Everything You Need to Know on Thursday: TD Bank Says Deep Rate Cuts Will Provide 'big Tailwind' to Canada's Economy
Good morning mooers! Here are things you need to know about today's market:
● S&P/TSX 60 Index Standard Futures are trading at 1,307.60, up 0.02%
● TD Bank says deep rate cuts will provide 'big tailwind' to Canada's economy
● Cost cutting continues at BlackBerry as firm reports US$42-million net loss in Q1
● Micron falls after forecast fails to meet lofty expectations
Market Snapshot
Today, the Canadian dollar is trading at 73.05 cents US, a slight decrease from Wednesday.
S&P/TSX 60 Index Standard Futures are trading at 1,307.60, up 0.02% from previous close.
Macro
TD Bank says deep rate cuts will provide 'big tailwind' to Canada's economy
The Bank of Canada’s decision to begin cutting interest rates ahead of the United States Federal Reserve will ultimately lead to a “big tailwind” for the Canadian economy, Toronto-Dominion Bank economist James Orlando said.
Canada’s economy is projected to grow just 0.9 per cent this year, well below the estimated 2.3 per cent growth in the U.S., according to a Bloomberg survey of economists. Canadian consumers are more sensitive to interest rates — they have more debt than U.S. households, on average, and mortgage rates are reset more frequently.
That’s why rate cuts are a big deal for Canada, Orlando said in an interview on BNN Bloomberg Television.
“We’re going to be able to have less of our disposable income go into mortgage payments,” he said. “That, in effect, will be able to close a little bit of this gap between Canada and the United States because we have just been suffering under the weight of these high rates for so long.”
Policymakers at the Bank of Canada lowered the overnight interest rate to 4.75 per cent earlier this month — the first cut in more than four years — and signalled that more reductions are likely, as long as price pressures continue to ease.
A reacceleration of inflation has lowered the odds of another rate reduction in July — the consumer price index rose 2.9 per cent year-over-year in May, up from 2.7 per cent in the prior month, Statistics Canada said this week. But rates are clearly on a downward path, said Orlando, director and senior economist at the bank.
“We had so much uncertainty in Canada — now we’re getting more certainty,” he said. Toronto-Dominion economists expect the Bank of Canada to cut its policy rate to 2.25 per cent by the start of 2026, he added.
Stocks to watch
Cost cutting continues at BlackBerry as firm reports US$42-million net loss in Q1
$BlackBerry Ltd (BB.CA)$'s chief executive says the company's preparations to divide up its business have so far produced millions in savings and put the business on a path to profitability.
John Giamatteo said Wednesday that he considered the work done so far "a significant achievement" that will deliver US$125 million in total savings.
"I'm proud of how far we've come in such a short period of time," said Giamatteo, who took the helm of BlackBerry in December 2023.
His remarks came as the company reported a US$42-million net loss in its first quarter compared with a US$11-million net loss.
BlackBerry, which reports its financial performance in U.S. dollars, said the results amounted to a loss of seven cents US per share, compared with two cents US per share a year prior.
Its revenue for the period ended May 31 amounted to US$144 million, down from US$373 million a year prior.
Its cybersecurity business was responsible for about US$85 million of the revenue, while its Internet of Things division earned US$53 million and its licensing segment US$6 million.
Micron falls after forecast fails to meet lofty expectations
$Micron Technology (MU.US)$, the largest U.S. maker of computer memory chips, declined in late trading after its forecast failed to meet the sky-high expectations of some investors.
Fiscal fourth-quarter sales will be US$7.4 billion to $7.8 billion, the company said in a statement Wednesday. While the average analyst estimate was $7.58 billion, some projections were above $8 billion. Profit will be about $1.08 a share, minus certain items, versus a projection of $1.02.
Though Micron is getting a boost from the AI computing boom, demand is still sluggish in its traditional markets, such as personal computers and smartphones. The outlook suggests those areas aren’t rebounding from last year’s historic slump as quickly as some had hoped.
The shares fell about 5 per cent in extended trading. Micron had rallied 67 per cent this year before the close, lifted by investor expectations that it will be one of the main beneficiaries of AI spending.
Source: BNN Bloomberg, MT Newswires
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SoundOfMusic : Shelter inflation of 6.4% is an outsized component in the Canadian CPI. The shelter inflation is a reflection of the rising mortgage interest payment when fixed rate mortgages are renewed.
So when the BoC rate comes down, which will drop the fixed mortgage rate, in turn, it will lessen the mortgage interest expense increase when fixed mortgages are renewal. This will lower the shelter cost and thus lower the CPI.
Lower the BoC rate will lower the CPI!
Do we have a magic formula to lower inflation in Canada!!!