cited the strength of both the economy and Quebec’s books.

“This year’s budget continued to cut taxes and uphold what is arguably the most positive fiscal story in Canada – we don’t see that momentum changing in the near future,” he said.

“We estimate that 2019 GDP will come in 2.8 per cent above potential, the largest spread since 2000 and the most favourable of any Canadian province,” Mr. Arseneau said.

“With the economy in this enviable state, we think the Quebec government should be showing a surplus rather than balanced books.”

So “it will not be surprising” to see stronger government revenues than forecast.

But, Mr. Arseneau warned, the province should shy away from commitments “with recurring effect” unless they’re accompanied by ways to boost productivity.

“The government has set out to raise Quebecers’ standard of living to reduce their dependence on equalization payments,” he added.

“This objective cannot be attained without an increase in business and government productivity. Without that, the structural deficit will keep growing as demographics keep changing, demanding painful correctives that could compromise the sustainability of Quebec’s social safety net.”

What analysts are saying today

“Having seen markets pause briefly over the course of the past two days on concerns that the [U.S.-China trade] talks might get bogged down on the U.S. being resistant to the removal of tariffs, investors appear to be growing in confidence that we will see some progress by year end. This could well be another false dawn given the U.S. presidential election is still a year away and could merely be a case of stating the obvious when it comes to signposting progress. Mapping out a timetable is one thing, implementing it is another, and it certainly doesn’t mean progress is likely to be swift.” Michael Hewson, chief analyst, CMC Markets

“I can't escape the feeling that President Trump likes a ‘two-step forwards, one step backwards' approach to negotiations. Maybe more line dance than tango? Anyway, the erratic news flow doesn't mean progress isn't being made, and in that regard some optimism is warranted. That doesn't mean the U.S. is certain to escape further slowdown, or even recession, next year, but it does mean that a big negative shock is unlikely, and maybe that will continue to put a floor under the most trade-sensitive currencies.” Kit Juckes, global fixed income strategist, Société Générale

“Traders are all too aware that China can play the long game. Trump is up for re-election in November 2020, so Beijing have no motivation to wrap things up quickly. Mr. Trump needs to be seen to be taking the economic fight to China, but he also needs stock markets to be strong, so this entire process is likely to go back and forth for many months to come.” David Madden, analyst, CMC Markets

Required Reading

Orphaned wells threat

Alberta faces another spike in unfunded environmental cleanup liabilities after the latest collapse of an oil-and-gas producer, Jeffrey Jones writes. The insolvency of Houston Oil & Gas Ltd. could push as many as 1,400 more wells onto the province’s inventory of orphan sites – unless they can be sold – after the company’s officers and directors walked away from the assets and let go its employees and contractors.

IPO failure

Debt concerns and private backers playing hardball. Tim Kiladze looks at why GFL’s IPO failed.

More cost savings needed: Barrick chief

Barrick Gold Corp.’s chief executive officer says the gold mining sector needs more merger activity to capitalize on the cost savings that come from closing head offices and cutting staff. Niall McGee reports.

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