TodayEquities reversed earlier gains this morning as investors await minutes from the Fed’s latest policy meeting to further detail around the pace of monetary tightening. Markets are showing that investors continue to worry about growth amid tighter monetary conditions, the war in Ukraine and China’s lockdowns further worsening the outlook. Investors are also eyeing a growing list of companies citing the effects that inflation have had and will have on results going forward. Many retailers have slashed their earnings forecasts for the year as the companies absorbed rising goods and transportation costs.
Canadians are growing increasingly pessimistic about the economy. A new survey indicates that consumer confidence decreased 11.7 points this month, the largest monthly drop since the pandemic’s onset, while optimism over current finances also edged lower. Canadians appear increasingly cautious about spending, with generally negative attitudes toward purchasing big-ticket items. The drop in consumer confidence comes as the BoC continues to signal higher interest rates in the near future to combat rising inflation.
Canada’s big banks are expected to post their slowest earnings growth in almost two years. Fiscal second-quarter results kick off today with reports from Bank of Nova Scotia and Bank of Montreal, with the remaining banks reporting later this week. Net income at the country’s six largest lenders is projected to have risen 3.4% in the quarter through April, the smallest year-over-year gain since average profit fell 18% in the third quarter of 2020. With the prospect of a rapid tightening cycle rattling markets and reducing economic-growth forecasts, the banks are expected to set aside more money to protect against potential loan losses, manipulating restraining their earnings growth. See company news below to see how the first two fared.
Investors withdrew more than $1.6 billion from ESG-labeled ETFs last week, the largest outflow since the start of 2020 when tracking for this data started. The redemptions, which have now occurred in two of the past three weeks, follow what is happening in the broader market with the S&P 500 down 18% this year and the Nasdaq down 27%. Despite the recent outflows, ETFs that adhere to environmental, social and governance investment principles have taken in a net $21.1 billion YTD. ESG ETFs are not the only funds feeling the pain. Investors are offloading sector-specific funds as roughly $11.9 billion has been pulled from sector exchange-traded funds so far in May, putting the category on track for the biggest monthly drawdown on record.
In an attempt to raise the U.S.’s economic profile in Asia (and rely less on China), President Biden announced the Indo-Pacific Economic Framework with Asian partners including Australia, Japan, and Korea (South, not North). The plan is designed to help expand the economic leadership of the U.S. in the Indo-Pacific region with the group wanting to set international rules on the digital economy, supply chains, decarbonization, and regulations applying to workers. Biden has made tackling inflation his priority and said that this framework will help lower costs by making supply chains more resilient in the longer term.
Bankruptcies are on the rise in Canada as government supports end and businesses grapple with a challenging post-pandemic recovery. Facing soaring costs, supply chain issues, and a continued labour shortage, many businesses have been forced to shut their doors. The number of businesses that filed for insolvency in the first quarter of the year jumped 33.8% compared to 2021, according to a new report released yesterday. While the number of businesses filing for bankruptcy rose, some are saying this is a return to normal times. Experts have noted that financial support provided by the government through the pandemic helped delay the surge in bankruptcies and with federal support programs ended, we will see the numbers reach their long-term average in the coming months.
Our hearts are broken for the innocent lives taken too soon from the senseless school shooting in Texas. Our thoughts and prayers go to the families that have lost a loved one and for the Uvalde, Texas community that will mourn the lives of the 19 children and two adults that undoubtedly left a lasting imprint on those they encountered.
Diversion: Canadian takes on U.S. soldiers in a fight.