Markets

North American markets closed slightly higher as we close out the week. The Dow extended its weekly winning streak to three, while the TSX was anchored by a sagging gold sector and Apple’s 8% decline singlehandedly pulled the S&P500 lower.

A better than advertised 146,000 increase in US employment got trading started off on the right foot this morning, but that warm and fuzzy feeling was short lived after a subsequent report showed consumer confidence fell sharply.

The Canadian employment report was nothing short of blockbuster with a gain of 59,300 positions last month, about six times more than forecast. The finer details were equally as encouraging as almost all of the gain was in full-time employment with private companies. We also had a decent earnings report from Scotiabank who beat estimates on the back of strong activity in capital markets, a continuing theme we’ve seen across the financial sector.

The Canadian dollar climbed to a one month high after the employment report, up 24 bps to US$1.0114. Bond yields jumped a couple of ticks for the same reason, with the 5-year Canada now yielding 1.29% and the 10-year 1.71%. Gold is up a dollar to US$1703/oz. Oil is flat at US$86.24/barrel.

Have a great weekend.

Weekly Bottom Line - December 7, 2012

HIGHLIGHTS OF THE WEEK

United States

•    The risk of running off the fiscal cliff will become a reality in a couple of weeks if a middle ground is not found by December 20th.

•    Financial markets may be acting too complacent. As of early Friday, the S&P500 index was up 4.5% in three weeks, even though there is already evidence that excess cautious behavior from policy uncertainty is taking a toll and creating distortions in the real economy.

•    Our Q4 real GDP tracking is less than 1%, showing an economy already on thin ice.

•    The Fed has a 2-day meeting on December 11th and 12th. Monetary policy can not single-handedly push against the fiscal headwind, but we doubt the Fed will stand by idly. Operation Twist terminates at year-end and in its place may come an extension of QE3 with open-ended Treasury purchases.

Canada

•    To no one’s surprise the Bank of Canada left interest rates unchanged this past week, as Canadian economic growth continues to be soft, hurt by weak foreign demand. But, the Bank retained its hawkish bias.

•    November’s very healthy job growth would seem to support that hawkish stance by the Bank. However, some of the details in the report reveal the soft underbelly of the Canadian economy, namely a slowing goods sector.

•    In addition to weaker external demand, Canada faces competitiveness challenges seen clearly in Canada’s poor productivity performance in Q3. These reasons underscore why November’s healthy job gain is unlikely to be sustained in the months ahead.

Webcasts:

Canada:  https://www.brainshark.com/tdeconomics/vu?pi=zHJzwYfH0z1sQYz0

United States:  https://www.brainshark.com/tdeconomics/vu?pi=zGwzUCfh2z1sQYz0

Financial Update - December 05, 2012

There’s lots going on this morning, but you wouldn’t know it from looking at the relatively flat indexes. Apple is taking a beating after research firm IDC suggested the companies share in the tablet market will fall below 50% by 2016 as competition heats up. Copper and gold giant Freeport McMoRan agreed to acquire both Plains Exploration and McMoRan Exploration for about $9 billion, leading to a steep drop in the former and a surge in the latter companies. The Canadian REIT”s are strong this morning after a consortium of pensions announced plans to buy shopping mall operator Primaris for about $4.4 billion. In fact almost every sector in the TSX is higher this morning, but the index is being anchored by pronounced weakness in the gold sector as the price of the metal approaches a three-month low. Chinese markets rallied overnight after regulators discarded a rule limiting investment by insurance companies in the countries commercial banks. The TSX is up 24 pts. The Dow is up 16 pts.

The Canadian dollar is up 10 bps to US$1.0078. Bond yields are down about 2 bps across the curve to 1.26% for the 5-year Canada and 1.68% for the ten. Oil is off 54 cents to US$87.96/barrel. Gold is down $7 to US$1689/oz.

Have a great day.

