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Financial market risks are high and rising: ESMA
James Langton Amid an array of elevated risks, investors should brace for further market turmoil, the European Securities and Markets Authority (ESMA) is warning. In its latest report on market risks and vulnerabilities, the region’s securities regulator said overall market risks remain at the highest level, with the fallout from Russia’s invasion of Ukraine compounding the effects on an economy and financial markets grappling with already-high inflation.
Metals prices to soften as growth slows: Moody's
James Langton Amid slowing economic growth and weakening demand, Moody’s Investors Service is cutting its price expectations for an array of metals over the coming year. The rating agency said it lowered its 12-month price assumptions for gold, silver, steel, aluminum and copper, citing slack demand as growth momentum slows.
What’s new from fund manufacturers
TD launched a carbon credit ETF, while Equitable Life has 12 new seg funds By: Greg Meckbach September 1, 2022 10:35 Greg Meckbach Advisor’s Edge regularly lists notable developments in Canada’s investment product landscape. Here are some newly released funds as well as a change to an existing ETF. TD Asset Management Inc.’s TD Global Carbon Credit Index ETF (TSX: TCBN) started trading Aug. 30.
Ex-fund rep sanctioned for failing to cooperate
Staff A former mutual fund rep that was suspected of having pre-signed client account forms has been fined and banned for failing to participate in a regulatory investigation. Following a virtual hearing, a disciplinary panel of the Mutual Fund Dealers Association of Canada (MFDA) ruled that Nhat Nick Trieu, a former rep with TeamMax Investment Corp., had violated the self-regulatory organization’s rules by failing to cooperate with their investigation.
Wanted: Productivity investment
“With one-fifth of working Canadians nearing retirement age in the coming decade, higher productivity will be needed to offset the impact of the aging population on Canada’s workforce,” it said. “Higher productivity will also be essential for sustaining real wage growth and enhancing the productive capacity of Canadian industry.” Yet, the sort of business investment that’s needed to drive productivity improvement remains 4% below its pre-pandemic mark and down 20% from its peak.
Recession now likely for Europe amid gas shutdown
James Langton A recession may be in the cards for Europe amid the fallout from the disruption of Russian gas imports, says Fitch Ratings. In a new report, the rating agency said the prospect of a recession in the eurozone now appears likely “as a result of the deepening gas crisis.” “Economic vulnerabilities to a shut-off of Russian pipeline gas supplies are still very high despite recent aggressive efforts to diversify import sources,” it said.
Metaverse is ripe for investment scams, regulators warn
James Langton Don’t take investment advice from — or get scammed in — the metaverse, the North American Securities Administrators Association (NASAA) warned today. In an investor alert, the umbrella group of U.S. state and Canadian provincial regulators called on investors to guard against investment scams and frauds in online virtual worlds.
Federal governance reforms kick in
James Langton With changes to federal corporate law, new governance requirements — including a ban on slate voting and mandatory majority voting — take effect today. Revisions to the Canada Business Corporations Act (CBCA) and related legislation that set out the rules for companies at the federal level came into force on August 31.
Inflation hits 9.1% in countries using euro currency
Inflation is at the highest levels since record-keeping for the euro began in 1997. The latest figures add pressure on European Central Bank officials to continue raising interest rates, which can tame inflation, but also stifle economic growth. Prices are rising in many other countries as Russia’s war in Ukraine grinds on, triggering unprecedented increases for energy and food that are squeezing household finances.
Arming investors to guard against greenwashing
James Langton Regulators should use education for both investors and advisors as a bulwark against greenwashing, according to a new report from the International Organization of Securities Commissions (IOSCO).
Canadian economic growth lags expectations in Q2; July estimate points to contraction
The Canadian Press Economists expect the Bank of Canada to move forward with another aggressive interest rate hike next week after the release of data showing the economy remained in relatively good shape during the second quarter of the year. The Canadian economy grew at an annual rate of 3.3% in the second quarter, Statistics Canada said Wednesday in its latest report on real gross domestic product. For comparison, the economy grew by an annual rate of 3.1% in the first quarter.
The failed promise of crypto diversification
James Langton One day, crypto assets may replace gold as a traditional safe haven for investors, but we’re not there yet. So far, the value of crypto appears to depend on many of the same drivers as equities, says TD Economics. In a new report, TD noted that so far, the crypto market has failed to provide investors with any shelter from the downside in traditional assets and macroeconomic risks.
Global growth outlook dims: Moody's
James Langton Citing increasingly tight financial conditions and high commodity prices, Moody’s Investors Service has cut its global economic forecasts for this year and next. In a new report, the rating agency lowered its growth forecasts for the G20 economies to 2.5% from 3.1% in 2022, and cut its 2023 forecast from 2.9% to 2.1%.
