These are stories Report on Business is following Monday, March 9, 2015.
Loonie short positions rise
Speculative bets against the Canadian dollar are rising almost by the week, reaching their highest levels in just about a year.
The net short positions for the loonie rose again last week, according to the U.S. Commodity Futures Trading Commission, to top the $3-billion mark.
"Shorts have piled on during eight of the last 10 weeks, although the CAD is still much less short than AUD and NZD," said Kevin Hebner, chief foreign exchange strategist at JPMorgan Chase & Co., referring to the currencies of Canada, Australia and New Zealand by their symbols.
The latest CFTC report was released Friday, and lists the short positions as of last Tuesday.
That means that speculators had a full week to digest the comments of a week earlier by Bank of Canada Governor Stephen Poloz, which sent the currency higher in a signal that rates would be on hold.
That's in fact what happened.
Mr. Poloz sparked the rally in the loonie by suggesting that the "insurance" he'd taken out with his surprise January rate cut was "appropriate." Then, last week, he followed through by holding his benchmark overnight rate at 0.75 per cent, though some observers still expect a second rate cut at some point.
Chief currency strategist Camilla Sutton of Bank of Nova Scotia said today she expected the short positions would have narrowed somewhat last week, given the shift in market thinking.
Having said that, the rise wasn't that big, climbing to $3.1-billion from about $2.9-billion a week earlier.
Ms. Sutton believes it all reflects the broader strength in the U.S. dollar, the general economic climate in Canada and the "vulnerability" in oil prices given the most recent crude inventory reports in the United States.
There may also have been some "switching" to bets against the loonie from the Australian dollar.
The Canadian currency, which touched a low of 79.21 cents U.S. and a high of 79.53 cents today by late afternoon, tanked again on Friday after a strong report on U.S. employment and a troubling reading on Canada's trade position.
"Even then, CAD was the third-best performing G10 currency, so most of the movement should be ascribed to USD fundamentals – not CAD fundamentals," Greg Anderson and Stephen Gallo of BMO Nesbitt Burns said in a research note.
What's next for the dollar?
Well, Friday's Canadian jobs report from Statistics Canada, for one. And oil prices, for another, said senior currency strategist Greg Moore of RBC Dominion Securities.
Employment reports are difficult to call, and observers note that Canada has yet to see the fallout from the collapse in oil prices show up in the jobs numbers.
"RBC's official forecast for the jobs report is relatively optimistic in calling for a print close to the long-term average rate … but we would shade that with some caution with three big wild cards that all point lower: 1) we have not yet seen a hit to resource sector employment despite the selloff in oil; 2) high-profile retail closures early this year have yet to appear in the data; 3) weather-related weakness," Mr. Moore said.
Target Corp., of course, is pulling out of Canada.
"Over all, even if we do see a decent employment number on Friday, the report should not change the view that we are still waiting for the hit from oil," Mr. Moore added in a report.
"And from a trading perspective we would use this week to position for our longer view of being short CAD against USD in particular."
Bank of America Merrill Lynch, for one, sees the loonie softening further, to just over 76 cents by the third quarter of the year.
And that should help the manufacturing sector.
"Although the Canadian economy faces risks from falling oil prices, the associated C$ weakness should boost exports," said the bank's Emanuella Enenajor.
"Relative to a year ago, the C$ has fallen by 15 per cent vs. the U.S. dollar," the economist added.
"And encouragingly, we have seen exports rise by an impressive 5 per cent in 2014, double the previous year's pace."
The euro, by the way, remains the most heavily-shorted currency, though that has been improving.
"The euro has pulled back most of the losses that it endured last week, but the next wave of political uncertainty in Greece will ensure that gains by the single currency will be short-lived," market analyst David Madden, of IG in London, said today, referring to its value rather than short positions.
"Greece may be content to stay in the currency union but only on its terms, and this is weighing on the euro."
- Canadian dollar sinks fast, swings wildly
- David Parkinson in ROB Insight (for subscribers): Chatty and colourful: Stephen Poloz's communication problem
- Marina Strauss: Retailers expect to raise prices, feeling pinch of weak loonie
- David Parkinson and Barrie McKenna: How Stephen Poloz changed Canada's central-banking game
- Luke Kawa: Canada's trade gap widens sharply on plunging oil
- David Parkinson: Poloz sees evidence of 'front-loaded' oil shock
Apple unveils the Watch
Apple Inc. today took the wraps off a Watch it says will change the way you use your wrist.
Among other things discussed, Apple said the watch will go on sale April 24 in several countries, including Canada and the United States.
