MORNING NEWS CALL REUTERS Canada Edition Monday, January 30, 2017

WALL STREET WEEKAHEAD

Investors upbeat on data, Fed; wary of Trump

In an ordinary world, a U.S. Federal Reserve meeting, jobs data and a TOP NEWS hefty number of earnings reports • Canadian PM says mosque shooting a "terrorist attack on Muslims" next week would provide investors Six people were killed and eight wounded when gunmen opened fire at a Que- with welcome distraction from specu- bec City mosque during Sunday night prayers, in what Canadian Prime Minis- lation about the U.S. president's poli- ter Justin Trudeau called a "terrorist attack on Muslims". cy plans. • Canada to offer temporary residency to travelers stranded by U.S. But the current world is less than Canada will offer temporary residency to any travelers stranded by U.S. Presi- ordinary. In the second week after dent Donald Trump's orders temporarily barring people from seven Muslim- Donald Trump's inauguration, issues majority countries, a senior official said on Sunday. such as his controversial immigration • Saputo seeks to mop up Australia's Warrnambool Cheese and Butter policies will likely keep his voice ring- Dairy company Saputo Inc said it will make an all-cash takeover offer for the ing louder in investors' ears than the 12 percent of Australia's Warrnambool Cheese and Butter it does not already words of Fed Chair Janet Yellen. own, valuing the company at A$682 million. Wall Street has already bet on solid • MGX Minerals hunts battery lithium in oilfields economic data, strong earnings and MGX Minerals is close to completing testing of technology that uses brine from the pace of Fed interest rate hikes, oilfields aiming to shorten the production of lithium to just one day, CEO Jared but investors are still uncertain how Lazerson told Reuters. to bet on the president. • CSX, outgoing Canadian Pacific CEO in settlement talks - WSJ On Friday Trump ordered a 120-day U.S. railroad operator CSX Corp is discussing a settlement with Hunter Harri- hold on allowing refugees into the son, the outgoing chief executive of Canadian Pacific Railway Ltd, and activist country, an indefinite ban on refu- investor Paul Hilal that could make Harrison CSX's CEO, WSJ reported. gees from Syria and a 90-day bar on citizens from Iran, Iraq, Libya, Soma- lia, Sudan, Syria and Yemen. BEFORE THE BELL The action has sparked confusion Tracking weakness in U.S. stock index futures, Canadian stock index fu- and anger after immigrants and refu- tures pointed to a lower open after immigration curbs introduced by Donald gees were kept off flights and left Trump added an extra layer of uncertainty to the economic impact of the new stranded in airports and was met U.S. president's policies. European shares dipped and Asian stocks were with international criticism, outrage down. Oil prices fell as news of another increase in drilling activity spread con- from civil rights activists and legal cern over rising output. In the currency markets, investors sought the tradition- challenges. al security of the yen and the greenback was little changed against the ster- "I don't see how markets could look ling and the euro. Gold inched up. on this favorably," David Kotok, chairman and chief investment of- ficer of Cumberland Advisors, said STOCKS TO WATCH late Saturday. "International tensions are raised. Obstacles to peaceful Deals of the day exchanges are abruptly announced. • Saputo Inc (SAP). The dairy company said it will make an all-cash takeover And litigation commences." offer for the 12 percent of Australia's Warrnambool Cheese and Butter it Kotok said stocks may react nega- does not already own, valuing the company at A$682 million. The A$8.85 per- tively as the market is ripe for a cor- share offer is at a 24.8 percent premium to Warrnambool's Friday closing price rection, and for "current market pric- of A$7.09. Saputo will fund the acquisition from cash on hand and existing es to be justified, the Trump agenda credit facilities, the company in a statement to the Australian Securities Ex- must unfold perfectly." change. While stocks have risen since the Nov. 8 election on hopes for tax cuts, lighter regulation and fiscal In other news stimulus, investors are waiting for • Canadian Pacific Railway Ltd (CP). The railroad operator CSX Corp is dis- evidence Trump has the willingness cussing a settlement with Hunter Harrison, the outgoing chief executive of Ca- and ability to follow through on his MORNING NEWS CALL - CANADIAN EDITION January 30, 2017 nadian Pacific Railway, and activist investor Paul Hilal that could make Harri- pro-business campaign promises. son CSX's CEO, WSJ reported. The parties are discussing Mantle Ridge's On top of this, add to the uncertainty request for more than three CSX board seats, but CSX is said to be unwilling the fear of his threats to slap mas- to hand over that many seats, WSJ reported, citing people familiar with the sive tariffs on imports and his com- matter. ments on China's currency policy. • WestJet Airlines (WJA). The airline said it turned back a passenger bound "Wall Street's already figured out for the United States on Saturday in order to comply with an executive order that the recovery is in place, that the that prohibits people from seven Muslim-majority countries from entering the Fed is going to start getting aggres- United States. WestJet spokeswoman Lauren Stewart said the airline would sive. What they haven't figured out give full refunds to anyone affected by the U.S. executive order. It did not say yet is, exactly who is Donald Trump," which country the passenger had come from. said Robert Phipps, a director at Per Stirling Capital Management in Aus- tin, Texas. Fed fund futures show bets of a 96- percent chance the Fed leaves rates unchanged when it ends its two-day meeting on Wednesday, according to Reuters data.

