Everything You Need to Know on Monday: Air Canada Trims 2024 Forecasts After Q2 Revenue Falls Short

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

● S&P/TSX 60 Index Standard Futures are trading at 1,366.20, up 0.53% from previous.

● Economists urge further BOC rate cuts as retail sales dip amid economic pressures

● Biden's exit upends 'Trump Trade' as investors eye Harris's rise

● Air Canada trims 2024 forecasts after Q2 revenue falls short

● Tilray gains in US premarket as Germany grants first cannabis license under new law

Today, the Canadian dollar is trading at 72.88 cents US, a slight increase from previous close.

S&P/TSX 60 Index Standard Futures are trading at 1,366.20, up 0.53% from previous.

Amidst higher interest rates and inflation, Canadian consumers are tightening their belts, reflected in a 0.8% decrease in May's retail sales, surpassing economists' predictions for a smaller decline. Even with record population growth bolstering the economy, adjusted retail sales dipped by 2.3% year-over-year in April. Core sales saw an even steeper drop of 4.6%.

Despite recent and anticipated rate cuts by the Bank of Canada, including a reduction to 4.75% in June, economists from Alberta Central and National Bank of Canada predict continued consumer caution. The National Bank team points to significant drops across sectors and a gloomy outlook even when adjusting for population growth, with a predicted 3.9% per-capita contraction in real retail sales for the second quarter.

CIBC World Markets economist Andrew Grantham echoes this sentiment, noting the necessity for further rate reductions to alleviate the strain on consumers and retailers. With a nominal annual sales increase of 0.7% that pales in comparison to the population growth rate, the call for action becomes more pressing. As the labour market shows signs of weakening, consumer spending is expected to remain restrained despite the Bank of Canada's next moves.

Investors are reassessing their strategies following Joe Biden's departure from the presidential race and his endorsement of Vice President Kamala Harris. Biden's exit, anticipated due to pressures despite being widely expected, introduces fresh uncertainty into the markets, potentially disrupting the so-called "Trump trade" that benefited from Trump's fiscal and regulatory policies.

Markets saw immediate reactions with traditional safe-haven assets like the Swiss franc, US Treasuries, yen, gold, and Bitcoin, experiencing increased demand. As the landscape shifts, investors are also preparing for possible market turbulence from upcoming earnings reports and anticipated Federal Reserve interest rate decisions.

While the Trump trade has been associated with deregulation, tax cuts, and increased spending, leading to a steeper yield curve, a stronger US dollar, and a boost for Bitcoin, Biden's decision presents a new variable. Analysts are now contemplating the implications of a potential "Harris Trade," which could signify a continuation of current policies but with a focus on tax relief for lower-to-middle incomes and increased regulatory measures.

As the markets grapple with these developments and Harris's rising prominence, sectors like energy are under scrutiny due to her stance on oil and fracking. The political landscape remains fluid, with investors closely watching the polls and Harris's bid for the Democratic nomination, ready to adjust their positions in response to the evolving election narrative.

Air Canada reported a slight year-over-year increase in Q2 operating revenue to $5.5 billion, but saw operating income drop from $802 million last year to $466 million. The airline has also revised its 2024 growth projections, now expecting a 5.5-6.5% increase in ASM capacity (down from 6-8%) and a 2.5-3.5% rise in Adjusted CASM (narrowed from 2.5-4.5%). Adjusted EBITDA estimates have been lowered to $3.1-$3.4 billion from the previous $3.7-$4.2 billion range.

These adjustments reflect challenges from a lower yield environment, disappointing load factors, competitive international market pressures, volatile fuel prices, and a weaker Canadian dollar. Despite these factors, Air Canada maintains that demand remains strong, with record Q2 operating revenues and load factors above the historical average. More information will be shared with the final Q2 results on August 7.

Tilray Brands, Inc. shares increased by 2.8% in US premarket trading following the announcement that its German subsidiary, Aphria RX GmbH, was granted the first cannabis cultivation license under Germany's new Cannabis Act, MedCanG. This license allows Aphria RX to grow and produce a wider range of medical cannabis products.

Denise Faltischek, Tilray's Chief Strategy Officer and Head of International, commented on the milestone, highlighting the potential for improved patient access to high-quality medical cannabis and an expanded variety of treatment options in Germany.

The company also recalled that in May 2019, Aphria RX received the German Federal Institute for Drugs and Medical Devices' most extensive license for medical cannabis cultivation, uniquely authorizing it to cultivate all three government-approved cannabis strains.