BMO wraps Big Six earnings with Q3 profits down from a year ago
Ian Bickis, Canadian Press BMO Financial Group wrapped the Big Six earnings season with a drop in earnings as a pullback in capital markets more than offset gains from loan growth and improved returns on interest income. The bank reported earnings of $1.37 billion for the quarter ending July 31, down from $2.28 billion in the same quarter a year earlier, as it took a $945-million charge related to its acquisition of Bank of the West.
Robo advice shines for borrowers: study
James Langton Robo advice can significantly improve outcomes for financial consumers, particularly those with low financial literacy and numeracy, according to new research. But many people reject free advice that would benefit them, while others would overpay for it.
Big Six earnings slide amid headwinds: Fitch
James Langton Weak capital markets and a deteriorating economic outlook battered the Big Six banks in their fiscal third quarter, according to Fitch Ratings. In a new report, the rating agency said that Canada’s domestic systemically important banks reported reduced aggregate earnings — down 7% year over year and 5% quarter over quarter for the period ending July 31.
Energy prices continue to boost trade surplus, StatsCan says
James Langton High commodity prices are continuing to deliver trade surpluses for the Canadian economy, according to the latest data from Statistics Canada. The national statistical agency reported a $2.7-billion current account surplus for the second quarter, which was in line with the first quarter’s results. “As in the first quarter, overall cross-border activity in the second quarter occurred against the backdrop of rising interest rates and commodity prices.
Businesses optimistic in face of ongoing obstacles
This underlying optimism comes amid an array of challenges that businesses expect to persist. “Over the next three months businesses continue to expect to face a variety of obstacles related to rising costs, hiring and retention, as well as those related to supply chains and rising inflation,” StatsCan reported.
BMO sees signs of Q3 slowdown
Staff High inflation and rising interest rates are starting to take their toll on the economy, according to the latest reading from Bank of Montreal’s Canadian business activity index. The index — which reflects data from 10 monthly indicators, along with high-frequency data on retail mobility and internal credit card transaction data — declined by 0.4% for July, reversing a 0.3% gain in June, BMO reported.
RBC climate action mild enough to pass Texas fossil fuel test
Ian Bickis, Canadian Press RBC’s climate policies have been deemed mild enough to pass a Texas test on whether banks are boycotting oil and gas companies. State Comptroller Glenn Hegar last week named 10 financial institutions including BlackRock Inc., Credit Suisse Group AG and UBS Group AG that it deems to be boycotting fossil fuels, which under a law passed last year means they are barred from participating in the state’s sizable bond market.
Insolvency filings drop in July
Staff Insolvency activity activity cooled in July, but bankruptcy and debt restructuring filings remain elevated year over year, according to new data from the Office of the Superintendent of Bankruptcy (OSB). There were just over 8,000 insolvencies in July, down 12.6% from the previous month as both bankruptcies and credit proposals dropped — by 12.3% and 12.6%, respectively.
Finding bargains in high-quality stocks
Maddie Johnson Murdo MacLean, client investment manager at Walter Scott & Partners Ltd. in Edinburgh, Scotland said high-quality growth businesses almost always overcome short-term valuation pressures, provided an investor is willing to wait.
Finding Bargains in High-Quality Stocks
Related article Text transcript I’m Murdo MacLean. I am a client investment manager here at Walter Scott & Partners in Edinburgh. I think valuation is a perennial focus for us. As long-term investors, it is true that high quality growing businesses can overcome short-term valuation pressures provided you’re willing and patient to see the qualities of those businesses come through. But it certainly always helps not to overpay for businesses, even with that long-term investment horizon.
IIROC proficiency project moves on to traders, PMs
James Langton The Investment Industry Regulatory Organization of Canada’s (IIROC) ongoing project to develop proficiency standards for industry personnel is turning its attention to traders and portfolio managers. Back in 2020, IIROC launched a project to establish competency standards for various registration categories in an effort to “strengthen and enhance confidence in its proficiency regime,” the self-regulatory organization said in a notice setting out its proposals.
Q2 growth remains sluggish in OECD
Staff Global economic growth remained slow in the second quarter, according to new data from the Organization for Economic Cooperation and Development (OECD). In the second quarter, GDP rose by 0.3% in the OECD, which was flat with the previous quarter, the Paris-based group reported. For the G7 countries alone, quarterly GDP growth came in at 0.2%, up from zero growth in the first quarter.
Alberta fraudster gets near-max sentence
James Langton An Alberta court has sentenced a convicted fraudster to 10 years in prison and ordered over $3 million in restitution after finding that his scheme defrauded more than 100 investors out of at least $21 million. In his reasons on sentencing, Justice Colin Feasby of the Court of Queen’s Bench of Alberta cited a series of aggravating factors in the case of Arnold Breitkreutz.
