Shares of Canada’s largest company Shopify (TSX:SHOP) were down close to 5% on April 29 after it gained over 11% a day before. The e-commerce giant reported record sales of almost a US$ 1 billion in the March quarter. While sales rose over 110% year over year, its earnings soared 11x in Q1 of 2021. Comparatively, the S&P/TSX Composite Index was down 0.5% today.
The other major underperformers on the TSX were:
- Resolute Forest Products down 15.5%
- Methanex Corp down 9%
- Real Matters down 7.5%
- Cargojet down 5.6%
- Village Farms down 4.9%
Gold miners on the TSX are facing the heat
Gold mining stock also trailed the market as gold futures ended lower for the third day in a row as well as a rise in bond yields. According to Edward Moya senior analyst at Oanda, “Gold will eventually climb higher, it just needs to see the bond market believe that the Fed will remain stubbornly accommodative throughout the next few months of robust economic data.”
Further, global demand for gold was down 23% year over year in Q1 of 2021 at 815.7 metric tons. This was fueled by a 70% decline in gold investments while gold ETF saw outflows of 179 metric tons.
While Barrick Gold stock fell 2.5%, Kirkland Gold stock was down 1.4% today.
S&P Global Rating maintains AAA rating on Canada
According to a report by BNN Bloomberg, S&P Global Ratings maintained its AAA rating on Canada. This was despite the federal budget announced last week which said the government would spend $101 billion in additional spending measures in the next three years.
S&P explained, “Canada’s public finances were well positioned entering the pandemic, enabling a strong policy response to contain its negative effects without weakening sovereign creditworthiness.”
The COVID-19 pandemic has led to a spike in borrowing and the shortfall for the last fiscal year stood at $354.2 billion. While the budget deficit has fallen more than 50% to $154.7 billion in the 2021-22 fiscal year, the debt-to-GDP ratio is expected to be 51.2%.
S&P expects Canada’s GDP to rise by 5.5% in 2021, 2.4% in 2022 and 2.8% in 2023. Comparatively, Bank of Canada has forecast the country’s GDP to rise by 6.5%, 3.7% and 3.2% respectively in the next three years.
S&P reaffirmed, “Although fiscal and debt metrics are weaker, we believe that the government’s use of its policy flexibility moderated the economic and labour market effects of the pandemic. This deviation from the government’s fiscal profile does not offset Canada’s structural credit strengths, in our view.”
Retail sales rise by 4.8% in February
According to a report from Statistics Canada, Canadian retail sales rose 4.8% to $55.1 billion in February. This was driven by an increase in automobile sales, gas stations and clothing stores. However, economists warned that the growth will be impacted due to the ongoing third wave of COVID-19 infections.
TD Bank economist Ksenia Bushmeneva confirmed, “Recent spending and mobility data suggests that retail sales are likely to weaken once again in April amid renewed restrictions and stay-at-home orders.”