Top headlines: Banking watchdog wants to rein in ultra-long mortgages

Today’s top stories

4:50 p.m.

China poses dilemma for asset managers, AIMCo CEO says

China poses a conundrum for asset managers because while it is cheap and growing, there are risks when it comes to rule of law and transparency, said Evan Siddall, chief executive of the Alberta Investment Management Corp. (AIMCo).

The $158-billion pension and endowment manager opened its first office in Asia this month, in Singapore, and Siddall spoke about AIMCo’s plans there following a speech in Toronto on Sept. 26.

“My guess is that we’ll probably position ourselves in economies around that market that can participate in the growth but don’t have some of the risks,” he said. “If you can find opportunities to participate in the growth of consumer spending in China without actually being in China, those are attractive, depending on the price.”

4:40 p.m.

Market close: Stock markets tumble amid higher bond yields, interest rate expectations

Canada’s main stock index closed down almost 250 points today with broad-based losses led by the telecom, utilities and base metal sectors, while U.S. stock markets also tumbled.

The S&P/TSX composite index closed down 244.46 points at 19,556.15.

In New York, the Dow Jones industrial average was down 388.00 points at 33,618.88. The S&P 500 index was down 63.91 points at 4,273.53, while the Nasdaq composite was down 207.71 points at 13,063.61.

The Canadian Press

3:30 p.m.

Rio Tinto Alcan fined $500,000 for one count of violating Fisheries Act

A Quebec court has ordered Rio Tinto Alcan Inc. to pay $500,000 after the company allowed the discharge of acidic water into the Saguenay River following the failure of a boiler at its Arvida factory in Saguenay, Que., in 2019.

The company was fined after pleading guilty to one count of violating the Fisheries Act.

Environment Canada says the discharge happened on Sept. 17, 2019, after the company sprayed equipment with water to cool it down to allow for repair work.

The water from the sprinklers flowed into a drainage system that emptied into the Saguenay River.

Environment Canada says the company took steps to stop the flow, but 351.3 cubic metres of acidic water was discharged into the river.

The fine will be paid into the federal government’s environmental damages fund and will support environmental restoration and wildlife and habitat conservation projects.

The Canadian Press

2:57 p.m.

Canada raises mortgage bond limit by 50% in housing strategy

Finance Minister Chrystia Freeland said Sept. 26 the change will take effect immediately and will help builders with low-cost capital to ensure that homes are built more quickly.

The announcement appears to mark a reversal — at least temporarily — of the government’s proposal to phase out the mortgage bond program.

Freeland said the government is still carefully considering such a move. Some financial market participants have said it may have negative unintended consequences for companies and other issuers.

Bloomberg

2 p.m.

Banking watchdog wants to rein in ultra-long mortgages

The country’s banks have about $250 billion of mortgages with amortization periods — the length of time permitted to pay off the loan — that sit at 35 years or longer, according to Peter Routledge, the superintendent of financial institutions.

Homeowners with variable-rate mortgages who have fixed monthly payments have seen the portion of their monthly payment that covers interest skyrocket as rates rise, and in many cases are now making only interest payments. When those loans come up for refinancing in coming years, they face the prospect of much higher payments should interest rates remain high.

The problem is “manageable,” Routledge said, noting that the $250-billion figure has declined from $280 billion earlier this year, with OSFI asking senior leaders at the banks what they are doing to “shrink this problem.”

Routledge, who spoke earlier at the Global Risk Institute Summit, also pointed out that negatively amortizing mortgages are a relatively small portion of the total $2.1 trillion in Canadian residential mortgage debt that his organization monitors.

Bloomberg

1 p.m.

Amazon’s checkout-free stores are coming to Toronto and Calgary

Toronto and Calgary sports fans will soon be able to skip the lineup when purchasing snacks before or during games.

The “Just Walk Out” technology requires fans to gain entry to a store with their credit or debit card and then uses computer vision, machine learning and generative artificial intelligence to track what they pick up and return to store shelves.

When fans are done shopping, they simply leave with their purchases in hand and the technology charges the card they used for entry and sends them a receipt.

The technology will make its Canadian debut on Sept. 29 at the Saddledome, where it will be available to Market 213 shoppers.

It will then launch at the Scotiabank Arena’s 100-level Grains and Greens and the Molson Market on the 300 level on Oct. 10.

The Canadian Press

12:15 p.m.

U.S. sues Amazon over allegations it inflates prices, overcharges sellers

The lawsuit, filed in U.S. District Court for the Western District of Washington, is the result of a yearslong investigation into Amazon’s businesses and one of the most significant legal challenges brought against the company in its nearly 30-year history.

