Everything You Need to Know on Monday: TD Nears Guilty Plea on Criminal Charges for U.S. Unit in Money-Laundering Probe
Good morning mooers! Here are things you need to know about today's market:
●S&P/TSX 60 Index Standard Futures are trading at 1,440.40, down 0.16% from previous close
● Rosenberg Research comments on Canada's economy
● Crude oil prices climb as escalating middle east conflict leads to supply concerns
● Toronto still at elevated risk of housing bubble despite market correction, UBS index shows
● TD Bank nears guilty plea in U.S. over alleged money laundering links to the crime groups
Currency Snapshot
Today, the Canadian dollar is trading at 74.03 US cents, a slight increase from previous close.
Macro
Rosenberg Research Comments on Canada's Economy
Rosenberg Research noted that Canada's real gross domestic product (GDP) saw a slight increase of 0.2% month-over-month in July, slightly outperforming the expected 0.1% rise. However, the preliminary estimate for August indicates no growth at 0.0%.
The modest July growth was primarily driven by gains in utilities and the automotive sector. Despite this, with June also recording a 0% growth, the third quarter is on track to achieve just below a 1.0% annual growth rate. Adjusted for population growth, this translates to a significant contraction of about 3% per capita, substantially below the Bank of Canada's forecasted 2.8% growth.
Given these conditions, Rosenberg suggests that the Bank of Canada might consider a substantial 50-basis point rate cut in its next policy meeting scheduled for October 23. The firm also highlighted that certain unique factors, such as the July wildfires in Western Canada and a brief rail strike in August, temporarily restrained economic activity.
The analysis pointed out continued weakness across the Canadian economy, with the goods sector barely growing by less than 0.1% month-over-month following a 0.35% decline in June, and the service sector posting its third consecutive month of growth below 0.2%. Moreover, a 0.7% decline in durable manufacturing after a significant 2.2% drop in June suggests the need for a weaker currency to support domestic economic conditions, potentially influencing the central bank's rate decisions.
Additionally, a decline in construction by 0.4% following a 0.6% drop in June, coupled with near stagnation in the real estate sector, underscores the vulnerability of interest rate-sensitive sectors. This highlights the adverse impacts of the central bank's tightening measures implemented in 2022 and 2023, according to Rosenberg.
Commodities
Crude Oil Prices Climb as Escalating Middle East Conflict Leads to Supply Concerns
Crude oil prices increased as escalating Middle East conflicts heightened concerns over potential disruptions in oil supply.
Brent crude rose by 0.8% to US$72.58 per barrel, while West Texas Intermediate crude saw a 0.7% increase to US$68.66 per barrel as of early Monday.
Tensions intensified as Israel intensified its military actions against Hamas and Iran-supported groups in the region. According to Reuters, a strike by Israel on Monday resulted in the death of a Hamas leader in Lebanon, with another militant group reporting the loss of three leaders in Beirut.
Over the weekend, Israel also conducted airstrikes targeting Houthi forces in Yemen and multiple Hezbollah locations in Lebanon. The rising oil prices are partly due to fears that the conflict could expand to include Iran, a major oil producer and a member of the Organization of the Petroleum Exporting Countries (OPEC).
Additionally, economic data released on Monday indicated weakening demand prospects; China's manufacturing sector contracted for the fifth consecutive month and the services sector experienced a significant slowdown in September, as reported by Reuters.
Industry
Toronto Still at Elevated Risk of Housing Bubble Despite Market Correction, UBS Index Shows
Canada's housing market has cooled significantly due to rising inflation and interest rates, yet Toronto remains vulnerable to overheating, according to the latest UBS Global Real Estate Bubble Index. While the frenzy of the housing boom post-pandemic elevated bubble risks in cities worldwide, including Canadian hubs, the surge has subsided over the past two years.
Of the 16 cities globally identified as high or elevated risk last year, only six continue to be flagged this year, with Toronto positioned fifth on the list. The UBS index, which identifies a bubble as a substantial and prolonged mispricing of assets, notes that typical bubble indicators include a disconnection between real estate prices and local incomes and rents, alongside excessive lending and construction.
Cities scoring above 1.0 on the index are considered at elevated risk, while those above 1.5 are seen as high risk. Toronto’s score decreased slightly from 1.21 in 2023 to 1.03 in 2024, yet the slow growth in incomes and rents maintains its status as elevated risk.
Meanwhile, Vancouver, Canada's priciest housing market, shows a different trend. Despite high home prices relative to income, a sharp increase in rents has moderated its bubble risk to moderate levels.
Globally, cities that were at the highest risk of real estate bubbles in 2022 experienced the most substantial price corrections as interest rates rose. Notably, Vancouver, Toronto, and Amsterdam each saw significant price declines of around 10 percent in real terms, according to the report.
Stocks to watch
TD Bank Nears Guilty Plea in U.S. Over Alleged Money Laundering Links to Chinese Crime Groups
$The Toronto-Dominion Bank (TD.CA)$ is on the verge of pleading guilty to criminal charges alleging that its U.S. retail banking division failed to prevent money laundering activities connected to the criminal organizations and illicit fentanyl transactions, according to sources cited by The Wall Street Journal. Discussions with U.S. federal prosecutors are ongoing, with the bank's U.S. retail branch anticipated to submit a guilty plea within the next two weeks. While no deal has been finalized and negotiations could still break down, the bank has reportedly set aside over $3 billion to address potential penalties from U.S. government probes into these allegations. TD has acknowledged the issues raised by authorities and is actively working towards rectifying the lapses in its anti-money laundering practices.
Source: MT Newswires
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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