Hello and welcome back to Top Five Friday Finds – the weekly series where we share five of the business news stories that dominated the papers (and our conversations) this week.
We are only two weeks into 2018, and already we have seen big changes on the global market. Last week we spoke about how Canadian marijuana stocks took a hit following changes in USA regulation. This week Bitcoin, 2017’s other investment darling, plummeted in value due to changes in South Korean regulation. On Thursday South Korean Justice minister Park Sang-ki announced that the government was preparing to suspend bitcoin trading. Governments across the globe have struggled to regulate cryptocurrency trading, and have been wary of the safety of investing in digital currency. South Korea is not the first country to ban trading of cryptocurrency (Ecuador, Morocco, and Bolivia have all deemed virtual currency trades ‘illegal’), but as a critical source of cryptocurrency demand, the move stands to make a massive impact on the market, and signals to investors the regulatory pitfalls of sinking funds into new currencies.
The NAFTA negotiation’s clock is ticking and Canada, the United States and Mexico seem no closer to reaching an agreement. Officials are due to hold the final round of negotiations from January 23-26, however government insiders indicate that Canada is increasingly convinced President Donald Trump will announce the decision to leave the trade agreement – a belief that sent the Canadian dollar, and the country’s stock prices, spiralling downward this week. When it first came into effect in 1994 NAFTA created one of the world’s largest free trade zones, and aimed to eliminate most of the barriers to trade and investment that exist between the three North American nations. While the agreement aimed to strengthen domestic economies and improve living standards, it hasn’t received universal praise and has its fair share of critics. Renegotiation NAFTA was a critical element of Trump’s presidential campaign, and negotiations have been creeping onward since his 2017 inauguration.
Canada’s markets might be down, but the price of at least one important commodity is on the rise. Oil reached it’s highest price since 2014 on Wednesday, reaching a price of $70 a barrel. Between 2011 and 2014 Oil producers regularly enjoyed prices over $100 per barrel. That all shifted in 2014, when the price of the oil entered into a 3.5 year tailspin which would ultimately see a 50% drop in oil prices from over $100 per barrel, to sub-$50 per barrel. The dramatic price decline was triggered by a combination of factors. First, Saudi Arabia, a member of the Middle Eastern Organization of Petroleum Exporting Countries (OPEC), made the decision to maintain high levels of oil production. This move increased the quantity of oil available on the global market, and had a downward effect on the price of oil. Second, North America entered into a natural gas ‘boom’ with the advent of ‘fracking’ – a process which allows produces to extract natural gas cheaply, and effectively, from shale formations. This decreased demand for oil, as individuals were able to turn to a cheaper energy source. This weeks higher prices has Canada’s oil producers cautiously optimistic. With that being said, those in Calgary are hesitant to boost capital investment – still scarred by the 2014/2015 bloodbath.
“Hold the sugar, hold the cream, Tim Hortons don’t be mean” is the rallying cry of many after Tim Hortons franchises across Ontario announced cuts to employee benefit plans, and a move to an unpaid break plan. The cuts were made in response to Ontario’s January 1st minimum wage increase, which saw hourly rates jump to $14/hour from a previous rate of $11.60/hour. Under the new regulation minimum wage is set to increase by nearly one-third in just 18 months, reaching a total of $19/hour by 2019. When Premier Kathleen Wynne introduced the province’s minimum wage hike plan in May 2017 it was received with almost universal criticism by the business community. The Bank of Canada, TD Economics, the Centre for Economic Analysts and the province’s own accountability office all stepped forward, predicting that the hike in wages would result in an increased inflation rate, and cost of doing business. As a result, these critics predicted that the increased wage rate would result in a loss of tens of thousands of jobs (estimates place lost jobs as between 60,000 and 90,000 by 2020), and a restriction in available employees benefits. Tim Hortons’ actions are representative of the fears espoused by these critics and, if the critics are right, just the beginning of the negative impact Wynne’s policy could have on the province’s labour market.
And finally, the merger between Western Canadian fertilizer giants PotashCorp and Agrium became official last week, with shares of the newly formed Nutrien Ltd. trading on the TSX starting January 2. The merger was first proposed in September 2016, but was delayed several times as the companies encountered various regulatory hurdles. The companies were required to gain approval by regulatory officials in Canada, China, India, Russia, Brazil and the United States. These countries raised various concerns which touched on issues including the potential market impact that the merging of two major players would have on the global supply (and price) of fertilizer products. Ultimately, all countries granted leave, with the United States Federal Trade Commission being the last to sign off on the transaction. Nutrien, headquartered in Saskatoon, is now the world’s largest nutrient company with operations in 18 countries and an enterprise value of $36 billion.