TSX drops to two-week low amid econ

CANADA-STOCKS/ (UPDATE 1):CANADA STOCKS-TSX drops to two-week low amid economic growth concerns, Trump’s tariff threats

Reuters

Published13 Dec 2024, 04:57 AM IST

(Updated at 10:38 a.m. ET/ 1538 GMT)

By Ragini Mathur and Nikhil Sharma

Dec 12 (Reuters) – Canada’s main stock index dropped to a more-than-two-week low on Thursday, dragged by commodity stocks, as investors grew nervous about the domestic economic growth amid looming tariff threats by Donald Trump.

The Toronto Stock Exchange’s S&P/TSX composite index was down 209.55 points, or 0.82%, at 25,448.45, and was trading at its lowest since Oct. 31.

At least nine sectors on the index nursed losses, led by the commodity-focussed sectors, with materials falling 2.1%, tracking gold and copper prices.

The heavyweight energy also declined 2% as oil prices decreased following forecasts of ample supply, which offset the optimism around a potential U.S. interest rate cut.

The Canadian central bank slashed its key policy rate by 50 basis points on Wednesday to help boost the country’s slower growth.

“This is the fifth consecutive rate cut and another super-sized cut as well” and “signals a weaker-than-expected economy in Canada,” said Shiraz Ahmed, senior portfolio manager and founder of Sartorial Wealth at Raymond James.

“Adding to this are the ongoing tariff discussions,” Ahmed continued, which he said are among the factors that are “creating a sense of unease in the markets”.

Trump’s tariff threats have raised fears of a trade war between the U.S. and Canada, with the majority of Canadian oil exports sent across the border.

Among individual stocks, Empire Company jumped 7.6% to scale to an all-time high after the food and retail distribution company surpassed estimates for second-quarter profit.

Imperial Oil fell 4.8% following its forecast of higher crude production in 2025, as the Canadian energy major expects to ramp up output from existing oil sands assets.

Stateside, producer prices rose more than anticipated in November, while weekly jobless claims unexpectedly rose last week. (Reporting by Ragini Mathur; Editing by Vijay Kishore)

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First Published:13 Dec 2024, 04:57 AM IST

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Two senior federal government sources have confirmed to CTV News that the federal government has sold its stake in Air Canada.

The news was first reported by the Globe and Mail.

During the COVID-19 pandemic in 2021, the government purchased a six per cent stake in the airline for $500 million as part of a bailout package.

Ottawa’s rescue deal with Air Canada at the time included a $5.9-billion loan from the government to help support the airline after it lost billions of dollars during the pandemic.

As of Thursday afternoon, Air Canada shares closed at $25.28 on the Toronto Stock Exchange, up 23 cents.

CTV News reached out to the federal transport minister’s office and was referred instead to Deputy Prime Minister and Minister of Finance Chrystia Freeland’s office, who has not yet responded.

Last week, Transport Minister Anita Anand told CTV News she was “examining the particular legal relationship” with Air Canada in an effort to figure out how to dissuade the airline from bringing in additional carry-on fees.

Air Canada has yet to respond to CTV News’ request for comment.

Ian Lee, associate professor at Carleton University’s Sprott School of Business, says the government should have never bought shares in Air Canada in the first place.

“Its role is the referee of the hockey game, it should not own the hockey team or tell Sidney Crosby when to shoot the puck,” he told CTV News Channel.

“The government of Canada provided billions of dollars to many thousands of corporations in Canada and did not take ownership positions in all those other companies.”

When asked about whether Ottawa selling its shares in Air Canada is in any way connected to the government’s spending announcement on Monday, Lee says yes.

“There’s an awful lot of buzz that they’re going to crank up spending yet again. And so, the government needs money. They’re rattling the cupboards to see what bits and pieces can be sold off.”

Empire’s chief executive believes the grocery retailer has a leg up on the competition as consumer sentiment improves amid lower inflation and interest rates, and the gap between its discount and full-service stores shrinks.

“We believe this will be advantageous to us as we continue to lean into our strengths as a full-service foremost grocer,” said Michael Medline, president and CEO of the company that owns Sobeys, Safeway, FreshCo, Farm Boy, Longo’s and other grocery banners across the country.

“We saw momentum and green shoots in both the economy and our business,” he said on a conference call with analysts discussing the company’s second-quarter financial results.

“Inflation has now moderated, and interest rates have begun to decline, representing a positive inflection point for full service.”

Like its competitors, Empire has been increasing its discount store footprint through new stores and conversions. But it’s also got big plans for its higher-end stores in Ontario.

“You’re going to see many new Farm Boy and Longo’s stores going up over the next year and two years,” said Medline.

The company said it earned a second-quarter profit of $173.4 million, compared with $181.1 million a year earlier.

Sales for the quarter totalled $7.78 billion, up from $7.75 billion a year earlier.

The increase came as same-store sales rose 1.1 per cent. Same-store sales growth, excluding fuel sales, were up 1.8 per cent.

The company’s e-commerce sales grew 12.2 per cent during the quarter, driven primarily by Voilà, said Medline.

“Growing Canadian e-commerce penetration is the key tailwind that we need to accelerate the growth of Voilà,” he said.

Near the end of the quarter, the company also launched new partnerships with Instacart and Uber Eats to complement its Voilà service.

Empire said in a press release that it intends to continue investing in its store network, including renovating approximately 20 to 25 per cent of stores between fiscal 2024 and 2026.

During the quarter, Empire said it invested $149.2 million in capital expenditures, including renovations, construction of new stores, and other technological investments.

Medline said during the quarter the company completed the expansion of one of its distribution centres in Ontario.

This has helped margins by redirecting some deliveries to the distribution centre instead of individual stores, he said, boosting freshness, waste reduction and product availability.

The company provided an update on its expansion of discount banner FreshCo in Western Canada, with 48 stores now operating in the region. Empire said it expects to achieve its original target of converting up to a quarter of its Safeway and Sobeys stores to FreshCo over the next several years.

Empire’s stock closed more than five per cent higher to $45.28 on the Toronto Stock Exchange on Thursday.

The company said its profit amounted to 73 cents per diluted share for the 13-week period ended Nov. 2 compared with a profit of 72 cents per diluted share a year ago when it had more shares outstanding.

On an adjusted basis, it earned 73 cents per diluted share in its latest quarter, up from an adjusted profit of 71 cents per diluted share in the same quarter last year.

The average analyst estimate had been for an adjusted profit of 66 cents per share, according to data provided by LSEG Data & Analytics.

This report by The Canadian Press was first published Dec. 12, 2024.

Companies in this story: (TSX:EMP.A)

Rosa Saba, The Canadian Press

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