Data Release: Bank of Canada holds interest rates steady at 1.00%

Good Morning,

TD Economics

Data Release: Bank of Canada holds interest rates at 1.00%

• As expected, the Bank of Canada left its benchmark overnight rate unchanged at 1.00%.
• As for the much watched forward-looking language, the Bank reiterated that “over time, some modest withdrawal of monetary policy stimulus will likely be required”, and that the timing on such a move will be “weighed carefully” against global and domestic developments.
• In its assessment of how those global economic conditions are developing, the Bank stated that the U.S. economic expansion is progressing at a gradual pace, but being held back by uncertainty related to the fiscal cliff. Growth in China appears to be stabilizing, and global inflationary pressures are subdued in response to persistent excess capacity. The Bank also highlighted that globally financial conditions remain stimulative, although vulnerable to an economic shock from the U.S. or Europe.
• For Canada, the bank chalked some of the third quarter weakness to transitory disruptions in the energy sector, but expects momentum to pick up in 2013. It also noted that household credit growth has slowed, but that it is too early to tell whether the moderation will be sustained. The Bank also noted that exports continue to be restrained by weak foreign demand and competitiveness challenges.
• Inflation has evolved broadly as the Bank expected, with total and core inflation set to return to 2% over the next 12 months.

 Key Implications

• After surprising markets last week with the announcement that Governor Carney will be leaving for the Bank of England, today’s interest rate announcement did not change the calculus for monetary policy in the months ahead. The Bank maintained its forward-looking language, and there was nothing unexpected in its assessment of economic developments since the last statement.
• With the economics world waiting for a resolution to the fiscal negotiations in Washington, January’s statement and Monetary Policy Report are likely to provide a lot more meat on the Bank’s expectations for Canadian growth in a post-fiscal cliff world. For now, the Bank maintains its prudent tightening bias; barring unforeseen events the next move in Canadian interest rates in up, rather than down. And overall, TD Economics continues to expect the Bank of Canada to be the first among its peers to hike rates, likely in the second half of 2013, but that interest rate increases will be modest and occur in gradual steps.   

Data Release: Canadian Existing Home Sales and Prices (October 2012)

TD Economics

Data Release: The slowdown in the Canadian resale housing market prevails

• National home sales slipped on a month-over-month basis in October by 0.1%.  A decline has now been posted in seven of the last ten months.  The slowdown in sales is more noticeable on a year-over-year basis: this metric is down 0.8%.
   
• With listings edging down more than sales, the sales-to-listings ratio increased to 51%.  To recall, a ratio between 40% and 60% range is indicative of fairly balanced market conditions. 
• The number of months of inventory of unsold homes rests at 6.5 months.  The national housing market has hovered around the six month mark since late-2010.
• The average residential home price increased by just 0.02% year-over-year.  With the modest dip, the average home price in Canada, on a non-seasonally adjusted basis, is approximately $361,516. 
• The MLS® home price index is less distorted by the composition of sales.  By this measure, prices remain up by 3.6% when compared to October 2011.  However, these gains have significantly decreased relative to where early-2012. The October gain is also the smallest posted since May 2011.

Key Implications

• Housing market trends in Canada for 2012 can be characterized as before and after regulatory changes.  In the first half of the year, sales and price gains were modest, but positive.  More stringent mortgage rules and tighter mortgage underwriting rules have ‘purposely’ knocked the wind out of the housing market sails.
• While regulation is having the intended impact on the housing market, it typically has only temporary staying power.  The cool down we are currently experiencing should be lifted in early-2013.  What happens thereafter is less certain.  The low interest rate environment could pull home owners back onto the market, causing home prices to once again trek upwards.  Alternatively, an absence of pent-up demand may leave the market in a bit of a lull until interest rate hikes resume in late-2013.  Under either scenario, it is safe to say that there is a low probability of out-sized home price gains over the near-term.
• It is commonly said that there is no such thing as a national housing market. This is especially true given the regional differentiation present in Canada.  Greater Vancouver is already in the middle of its housing adjustment – the market had simply gone too far too fast and is now pulling back.  In the last few months, the Greater Toronto Area has been losing its lustre.  Other areas like Calgary and Edmonton continue to post price gains so far in 2012.  No region will be immune from the macroeconomic trends and regulatory developments. That being said, the impacts to be felt will depend on location, location and location.  

Financial Update - September 27, 2012

Indexes opened in positive territory this morning and have maintained gains despite some sluggish economic data. Both the TSX and S&P500 are looking to snap a five-day losing streak, and with less than two trading days left in September will almost assuredly post their fourth consecutive month of gains. The final tally of US economic growth was revised down to a rather anaemic 1.3% for the second quarter, well short of forecasts. Durable goods orders dropped a whopping 13% in August although the print was dominated by a near goose egg in new orders at Boeing. The figure climbed 1.1% excluding defence and aircraft, reversing the decline from the prior two months. The lone bright spot was initial unemployment claims which fell to 359K last week, close to the lowest levels we’ve seen through this expansion. The TSX is up 37 pts. The Dow is up 18 pts.

