/Posthaste: Air Canada stock hit by the China virus, BoC’s decision day, and Volkswagen’s back in Canadian court

Posthaste: Air Canada stock hit by the China virus, BoC’s decision day, and Volkswagen’s back in Canadian court

Good Morning!

A Citibank report this morning notes that the coronavirus currently sweeping China and Asia could reach a full-blown crisis by March, before it can be contained.

“Drawing from the 2003 SARS experience, that outbreak peaked about 3-4 months after the first case was reported in November 2002, and was mostly contained after 6-7 months. Assuming a similar trajectory, the outbreak of the 2019-Nov may not peak until March-April,” wrote Jian Chang, analyst at Citi.

“However, we are mindful of the potential for the outbreak to accelerate at a faster pace during the Lunar New Year travel season, with official estimates putting the number of trips being made at around 3 billion.”

The impact is already be felt far and wide. The U.S. registered its first case in Washington state on Tuesday. In Canada, Air Canada stock has already reacted badly to the crisis, falling 4.5 per cent.

If this virus is as bad as “black swan” events, the Canadian airline could take a $475 million hit to Ebitda, suggesting a$7 per share hit to its stock value or a 14% decline from its Monday’s closing price, Canadian Imperial Bank of Commerce analyst Kevin Chiang in a report published Tuesday. “That being said, it is unknown at this time if the coronavirus will be as bad as the SARS outbreak from 2003,” Chiang said, according to a Bloomberg report.

Scotiabank analyst Derek Holt believes the Bank of Canada will keep its powder dry today as it decides on interest rates, and the markets expect the bank to remain on hold in in March too, while there is one-in-four odds of a cut from April-June after which about half a cut is priced by September-October.

“Nevertheless, there are a few things to monitor. They (the BoC) said they would update fiscal policy developments in the January outlook and I’d expect them to indicate that there is no net incremental Federal-provincial stimulus to 2020-21 growth.  That means it’s all on monetary policy.”

Key will be whether they maintain “future interest rate decisions will be guided by….” language or upgrade/downgrade that concluding bias.

“There is a solid case for turning more cautious/dovish as slight possible improvement in external risks is accompanied by a souring of Canadian risks which is a reversal of the Canadian resilience argument relative to the ROW (rest of the world),” Holt noted.

Here’s what you need to know this morning:

  • Bank of Canada to make its interest rate announcement and releases its monetary policy report at 10 a.m. ET. Bank of Canada governor Stephen Poloz to hold a news conference to discuss the central bank’s rate decision and monetary policy report at 11:15 a.m.
  • Statistics Canada to report wholesale trade figures for November and the consumer price index for December
  • German automaker Volkswagen expected to plead guilty to 60 environment-related charges in Toronto at 10 a.m. ET
  • Former MLA David Swann and other Alberta Liabilities Disclosure Project coalition members call on the provincial government to hold oil and gas companies accountable for not paying rural property taxes in Calgary
  • Hassan Yussuff, president of the Canadian Labour Congress, to attend rally in support of locked-out Co-op refinery Unifor workers in Regina
  • Extradition hearing for Huawei executive Meng Wanzhou in Vancouver
  • Notable earnings: Rogers Communications, Score Media and Gaming Inc., AGF Management, Baker Hughes Co

According to a new publication by researchers at the World Economic Forum in Davos, it’s easier to get ahead in Canada and achieve the American Dream than it is in the U.S., according to a National Post report.

The Global Social Mobility Index 2020, published Tuesday as world leaders converged on the Swiss mountain town, says it provides “a much-needed assessment of the current state of social mobility worldwide” as we face “entrenched” inequality. Using recent international figures and an executive survey, it examines how worker potential can be better realized, and where countries are falling short.


— Please send your news, comments and stories to [email protected]. — Yadullah Hussain @Yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg


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