Investors will watch for hints of poli- cymakers' plans for the rest of 2017. ANALYSTS' RECOMMENDATION If their language indicates faster- • Bank of Montreal (BMO). RBC raises target price to C$106 from C$97 to than-expected hikes, "the equity rally reflect an improving economic outlook (albeit mostly U.S. driven), a continued could pause as investors recali- benign credit environment and improving excess capital levels. brate," said Paul Christopher, head • Onex Corp (ONEX). Canaccord Genuity raises target price to C$102 from global market strategist at Wells Far- C$100 reflecting Jeld-Wen's IPO debut and the implied equity value. go Investment Institute in St. Louis. • Osisko Mining Corp (OSK). National Bank Financial raises target price to But investors don't see the Fed rock- C$4.85 from C$4 based on the recent positive exploration updates from the ing the boat next week, at least until company’s Windfall project. it has some clarity on Trump's policies. "Like many of us, the Fed is probably ECONOMIC EVENTS waiting to see what is going to come No economic indicators are scheduled for release. of all the new policies and changes that can be expected out of the new administration," said Tim Dreiling, COMPANIES REPORTING RESULTS senior portfolio manager at the Pri- vate Client Reserve at U.S. Bank in Jan 30: Kansas City. Bluedrop Performance Learning Inc (BPL). Expected Q4 earnings of break Strong fourth-quarter corporate earn- even per share ings and forecasts have partly driven Detour Gold Corp (DGC). Expected Q4 earnings of 6 cents per share the S&P 500's 10-percent increase since Nov. 4, and many big compa- Jan 31: nies are due to report next week. Imperial Oil Ltd (IMO). Expected Q4 earnings of 37 Canadian cents per share A few weeks into the reporting sea- son, analysts now expect quarterly earnings to have risen 6.8 percent, CORPORATE EVENTS up from an expectation of a 6.1 per- 08:30 Teranga Gold Corp (TGZ). Q4 earnings conference call cent gain on Jan. 1, according to Reuters data. This growth rate would be the fastest in two years. EXDIVIDENDS Bank of Montreal (BMO). Amount C$0.88 'TRUMP IS SERIOUS' Emera Inc (EMA). Amount C$0.52 On Friday, the U.S. is expected to Secure Energy Services Inc (SES). Amount C$0.02 report 171,000 new non-farm jobs TransAlta Renewables Inc (RNW). Amount C$0.07 were created in January, up from 156,000 in December. Unless the number is below 100,000 or above (All analysts' estimates are according to Thomson Reuters I/B/E/S) 300,000, stocks will likely not move sharply, according to Wells Fargo's Christopher. "If the data coming in are unremark-

2 MORNING NEWS CALL - CANADIAN EDITION January 30, 2017

able, it would tend to turn attention back to Washington," he said. Aside from seeking clarity on Trump's pro-business policies, the market will also watch for signs of whether the president will help or hurt foreign trade. For example, the administration has said it would tax imports from Mexico to help pay for a new wall to secure the border. But such a tax could push inflation high- er, nudging the Fed closer to tighten- ing policy. Investors are also nervous about the implications if Trump officially de- clares China a currency manipulator, as he has implied he might do. The best-case scenario would be that he sits down to negotiate trade concessions with the world's second- biggest economy, said Wells Fargo's Christopher. "I think Trump is serious about getting things done, but he does have to reckon with the fact that even as the most powerful person in the world he does have to work with others," he said.

-- By Sinead Carew

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