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Treasury
Canada's Federal Govt May "Hit" Its Deficit For FY25-26, Over Even Come In Lower, says Scotia's Holt
Additional stimulus measures, the closing deficit for FY25-26, "guesstimates" on future deficits and issuance, and details behind plans for a sovereign wealth fund will be "key" in Canada's Spring economic statement and fiscal update due after the close on Tuesday, says Derek Holt, Vice-President & Head of Capital Markets Economics, at Scotiabank."Never take the deficit and issuance guidance seriously; Finance's track record is very poor on magnitudes and missed inflection points. So is the analyst community's track record," he says."That's because surprises, like commodity booms, come along, politics gets in the way by doing things like spending unexpected improvements and because the economy doesn't always perform to expectations whether good or bad. It's a tough business. Tougher than the strident talk that too often surrounds anyone's projections."In this case, however, Canada's federal government may "hit" its deficit for FY25-26 or come in lower by spending all or most of the positive surprises, says Holt. He adds: "Higher prices are definitely helping the government since they tax all the booming commodities and the relevant price deflator isn't CPI -- it's the broad GDP deflator that guides nominal GDP as a driver of the fiscal position. The domestic economy may be performing better than feared. Rolling out the government's spending initiatives is fraught with uncertainty because of the sheer enormity and complexity of the varied programs. Additional spending measures are likely but they've pre-announced a lot as well."
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Sectors
Oil Prices Jump as Progress on Ending the Iran War Stalls
Oil prices were sharply higher early on Tuesday, with the U.S. benchmark price rising back above US$100 per barrel for the first time in three weeks as hopes for an end to the war on Iran fade and the Strait of Hormuz remains closed.West Texas Intermediate crude oil for June delivery was last seen up US$4.94 to US$101.31 per barrel, the highest since April 7, while June Brent oil was up US$3.66 to US$111.89.Weekend talks expected to be held in Pakistan between Iran and the United States failed to take place, while a Monday proposal from Iran to reopen the Strait of Hormuz in return for lifting a U.S. blockade of its ports and deferring talks over its nuclear program was rejected by President Trump.Iran closed the Strait of Hormuz after the United States and Israel launched attacks on the country on Feb. 28. The Strait is the chokepoint for 20% of daily global oil demand supplied by Persian Gulf nations and its closure has produced the largest-ever supply shock, pushing up oil prices by 44% since the start of the war."Oil extended its rally ... amid no signs of progress toward reopening the Strait of Hormuz, where US and Iranian blockades have reduced daily transits to near zero. Warnings over the severity of the global supply squeeze continue to intensify, with tightness in refined fuel markets already pushing diesel and jet fuel prices toward USD 200 per barrel," Saxo Bank noted.The closure of the Strait has pushed up spot price for oil, as the Asian nations that rely on Gulf producers compete for available barrels. Rising prices have heightened inflation and raises the risk of a global recession as the lack of supply forces demand destruction and chokes off economic growth."Alarm bells will ring loudly if the SoH (Strait of Hormuz) doesn't reopen during May. Spot crude and product prices will trade higher and higher. And if a decent reopening doesn't take place before June/July, then the risk is significant for a real crisis where the world may be forced to reduce its oil consumption closer to the level of availability," Bjarne Schieldrop, Chief analyst commodities at SEB Research, wrote.
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Research
Research Alert: Alliancebernstein Posts Mixed Q1 Results; Aum Rises Despite Fund Outflows
CFRA, an independent research provider, has providedwith the following research alert. Analysts at CFRA have summarized their opinion as follows:AllianceBernstein (AB) posted Q1 adjusted EPS of $0.83 versus $0.80, matching the consensus forecast but lagging our $0.90 estimate. GAAP EPS of $0.92 versus $0.67 a year ago reflected a $48.4M gain from the SocGen joint venture transaction. Q1 adjusted revenues rose 3.9% to $871M, in line with our 3%-7% growth forecast, reflecting a 3.8% rise in base fees and 77% higher distribution fees. AB noted its institutional pipeline totaled $27.5B at Q1-end, set to benefit from strategic initiatives including the planned expansion into Asia insurance markets. AUM grew 6.9% to $838.6B, though net outflows deteriorated to $7.1B (from $2.4B of inflows a year ago), masking $6.7B of inflows into fixed income, alternatives and multi-asset investments. GAAP operating margins expanded 430 bps to 26.1% from restructuring actions. We expect modest additional operating margin expansion in 2026 and view the partnership interests as undervalued given their above-average yield potential.
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