Top of the Morning

Jason Kirby of Maclean’s discusses outgoing TD CEO Ed Clark’s latest plea for more regulation and what this tells us about our housing market:

To paraphrase Clark, it’s cutthroat out there, and no bank can afford to lose any lending business to rivals, even if those rivals take undue risks by issuing loans to people who can’t really afford them. As such, it’s necessary for government to tighten lending rules to keep the industry from rocketing out of control….

We’re long past the point of saying we shouldn’t have gotten ourselves into this mess in the first place. But we shouldn’t have. Successive governments used the Canada Mortgage and Housing Corporation—the Crown corporation that insures lenders against losses—as an economy-boosting plaything, moral hazard be damned.

On the Homefront

TSX 60 futures are moving slightly higher ahead of the open after the composite index finished with a tiny loss on Tuesday.

 

The Canadian dollar is trading in a tight range around 0.903 against the greenback this morning.

 

BlackBerry’s big day has arrived. In a three-city event beginning at 9:00am(EDT), BlackBerry (BBRY) is set to launch its PassPort ‘phablet’ device, software that unifies the user experience between the smartphone and PC, and make a surprise announcement. While this launch is certainly significant, the company derives the majority of its revenue from services. As such, the roll-out of BlackBerry Enterprise Service (BES) 12 may mean more to the company’s bottom line than anything we see or hear today. Nonetheless, we’ll be at the Toronto launch, providing live updates from on location. Here’s a preview of what to expect.

UPDATE: We’re live-blogging the BlackBerry launch here.

 

The Great Rotation from Maple Leaf Foods to Wind Mobile. The Business News Network’s Amber Kanwar reports that West Face Captial, the second-largest shareholder of Maple Leaf Foods (MFI), eliminated its position in the food processing company over the past month, with 7.4 million shares changing hands in two block trades on September 15. The next day, Globalive Capital announced that it was acquiring a majority stake in Wind Mobile from VimpelCom for about $300 million, and that it had financial backing from a group of investors. West Face, a Toronto-based hedge fund, is one of the members of this consortium. This selling pressure has certainly weighed on shares of Maple Leaf Foods, which are down roughly 7 percent in September.

 

Ottawa lambastes CN Rail. Federal Agriculture Minister Gerry Ritz is telling Canadian National Railway (CNR) to “pick up their game” when it comes to grain shipments, writes The Globe and Mail’s Eric Atkins. The railway is facing a yet-to-be-determined fine for failing to meet the weekly quota for grain shipments (approximately 5,000 rail cars). Ritz disputes the notion that there wasn’t enough grain for the iron horse to move, a claim made by CN CEO Claude Mongeau.

 

Another dose of BoC-speak. Bank of Canada Deputy Governor Timothy Lane will deliver a speech on the United States and Canada’s economic recoveries from the Great Recession beginning at 3:05pm (EDT) at Carleton University. Lane’s remarks come on the heels of two blockbuster speeches – one from Governor Poloz on the importance of the exchange rate, and one from Senior Deputy Governor Wilkins on the “new neutral” for interest rates – so it’s unlikely we’ll get much in the way of new information today. “The Canadian dollar could remain on the defensive so long as the Bank continues to (subtly) drill home the point that rates aren’t going up for a while,” writes Bank of Montreal senior economist Sal Guatieri. “That’s despite the fact that both growth and inflation are running hotter than the Bank anticipated.”

 

Seven Generations takes major step towards IPO. The Globe and Mail’s Jeff Jones reports that Seven Generations Energy, an Alberta-based oil producer, has filed a preliminary prospectus for an IPO that it expects close this year. Citing industry sources, Jones writes that the company could sell up to $1 billion worth of stock. Concerns about a drop-off in Chinese demand and the strengthening greenback have weighed on the price of crude oil in recent months and sparked a sell-off for many energy stocks.

Daily Dispatches

Australia is concerned about its housing bubble. The Reserve Bank of Australia published its Financial Stability Review, and drew attention to the “unbalanced” housing and mortgage markets. “It seems the RBA is concerned about speculative demand amplifying property prices and it will work with APRA to curb excessive lending to investors,” writes IG market strategist Stan Shamu. Meanwhile, the Bureau of Resources and Energy Economics also cut its price outlook on iron ore, one of the nation’s key exports. RBA Governor Glenn Stevens is scheduled to deliver a speech in Melbourne this evening.

 

China is concerned about its housing bust. Though Finance Minister Lou Jiwei told the world not to expect any noteworthy stimulus from China, it’s clear that the powers that be are making a serious effort to prop up the nation’s softening real estate market. Reuters reports that major Chinese banks are slashing mortgage rates while policymakers are lifting restrictions on buying multiple homes in many cities. There are also odd marketing gimmicks, with one Chinese developer offering a discount on the purchase price depending on how much weight the buyer is able to lose.

 

“The German economy is no longer running smoothly.” That’s what Hans-Werner Sinn, President of the IFO Institute, wrote after the nation’s business climate index fell for the fifth consecutive month to its lowest level since April 2013. Businesses aren’t too optimistic about how they’ll be doing six months from now, either.

 

Japan’s manufacturing PMI came in at 51.7, which was lower than economist anticipated but still suggests that the sector is growing. “The manufacturing PMI slipped 0.5 pts to a 2-month low of 51.7 this month, mimicking the slow pace of expansion in the Eurozone and China, where their respective PMIs were barely above 50,” writes Bank of Montreal senior economist Jennifer Lee.