The Canadian dollar is up 16 bps to US$1.0167. Bond yields are steady at 1.32% for the 5-year Canada and 1.75% for the ten. Gold is up $14 to US$1768/oz. Oil is up $1.21 to US$91.19/barrel.

Have a great day.

Financial Update - September 25, 2012

North American markets continue to unwind the overbought extremes reached in the wake of the QE3 announcement. Despite the positive start to yesterday’s trading, the session ended with one of the broadest negative tally’s since June. Interesting to note that the Canadian banks have been pillars of strength throughout the pullback over the last week and a half, with the big-six flat to slightly higher over that time. Tensions in Europe are flaring again as anti-austerity protests ramp up in Spain and Greece. Existing home sales in the US climbed slightly in August, while mortgage applications are also climbing amid all-time-low 30-year rates. Interesting article in USA Today about the knock-on effects of the improving trend in US real estate with home improvement sales being a prime example. No better evidence than shares of Home Depot which are breaching highs last seen in 1999. The TSX is down 59 pts. The Dow is down 23 pts.

The Canadian dollar also continues to pull back, falling 34 bps this morning to US$1.0164. Bond yields have declined to 1.33% for the 5-year Canada and 1.77% for the ten. Gold is down $18 to US$1748/oz. Oil is down $1.80 to US$89.52/barrel.

Have a great day.

Financial Update - September 17, 2012

North American markets are taking a breath this morning after last week’s Fed induced frenzy. Just in case you missed it, the Federal Reserve announced a third round of quantitative easing by pledging to buy some $40 billion of mortgage backed securities per month in the open market. They left the policy open- ended, meaning they will continue to ease as long as they see fit, while also extending their expectations of keeping interest rates low until 2015. This sent equities soaring, pushing the S&P500 to its highest level since December 2007 (actually an all time high if dividend reinvestment is included). The breadth of the advance was remarkable with volumes surging and the number of stocks making new 52-week highs jumping to its strongest level since late 2010. There is some question as to whether the move will do anything stimulate the US economy, but there is no question the action is inflationary. This week should be relatively quiet compared to last week’s fireworks with little economic or profit data on tap. Rona shares declined after Lowe’s withdrew its unsolicited offer to purchase the company. Apple shares are a few pennies shy of breaching $700 after first day pre-orders of its new gadget were double the numbers of its last phone. The TSX is down 13 pts. The Dow is down 18 pts.

The Canadian dollar has slipped a little after peaking Thursday, off 9 bps this morning to US$1.0288. Bond yields are also retreating with the 5-year Canada yielding 1.47% and the 10-year 1.95%. Oil is up 30 cents to US$99.30/barrel. Gold is flat at US$1773/oz.

Have a great day.

Financial Update - September 13, 2012

It’s pretty quiet out there this morning as market participants await the Fed’s policy announcement due today. Expectations for a third round of quantitative easing are running high. Jobless claims in the US climbed by 15,000 last week, which was slightly more than forecast. WTI crude oil touched a four month high this morning as concerns over supply disruptions flare in the wake of violent anti-US demonstrations over an amateur movie. Shares of Chevron just hit an all-time high. Apple shares are higher after unveiling its latest iPhone yesterday, which is expected to become the best selling gadget of all-time. The TSX is flat. The Dow is up 28 pts.

The Canadian dollar is up 17 bps to US$1.0257. Bond yields are lower ahead of the Fed announcement with the 5-year Canada yielding 1.41% and the 10-year 1.87%. Gold is up $2 to US$1736/oz. Oil is up a buck to US$98.00/barrel.

Have a great day.

Financial Update - September 11, 2012

The TSX failed to retain yesterday’s early gains, thereby extending its streak of miserable Monday’s in the process. The trend over balance of the week has been much more positive for the last few months, and that trend continues this morning with the major North American benchmarks in positive territory. The Dow just touched a figure not seen since December 2007. There is very little hard data out there this morning so the focus remains the FOMC’s rate decision due Thursday. Short term interest rates in countries such as Spain and Italy continue to slide after last week’s ECB announcement, which has significantly reduced the risk financial disruption in the region. The TSX is up 28 pts. The Dow is up 89 pts.

