Slide in metals, oil sends TSX plunging 260 points;NY mixed on economic news
· TSX -260.25 (Reuters) - Toronto's main stock market index remained weak on Tuesday
amid falling gold and energy prices
· Dow -39.81
· Dollar +.07c to $ $98.82US
· Oil -3.12 to $115.63US per barrel
· Gold -18.70US to $874.20US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
By Malcolm Morrison, The Canadian Press- The Toronto stock tumbled more than 250 points Tuesday as both oil and gold registered steep declines a day before the U.S. Federal Reserve is widely expected to announce a quarter-point cut in its key funds rate. Analysts suggested that it's the prospect of a break in rate cuts that punished commodities, since the parade of rate declines since last year has also helped weaken the American dollar and push up the prices of oil and metals.
"If we get an indication from the Fed that after tomorrow, that's it, then there's not necessarily that U.S. dollar weakness stimulus consistently coming out of each Fed meeting," said Gareth Watson, Canadian equity adviser at Scotia Capital. "With the Fed decision.... it could very well be people pre-emptively saying well, made some money, let's take it off the table no matter what happens."
The have-not province?
Equalization payments for Ontario by '09, bank says April 30, 2008 Keith Leslie The Canadian Press
With soaring energy prices changing the landscape of the Canadian economy, analysts warned yesterday that Ontario could soon qualify for equalization payments while Newfoundland and Labrador is poised to shed its have-not status.
The latest report from TD Bank Financial Group said Ontario is set to become a have-not province that would qualify for equalization payments by 2010 -- and perhaps even as early as next year.
That dire prediction came on the same day the Newfoundland budget forecast a $544-million surplus. The province is poised to get off equalization next year for the first time since joining Confederation. The boon comes largely through record oil prices.
It's no coincidence that Ontario's recent slippage in terms of a relative standard of living "occurred in lockstep'' with the high dollar, soaring energy rates, and high commodity prices, the TD report said. The fall, so far, is more a story of booming economic strength in the energy-rich western provinces than it is about a poor performance in Ontario, said TD chief economist Don Drummond.
"That was a fairly minor factor, in fact, when you go through the calculations,'' Drummond said. "It was basically the western provinces, in particular Alberta, have been earning so much resource royalties, and that interacted with the change in the formula that was made last year.''
Falling to have-not status is an important psychological barrier for Canada's largest province, Drummond added.
"It gives the signal that Ontario is not the mighty king of the economy anymore,'' he said. "It's one of the weaker partners, but again it's not so much Ontario's being weak as the other provinces are really roaring along.''
The equalization formula, which aims to smooth out regional disparities, sees provinces deemed to have a less-than-average ability to generate tax revenue get cash transfers from the federal government. Ottawa has a constitutional responsibility to help provinces deliver similar social services at comparable tax rates.
The formula was changed recently from a five-province standard to a 10-province standard, which brought oil-rich Alberta into the calculations and automatically raised the economic performance bar for all provincial economies, Drummond said.
"High oil prices, of course, hurt Ontario because it's an oil importer, and the high oil prices have pulled up the Canadian dollar, which has been the weakness for Ontario manufacturers,'' he said.
"If we look for a common culprit, certainly the oil prices stand out.''
Federal Finance Minister Jim Flaherty raised the ire of many provincial politicians when he said recently that Ontario was on its way to have-not status. Yesterday, he rejected Ontario's claims that it's the equalization funding formula that's flawed and not the province's corporate tax policies. "What we have to do as governments is to stop blaming, you know, people that do economic calculations and instead say what can we do as a government to encourage economic growth in our jurisdiction,'' Flaherty said in Ottawa.
"I've been urging Premier McGuinty and his government to reduce the tax burden on businesses in Ontario because they're shouldering the heaviest tax burden in Canada.''
Liberal critics said yesterday that Flaherty was turning into "an economic hazard'' for Canadian workers with his repeated attacks on the Ontario government.
Ontario's Progressive Conservatives blamed the Liberal government's high corporate taxes for driving the province towards have-not status.
"Premier, you've taken Ontario from a province that gives a hand up to one that will soon be taking handouts from the rest of Canada,'' said acting Opposition Leader Bob Runciman.
But Premier Dalton McGuinty wasn't prepared to accept blame for Ontario's woes, telling the legislature the TD report also noted the province sends $20 billion more to the federal government every year than it receives in transfers and services.
"How is it that we can be a have-not province if we're sending $20 billion annually to the rest of the country?'' McGuinty asked the legislature. "I think that tells us something about the (equalization) formula.''
The TD report said Ontario's gross domestic product per capita fell steadily for five years, from seven per cent above the national average in 2002 to two per cent below the average in 2007, and warned the situation isn't expected to improve in the short term.
Nagging credit woes trigger Bank of Canada moves Louise Egan, Reuters Published: Tuesday, April 29, 2008 OTTAWA -- The Bank of Canada has injected $5.5 billion in overnight money markets in four days and renewed a term liquidity agreement in a sign the market doesn't believe the credit crunch is waning. "They're injecting liquidity into a market that is not convinced that the credit crisis is fully over with," said Derek Holt, vice-president of economics at Scotia Capital.
The central bank bought $1.71-billion worth of securities in the market on Tuesday for resale on Wednesday, its fourth straight intervention to nudge the overnight interest rate closer to its target of 3%. The market rate is slightly higher at about 3.09%. The volume of the so-called SPRA transaction was bigger than any done at the height of the global credit squeeze last August and the biggest since Oct. 31, 2006, according to data on the central bank's Web site.
U.S. foreclosures jump 112%, with no end in sight Lynn Adler, Reuters Published: Tuesday, April 29, 2008 Financial Post
BloombergOne in every 54 Nevada households got a foreclosure filing in the first quarter, while California had the second-highest rate of filings among states with one in every 78 households.
NEW YORK -- Home foreclosure filings in the United States jumped 23% in the first quarter from the prior quarter, and more than doubled from a year earlier, as more overextended borrowers failed to make timely payments, real estate data firm RealtyTrac said on Tuesday.
One of every 194 households received a notice of default, auction sale or bank repossession between January and March, for the seventh straight quarter of rising foreclosure activity, RealtyTrac said.
