/Posthaste: CN Rail estimated to take a $180 million earnings hit for every week the strike drags on: Analyst

Posthaste: CN Rail estimated to take a $180 million earnings hit for every week the strike drags on: Analyst

Good Morning!

Good morning,

Disappointing economic news could set the loonie back in the next few months, according to Desjardin Group.

“The Canadian dollar should end the year at US$0.75 (or C$1.3333),” the Quebec-based financial services company said in a report published last evening. “This forecast is based on continued international concerns in the short term, which should also feed expectations of an interest rate cut in Canada. There may also be disappointments with Canadian economic figures in the short term. The loonie might stay weak into the first quarter of next year. A slight rebound is then anticipated alongside some renewed optimism and an improvement in economic data.”

The loonie was trading at C$1.3316 against the greenback this morning.

The ongoing Canadian National Railway Co. strike is unlikely to help Canadian economic sentiment as impacted companies start announcing layoffs and production closures at their plants.

The strike could also start hurting CN’s bottomline in the fourth quarter, according to CIBC Capital Market’s calculation.

“If we look at this over a full week, this would equate to a ~$180MM hit to EBIT (earnings before interest and taxes) for every week the strike drags on,” CIBC analyst Kevin Chiang said in a note to clients on Nov.24. “Longer-term though, this labour disruption does not change our long-term thesis on CN.”

Here’s what you need to know this morning:

  • An Ecofiscal Commission report assesses modelling results of policy options for meeting Canada’s 2030 greenhouse gas emissions target, and their economic consequences
  • Prime Minister Justin Trudeau will meet with the Premier of Newfoundland and Labrador, Dwight Ball, in Ottawa
  • Officials from Grain Growers of Canada and the Canadian Federation of Agriculture in Ottawa to discuss the impact of the rail strike and the need for government action to get trains running again
  • CEOs of the Windsor-Detroit Bridge Authority and Bridging North America provide an update on the Gordie Howe International Bridge Project in Windsor
  • Petronas International Energy Speaker Series featuring retired Dutch politician and former executive director of the International Energy Agency, Maria van der Hoeven in Calgary
  • National Farmers Union national convention in Winnipeg
  • Intergovernmental Affairs Minister Chrystia Freeland meets with Saskatchewan Premier Scott Moe in Regina
  • Carole James, Minister of Finance releases British Columbia’s Second Quarterly Report for 2019-20

Gold is enjoying strong support from central banks, and that has fuelled a 14 per cent rally year-to-date for the precious metal.

And the monetary policymakers, worried about geopolitical uncertainty, will maintain their support for the safe-haven commodity in the foreseeable future, according to Citibank.

“Official sector survey data and our own medium-term thesis suggest that this net gold buying trend can continue at a robust pace in 2020,” the Wall Street bank said. “We expect a US$1,400-1,600/oz gold price range to persist on average over the next 3-6 months, with an upside bias into 2021.”

Total worldwide central bank gold holdings should soon eclipse 35,000 tonnes, according to the bank. To put this figure in perspective, it is already 14 times the size of the physically backed global gold exchange-traded-fund market. From a “flows” perspective, central bank net buying now represents 20 per cent of annual mine production, according to Citi.

“The CBs are not a panacea for an outright collapse in retail gold demand, but in our view represent a key stabilization mechanism for gold. Ultimately, reserve managers are absorbing physical gold and leaving a smaller burden on investors to fill the gap and clear the market,” the bank noted.


— Please send your news tips, comments and story ideas to Yadullah Hussain at [email protected]. or @Yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg

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