Here are five things you need to know this morning
U.S. inflation comes in hotter than expected: The U.S. consumer price index (CPI) rose by 0.5 per cent in January, hotter than what economists were expecting. The so-called core rate which strips out volatile items was also higher than forecast, at 0.4 per cent. Shelter costs made up almost a third of the increase, the U.S. Bureau of Labor Statistics said. Overall, the headline inflation rate came in at a three per cent pace for the year, higher than the U.S. Federal Reserve would like to see, and an apparent vindication of the central bank’s cautious approach with regard to rate cuts. The market reaction to the CPI number has been swift, with traders downgrading their expectations for more rate cuts to come. Pricing in the swaps market implies the Fed will now stand on the sidelines for much of this year, before maybe cutting by 25 points in December.
Bank of Canada summary of deliberations: This afternoon, we will get the summary of deliberations from the most recent Bank of Canada policy meeting, where the central bank cut its benchmark rate to three per cent. That move was exactly what the market was expecting, so we shouldn’t expect anything overly surprising to come out of today’s summary, but it’s always interesting to see a recap of the bank’s thought processes, even if the ultimate decision they made is exactly what we thought they’d do.
Gold loses some shine: After slowly and steadily marching toward US$3,000, gold has pulled back below the $2,900 level but the gold bugs (as is their custom) still think the bull has plenty of room left to run. Gold just had its first two consecutive down days in weeks, but after a 10 per cent gain since January and a 40 per cent gain in the past year, the market is likely just booking some profits. “It’s too early to definitively say that the yellow metal has lost its shine, with yesterday’s move looking more like profit taking than anything else,” said Michael Brown, senior research analyst with Pepperstone, in a note to clients this morning. “Amid continued haven demand, upside inflation risks, and solid momentum, the bull case for bullion remains a solid one.”
Restaurant Brands beats expectations on Timmies strength: We will be watching shares in Restaurant Brands International today after the owner of Tim Hortons, Burger King and other quick service food chains put out strong earnings before the bell. Same store sales at Burger King expanded, reversing two straight quarterly contractions. Firehouse Subs eked out a gain in the U.S. and Canada, while Popeye’s declined slightly. Leading the way was the Tim Hortons business, where same store sales grew by 2.2 per cent, and even more – by 2.5 per cent – in Canada. It’s worth noting that the reporting period was up until the end of December, well before all that “51st state” talk compelled Canadians to double-double down on their version of economic patriotism. The stock was up slightly in premarket trading.
Tariff talk continues: Speaking of Donald Trump, his goal of reorienting global trade flows in favour of the U.S. continues apace. Canadian premiers are in D.C. today, trying to convince the U.S. president that throwing around tariff threats willy-nilly is nothing more than mutually assured economic destruction. Canadians aren’t the only ones who think so, either, as the CEO of Ford told Trump and other lawmakers this morning that the proposed 25 per cent tariffs would be “devastating” for the Big Three automakers and ironically amount to a “windfall” for Asian and European rivals. As part of the multipronged strategy to ostensibly give Trump what he wants, Canadian Prime Minister Justin Trudeau has named his aforementioned Fentanyl Czar. The man tasked with the job is Kevin Brosseau, a 20-year RCMP veteran and most recently Trudeau’s own intelligence advisor.
