Everything You Need to Know on Monday: Bank of Canada Seen Cutting Rates Faster After Weak U.S. Jobs Data

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

● S&P/TSX 60 Index Standard Futures are trading at 1,331.60, down 2.17% from previous close

● Bank of Canada seen cutting rates faster after weak U.S. jobs data

● Enbridge makes progress on utility purchases; raises earnings forecast

● Imperial Oil reports $1.13 billion in net income, up from $675 million a year ago

Today, the Canadian dollar is trading at 72.17 cents US, a slight increase from previous close.

S&P/TSX 60 Index Standard Futures are trading at 1,331.60, down 2.17% from previous close.

Markets are betting the Bank of Canada will cut at each of its remaining interest rate decisions this year as the labor market in the U.S. looks to be loosening faster than expected.

The U.S. unemployment rate unexpectedly rose to 4.3% on Friday, leading markets to price deeper cuts from the Federal Reserve in 2024. Some analysts, including at Citigroup and JP Morgan, are now expecting two half-percentage point bouts of easing from the Federal Reserve at its next two meetings.

Though Governor Tiff Macklem insists the Bank of Canada sets policy independently, he can more comfortably lower borrowing costs if the country’s biggest trading partner is about to join the global trend of cutting interest rates.

The two countries’ economies are deeply intertwined, and more weakness in the U.S. is likely to trickle through to Canada. That also allows Macklem to keep normalizing borrowing costs without worrying about moving too far ahead of the Fed and risking consequences for the loonie.

“If the U.S. economy is rolling over and the Federal Reserve is cutting, that gives the Bank of Canada a green light to keep going and push toward neutral,” Benjamin Reitzes, rates and macro strategist at Bank of Montreal said.

Chief executive Greg Ebel said Friday Enbridge also expects the closure of the previously announced purchase of a third utility, the Public Service Company of North Carolina, to take place in the third quarter.

The higher forecast incorporates expected revenue contributions from The East Ohio Gas Company and Questar Gas Company, which Enbridge now owns following the successful closure of a previously announced purchase agreement from Virginia-based Dominion Energy Inc.

Chief executive Greg Ebel said Friday Enbridge also expects the closure of the previously announced purchase of a third utility, the Public Service Company of North Carolina, to take place in the third quarter.

Enbridge’s US$14-billion purchase of the three utilities was first announced last September, and was viewed by market-watchers as a major vote of confidence by the Canadian company in the long-term outlook for natural gas.

“We are well on our way to creating the largest natural gas utility in North America,” Ebel said on a conference call with analysts to discuss the company’s second-quarter financial results.

The purchase of the three U.S. utilities gives Enbridge natural gas utility operations in Ohio, North Carolina, Utah, Idaho and Wyoming a significant presence in the U.S. utility sector.

The $720-million project under way at Imperial’s Strathcona refinery is expected to have a capacity of more than one billion litres of renewable diesel annually.

The facility will use locally sourced vegetable oils and low-carbon hydrogen to produce a biomass-based fuel, helping set Imperial up for the energy transition by diversifying its petroleum-based portfolio, according to the company.

Imperial chairman and CEO Brad Corson told analysts on a conference call Friday that the company continues to feel good about its decision to move forward with the project, in spite of the fact that a recent glut of renewable fuel supply south of the border is hurting margins for producers of the product in the U.S.

“It’s important to distinguish the market that we see and the economic drivers for us, relative to maybe what you are seeing in other markets like the U.S.,” Corson said.

“For us, we continue to see this as a highly economic project.”