Apple described an "intimate and immediate communication device and a groundbreaking health and fitness companion." It brings "an entirely new way to receive information at a glance and interact with the world through third-party app experiences designed specifically for the wrist."
Oh, yeah, it's also an "incredibly accurate timepiece."
You can send and read messages, and answer calls from your iPhone, or use the Apple Pay function.
It will be available in two sizes and in three editions, Sport, Watch and the upper-end Edition.
- Shane Dingman: Four things you need to know about Apple Watch launch
- A moment in time: The evolution of the smartwatch
- Apple CEO cook unveils smartwatch features, new Macbook
'Urgent' call for change
McDonald's Corp. today called for "urgent" change as it posted a same-store sales drop in February.
On a global basis, its comparable sales, a key measure in retailing, fell 1.7 per cent.
And in the key U.S. market, sales slipped 4 per cent because of what the fast-food chain called "ongoing aggressive competitive activity."
McDonald's, now under the helm of a new chief executive officer, has been struggling, saying today that being relevant has been a hallmark.
"However, consumer needs and preferences have changed, and McDonald's current performance reflects the urgent need to evolve with today's consumers, reset strategic priorities and restore business momentum," it said.
"The goal going forward is to be a true destination of choice around the world and reassert McDonald's as a modern, progressive burger company."
Simon unveils bid
Forget about deals at the mall. This one's a proposal for the mall.
Simon Property Group Inc. unveiled a $16-billion (U.S.) hostile bid for Macerich Co., a move that would link two of the America's biggest mall owners.
Having already assembled a small stake in Macerich, Simon today proposed a cash-and-stock bid it valued at $91 a share.
It has also already struck a deal to sell some of its target's assets to General Growth Properties Inc. should it succeed in its quest.
The Ontario Teachers' Pension Plan is also a player here, with Simon saying today that its proposed price is $20 more than the almost 11-per-cent stake in Macerich sold to the pension manager late last year.
GM in deal
General Motors Co. has struck a deal to end the threat of a proxy battle, unveiling a $5-billion (U.S.) stock buyback today.
The auto maker said that given its plans, activist investor Harry Wilson and the hedge funds on his side have agreed to stop.
Mr. Wilson, a former key man in the U.S. government's bailout of GM and Chrysler, had been pushing for the auto maker to spend its cash.
"Today's announcement by General Motors represents the culmination of a constructive dialogue between our investor group, senior management and the board," Mr. Wilson said in a statement today.
"As a result of this dialogue, we have arrived at a win-win outcome that includes a thoughtful approach to critical capital allocation issues and other important measures to increase long-term shareholder value."
Residential construction starts slipped in Canada last month, but economists wonder just how much to read into that given the weather.
Housing starts fell in February to an annual pace of 156,276 units from 187,025 a month earlier, Canada Mortgage and Housing Corp. said today.
It marked the lowest level since 2009, The Globe and Mail's Tamsin McMahon reports.
"The trend in housing starts decreased for a fifth consecutive month in February and reflects a decreasing trend in multiple starts," said chief economist Bob Dugan of the group's market analysis centre.
CMHC prefers to use a six-month moving average, and thus the "trend," because of the month-to-month volatility in the numbers and the impact of multiple units such as condominiums.
"The declining trend in multiple starts is helping to gradually erode the inventory of completed and unsold units, which is high compared to historical levels," Mr. Dugan said.
Yes, it's Canada. But February was particularly cold.
"The winter's chill casts doubt on how much we should read into the dive in Canadian housing starts in February," said chief economist Avery Shenfeld of CIBC World Markets, noting that today's reading is "well below" what the trend in building permits would indicate.
"February isn't in raw, unadjusted terms an important month for home building, which is a further reason to downplay this particular month's figures," he added.
"Still, we see residential construction as a slight negative in terms of its contribution to real GDP growth in upcoming quarters."
- Tamsin McMahon: Housing starts fall sharply to lowest level since 2009
- The 'hyper-competitive' Toronto home market: I feel like a million bucks
- Tamsin McMahon: Toronto housing market gets richer is it hits record $1-million price tag
Consumer confidence slips
Canadians appear to be growing ever more worried amid these uncertain economic times.
They're downright anxious, according to the latest reading of the Conference Board of Canada's consumer confidence index, which could play into consumer spending going forward.
The index slumped in February, the group said today, as consumers fretted over their own finances and job prospects.
All provincial indexes, but for that in Quebec, slipped.
"The results showed Canadians' deteriorating confidence about their current and future financial situations, their willingness to make a major purchase, and, in particular, about future job prospects in their region."
Streetwise (for subscribers)
ROB Insight (for subscribers)