Foreclosure filings were far-reaching, rising on an annual basis in 46 states and in 90 of the 100 largest metropolitan areas, to a total of 649,917 properties. The first quarter filings surged 112% from the same period last year.
"In most of the states with the highest levels of foreclosure activity, we're still seeing the fallout from overheated home prices and people overextending themselves with risky loans to try to buy those properties," Rick Sharga, vice president of marketing at RealtyTrac, in Irvine, California, said in an interview.
"I'm more convinced that we haven't seen the peak of foreclosure activity yet, and the wave probably won't crest until late third or fourth quarter of 2008," he added.
Nevada, California, Arizona and Florida had the highest foreclosure rates among states during the quarter.
A buying frenzy by speculative investors had sharply inflated home prices in all of those states before a slide into one of the worst housing markets in a century began in 2006.
These states are now inundated with unsold homes, many valued less than the size of the mortgage. The oversupply is pressing prices down, forcing some owners to walk away and escalating pressure to foreclose.
Many homeowners, particularly those with adjustable-rate subprime mortgages, are struggling to make payments that have skyrocketed when the loans reset.
One in every 54 Nevada households got a foreclosure filing in the first quarter, up 137% from a year earlier.
California had the second-highest rate of filings among states with one in every 78 households, soaring by nearly 213% above the same period last year.
"The really insidious part is that, particularly if you're in a market with a glut of inventory, as more properties go through foreclosure ... they add properties on the market that are effectively going to be coming in with distress pricing, which makes it even worse," Sharga said.
Georgia, Michigan, Ohio, Massachusetts and Connecticut were the other states with the top 10 foreclosure filings.
Poor underlying economic conditions drove foreclosure filings higher in Michigan and Ohio, according to RealtyTrac.
The share of vacant U.S. homes grew to a record high in the first quarter, the government reported on Monday, as homeowners struggled to find buyers and foreclosures escalated.
The percentage of owner-occupied homes sitting empty rose to 2.9%, the third straight monthly rise, for a total of 18.6 million vacancies, U.S. Census Bureau data showed.
With prices seen falling further at a time when there is an overabundant supply, some government mortgage relief programs may not preclude foreclosures from mounting.
Philadelphia, Pennsylvania, for example, has adopted a program that delays foreclosure proceedings on owner-occupied properties until owners have met directly with lenders to attempt a loan workout plan, James J. Saccacio, chief executive officer of RealtyTrac, said in a press release.
"While we're hopeful that programs like those in Philadelphia will have a positive long-term impact, they could be simply deferring another flood of foreclosures," extending the time it takes for housing to recover, he said.
Metro areas in California and Florida had 13 of the 20 cities with the highest foreclosure filing rates. Stockton and Riverside-San Bernardino in California had the top two spots.
One in every 30 households in Stockton got a foreclosure filing during the quarter, 6.6 times the national average.
Las Vegas had the third-highest foreclosure filing rate among metro areas, at one in every 44 households. The rate was up 1% in the quarter, and 134% from the first quarter of last year.
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Wednesday, April 30, 2008
Tuesday, April 29, 2008
Financial Update
Sky High Oil Prices may be permanent
· TSX +137.54 Oil prices moving further into record territory could give the TSX another boost this week while investors look to the US Fed to further ease interest rates in an attempt to limit damage from a slowing American economy.
· Dow -42.91
· Dollar -.2c to $ $98.40US
· Oil +2.46to $118.52US per barrel growing demand and tighter supplies are likely to keep
prices high-some say as high as $200 per barrel
· Gold +$.40US to $887.20US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
· TSX +137.54 Oil prices moving further into record territory could give the TSX another boost this week while investors look to the US Fed to further ease interest rates in an attempt to limit damage from a slowing American economy.
· Dow -42.91
· Dollar -.2c to $ $98.40US
· Oil +2.46to $118.52US per barrel growing demand and tighter supplies are likely to keep
prices high-some say as high as $200 per barrel
· Gold +$.40US to $887.20US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html
Financial Update
Flaherty says Canadian financial sector solid but needs can't be complacent
· TSX -18.02 closed slightly lower on profit taking
· Dow -20.11
· Dollar +.35c to $ $98.75US
· Oil +$0.23 to $118.75US per barrel
· Gold +$5.70US to $892.90US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Associated Press WASHINGTON - The Federal Reserve is poised to deliver another interest rate cut to millions of people and businesses this week, although that could be the last break they get for a while.
Fed Chairman Ben Bernanke and his colleagues open a two-day meeting Tuesday to take a fresh pulse on the economy and decide their next move on interest rates. The Fed is widely expected to lower its key interest rate by one-quarter percentage point to two per cent at the end of its session Wednesday.
By David Friend, The Canadian Press
TORONTO - Finance Minister Jim Flaherty wants Canada's financial community to provide more disclosure about the products they offer so investors have a better understanding of the risks they face.
The economic and financial market turmoil is "less pronounced" in Canada than in the United States or Europe and the Canadian financial sector continues to be "solid," the finance minister said after a meeting with senior executives of several banks.
But all agreed that the Canadian financial sector can't be complacent, Flaherty said.
He noted that the troubles surrounding $32 billion worth of frozen Canadian non-bank asset-backed commercial paper was a topic of discussion, in the context of the necessity for a common securities regulator.
"We need to have a framework for regulation in Canada that includes the financial institutions, not just the banks," Flaherty said.
"This has a lot to do with appropriate disclosure, with making sure investors are informed with what people are attempting to sell them..."
Pensions hold the largest amounts of the money tied up in non-bank asset-backed commercial paper. But there are also about 2,000 individuals and numerous companies who also have the notes.
Some people have said their life savings are tied up in frozen ABCP and some companies have said they could face bankruptcy if they can't get access to the money that's tied up in the notes.
Many individual investors have complained they didn't understand the notes they were sold while companies have said they relied on the high ratings given to the paper.
"A lot of investors have been through an ordeal," Flaherty said.
"Most Canadians expect a degree of regulation that doesn't impede capital markets but provides adequate protection for investors. And not just investors directly, but investors who are invested in other mechanisms, through pension plans and so on."
All sides of the debate weighed in on "what the right regulatory touch will be," said Nancy Hughes Anthony, president and CEO of the Canadian Bankers Association.
