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THURSDAY, MAY 17, 2012, CANADIAN EDITION
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TOP NEWS
• HSBC turnaround on target, sees revenue boost
HSBC doubled the annual revenue boost expected from its turnaround plan to $2 billion, as Europe's biggest bank targets emerging markets and cost cuts to lead its battle to recover from the financial crisis and cope with new regulations.
• Spanish recession bites, may be prolonged
Spain officially slipped in to recession in the first quarter, final figures confirmed, leaving the country threatened with a prolonged slump as the turmoil-wracked euro zone struggles to balance austerity with growth.
• Sears to spin off piece of Canada stake
The company said it plans to spin off a large part of its stake in its Canada unit, which has struggled with weak sales and dragged down overall performance.
• Wal-Mart posts strong profit as U.S. sales jump
The retailer posted a better-than-expected quarterly profit as its Walmart U.S. division showed a 2.6 percent rise in sales at stores open at least a year, as warm weather and an earlier Easter enticed shoppers to spend.
• CP Rail CEO quits in victory for dissident Ackman
CEO Fred Green resigned, handing activist shareholder William Ackman a clear victory after a bruising proxy battle for control of Canada's second biggest railroad.
• UK agency approves BlackBerry 7 OS for govt
The BlackBerry maker said the UK agency responsible for setting standards for computer security has approved the BlackBerry 7 operating system for government use.
BEFORE THE BELL
Canada’s main stock index looked set for a lower open as worries about the Greece contagion spreading to other euro zone countries hurt global shares and oil, though losses may be limited as gold rose on bargain hunting. Wholesale trade data and foreign investment data is on the calendar. Talks of a possible credit rating downgrade to Spanish banks circulating in the market and reports of customers pulling out money from Spanish lender Bankia, weighed on sentiment. However, Asian markets rebounded after Japan's better-than-predicted economic growth.
STOCKS TO WATCH
Results
• Dynex Power Inc. (DNX). The company reported first-quarter earnings of 1 Canadian cent a share on revenue of C$10.5 million.
• Storm Resources Ltd. (SRX). The company reported first-quarter loss of 4 Canadian cents a share on production revenue of C$3.4 million.
In Other News
• Canadian Pacific Railway Ltd. (CP). The company's Chief Executive Fred Green resigned, handing activist shareholder William Ackman a clear victory after a bruising proxy battle for control of Canada's second biggest railroad. The company also said Chairman John Cleghorn, along with fellow directors Tim Faithfull, Edmond Harris, Michael Phelps and Roger Phillips will not stand for re-election, opening the door to nominees from Ackman's Pershing Square Capital Management to join the 16-member board.
• Enbridge Inc. (ENB). The oil transporter kicked off one of the most sweeping expansions in its history on Wednesday, a C$3.2 billion series of projects across its pipeline system aimed at moving western Canada and North Dakota oil to Eastern refineries and eliminating costly bottlenecks in the U.S. Midwest.
• Research In Motion Ltd. (RIM). The blackberry-maker said the UK agency responsible for setting standards for computer security has approved the BlackBerry 7 operating system for government use. This will allow UK government employees to use six models of the smartphone including BlackBerry Bold 9900, BlackBerry Torch 9810 and BlackBerry Torch 9860, RIM said.
• Royal Bank of Canada (RY). The bank along with Credit Suisse are among suitors who have put in initial bids to buy the non-U.S. wealth management business of Bank of America in a deal that could be worth about $2 billion, sources said.
• Sears Canada (SCC). Sears Holdings Corp said that it planned to spin off its Canadian arm into a separate company and sell a large part of its stake. Sears currently owns about 95 percent of Sears Canada and would still hold about 51 percent after the spinoff, which it expects to complete this year.