According to a news release sent by the agency, the FTC and states that joined the lawsuit are asking the court to issue a permanent injunction court that they say would prohibit Amazon from engaging in its unlawful conduct and loosen its “monopolistic control to restore competition.”

“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them,” FTC chairman Lina Khan said in a statement.

Many had wondered whether the agency would seek to a forced break-up of the retail giant, which is also dominant in cloud computing and has a growing presence in other sectors like groceries and health care. In a briefing with reporters, Khan dodged questions of whether that will happen.

“At this stage, the focus is more on liability,” she said.

The Associated Press

12 p.m.

Midday markets: S&P 500 sinks to 3-month low, TSX down 200 points

The S&P 500 slid to a three-month low as consumer confidence in the economy waned and investors factored in a protracted period of high interest rates. A selloff in government bonds paused while the dollar climbed.

The S&P 500 lost 1.1 per cent as the equities benchmark fell to the lowest since June after a report showed consumer confidence in the world’s biggest economy stalled this month, falling to 103 from a revised 108.7 in August, and missing the median estimate of 105.5 in a Bloomberg survey of economists.

In Canada, the S&P/TSX composite fell more than 200 points as losses in the industrial, technology and base metal sectors helped lead the way lower.

In New York, the Dow Jones industrial average was down 310.83 points at 33,696.05. The S&P 500 index was down 50.46 points at 4,286.98, while the Nasdaq composite was down 169.66 points at 13,,01.66.

Bloomberg, The Canadian Press

11:30 a.m.

Volkswagen slashing EV production in Germany as demand collapses

Production of Volkswagen’s ID.3 and Cupra’s Born electric models will be dialed back at the German carmaker’s main EV plant in Zwickau until Oct. 16, and assembly of the ID.3 will cease in Dresden for the first two weeks of October.

Talks with the Zwickau works council about the next steps for production are ongoing, the spokesperson said.

Bloomberg

10:50 a.m.

Bank of Canada rate hikes are over, but don’t expect cuts soon: economists

That’s a change from earlier surveys in which economists saw the Bank of Canada cutting rates more quickly. The expectations for long-bond yields have also shifted — the 30-year note is now expected to stay above three per cent into early 2025.

Bloomberg

10:30 a.m.

Alberta drivers are paying big bucks for auto insurance thanks to high legal fees: IBC

The report also said the costs awarded for legal fees far outweigh cash settlements for pain and suffering once a claim is litigated. About 38 per cent of a settlement goes to legal fees, the report said, while an average of 15 per cent goes to claimants for pain and suffering.

“Auto insurance premiums should help those injured recover following a collision, not line the pockets of personal injury lawyers,” Aaron Sutherland, vice president Pacific and Western at IBC said.

The insurance association is advocating for reform to Alberta’s auto insurance regime and argues the province’s “one-size-fits-all approach” is costing drivers too much.

“Alberta does not need to move to a full no-fault model like other jurisdictions — where drivers lose the right to sue — to address the legal costs facing our auto insurance system,” Sutherland said. “But something has to be done to mitigate the impact these legal costs are having on the premiums drivers pay.”

Financial Post

9:30 a.m.

Stock markets sink at the open

North American stock markets fell in early morning trading, as traders weighed the possibility of a U.S. government shutdown and digested the news that interest rates are likely to stay higher for a long time.

In Canada, the S&P/TSX composite index fell 95.39 points to 19,705.22 at 9:30 a.m.

In the U.S., the S&P 500 fell 28348 points to 4,308.96, the Dow was down 191.14 points to 33,815.74 and the Nasdaq declined 92.63 points at 13,178.69.

9:15 a.m.

Prepare for 7% interest rates, stagflation, Jamie Dimon warns

“We urge our clients to be prepared for that kind of stress,” the JPMorgan Chase & Co. chief executive said in an interview with the Times of India, saying a hard landing remains a risk for the U.S. economy.

His comments contrast with the consensus view after 5.25 percentage points of hikes that lifted the benchmark rate to 5.5 per cent — the highest level in 22 years. U.S. policymakers have signalled that rates will need to stay higher for longer to contain inflation, though money markets are pricing in cuts from next year.

“If they are going to have lower volumes and higher rates, there will be stress in the system,” Dimon said while visiting Mumbai for a JPMorgan investor summit. “Warren Buffett says you find out who is swimming naked when the tide goes out. That will be the tide going out.”