The group discussed the lessons learned from the ABCP debacle, increased disclosure on the investment products and future transparency and "stress testing," she said.
"I don't think there was any conclusion today about anything specific that had to be done," she added.
"It's very positive when the decision makers from Canada's financial community can actually get in a small boardroom like this and have a good dialogue."
Scotiabank chief executive Rick Waugh said the Canadian banks are in a position of financial strength, but "can't be complacent."
"We're working together - that's one of the strengths of the Canadian system," he told reporters after the meeting.
Flaherty said the Canadian banks will establish and adopt leading practices for disclosure within 100 days, and expects the Bank of Canada to play a leadership role in some areas.
The minister said he plans to meet with the banks again "before the summer" to review their progress.
· TSX -18.02 closed slightly lower on profit taking
· Dow -20.11
· Dollar +.35c to $ $98.75US
· Oil +$0.23 to $118.75US per barrel
· Gold +$5.70US to $892.90US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Associated Press WASHINGTON - The Federal Reserve is poised to deliver another interest rate cut to millions of people and businesses this week, although that could be the last break they get for a while.
Fed Chairman Ben Bernanke and his colleagues open a two-day meeting Tuesday to take a fresh pulse on the economy and decide their next move on interest rates. The Fed is widely expected to lower its key interest rate by one-quarter percentage point to two per cent at the end of its session Wednesday.
By David Friend, The Canadian Press
TORONTO - Finance Minister Jim Flaherty wants Canada's financial community to provide more disclosure about the products they offer so investors have a better understanding of the risks they face.
The economic and financial market turmoil is "less pronounced" in Canada than in the United States or Europe and the Canadian financial sector continues to be "solid," the finance minister said after a meeting with senior executives of several banks.
But all agreed that the Canadian financial sector can't be complacent, Flaherty said.
He noted that the troubles surrounding $32 billion worth of frozen Canadian non-bank asset-backed commercial paper was a topic of discussion, in the context of the necessity for a common securities regulator.
"We need to have a framework for regulation in Canada that includes the financial institutions, not just the banks," Flaherty said.
"This has a lot to do with appropriate disclosure, with making sure investors are informed with what people are attempting to sell them..."
Pensions hold the largest amounts of the money tied up in non-bank asset-backed commercial paper. But there are also about 2,000 individuals and numerous companies who also have the notes.
Some people have said their life savings are tied up in frozen ABCP and some companies have said they could face bankruptcy if they can't get access to the money that's tied up in the notes.
Many individual investors have complained they didn't understand the notes they were sold while companies have said they relied on the high ratings given to the paper.
"A lot of investors have been through an ordeal," Flaherty said.
"Most Canadians expect a degree of regulation that doesn't impede capital markets but provides adequate protection for investors. And not just investors directly, but investors who are invested in other mechanisms, through pension plans and so on."
All sides of the debate weighed in on "what the right regulatory touch will be," said Nancy Hughes Anthony, president and CEO of the Canadian Bankers Association.
The group discussed the lessons learned from the ABCP debacle, increased disclosure on the investment products and future transparency and "stress testing," she said.
"I don't think there was any conclusion today about anything specific that had to be done," she added.
"It's very positive when the decision makers from Canada's financial community can actually get in a small boardroom like this and have a good dialogue."
Scotiabank chief executive Rick Waugh said the Canadian banks are in a position of financial strength, but "can't be complacent."
"We're working together - that's one of the strengths of the Canadian system," he told reporters after the meeting.
Flaherty said the Canadian banks will establish and adopt leading practices for disclosure within 100 days, and expects the Bank of Canada to play a leadership role in some areas.
The minister said he plans to meet with the banks again "before the summer" to review their progress.
Thursday, April 24, 2008
Financial Update
· TSX -196.54 (Reuters) as falling bullion prices took the luster out of gold-mining stocks, and the energy sector was stung by profit-taking
· Dow +42.99
· Dollar -1.04c to $ $98.14US due to a report that showed an unexpected drop in retail sales in February.
· Oil +$1.89 continues to break records at $119.37US per barrel causing gas to also hit an all time high. Today’s average price was $1.23 litre
· Gold tumbled -$16.20US to $909US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
· Dow +42.99
· Dollar -1.04c to $ $98.14US due to a report that showed an unexpected drop in retail sales in February.
· Oil +$1.89 continues to break records at $119.37US per barrel causing gas to also hit an all time high. Today’s average price was $1.23 litre
· Gold tumbled -$16.20US to $909US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Wednesday, April 23, 2008
Financial Update
Chartered banks reluctantly follow Bank of Canada in interest rate cut
· TSX -54.82 (Reuters) – The main index closed lower,ending a 6-session rally, amid disappointing corporate results and comments from the Bank of Canada that U.S. economic prospects were worse than previously thought.
· Dow -104.79
· Dollar -.19c to $ $99.21US
· Oil +$1.44 to a new record of $118.07US per barrel .
· Gold +$7.60US to $922.30US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
By Julian Beltrame, The Canadian Press
OTTAWA - The Bank of Canada slashed interest rates by half a percentage point Tuesday amid worrying signs that the economic slowdown could be steeper and longer than previously thought.
It was second time in as many months that new bank governor Mark Carney has moved aggressively on interest rates, bringing down the key overnight rate to three per cent, one-and-a-half points below where it was at the start of December.
But in an unusual reaction, Canada's chartered banks delayed for most of the day matching the central bank's reduction, suggesting growing unease with the state of financial markets.
The Toronto-Dominion Bank was first to act, after 5 p.m. ET, announcing a 50 basis rate cut to its prime lending rate to 4.75 per cent, followed by the other four big Canadian banks.
"It's a fair question to ask if monetary policy is losing its steam," said Dale Orr, managing director of Global Insight Canada. He noted that the last time the bank cut the rate by 50 basis points on March 4, short-term lending rates dropped in response, but five-year, and 10-year bond rates actually went up.
The Canadian Real Estate Association offered further evidence consumers are not receiving the full benefits of monetary easing. The group said five-year conventional mortgages in Canada were 6.99 per cent prior to the central bank's latest action, just slightly above where they stood a year ago.
