Everything You Need to Know on Thursday: Crude Oil Prices Drop Amid Easing Tensions Between Iran and Israel, ANZ Bank Says

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

● S&P/TSX 60 Index Standard Futures are trading at 1,302.10, up 0.05%.

● Uncertainty in Canada's tax landscape could weigh on investment: economist

● Lack of investment is a 'big part' of Canada's productivity slowdown — and it could get worse

● Crude oil prices drop amid easing tensions between Iran, Israel, ANZ bank says

● Stocks to watch: Lithium Americas

Today, the Canadian dollar is trading at 72.71 cents US, a slight increase from Wednesday.

The S&P/TSX 60 Index Standard Futures (SXF) are currently trading at 1,302.10, which is up 0.05% from the previous close.

One economist says Canada needs more tax certainty, following the federal government’s move to raise the inclusion rate on capital gains taxes for corporations and some high-earning individuals.

Finance Minister Chrystia Freeland tabled the federal government’s 2024 budget on Tuesday. The government announced in the budget that it intends to raise the inclusion rate on capital gains taxes from one-half to two-thirds for all gains realized by corporations and trusts. However, the newly announced rate would only apply to individuals with gains above $250,000.

“If every year we get a budget that changes the tax landscape and is picking arbitrarily winners and losers, I feel like that uncertainty might be really the factor that limits future investment,” James Orlando, the director of economics at TD Bank.

“It's a matter for businesses, you just need to have that level of certainty before you're able to commit to investment.”

He added that many economists would like to see a larger degree of certainty surrounding the nation’s tax system, as Canadians are already subject to high taxes.

The announced changes to Canada’s tax system are expected to generate $21.9 billion in revenue over five years, according to the budget. The new capital gains rules would take effect June 25 and be implemented through amending the Income Tax Act.

A lack of innovation and investments in businesses are key reasons why Canada’s labour productivity growth rate has declined in the past two decades, according to a new Statistics Canada study, and business leaders say the capital gains tax hike in the latest budget will only make things worse.

Labour productivity grew at about 1.8 per cent per year between 1980 and 2000, but it slowed to around one per cent from 2000 to 2015 and 0.8 per cent from 2015 to 2022, the agency said.

A lack of investment in businesses was a major reason behind the slower growth rate, as its contribution to labour productivity fell to about 0.4 per cent during the 2015–2022 period from about 0.9 per cent during the 1980–2015 period.

Innovation rates also declined in the past two decades compared to the 1980s. The contribution of Canada’s multifactor productivity growth — which the Statistics Canada study associates with technological or organizational change — in labour productivity declined to 0.1 per cent from 2015 to 2022 from 0.5 per cent per year from 1980 to 2000.

Wulong Gu, an economist at Statistics Canada, said Canada’s lower productivity growth after the 2000s is due to a lack of investment.

Crude oil prices dropped as the market cut its geopolitical risk premium amid doubts about an escalation of tensions between Iran and Israel, ANZ Bank said in a Thursday note.

Brent crude fell 0.5% to US$86.82 per barrel and West Texas Intermediate crude lost 0.6% to US$82.22/b at last look early Thursday. Tensions appear to have eased with the lack of an immediate response by Israel to Iran's attack, the bank noted.

In addition, a bearish inventory report from the US Energy Information Administration served as an opportunity for investors to lock in profits after recent price gains, ANZ Bank said. While US oil inventories rose 2.7 million barrels last week, gasoline and distillate inventories fell 1.2 million barrels and 2.8 million barrels, respectively, a sign of stronger demand.

However, supply risks remain as the US House Speaker proposed new sanctions on Iran as part of the Ukraine aid package, the bank said. The US has also reinstated sanctions on Venezuela's oil industry after an agreement for fairer elections failed.

Still, the decision is likely to have a small impact, and Venezuelan oil produciton is set to continue declining over the coming years amid the lack of investment, ANZ Bank said.

The company did not disclose a price for the shares on offer, nor the amount it expects to raise in the sale.

The offering is subject to market and other conditions, and there can be no assurance as to whether or when the it may be completed, or as to the actual size or terms. Lithium Americas also expects to grant the underwriters a 30-day option to purchase up to an additional 15% of the common shares, it said.

The company's shares closed up C$0.21 to C$9.16 on the Toronto Stock Exchange.

Source: BNN Bloomberg, Financial Post, MT Newswire