Remains of PACE to face liquidation
James Langton Troubled credit union PACE Savings & Credit Union Ltd. is no longer under regulatory administration, as the remnants of the firm are now undergoing a court-supervised liquidation process. The Ontario Superior Court of Justice appointed KPMG Inc. as liquidator of PACE, removing it from administration by the Financial Services Regulatory Authority of Ontario (FSRA), which had been overseeing the firm.
Issues for advisors to watch this fall
Keep an eye on interest rates, inflation, legislation and more By: Staff August 29, 2022 12:17 Staff As we approach the last long weekend of the summer, here’s a look at important dates to keep on your radar in the fall. Interest rates The Bank of Canada has three remaining interest rate announcements scheduled for 2022: Sept. 7 Oct. 26 (including the quarterly monetary policy report) Dec.
How do product solutions serve the broader needs in large cases?
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Stocks aren't pricing recession, Fed finds
Staff While U.S. stocks are well off their highs, they have not yet priced in a recession and would have further to fall if one materializes, according to a research note from the U.S. Federal Reserve Board. Fed staff used dividend futures to examine whether equity prices reflect the risk of a recession. They found that, since the start of the year, expected dividends are essentially unchanged for this year and are down modestly for 2023.
Toronto-area commercial real estate deals up 43% from year ago
The Canadian Press A new report says the total value of commercial real estate sales in the Greater Toronto Area in the second quarter rose 43% compared with a year ago. The report by Avison Young says sales of office, industrial, retail, multi-residential and industrial, commercial and investment (ICI) land across the region totalled $7 billion for the three-month period, up from $4.9 billion a year earlier. The result brought total investment to $14 billion for the first half of 2022.
IIROC takes aim at naked shorts
Staff New guidance from the Investment Industry Regulatory Organization of Canada (IIROC) aims to clarify the status of naked short selling under its trading rules. The self-regulatory organization issued a guidance note declaring traders must have a “reasonable expectation” that they will have access to the securities required to settle their trades. If not, the order is considered prohibited under its rules on manipulative and deceptive trading.
Uptick in business bankruptcies just the tip of the iceberg: CFIB
The Canadian Press A small business lobby group says commercial bankruptcies are rising in Canada and even more small businesses are at risk of closure. Statistics Canada data show that small business insolvencies have been on an upward trend since May 2021. But in a report on Thursday, the Canadian Federation of Independent Business said its own survey data indicate only 10% of Canada’s small business owners would file for bankruptcy if their business was no longer solvent.
Suspensions down, permanent bans up for financial planners in 2021
Staff Suspensions of certified financial planners and qualified associate financial planners were down slightly last year while bans were up, according to FP Canada’s 2021–22 annual report released Thursday. As part of the report, FP Canada’s enforcement division, the Standards Council, detailed its 2021 enforcement activity.
At takeover meeting, TD urged to better benefit underserved groups in U.S.
Ian Bickis, Canadian Press TD Bank was urged to make firm commitments to better benefit underserved communities at a public meeting Thursday about its proposed takeover of Memphis-based First Horizon Bank. The virtual meeting, convened jointly by the Federal Reserve Board and the U.S. Office of the Comptroller of the Currency that are reviewing the proposed US$13.4-billion deal, heard from several groups concerned about TD’s track record of serving Black and Latino clients.
Separation agreement didn't terminate "marriage-like" relationship
Staff Two British Columbia women live common law and sign a separation agreement. Four months later, one dies without a will. What happens when the deceased’s sibling hires a lawyer to administer the estate, and the surviving partner subsequently seeks to be declared a spouse? As outlined in Razafsha vs. Heidary, released Aug.
OSFI sets capital rules for crypto
James Langton Federal financial regulator the Office of the Superintendent of Financial Institutions (OSFI) unveiled its approach to cryptoassets held by banks and insurers.
U.S. retail sales were flat in July as inflation takes a toll
Paul Wiseman and Anne D’innocenzio, The Associated Press The pace of sales at U.S. retailers was unchanged last month as persistently high inflation and rising interest rates forced many Americans to spend more cautiously. Retail purchases were flat after having risen 0.8% in June, the Commerce Department reported Wednesday. Economists had expected a slight increase. Still, Wednesday’s report contained some positive signs: Excluding autos and auto parts, retail sales rose 0.4% in July.
ESG integration category criticized in responses to SEC proposals
Mark Burgess The ESG integration category is being criticized as “meaningless” and open to manipulation in response to the U.S. Securities and Exchange Commission’s ESG disclosure proposals. The regulator proposed reforms earlier this year that would require funds to disclose more information to investors about their ESG strategies in an attempt to combat greenwashing. The proposals went out at the end of May for a 60-day comment period.