"There's a cost of funds issue that no doubt the banks have to wrestle with - the banks are reluctant to lend to each other because there's a default risk," TD Bank chief economist Don Drummond explained.
"We tend to think that the bank rate tends to set all the cost of funds, and it normally does, but it certainly hasn't been doing that lately."
In an explanatory statement of its action, the central bank did not mince words that its expectations for the economy have darkened and that it would probably need to cut rates at least once more to provide needed stimulus.
The bank said Canada is in for two relatively lean years and the economy would not fully recover until mid-2010.
"The bank is now projecting a deeper and more protracted slowdown in the U.S. economy," it said in a statement.
"This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008."
The Canadian dollar slumped almost three-quarters of a cent in reaction, but recovered most of those losses to close at 99.21 cents U.S., down 0.19 cents.
While some economists said the steep reduction was necessary, several questioned whether former governor David Dodge, who had praised the measured approach at his leave-taking in late January, would have reacted in similar fashion.
"It's quite possible we may have had a different decision under David Dodge, but we'll never know," said BMO deputy chief economist Douglas Porter.
While avoiding using the word recession, the bank's statement presented a gloomy picture of the global, U.S. and Canadian economies as they struggle to overcome the ongoing turmoil in financial markets caused by the U.S. subprime mortgage crisis.
The global economy has weakened, the bank said, and because of the slump in the U.S., Canadian exporters will find many of their traditional markets have dried up. But tight credit conditions and softening confidence will also slow down business investment and consumer spending, it added.
It projected growth at 1.4 per cent this year and 2.4 per cent next year, a significant downward revision from last January's modest growth expectations of 1.8 per cent and 2.8 per cent. The economy will finally bounce back in 2010, it said, to record a 3.3 per cent rate of growth.
Still, that's far from a recession. What will keep Canada's economy above water, the bank said, is relatively strong domestic demand supported by high commodity prices, strong employment and stimulus provided by lower interest rates.
Porter said the bank's stark language would justify such a deep cut, although he questioned whether the situation is as bleak as the central bank suggests.
"But given that Canadian inflation is so far below two per cent, the bank has the luxury of over-insuring the economy against downside risk," he said. "They've taken out a huge insurance policy. Maybe they have too much insurance, but the upside risk on inflation is relatively mild at this point."
The central bank said that the rate of price increases has been running at about 1.5 per cent in recent months and is expected to remain below its two per cent target throughout this year and next.
The bank's next announcement for the target rate is scheduled for June 10, when many expect it will make its last adjustment this year by shaving the overnight rate to 2.75 per cent.
· TSX -54.82 (Reuters) – The main index closed lower,ending a 6-session rally, amid disappointing corporate results and comments from the Bank of Canada that U.S. economic prospects were worse than previously thought.
· Dow -104.79
· Dollar -.19c to $ $99.21US
· Oil +$1.44 to a new record of $118.07US per barrel .
· Gold +$7.60US to $922.30US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
By Julian Beltrame, The Canadian Press
OTTAWA - The Bank of Canada slashed interest rates by half a percentage point Tuesday amid worrying signs that the economic slowdown could be steeper and longer than previously thought.
It was second time in as many months that new bank governor Mark Carney has moved aggressively on interest rates, bringing down the key overnight rate to three per cent, one-and-a-half points below where it was at the start of December.
But in an unusual reaction, Canada's chartered banks delayed for most of the day matching the central bank's reduction, suggesting growing unease with the state of financial markets.
The Toronto-Dominion Bank was first to act, after 5 p.m. ET, announcing a 50 basis rate cut to its prime lending rate to 4.75 per cent, followed by the other four big Canadian banks.
"It's a fair question to ask if monetary policy is losing its steam," said Dale Orr, managing director of Global Insight Canada. He noted that the last time the bank cut the rate by 50 basis points on March 4, short-term lending rates dropped in response, but five-year, and 10-year bond rates actually went up.
The Canadian Real Estate Association offered further evidence consumers are not receiving the full benefits of monetary easing. The group said five-year conventional mortgages in Canada were 6.99 per cent prior to the central bank's latest action, just slightly above where they stood a year ago.
"There's a cost of funds issue that no doubt the banks have to wrestle with - the banks are reluctant to lend to each other because there's a default risk," TD Bank chief economist Don Drummond explained.
"We tend to think that the bank rate tends to set all the cost of funds, and it normally does, but it certainly hasn't been doing that lately."
In an explanatory statement of its action, the central bank did not mince words that its expectations for the economy have darkened and that it would probably need to cut rates at least once more to provide needed stimulus.
The bank said Canada is in for two relatively lean years and the economy would not fully recover until mid-2010.
"The bank is now projecting a deeper and more protracted slowdown in the U.S. economy," it said in a statement.
"This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008."
The Canadian dollar slumped almost three-quarters of a cent in reaction, but recovered most of those losses to close at 99.21 cents U.S., down 0.19 cents.
While some economists said the steep reduction was necessary, several questioned whether former governor David Dodge, who had praised the measured approach at his leave-taking in late January, would have reacted in similar fashion.
"It's quite possible we may have had a different decision under David Dodge, but we'll never know," said BMO deputy chief economist Douglas Porter.
While avoiding using the word recession, the bank's statement presented a gloomy picture of the global, U.S. and Canadian economies as they struggle to overcome the ongoing turmoil in financial markets caused by the U.S. subprime mortgage crisis.
The global economy has weakened, the bank said, and because of the slump in the U.S., Canadian exporters will find many of their traditional markets have dried up. But tight credit conditions and softening confidence will also slow down business investment and consumer spending, it added.
It projected growth at 1.4 per cent this year and 2.4 per cent next year, a significant downward revision from last January's modest growth expectations of 1.8 per cent and 2.8 per cent. The economy will finally bounce back in 2010, it said, to record a 3.3 per cent rate of growth.
Still, that's far from a recession. What will keep Canada's economy above water, the bank said, is relatively strong domestic demand supported by high commodity prices, strong employment and stimulus provided by lower interest rates.
Porter said the bank's stark language would justify such a deep cut, although he questioned whether the situation is as bleak as the central bank suggests.
"But given that Canadian inflation is so far below two per cent, the bank has the luxury of over-insuring the economy against downside risk," he said. "They've taken out a huge insurance policy. Maybe they have too much insurance, but the upside risk on inflation is relatively mild at this point."