ANALYST RECOMMENDATIONS
• Allied Properties REIT (AP_u). Canaccord ups target to C$28 from C$27 on strong Q1 results; rating hold
• Boardwalk REIT (BEI_u). Macquarie ups price target to C$65 from C$60 as it sees long-term gain from the REIT's unutilized land holdings; rating outperform
• Canadian National (CNR). Barclays ups target to C$88 from C$84; rating underweight
• Canadian Pacific Railway (CP). Barclays raises to overweight from equal weight; ups price target to C$92 from C$80, as company has potential to nearly double current earnings
• Timmins Gold (TMM). Canaccord Genuity raises to hold from sell on valuation; cuts target price to C$1.60 from C$1.85
ECONOMIC EVENTS
08:30 Wholesale trade for Mar: Expected 0.3 pct Prior 1.6 pct
08:30 Foreign investment in Canadian securities for Mar: Prior C$12.50 bln
08:30 Canadian investment in foreign securities for Mar: Prior C$2.16 bln
COMPANIES REPORTING RESULTS
(Estimates according to Thomson Reuters I/B/E/S)
• Edleun Group Inc.(EDU). Expected Q1 breakeven
• Just Energy Group Inc. (JE). Expected Q4 earnings of 22 Canadian cents a share
• Silvercorp Metals Inc. (SVM). Expected Q4 earnings of 9 cents a share
• Smart Technologies Inc. (SMA). Expected Q4 earnings of 1 cent a share
CORPORATE EVENTS
09:00 5n Plus Inc. (VNP). Annual shareholder meeting
09:15 Liquid Nutrition Group Inc. (LQD). Annual shareholder meeting
10:00 Centerra Gold Inc. (CG). 2012 Annual shareholders meeting
10:00 Canadian Pacific Railway (CP) Annual shareholder meeting
10:00 Orvana Minerals Corp. (ORV). Q2 2012 earnings conference call
12:00 Pace Oil and Gas Ltd. (PCE). Annual shareholder meeting
12:30 Potash Corporation of Saskatchewan Inc. (POT). Annual shareholder meeting
14:00 Just Energy Group Inc. (JE). Q4 2012 earnings conference call
16:00 McEwen Mining Inc. (MUX). Annual shareholder meeting
16:00 Twin Butte Energy Ltd. (TBE). Annual general meeting
16:30 Pure Industrial Real Estate Trust (AAR_u) Q1 2012 earnings conference call
16:30 SMART Technologies (SMA). Q4 2012 earnings conference call
16:30 Velan Inc. (VLN). Q4 2011 earnings conference call
18:00 MCCOY Corp. (MCB). Annual shareholder meeting
EXDIVIDENDS
(Amount rounded off to two decimal places)
• CanElson Drilling Inc. (CDI). Amount C$0.05
• Husky Energy Inc. (HSE). Amount C$0.30
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INSIGHT
PREVIEW: Canadian inflation likely to stay muted in April
Canadian consumer prices likely remained subdued in April, leaving the annual inflation rate unchanged from March when it dropped to an 18-month low of 1.9 percent, and suggesting price pressures are the least of the Bank of Canada's worries.
Consumers felt the pinch of rising gasoline prices in April - the single biggest driver of the consumer price index - which rose by just over 3 percent in the month, according to analysts' estimates.
But that represents a moderation from April 2011, making the year-over-year inflation rate look softer.
The core inflation rate, which excludes gasoline and other volatile items, is also expected to hold at 1.9 percent.
The numbers are not expected to play a decisive role in the Bank of Canada's judgment on how soon to raise interest rates from their ultra-low 1.0 percent, with domestic growth and the global environment seen weighing more heavily.
The central bank targets 2 percent annual inflation. The average 2.3 percent rate in the first quarter was a notch lower than its April projection and well below the average 2.9 percent seen in 2011. The bank sees second-quarter inflation averaging 2.0 percent.
"The bank is expecting inflation to hang at around 2 percent anyways. Barring major upside surprises in inflation, it's unlikely to affect the policy of the Bank of Canada," said Mazen Issa, macro strategist at TD Securities.
The bank adopted a more hawkish tone in mid-April, noting that inflation and growth were both firmer than it had anticipated, raising market expectations it could raise its key overnight target either late this year or in early 2013.
Since then, there has been some disappointing data in the United States, the predominant market for Canadian exports, and renewed uncertainty about the euro zone sovereign debt problems following elections in Greece and France.
At the same time, domestic data on jobs, housing and trade suggest the economy is getting closer to its growth potential, the point at which central banks usually prefer monetary policy to be neutral rather than stimulative to keep inflation in check.
In fact, after a second straight month of surprisingly strong jobs growth, markets began pricing in a quarter-point rate hike by December of this year.
To muddy matters further, Bank of Canada Governor Mark Carney reminded market players in an op-ed in the Financial Times on Friday that "inflation can be allowed to run below target for a longer period than usual if tighter policy is warranted."
Carney was not referring to Canada specifically, but this "flexible" inflation targeting approach suggests temperate inflation may mean little for monetary policy right now.
"Mr. Carney's article .. indicated that in some circumstances they'll basically close their eyes to what inflation is doing right now, " said Doug Porter, deputy chief economist at BMO Capital Markets.
--- Louise Egan
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