The Canadian dollar continues to climb along with risk appetite, up another 57 bps to US$1.0287. Bond yields are up a tick to 1.41% for the 5-year Canada and 1.86% for the ten. Oil is up 34 cents to US$96.88/barrel. Gold is up $4 to US$1736/oz.

Have a great day.

Financial Update - September 10, 2012

North American markets are slightly higher this morning, a nice surprise given that the TSX hasn’t experienced a Monday gain since mid-July. That said the overall trend over that period has been nothing but positive with our Canadian benchmark gaining ground in ten of the last fourteen weeks. There is little data on the wires this morning but the market will have its fair share of things to fret about as the week progresses. The German Constitutional Court will rule Wednesday on whether the country is legally able to fund the European Stability Mechanism, although is fully expected to give it the thumbs up. The Greek government will propose another round of contested budget cuts on Friday. Sandwiched in between will be the FOMC’s policy announcement Thursday with the Fed now clearly tilted toward more monetary easing. The TSX is up 15 pts. The Dow is up 16 pts.

The Canadian dollar is trading at a one year high, up a quarter-penny on the day to US$1.0249. Bond yields are flat at 1.42% for the 5-year Canada and 1.86% for the ten. Gold is $7 lower at US$1734/oz. Oil is unchanged at US$96.42/barrel.

Have a great day.

I AM HERE TO FIND THE RIGHT PRODUCT FOR YOU….

I will offer you the widest choice of Financing options as follows

• 1ST , 2ND AND 3RD MORTGAGES
• COMMERCIAL LOAN
• SMALL BUSINESS LOAN
• BUSINESS OPERATING LINE
• CONSTRUCTION LOAN
• PRIVATE LOAN
• EQUIPMENT LEASING   & FINANCING
• INTERNATIONAL FINANCING
• WE OFFER CONSTRUCTION DRAW MORTGAGES


• New Immigrants Welcome
• Bad Credit
• Self Employed
• Open Mortgage
• Pre Approval

Please contact me at 416-895-4321 for your financial needs....

Financial Update - September 06, 2012

The hills are alive with the sound of Outright Monetary Transactions this morning, the nickname applied to the ECB’s now-formally-announced plan to intervene in bond markets in an effort to stem the tide of rising yields in some of Europe’s over-indebted countries. The details were widely leaked over the last few days, with perhaps the only piece of the puzzle officially revealed this morning being no cap on the size of bond purchasing, essentially giving the ECB unlimited firepower. This has bond yields in countries like Spain and Italy plummeting, and stock markets soaring. The S&P500 just hit a fresh four-year high. Economic data out of the US is reinforcing the positive mood as the ISM services sector index expanded faster than forecast in August, while ADP estimated some 200,000 private sector jobs were added last month and unemployment claims dropped to a one month low. The TSX is up 131 pts. The Dow is up 237 pts.

The Loonie is in full flight along with most everything else, up almost a full penny to US$1.0182. Bond yields have jumped to 1.41% for the 5-year Canada and 1.83% for the ten. Oil is up $1.90 to US$97.26/barrel. Gold is up $15 to US$1709/oz.

Have a great day.

Financial Update - September 05, 2012

Yesterday morning’s sell-off didn’t last long as the major averages turned a corner around 9am and finished the day barely below water. Volume has been picking up from the anaemic levels of the last two weeks. There were more advancing issues than declining on the NYSE yesterday despite the small loss. The TSX index is moderately higher this morning with gold shares doing most of the heavy lifting as the metal approaches a five-month high. The ECB is set to announce a sovereign bond-buying program at their policy meeting tomorrow which has Italian and Spanish yields falling anew. The Bank of Canada kept its benchmark rate steady at 1% this morning and maintained its bias toward gradual removal of stimulus as it becomes necessary. The BoC is the only central bank among the G7 not currently leaning toward more monetary easing. The TSX is up 20 pts. The Dow is up 17 pts.

The Canadian dollar lost some of its steam after the rate announcement, falling 55 bps to US$1.0089. Bond yields are flat at 1.31% for the 5-year Canada and 1.74% for the ten. Oil is down 63 cents to US$94.67/barrel. Gold is unchanged at US$1696/oz.