The central bank said that the rate of price increases has been running at about 1.5 per cent in recent months and is expected to remain below its two per cent target throughout this year and next.
The bank's next announcement for the target rate is scheduled for June 10, when many expect it will make its last adjustment this year by shaving the overnight rate to 2.75 per cent.
Financial Update
Bank of Canada Cuts Rate by 50 Basis Points as Economy Slows
April 22 (Bloomberg) -- The Bank of Canada lowered its benchmark rate by half a point to revive an economy that's growing at its slowest pace in 16 years and signaled more easing may be needed. The rate on overnight loans <http://www.bloomberg.com/apps/quote?ticker=CABROVER%3AIND> between commercial banks dropped to 3 percent, the lowest since December 2005, as forecast by 28 of 32 economists in a Bloomberg survey.
· TSX continued to climb for the 6th day in a row +84.10
· Dow -24.34.
· Dollar -.11c to $ $99.40US
· Oil +$.79 continuing to break new records $117.48US per barrel
· Gold +$2.50US to $914.70US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Below is an informative piece from Saturdays National Post on what will happen to interest rates after both the Bank of Canada and the US Fed drop their predicted .50% on the overnight lending rate, broken down by fundamental, season and technical influences.
U.S. rates likely to bottom in spring
Comment; That will be good for the U.S. dollar but bad for bonds Don Vialoux, Financial Post
Central bank interest-rate changes will be a focus for investors during the next two weeks. The Bank of Canada is expected to preempt the Federal Reserve by reducing its overnight lending rate next Tuesday by another 0.5%. The Federal Reserve is expected to reduce the Fed Fund rate by 0.5% to 1.75% on April 30. What will happen to interest rates after these changes?
Fundamental influences
The Federal Reserve has been caught in a difficult position since last August. It had to battle against a virtual collapse in confidence in credit markets. In addition, it wanted to protect the U.S economy against inflationary pressures as well as defend the U.S. dollar.
The Fed chose to battle the confidence crisis in credit markets first. In so doing, it allowed the U.S. dollar index to fall 17% and watched while the inflation rate rose to 4.0%. The Fed Fund rate, at 2.25%, already is at a significant discount to the U.S. inflation rate and is generating negative returns after inflation throughout the U.S. yield curve.
Evidence of a recovery in confidence in credit markets appeared last week. Several U.S. banks announced substantial declines in quarterly earnings as well as major writedowns related to the credit crisis. Investors are guessing that the worst of the writedowns are over. Most stocks in the sector rallied on the news.
The Federal Reserve is expected to move to its next objectives after April 30. Inflation concerns and weakness in the U.S. dollar will be addressed. Traders will watch closely for guidance.
The best guess is that the Federal Reserve will halt reducing the Fed Fund rate at its April 30 meeting and will start to raise the Fed Fund rate as early as its June meeting.
Technical influences
Early technical signs of a recovery in long-term interest rates have appeared. An 11-month downtrend in U.S. 10-year treasury yields recently bottomed by establishing a range between 3.28% and 3.96%.
A tighter trading range between 3.28% and 3.62% evolved during the past month. Late last week, the tighter trading range was broken on the upside. In addition, yield moved above its 50-day moving average, and its 11-month downtrend was broken on the upside. The technical pattern on 10-year Government of Canada bond yields is similar. A breakout occurred last week when yield moved above 3.60%.
Seasonal influences
According to Thackray's 2007 Investor's Calendar, the yield on U.S. 10-year treasuries has a history of rising at this time of year. The period of strength is from April 16 to May 9. Yields have increased in 30 of the past 40 periods since 1967.
This annual event is tied to payment of U.S. taxes on or just before April 15. Taxpayers liquidate short-term money-market instruments and deposits to pay their taxes.
Brooke Thackray notes that, "after paying taxes, there is not a lot of money floating in the system, pushing up the price of money (raising interest rates), and pushing down the price of bonds."
Impact
A bottoming of long-term interest rates has important implications on a variety of markets including: the U.S. dollar (bullish); U.S. bond prices (bearish); financial service stocks (bullish as interest rate spreads widen); commodities (bearish). - Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at www.timingthemarket.ca . Mr. Vialoux does not own U.S. or Canadian 10-year bonds mentioned in this report.
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April 22 (Bloomberg) -- The Bank of Canada lowered its benchmark rate by half a point to revive an economy that's growing at its slowest pace in 16 years and signaled more easing may be needed. The rate on overnight loans <http://www.bloomberg.com/apps/quote?ticker=CABROVER%3AIND> between commercial banks dropped to 3 percent, the lowest since December 2005, as forecast by 28 of 32 economists in a Bloomberg survey.
· TSX continued to climb for the 6th day in a row +84.10
· Dow -24.34.
· Dollar -.11c to $ $99.40US
· Oil +$.79 continuing to break new records $117.48US per barrel
· Gold +$2.50US to $914.70US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Below is an informative piece from Saturdays National Post on what will happen to interest rates after both the Bank of Canada and the US Fed drop their predicted .50% on the overnight lending rate, broken down by fundamental, season and technical influences.
U.S. rates likely to bottom in spring
Comment; That will be good for the U.S. dollar but bad for bonds Don Vialoux, Financial Post
Central bank interest-rate changes will be a focus for investors during the next two weeks. The Bank of Canada is expected to preempt the Federal Reserve by reducing its overnight lending rate next Tuesday by another 0.5%. The Federal Reserve is expected to reduce the Fed Fund rate by 0.5% to 1.75% on April 30. What will happen to interest rates after these changes?
Fundamental influences
The Federal Reserve has been caught in a difficult position since last August. It had to battle against a virtual collapse in confidence in credit markets. In addition, it wanted to protect the U.S economy against inflationary pressures as well as defend the U.S. dollar.
The Fed chose to battle the confidence crisis in credit markets first. In so doing, it allowed the U.S. dollar index to fall 17% and watched while the inflation rate rose to 4.0%. The Fed Fund rate, at 2.25%, already is at a significant discount to the U.S. inflation rate and is generating negative returns after inflation throughout the U.S. yield curve.
