Here are five things you need to know this morning:
50 points on deck at the BOC: The Bank of Canada is widely expected to cut its benchmark lending rate this morning, and with inflation now below target, the only real question is: how much? Consensus is that we’re going to see 50 basis points sliced off the target rate, bringing it to 3.75 per cent. Some watchers think the innately cautious central bank won’t want to deviate from their slow and steady strategy, but 25 points would take the target rate to four per cent, more than twice the current inflation rate. The latest economic readings are flashing yellow warning signs about growth, so it’s fair to wonder what exactly it would take to warrant picking up the pace a little. The roughly 100,000 Canadian mortgage holders who come up for renewal every month are certainly wondering how hard their landing might be as they go over that cliff.
From quarter-point to quarter-pounder: Shares in McDonalds are slumping since Tuesday’s close, as an E. coli outbreak that has sickened 49 people and is already linked to at least one death seems to be expanding quickly. The shares are off about six per cent in the premarket as details of the outbreak filter out. It appears to be localized to Colorado, Nebraska and a handful of other western U.S. states, and the company says it believes a specific supply of sliced onions is to blame. (Those are only used on the chain’s Quarter Pounder burgers, as other menu items used diced onions which don’t appear to be a problem.) McDonald’s Canada told BNN Bloomberg in a statement that the U.S.-based outbreak “does not impact our Canadian restaurants, or menu items.”
Alberta’s natty discount may soon be cut in half, Tourmaline says: The discount on Alberta natural gas could be cut by as much as half once the massive Shell-led LNG Canada facility is up and running next year. So says the CEO of Tourmaline, one of the biggest natural gas players in the space. Michael Rose says the price of natural gas in Alberta has averaged about $1.50 below the going rate at the Henry Hub in the U.S. But that gap should narrow to about 75 cents once the LNG Canada facility is operational because it will take 1.9 billion cubic feet of daily production that is currently stuck domestically, depressing prices, and make them available for export. “It’s going to create much stronger pricing when that happens,” Rose told BNN Bloomberg’s Commodities show on Tuesday. Only time will tell what happens if and when the facility is up and running but considering the impact that the opening of the Trans Mountain Pipeline Expansion had on the price of previously landlocked Canadian oil earlier this year, a major impact on prices seems like a reasonable expectation.
Goldman Sachs may give Northvolt a lifeline – with Canadian battery plant as collateral: Goldman Sachs and several other investors are willing to throw a lifeline to cash-strapped electric vehicle battery maker Northvolt, with shares in the Canadian unit as collateral. Bloomberg is reporting that Northvolt, which needs at least US$300 million to keep its head above water, is in talks with the investment bank and others about a possible bridge loan. Goldman is considering it, as long as the primary lender for a proposed Canadian battery plant arm is willing to play ball. The Quebec government has pledged $1.4 billion to the project and has already lent out more than a third before the Sweden based parent company ran into liquidity problems. Investissement Quebec would be near the front of the line to get its money back out of the Canadian assets if the company went bankrupt, but nobody seems to want to see that happen, so Goldman is asking IQ to give Northvolt the greenlight to pledge equity in the Canadian unit as collateral for any bailout loan.
CN Rail posts higher revenue despite tumult: Revenue rose at Canadian National Railway last quarter, despite a labour dispute and wildfires that impacted operations. The rail company posted results after the bell on Tuesday; numbers that mostly beat expectations. Revenue came in at $4.11 billion, up three per cent from last year and ahead of expectations. We’ll get numbers from CN’s rival Canadian Pacific Kansas City after the bell today, so it will be interesting to see how other arms of the North American rail oligopoly are faring in the current economic climate.