Everything You Need to Know on Friday: Air Canada Warns of Operational Disruptions Amid Pilot Labor Dispute

Good morning mooers! Here are things you need to know about today's market:

● S&P/TSX 60 Index Standard Futures are trading at 1,418.20, up 0.43% from previous close

● Bank of Canada to start jumbo rate cuts by December, CIBC says

● Japan designates Seven & i as 'core' company, adding hurdles to Couche-Tard's acquisition bid

● Air Canada warns of operational disruptions amid pilot labor dispute

● BMO Financial Group secures legal victory in U.S. Ponzi scheme case

Today, the Canadian dollar is trading at 73.59 US cents, a decrease from previous close.

The Canadian Imperial Bank of Commerce predicts that the Bank of Canada, led by Governor Tiff Macklem, will hasten monetary easing to avoid a recession, cutting the policy rate by 50 basis points in both December and January. This adjustment, concluding in June with a rate of 2.25%, surpasses most economists' expectations according to a Bloomberg survey.

CIBC's chief economist, Avery Shenfeld, emphasized the need to lower interest rates quickly to rejuvenate the economy, citing a surprising rise in unemployment to 6.6%, particularly among young and prime-age workers. This trend could potentially push the unemployment rate to nearly 7% in the coming months. Despite these challenges, Shenfeld does not foresee a recession but suggests readiness for one.

This forecast aligns with the National Bank of Canada, which also anticipates a 50 basis point reduction by year's end, aiming for a policy rate of 2.75% by next year. Former Bank of Canada Governor Stephen Poloz also hinted at the possibility of deeper cuts if economic risks intensify.

Currently, other major Canadian banks predict more gradual rate cuts of 25 basis points. Shenfeld argues for more aggressive cuts to stimulate sectors like housing, given the economic slowdown and rising unemployment rates.

The reclassification reflects Seven & i's cautious approach following criticism from activist investors about its undervaluation. Despite potential regulatory hurdles, improvements in governance and regulatory changes in Japan are making it easier for foreign transactions in a historically closed market.

Seven & i's move also tests Japan's commitment to economic reform and restructuring. Recently, Seven & i argued that Couche-Tard's offer of $14.86 per share, valuing the company at $38.2 billion, undervalues it. Investors like Artisan Partners and Oasis Management have encouraged negotiations to increase shareholder value.

Japan's Ministry of Finance maintains strict oversight on foreign acquisitions over 10% in core industries, emphasizing security. Seven & i's application highlighted its key role in disaster response and community services.

The core designation means any potential buyer looking to acquire more than 1% of Seven & i must seek preapproval, promising not to interfere with board decisions, thus inviting more regulatory scrutiny early in any negotiation process. This framework has previously blocked significant foreign investments, reflecting Japan's cautious stance on foreign involvement in key industries.

Starting today, services such as cargo and vacation packages will be impacted, with the possibility of a complete halt to operations by September 18. Negotiations are tense, with the airline and pilots possibly issuing a 72-hour strike or lockout notice by Sunday. This would initiate Air Canada’s three-day plan to wind down operations.

The airline has criticized the pilots' union for not being flexible and making "unreasonable wage demands." Conversely, the union accuses Air Canada of corporate greed, arguing that the airline's record profits contrast with their demands for pilots to accept below-market wages.

Following this favorable ruling, BMO announced plans to reverse a $1.19-billion provision, anticipating an after-tax recovery of $875 million in the fourth quarter. The lawsuit had accused Marshall and Ilsley Bank, acquired by BMO in 2011, of aiding Thomas J. Petters in his fraudulent activities. Petters, who was using a chequing account at the bank for money laundering, was convicted in 2009 and is serving a 50-year prison sentence.