Evidence of a recovery in confidence in credit markets appeared last week. Several U.S. banks announced substantial declines in quarterly earnings as well as major writedowns related to the credit crisis. Investors are guessing that the worst of the writedowns are over. Most stocks in the sector rallied on the news.
The Federal Reserve is expected to move to its next objectives after April 30. Inflation concerns and weakness in the U.S. dollar will be addressed. Traders will watch closely for guidance.
The best guess is that the Federal Reserve will halt reducing the Fed Fund rate at its April 30 meeting and will start to raise the Fed Fund rate as early as its June meeting.
Technical influences
Early technical signs of a recovery in long-term interest rates have appeared. An 11-month downtrend in U.S. 10-year treasury yields recently bottomed by establishing a range between 3.28% and 3.96%.
A tighter trading range between 3.28% and 3.62% evolved during the past month. Late last week, the tighter trading range was broken on the upside. In addition, yield moved above its 50-day moving average, and its 11-month downtrend was broken on the upside. The technical pattern on 10-year Government of Canada bond yields is similar. A breakout occurred last week when yield moved above 3.60%.
Seasonal influences
According to Thackray's 2007 Investor's Calendar, the yield on U.S. 10-year treasuries has a history of rising at this time of year. The period of strength is from April 16 to May 9. Yields have increased in 30 of the past 40 periods since 1967.
This annual event is tied to payment of U.S. taxes on or just before April 15. Taxpayers liquidate short-term money-market instruments and deposits to pay their taxes.
Brooke Thackray notes that, "after paying taxes, there is not a lot of money floating in the system, pushing up the price of money (raising interest rates), and pushing down the price of bonds."
Impact
A bottoming of long-term interest rates has important implications on a variety of markets including: the U.S. dollar (bullish); U.S. bond prices (bearish); financial service stocks (bullish as interest rate spreads widen); commodities (bearish). - Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at www.timingthemarket.ca . Mr. Vialoux does not own U.S. or Canadian 10-year bonds mentioned in this report.
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Friday, April 18, 2008
Financial Update
· TSX + 16.02The Canadian Press Higher energy and financial stocks extended the winning
streak on the Toronto stock market to four sessions, a strong runup that’s sent the TSX to
its best level in 5 months.
· Dow + 1.22
· Dollar moved down 1.07c to $ $98.79US reversing a 1.7-c gain Wed - after Stats Can
reported year-over-year consumer price inflation slowed to 1.4% in Mar, its lowest level
since Jan 07. It was the 4th straight month in which inflation abated, leaving ample room
for the Bank of Canada to cut interest rates next week. Lower rates tend to stimulate the
economy but make the currency less attractive
· Oil -$.07 remained around Wed record close of $114.86US per barrel
· Gold -$5.30US to $939.50US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Housing boom 'officially over'
LORI MCLEOD Globe and Mail Update
April 17, 2008
It's time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.
“Canada's six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year's snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.
Home sales waned and new listings surged in the first quarter of 2008 as activity in Toronto cooled and a glut of sellers hit the markets in Western Canada, according to CREA's data.
In the first three months of the year 75,467 housing units changed hands in Canada, a 13 per cent drop from the first quarter of 2007, according to CREA. Sales tumbled by 18.7 per cent in March compared with the same month a year ago.
While the drop likely had something to do with this year's nasty winter weather, the cross-country weakness in sales suggests a deeper trend, Mr. Porter said.
While he's willing to declare an end to the housing boom now that a full quarter's worth of data are available, it will be important to watch the traditionally strong spring months to get a better handle on where the market will end up in 2008, he added.
By contrast with the weakening sales figures, new listings soared to their highest recorded level at 154,217 units in the first quarter, led by Calgary, Edmonton and Vancouver. Seasonally adjusted new listings climbed by 4.8 per cent quarter-over-quarter, despite a drop in newly listed properties in Toronto, the country's largest resale market.
In March, sales fell by 22 per cent year-over-year in Toronto, which accounts for one-quarter of existing home sales across the country. Last month, CREA attributed 53 per cent of the 5.6 per cent month-over-month drop in resale home sales to the softer Toronto market.
“Sales activity in a number of major markets trended lower while listings swelled in the first quarter. Many major markets are becoming more balanced and price gains are becoming more modest as a result. This trend is forecast to continue, as rising mortgage carrying costs and property taxes erode affordability,” Gregory Klump, chief economist at CREA, said in a statement.
Year over year basis, sales volumes fell in 16 of the 18 major markets for which data were available, led by a 35.9 per cent drop in Calgary and a 29.8 per cent decline in Edmonton.
In its statement, CREA also said seasonally adjusted sales activity hit new quarterly records in Regina and Saskatoon, but data for those cities were listed as not available in the tables included with the release.
The only two markets where sale activity rose, year over year, in the first quarter according to available data were Newfoundland and Labrador, and Thunder Bay, which showed increases of 14.3 per cent and 9.5 per cent, respectively.
The average price of a resale home rose by 5.5 per cent year-over-year in the first quarter to $327,620, the smallest such increase since the fourth quarter of 2001 and just half of last year's 11 per cent rise.
In March, the average existing-home price rose by 4 per cent year-over-year to $329,383, with new records set in markets including Saskatoon, Winnipeg, Hamilton-Burlington, Ottawa and Halifax.
None of the markets in the study showed a decline in home prices, and like many other economists, Mr. Porter expects moderate price gains this year.
“The residential average price continues to increase, unlike conditions in many U.S. markets,” said CREA president Cal Lindberg in a statement.
“The size of the increase is returning to what we consider more normal levels for most markets in Canada, reflecting a sound but cooling market for existing homes.”
In its release, CREA said the Canada's resale housing market was more balanced in the first quarter of 2008 than it has been compared with any other quarter over the past nine years.
This statement from CREA is enough to suggest that things are “calming down quickly,” Mr. Porter said.
streak on the Toronto stock market to four sessions, a strong runup that’s sent the TSX to
its best level in 5 months.
· Dow + 1.22
· Dollar moved down 1.07c to $ $98.79US reversing a 1.7-c gain Wed - after Stats Can
reported year-over-year consumer price inflation slowed to 1.4% in Mar, its lowest level
since Jan 07. It was the 4th straight month in which inflation abated, leaving ample room
for the Bank of Canada to cut interest rates next week. Lower rates tend to stimulate the
economy but make the currency less attractive
· Oil -$.07 remained around Wed record close of $114.86US per barrel
· Gold -$5.30US to $939.50US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Housing boom 'officially over'
LORI MCLEOD Globe and Mail Update
April 17, 2008
It's time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.