Have a great day.

Bank of Canada holds rate steady as global storm clouds gather

OTTAWA — In the face of mounting economic uncertainty, the Bank of Canada on Wednesday once again left its key lending rate on hold, as expected.
“Global growth prospects are unfolding largely as the bank projected in its July Monetary Policy Report,” the central bank said its statement, “with a widespread slowing of activity across advanced and emerging economies.”
The bank held its trendsetting interest rate at 1%, where it has stood since September 2010.
But as the U.S. Federal Reserve and other global central banks contemplate further rounds of easing, Canada repeated what it has been saying for months – that the time for removing stimulus could be near.
“To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2% inflation target over the medium term,” the bank said in its announcement, using language identical to its last two rate statements.
“There has been no significant change in the economic backdrop since July, and the bank’s bias is so mild that it can almost be regarded as aspirational rather than any type of commitment,” BMO Capital Markets said in a note ahead of the bank’s announcement.
The central bank’s rate announcement comes after Tuesday night’s election victory by the Parti Québécois, led by Pauline Marois. Still, the separatist party only narrowly defeated Jean Charest’s incumbent Liberals, making another referendum on independence unlikely any time soon.
The vote is also unlikely to affect markets, the Canadian dollar most importantly. The loonie was little changed Wednesday morning.
Bank of Canada governor Mark Carney and his policy advisors made no mention of the election outcome in Wednesday’s rate announcement.
Prime Minister Stephen Harper, in a statement late Tuesday, said Ottawa does not believe “that Quebecers wish to revisit the old constitutional battles of the past.”
“Our government will remain focused on jobs, economic growth and sound management of the economy,” he said. “We believe that economic issues and jobs are also the priorities of the people of Quebec.”
Bigger concerns for Canada remain: The still-unresolved European debt and banking crisis, as well as the weak recovery in the United States and slowing output elsewhere — in particular China, the world’s second largest economy after the U.S.
“The economic expansion in the United States continues at a gradual pace,” the Bank of Canada said in Wednesday’s rate announcement.
“Europe is in recession and its crisis, while contained, remains acute. In China and other major emerging economies, growth is decelerating somewhat more quickly than expected from previously rapid rates.”
Canada’s economy, meanwhile, continues to show modest growth. Gross domestic product rose 1.8% on an annualized basis in the second quarter, in line with the Bank of Canada’s most recent projections.
For the year, the bank expects GDP growth of 2.1%, followed by a 2.3% advance in 2013 and 2.5% in 2014.
Employment growth in Canada has been relatively disappointing, however, as has U.S. labour market. Statistics Canada will report the latest employment numbers for Canada on Friday.
Still, reiterating July’s statement, the bank on Wednesday said that “while global headwinds continue to restrain economic activity, underlying momentum remains at a pace roughly in line with the economy’s production potential.”
European concerns will be front and centre on Thursday, when the European Central Bank issues its monetary policy statement. No change is expected, but the central bank could present its long-awaited plans to buy bonds from Spain and Italy to ease the debt pressure in those countries.
And following its Sept. 12 and 13 meeting, the U.S. Federal Reserve could unveil its latest plan to stimulate that economy, most likely announcing another round of asset purchases.

Financial Update - September 04, 2012

The summer was pretty positive for equity markets with US and Canadian averages climbing in August to post their third consecutive monthly gains. We’re starting the new month with some weakness after US manufacturing activity contracted again while the Chinese manufacturing figure released Friday night was much lower than anticipated. Europe will take centre stage this week with Thursday’s ECB policy meeting. The market is looking for some form of decisive action from the bank, and ECB president Draghi is hinting that buying bonds at the short end of the curve is a likely scenario. This has Spanish and Italian yields dropping. The Bank of Canada will almost assuredly leave rates unchanged in tomorrow’s announcement. BMO Capital Markets has pushed out their forecast for rate increases to late 2013 at the earliest. The TSX is down 27 pts. The Dow is down 84 pts.

The Canadian dollar is down just 6 bps to US$1.0139. Bond yields are a couple of ticks lower at 1.33% for the 5-year Canada and 1.75% for the ten. Gold is up $8 to US$1695/oz. Oil is down a buck to US$95.50/barrel.

Have a great day.

Akila Senthil,AMP

416 895 4321