Demographic trends provide a floor to housing correction: RBC
Mark Burgess Rising interest rates are contributing to a steep correction in Canada’s housing market, but demographic trends will likely prevent a prolonged spiral, RBC says. Immigration is rebounding from pandemic lows and new targets should mean a record number of newcomers, an RBC report released Wednesday said. The federal government is targeting 1.3 million new permanent residents, or 550,000 households, by 2024.
Fed saw evidence of a slowing economy at its last meeting
Paul Wiseman Federal Reserve officials saw signs that the U.S. economy was weakening at their last meeting but still called inflation “unacceptably high” before raising their benchmark interest rate by a sizable three-quarters of a point in their drive to slow spiking prices. In minutes from their July 26-27 meeting released Wednesday, the policymakers said they expected the U.S. economy to expand in the second half of 2022.
Foreign investors dump Canadian banks, bonds
James Langton International transactions in securities generated a net outflow of $5.2 billion from the Canadian economy in June, StatsCan said, as foreign investors sold Canadian securities and Canadian investors reduced their foreign holdings. The outflow was driven by foreign investors selling $17.5 billion worth of Canadian securities, which StatsCan said represented the largest divestment since December 2018.
Risk of Recession Remains High as Central Banks Hike
Related article Text transcript Luc De la Durantaye, chief investment officer, CIBC Asset Management. The world economy is still digesting the impact of several shocks that have led to elevated inflation. The war in Ukraine is raising energy and food prices. The demographic shock, which I don’t hear a lot about, but it’s leading to shortage of labour, bringing elevated wage pressure.
Industry ‘will see how things shake down’ with new lifeco solvency metric
IFRS 17 replaces IFRS 4 as of Jan. 1, 2023, and the revised LICAT — a 217-page document — takes effect the same day. The new LICAT won’t change the financial health of a life insurer, said Steve Prince, head of RSM Canada’s stochastic modeling unit and president-elect of the Canadian Institute of Actuaries. “It’s about as neutral as you could get under the new accounting rules with the corresponding changes in the capital rules,” Prince said.
SEC alleges PR firm employee tipped partner to trade on Equifax breach
James Langton U.S. authorities allege that an employee of a PR firm hired to handle crisis communications for credit reporting agency Equifax Inc. after a massive cyber breach tipped her partner who engaged in insider trading on the news. The U.S. Securities and Exchange Commission (SEC) charged three people — the finance manager at the PR firm, her partner and his brother — for allegedly engaging in tipping and insider trading.
Risk of recession remains high as central banks hike
Maddie Johnson With the war in Ukraine raising energy and food prices, labour shortages leading to elevated wage pressure, and China’s more stringent approach to Covid disrupting supply chains, central banks have started aggressively tightening monetary policy to bring inflation down “almost regardless of the economic impact,” CIBC’s Luc de la Durantaye said. As a result, though a global recession is not his base case scenario, he said the probability has increased.
Canadians charged in U.S. account hacking scheme
James Langton U.S. regulators accused several Canadians of orchestrating the hacking of online retail brokerage accounts as part an international pump and dump scheme. The U.S. Securities and Exchange Commission (SEC) charged 18 people and firms, including several residents of Alberta and British Columbia, for allegedly engaging in a securities fraud that involved hacking into dozens of online brokerage accounts and using those accounts to drive up the price of microcap stocks.
Inflation slows to 7.6% in July as gas prices fall
Staff, with files from The Canadian Press Canada’s year-over-year inflation rate slowed to 7.6% in July, with the deceleration largely driven by a decline in gas prices. The inflation rate hit a nearly 40-year-high of 8.1% in June, but economists were widely expecting inflation to have since slowed. In its latest consumer price index report, Statistics Canada said the July saw the smallest monthly gains since December 2021. It also marks the first decline in the key inflation rate since June 2020.
Negative market returns weigh on Q2 pension funding: FSRA
Staff Impacted by negative market returns, Ontario’s defined benefit (DB) pension plans saw a quarterly decrease in funding, the Financial Services Regulatory Authority of Ontario (FSRA) reports. According to the regulator, 79% of DB plans were fully funded as of June 30. At the end of the first quarter, 85% were fully funded. The median solvency ratio of plans decreased in the latest quarter to 110% from 112% on March 31, ending a streak of eight consecutive quarters where the ratio improved.
Energy sector to bear brunt of new U.S. tax measures
Staff Corporate tax changes included as part of sweeping new U.S. legislation that also reforms climate and health care policy will fall most heavily on companies in the oil and gas sector, says Moody’s Investors Service. In a report, the rating agency said the tax measures featured in the Inflation Reduction Act — including a 15% alternative minimum tax on companies with at least US$1 billion in profits, and a 1% excise tax on stock buybacks — will hit energy sector firms hardest.
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