“Canada's six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year's snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.
Home sales waned and new listings surged in the first quarter of 2008 as activity in Toronto cooled and a glut of sellers hit the markets in Western Canada, according to CREA's data.
In the first three months of the year 75,467 housing units changed hands in Canada, a 13 per cent drop from the first quarter of 2007, according to CREA. Sales tumbled by 18.7 per cent in March compared with the same month a year ago.
While the drop likely had something to do with this year's nasty winter weather, the cross-country weakness in sales suggests a deeper trend, Mr. Porter said.
While he's willing to declare an end to the housing boom now that a full quarter's worth of data are available, it will be important to watch the traditionally strong spring months to get a better handle on where the market will end up in 2008, he added.
By contrast with the weakening sales figures, new listings soared to their highest recorded level at 154,217 units in the first quarter, led by Calgary, Edmonton and Vancouver. Seasonally adjusted new listings climbed by 4.8 per cent quarter-over-quarter, despite a drop in newly listed properties in Toronto, the country's largest resale market.
In March, sales fell by 22 per cent year-over-year in Toronto, which accounts for one-quarter of existing home sales across the country. Last month, CREA attributed 53 per cent of the 5.6 per cent month-over-month drop in resale home sales to the softer Toronto market.
“Sales activity in a number of major markets trended lower while listings swelled in the first quarter. Many major markets are becoming more balanced and price gains are becoming more modest as a result. This trend is forecast to continue, as rising mortgage carrying costs and property taxes erode affordability,” Gregory Klump, chief economist at CREA, said in a statement.
Year over year basis, sales volumes fell in 16 of the 18 major markets for which data were available, led by a 35.9 per cent drop in Calgary and a 29.8 per cent decline in Edmonton.
In its statement, CREA also said seasonally adjusted sales activity hit new quarterly records in Regina and Saskatoon, but data for those cities were listed as not available in the tables included with the release.
The only two markets where sale activity rose, year over year, in the first quarter according to available data were Newfoundland and Labrador, and Thunder Bay, which showed increases of 14.3 per cent and 9.5 per cent, respectively.
The average price of a resale home rose by 5.5 per cent year-over-year in the first quarter to $327,620, the smallest such increase since the fourth quarter of 2001 and just half of last year's 11 per cent rise.
In March, the average existing-home price rose by 4 per cent year-over-year to $329,383, with new records set in markets including Saskatoon, Winnipeg, Hamilton-Burlington, Ottawa and Halifax.
None of the markets in the study showed a decline in home prices, and like many other economists, Mr. Porter expects moderate price gains this year.
“The residential average price continues to increase, unlike conditions in many U.S. markets,” said CREA president Cal Lindberg in a statement.
“The size of the increase is returning to what we consider more normal levels for most markets in Canada, reflecting a sound but cooling market for existing homes.”
In its release, CREA said the Canada's resale housing market was more balanced in the first quarter of 2008 than it has been compared with any other quarter over the past nine years.
This statement from CREA is enough to suggest that things are “calming down quickly,” Mr. Porter said.
Thursday, April 17, 2008
Financial Update
TSX hits highest level in 4 months-Markets take flight on signs of hope
Low Inflation Sets Up Cut In Bank Rate
· TSX + 248.53 to close over 14,099-the first time in 4 months
· Dow + 256.80
· Dollar continued upwards +.1.73c to almost par $ $99.86US
· Oil hit a new record for the 3rd day in a row and is already at $115US per barrel this
morning
· Gold +16.40US to $945.10US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Financial Post Gas, mortgages, food provide biggest push to 2.2% annual rate
The chance of a half-percentage-point cut in the bank rate next month has increased, and most of the market is now expecting a steeper cut after the weakest annual inflation reading since August last year.
Inflation fell 0.2% last month, pulling the 12-month rise in consumer prices down to 2.2% from 2.4% in December, Statistics Canada figures showed yesterday.
Dawn Desjardins, senior economist at RBC Financial Group, said overall inflation fell because of lower car prices and the 1% goods and services tax cut on Jan. 1 -- estimated to have shaved 0.6% off the pace of inflation.
But lingering inflationary pressures remained, with gasoline and mortgage rate costs continuing to rise, Ms. Desjardins said.
Gas prices jumped almost 21% from a year earlier and were up almost 15% from December, while mortgage costs increased by 7.6% from January, 2007.
Food prices also increased notably in the month, up 0.6% for an annual increase of 1.4%.
The core consumer price index, which excludes volatile items such as gasoline and food, inched up 0.1% in the month for an annual pace of 1.4%. The core result was the lowest reading since July, 2005, and sat well below the central bank's inflation target of 2%.
The decline in inflation supports the case for a more aggressive easing in monetary policy, with the market also looking for more rate cuts as insurance against credit market risk and a U.S. economic slowdown.
The new Bank of Canada governor Mark Carney said on Monday more rate cuts were on the way following the quarter-point cut in January.
"We expect that the overnight rate will be cut 50 basis points at the March 4 policy meeting with an additional 50 basis points in rate cuts to come at subsequent meetings to bring the rate to 3% by mid-year," Ms. Desjardins said.
Overnight indexed swaps show investors have now priced in a 60% expectation that the Bank of Canada will cut the overnight cash rate by 50 basis points to 3.50% at its next meeting on March 4. The swaps indicate a 25% expectation of a 25-basis-point cut, Eric Lascelles, chief economist and rates strategist at TDSecurities said.
Mr. Lascelles said the GST cuts masked the strong upward pressure on inflation from food, gas and mortgage cost prices, but he still expects a 50-point cut in March.
"We know the Bank of Canada likes to move relatively slowly, but I think the case is strong enough right now to make a bigger move," he said. "But it's pretty clear, one way or the other, the Bank of Canada is going to cut and the inflation story simply gives them room to do so."
He said the Bank of Canada looks through tax adjustments when deciding policy.
