Today’s news: Trending business stories for February 9, 2024

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First Bank of Canada interest rate cut seen in June after strong jobs report: RBC

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The Bank of Canada will likely make its first interest rate cut in June after jobs data for January came in stronger than expected, the Royal Bank of Canada says.

The economy unexpectedly added 37,000 jobs last month and the unemployment rate ticked down to 5.7 per cent from 5.8 per cent. Hours worked also increased and wages grew 5.3 per cent year over year.

Royal Bank economists had expected employers to have added 10,000 jobs and for the unemployment rate to increase to 5.9 per cent.

The employment report is known to be volatile, but RBC said Friday’s data was “firm.” The data suggests the Canadian economy grew early in 2024 and supports evidence of a rebound in the housing market. As a result, a stronger than expected showing by both the Canadian and United States economies points to interest rates staying higher for longer, the bank said.

“Stronger than feared economic data both in Canada and abroad are leaving central banks with flexibility to be patient before starting to ease off the monetary policy brakes,” Nathan Janzen, assistant chief economist at RBC said in a note.

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“The data today will reinforce that near-term interest rate cuts from the Bank of Canada are unlikely.”

RBC’s base case is for an interest rate cut in June, he said.

— Financial Post

10 a.m.

Stock markets inch higher at the open, S&P 500 hits 5,000

Traders on the floor of the New York Stock Exchange.
Traders on the floor of the New York Stock Exchange. Photo by Angela Weiss/AFP via Getty Images

Wall Street got a bit of encouragement after an uneventful U.S. inflation revision lifted stocks, with investors now shifting gears to next week’s data for clues on the Federal Reserve’s rate path.

The S&P 500 topped 5,000. Treasury yields briefly fell in the immediate aftermath of the consumer-price index revision, but reversed that move and pushed slightly higher. The dollar fluctuated.

U.S. inflation was about the same at the end of last year as initially reported after incorporating annual revisions. Consumer prices excluding food and energy items rose at a 3.3 per cent annualized rate in the final three months of 2023 — matching the previous reading, government data showed. Revisions to the headline figure were also minimal, though December’s monthly increase was marked down to a 0.2 per cent advance instead of 0.3 per cent.

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“Much ado about nothing,” said Paul Ashworth at Capital Economics. “The annual revision to the seasonal factors used to generate the seasonally adjusted CPI data turned out to be a damp squib, with the new factors almost identical to the old ones. The lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut.”

The S&P/TSX composite index ticked up 0.02 per cent.

— Bloomberg

8:30 a.m.

Canada adds 37,000 jobs in January, unemployment rate falls to 5.7%

The Canadian economy added 37,000 jobs in January and the unemployment rate fell to 5.7 per cent, Statistics Canada said Friday.

It marks the first decline in the unemployment rate since December 2022.

Employment rose across several sectors in January, led by wholesale and retail trade as well as finance, insurance, real estate, rental and leasing.

Meanwhile, accommodation and food services saw the largest employment decline.

Workers’ wages, which have been growing rapidly as Canadians seek compensation for inflation, rose 5.3 per cent from a year ago.

Economists at the Royal Bank of Canada had expected employers to add 10,000 jobs.

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— The Canadian Press, Financial Post

Read the full story here. 

7:30 a.m.

Indigo revenues dive in ‘disappointing’ earnings report

Indigo said disruptions throughout 2023, including a ransomware attack, negatively affected its earnings results for the third quarter.
Indigo said disruptions throughout 2023, including a ransomware attack, negatively affected its earnings results for the third quarter. Photo by Peter J. Thompson/National Post

Indigo Books & Music Inc. says it earned $10 million in the latest quarter, down from $34.3 million a year earlier.

The retailer said revenues for its third quarter ended Dec. 30 were $370.6 million, down from $422.7 million during the same quarter in 2022. Earnings per diluted share were 35 cents, down from $1.22.

Indigo said disruptions throughout 2023, including a ransomware attack, negatively affected its results, particularly in e-commerce, which underperformed compared to retail.

The company said it also saw consumers show increasing price sensitivity amid economic headwinds, with increased penetration of promotions and discounts.

Chief executive Heather Reisman said in a press release that the results were “disappointing” and said the retailer is “deeply and effectively engaged in a turnaround.”

The company recently received a proposal to take the retailer private from a pair of companies owned by controlling shareholder Gerald Schwartz.

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— The Canadian Press

Stock markets before the opening bell

Stock markets February 9, 2024

Global markets were treading water on Friday before the release of U.S. inflation data that could shift the narrative of the U.S. Federal Reserve’s fight against inflation.

The U.S. is expected to release its annual revisions to its consumer price index at 8:30 a.m. New York time. Last year, the update was significant enough to cast doubt on overall inflation progress and traders were speculating again that the recalculations might sway views over when the Federal Reserve will cut interest rates.

“This could have important implications for the Fed,” wrote analysts at Rabobank in a research note. “It could increase or decrease the confidence that the FOMC has in a sustainable return to two per cent inflation.”

Europe’s Stoxx 600 and U.S. stock-index futures were little changed. Ten-year Treasuries held steady, leaving their yield up about 15 basis points in the past five days. The next key data point will be the regular U.S. inflation print due Tuesday.

— Bloomberg

What to watch today

Economic Development Minister Mary Ng and the executive vice-president and European Commissioner for Trade, Valdis Dombrovskis, will speak at the fourth Joint Committee of the Canada European Union Comprehensive Economic and Trade Agreement (CETA) held in Brussels.

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Jobs numbers for January will be released this morning, along with the Bank of Canada senior loan officer survey for the fourth quarter.

Companies reporting earnings today include Enbridge Inc., Telus Corp., Magna International Inc. and PepsiCo Inc.

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Additional reporting by The Canadian Press, Associated Press and Bloomberg

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