Some watchers of the Bank of Canada haven’t been paying attention.
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Bloomberg News, Reuters, the Financial Post, and the Globe and Mail’s Report on Business (subscribers only) all wrote about the air pocket the Canadian dollar flew into after Governor Stephen Poloz read his opening statement at the central bank’s quarterly press conference on Oct. 19. Everything was fine after the central bank announced that it had decided to leave its benchmark interest rate at 0.5%, while stating that it had cut its outlook for economic growth and indicating that it would take longer to achieve its inflation target. Those two things should have triggered some repricing, as the Bank of Canada’s outlook had materially changed. But that didn’t happen until Poloz said these words about an hour later: “Given the downgrade to our outlook, Governing Council actively discussed the possibility of adding more monetary stimulus at this time, in order to speed up the return of the economy to full capacity.”
LONDON – British American Tobacco has offered to buy out Reynolds American Inc. for $47 billion in an attempt to gain a strong presence in the U.S., a lucrative market where sales of electronic cigarettes are booming as traditional smoking fades.
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The takeover would create the world’s largest publicly traded tobacco company and combine BAT’s presence in developing countries, where anti-smoking campaigns are not as strong as in the U.S. and Europe, with Reynolds’ almost exclusive focus on the U.S.
BAT already owns 42 per cent of Reynolds and sells Dunhill, Rothmans and Lucky Strike cigarettes. Reynolds controls about a third of the U.S. market with brands like Newport, Camel and Pall Mall.
Though smoking in the U.S. is declining, it remains “the largest global profit pool” outside of China, BAT said in a statement Friday. The U.S. is one of the biggest markets for e-cigarettes.
“BAT and Reynolds American have a strong existing relationship, and while cost savings will be relatively modest, the full access this acquisition would give BAT to the U.S. — a lucrative, consolidated market with high barriers to entry — means it makes eminent sense,” Shane MacGuill, head of tobacco at Euromonitor International, said by email.
The British company offered Friday to buy the Reynolds shares it doesn’t already own for the equivalent of $56.50 each, 20 per cent more than Thursday’s closing price. Investors would
OTTAWA – The federal government formally launched consultations Friday to explore potential changes that would shift some of the financial risk tied to insured mortgages from the shoulders of taxpayers to lenders, such as the banks.
Under Canada’s current system, lenders are able to transfer virtually all of the risk from insured mortgages to insurers, which are indirectly backstopped by taxpayers, the government said.
The Finance Department has been examining the possibility of making such a change for a couple of years and it’s now seeking more input.
Finance Minister Bill Morneau announced the consultations into so-called “lender risk sharing” earlier this month as part of a package of changes related to Canada’s housing market.
The consultations are designed to help Ottawa determine whether having lenders absorb a modest chunk of loan losses on insured-mortgage defaults would help shore up stability in the system.
“Lender risk sharing would aim to rebalance risk in the housing finance system,” said a background document released Friday by Morneau’s department.
The trade-off from such a shift in risk away from taxpayers would likely raise costs for lenders, and therefore, homebuyers — but the government expects any impact to be “limited.”
The background document said a preliminary analysis suggests the average increase in lender costs over a five-year period could be 0.2 to 0.3 percentage points.
For several years, the International Monetary Fund has fired off warnings that Ottawa should consider scaling back its role in insuring home mortgages through the government’s Canada Mortgage and Housing Corp. The government-backed Canadian system is
Shares of Skechers plunged 17 percent in midday trading on Friday as it was downgraded to “neutral” from “buy” at Citi, following a disappointing earnings report.
The company posted earnings of 42 cents a share on revenue of $942 million on Thursday. Analysts had expected earnings of 46 cents a share on $954 million in revenue, according to a Thomson Reuters consensus estimate.
Skechers also issued disappointing guidance and said it now expects fourth-quarter sales between $710 million and $735 million. Wall Street had previously projected $800 million in quarterly revenue, according to Thomson Reuters.
Citi lowered its price target to $21 from $33, citing a “lack of visibility” which “could result in further volatility over the next year while keeping valuation in a depressed range until the company returns to a more predictable growth trajectory.”
Citi said, however, that it still believes Skechers “has significant long-term opportunities for global growth, supported by the company’s diversification across product categories [and] international markets.”
It’s also possible that “downside risks are priced in,” Citi said in its research note. With Friday’s decline, the stock is down about 37 percent so far this year.
Disclosure: Citigroup Global Markets or its affiliates has received compensation for investment banking services provided within the past 12 months from Skechers. The firm or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from the company. Citigroup currently has
Alkermes stock surged 47 percent Friday after its depression drug met its main goal in a final-stage study.
ALKS 5461 proved effective in re-balancing brain function in patients with major depressive disorder that failed to benefit from other treatments, the company reported late Thursday. Alkermes will now meet with the Food and Drug Administration to determine the next steps toward regulatory approval.
According to the National Institute of Mental Health, depression is one of the most common mental disorders in the U.S., with an estimated 16 million adults reporting at least one major depressive episode in the past year.
The news followed earlier setbacks with drug. In January, Alkermes shares plummeted after ALKS 5461 failed to meet goals in an earlier Phase III trial.
Even with Friday’s big gains, the company’s shares remain far below the stock’s 52-week high of $80.71. Recently, Alkermes traded hands at $57.43, up $13.92, or 32 percent.
Investors should avoid grocery companies’ shares in the short term due to the likelihood of more food price deflation into next year, according to Oppenheimer.
“The current food deflation cycle has lasted much longer than most anticipated, with the latest data point representing the worst reading,” analyst Rupesh Parikh wrote in a note to clients Friday.
“Based on our work, we see the possibility of food deflation persisting well into next year, potentially through the middle of 2017. … As a result, we continue to believe shorter-term investors should steer clear of grocery names.”
Parikh’s picks have a 17 percent one-year average return and a 59 percent success rate for a profit, according to analyst ranking service TipRanks. That places him in the top 2 percent of all Wall Street analysts covering any industry.
Renowned energy trader Mark Fisher is not parsing words when it comes to buying crude oil and natural gas — on Friday, he advised buying any dip in the commodities.
Crude futures have rallied about 90 percent since bottoming out earlier this year in the upper $20s, but remain well below their 2014 highs above $100 a barrel. They have more recently been bolstered as OPEC prepares to launch its first coordinated output limits in eight years in order to prop up prices.
This week, U.S. crude traded at a 15-month high near $52 a barrel.
Despite expectations that the OPEC deal will be difficult to enforce, Fisher said he believes oil will continue on a slow grind higher over the next 12 to 18 months.
“In my opinion, the most likely course is for the market to gradually establish a new base someplace in the $55 to $65 range barring some kind of geopolitical problem,” he told CNBC’s “Fast Money: Halftime Report.”
Fisher is the founder and CEO of MBF Clearing, one of the leading energy-oriented introducing brokers.
As crude rallies, natural gas futures are up about 29 percent year to date. Last week, they struck a high going back to December 2014 of $3.36 per million British thermal units.
Fisher said he believes natural gas can hit $4 per million British thermal units in just a