Dimon, who has said rates may need to rise further to fight inflation, added that the difference between five per cent and seven per cent would be more painful for the economy than going from three per cent to five per cent was.

Bloomberg

8:45 a.m.

Unifor starting contract talks with GM today

Contract talks between Unifor and General Motors Canada begin today.

The negotiations cover about 4,300 workers at the automaker’s St. Catharines Powertrain Plant, the Oshawa Assembly Complex and the Woodstock Parts Distribution Centre.

Unifor announced GM as the next target company in its negotiations with the U.S. automakers on Monday.

The talks come after workers represented by the union at Ford Motor Co. of Canada voted on the weekend to approve a new contract that Unifor plans to use as a pattern agreement in its talks with GM and Stellantis.

It also added two new paid holidays.

The Canadian Press

7:45 a.m.

COVID-19 is affecting air travel again, this time in the U.K.

In a statement late Monday, the airport said a daily 800-flight limit, affecting both departures and arrivals, has been imposed until Sunday.

Gatwick said around 30 per cent of staff in the division within air traffic control are off sick for a variety of reasons, including COVID-19. Gatwick first suffered major disruptions over the weekend amid mounting sick leaves.

It said the daily cap will prevent last-minute cancellations and delays for passengers while National Air Traffic Services, or NATS, gets back to normal.

“This has been a difficult decision but the action we have taken today means our airlines can fly reliable flight programs, which gives passengers more certainty that they will not face last minute cancellations,” Stewart Wingate, the chief executive of London Gatwick, said in a statement.

The largest number of cancellations will be on Friday, Sept. 29, with 33 departures affected.

The Associated Press, Bloomberg

7:30 a.m.

No new oil and gas projects needed with fossil fuel demand about to peak: IEA

The report released Sept. 26 says the worldwide rollout of key technologies such as renewable power, electric vehicles and heat pumps is happening so quickly that demand for coal, oil and natural gas is set to peak within the next 10 years.

“If the world is successful in bringing down fossil demand quickly enough to reach net zero emissions by 2050, new projects would face major commercial risks,” the IEA stated.

Still, the report’s authors pointed out that while the transition is occurring, more needs to be done to hold global warming to the 1.5-degree Celsius target the international community agreed to at the 2015 climate summit in Paris.

While 1.5 C is still achievable, the IEA said, the paths available to get there are narrowing. Global carbon dioxide emissions from the energy sector reached a record high of 37 billion tonnes in 2022.

The world is set to invest a record US$1.8 trillion in clean energy in 2023, but the IEA said that needs to climb to US$4.5 trillion by the early 2030s in order to achieve net zero by 2050.

“The energy sector is changing faster than many people think, but more needs to be done and time is short,” the report states.

The Canadian Press

Stock markets: Before the opening bell

U.S. stock futures fell Tuesday morning, while shares in Europe retreated for a fourth day.

The threat of tight policy is undoing some of the market’s biggest gains this year in high-flying tech stocks. These growth companies are prized for their long-term prospects but hold less appeal when future profits get discounted at higher rates. That’s reflected in growing short positions against the technology-heavy Nasdaq 100 Index.

“With weak but positive growth holding recession at bay on both sides of the Atlantic, central banks will not be able to ease financial conditions between now and the end of the year,” said Nadège Dufossé, global head of multi asset funds at Candriam. “With positive surprises now largely priced in, there seems to be little room for further appreciation in equity markets, suggesting a degree of caution on risky assets.”

Positioning in the Nasdaq 100 is now one-sided net short at US$8.1 billion, with all long positions unwound, according to Citigroup Inc. strategists.

In Canada, the S&P/TSX composite closed in positive territory on Monday.

Bloomberg

What to watch today

Peter Routledge, superintendent of financial institutions, will deliver a keynote speech at the Global Risk Institute Summit, in Toronto, at 11:20 a.m. The speech will address “Safeguarding the Integrity and Security of the Financial System.”

The Canadian Club hosts an event with Evan Siddall, chief executive of the Alberta Investment Management Corp. (AIMCo), at the Fairmont Royal York Hotel in Toronto, starting at 11:45 a.m.

B.C. Premier David Eby will be in Ottawa from Sept. 25-26 meeting with Prime Minister Justin Trudeau as well as other senior federal ministers to discuss opportunities in the clean-energy sector, support for critical infrastructure needs, and national support to respond to emergencies.

Costco Wholesale Inc., one of Canada’s five biggest grocers, will release its earnings report.

Additional reporting by The Canadian Press, Associated Press and Bloomberg