With tax cuts removed from the calculations, core inflation rose by 0.2% on the month and headline inflation was up 0.6%, Mr. Lascellessaid.
Nevertheless, Mr. Lascelles does not expect inflation to pose a problem in the near-term, with the strong Canadian dollar likely to continue to drive consumer prices lower.
Douglas Porter, deputy chief economist at BMO Capital Markets, said the Canadian dollar was the dominant factor behind the lower inflation figures, with the loonie appreciating about 40% since July, when core inflation peaked at 2.5%.
Mr. Porter expects a 25-point cut in March, and an overnight target rate of 3% by the end of the year.
The prospect of lower interest rates caused a sell-off in the Canadian dollar, which dropped almost a cent to close at US98.32¢ yesterday.
amcmullen@nationalpost.com
Low Inflation Sets Up Cut In Bank Rate
· TSX + 248.53 to close over 14,099-the first time in 4 months
· Dow + 256.80
· Dollar continued upwards +.1.73c to almost par $ $99.86US
· Oil hit a new record for the 3rd day in a row and is already at $115US per barrel this
morning
· Gold +16.40US to $945.10US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Financial Post Gas, mortgages, food provide biggest push to 2.2% annual rate
The chance of a half-percentage-point cut in the bank rate next month has increased, and most of the market is now expecting a steeper cut after the weakest annual inflation reading since August last year.
Inflation fell 0.2% last month, pulling the 12-month rise in consumer prices down to 2.2% from 2.4% in December, Statistics Canada figures showed yesterday.
Dawn Desjardins, senior economist at RBC Financial Group, said overall inflation fell because of lower car prices and the 1% goods and services tax cut on Jan. 1 -- estimated to have shaved 0.6% off the pace of inflation.
But lingering inflationary pressures remained, with gasoline and mortgage rate costs continuing to rise, Ms. Desjardins said.
Gas prices jumped almost 21% from a year earlier and were up almost 15% from December, while mortgage costs increased by 7.6% from January, 2007.
Food prices also increased notably in the month, up 0.6% for an annual increase of 1.4%.
The core consumer price index, which excludes volatile items such as gasoline and food, inched up 0.1% in the month for an annual pace of 1.4%. The core result was the lowest reading since July, 2005, and sat well below the central bank's inflation target of 2%.
The decline in inflation supports the case for a more aggressive easing in monetary policy, with the market also looking for more rate cuts as insurance against credit market risk and a U.S. economic slowdown.
The new Bank of Canada governor Mark Carney said on Monday more rate cuts were on the way following the quarter-point cut in January.
"We expect that the overnight rate will be cut 50 basis points at the March 4 policy meeting with an additional 50 basis points in rate cuts to come at subsequent meetings to bring the rate to 3% by mid-year," Ms. Desjardins said.
Overnight indexed swaps show investors have now priced in a 60% expectation that the Bank of Canada will cut the overnight cash rate by 50 basis points to 3.50% at its next meeting on March 4. The swaps indicate a 25% expectation of a 25-basis-point cut, Eric Lascelles, chief economist and rates strategist at TDSecurities said.
Mr. Lascelles said the GST cuts masked the strong upward pressure on inflation from food, gas and mortgage cost prices, but he still expects a 50-point cut in March.
"We know the Bank of Canada likes to move relatively slowly, but I think the case is strong enough right now to make a bigger move," he said. "But it's pretty clear, one way or the other, the Bank of Canada is going to cut and the inflation story simply gives them room to do so."
He said the Bank of Canada looks through tax adjustments when deciding policy.
With tax cuts removed from the calculations, core inflation rose by 0.2% on the month and headline inflation was up 0.6%, Mr. Lascellessaid.
Nevertheless, Mr. Lascelles does not expect inflation to pose a problem in the near-term, with the strong Canadian dollar likely to continue to drive consumer prices lower.
Douglas Porter, deputy chief economist at BMO Capital Markets, said the Canadian dollar was the dominant factor behind the lower inflation figures, with the loonie appreciating about 40% since July, when core inflation peaked at 2.5%.
Mr. Porter expects a 25-point cut in March, and an overnight target rate of 3% by the end of the year.
The prospect of lower interest rates caused a sell-off in the Canadian dollar, which dropped almost a cent to close at US98.32¢ yesterday.
amcmullen@nationalpost.com
Wednesday, April 16, 2008
Financial Update
RECORD OIL PRICES FOR 2ND DAY
· TSX + 112.35-(Reuters) - A record high for oil prices drove the Toronto Stock Exchange's main index higher
· Dow + 60.41 New York markets were also boosted by oil prices and some positive earnings reports.
· Dollar stayed strong +.05c to $ $98.13US
· Oil +2.03 to $113.79 US per barrel hitting a record price for the 2nd day in a row
· Gold +3.30US to $932US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Canada losing high-quality, high-productivity manufacturing jobs: report
By Julian Beltrame, The Canadian Press
OTTAWA - Canada is losing tens of thousands of its best and most productive workers in the manufacturing slump caused by stiff foreign competition, the high dollar and the U.S. recession, says a new bank report.
The Toronto-Dominion Bank estimates Canada lost 130,000 factory jobs in 2007 and will likely lose more this year as conditions worsen for manufacturers, particularly in Ontario and Quebec.
"In short, we are losing many of the high-quality, high-productivity jobs in manufacturing, not just the jobs in low-productivity industries," writes Beata Caranci, the bank's director of forecasting.
Prime Minister Stephen Harper and Finance Minister Jim Flaherty have often noted that Canada's strong job market has fortunately been able to replace those lost manufacturing jobs by strength in other areas of the economy.
But TD's nine-page report disputes the notion that these jobs are of the lower-end variety that would be lost to cheap-labour economies like China and India in any case, or that laid-off workers find comparable jobs elsewhere.
While many have found new jobs in the growing services sector, TD's report says on average the displaced workers wind up making about 25 per cent, or about $10,000 a year, less than what they were earning before.
The report found that 55 per cent of the 212,000 jobs lost in the sector in the past five years have been unionized, which tend to be higher paying and more productive.
"It's been an unfortunate set of circumstances. The auto sector for instance is facing a lot of global competitive pressure and slowing U.S. demand and that's been made worse by the fact we have a high Canadian dollar," said Caranci in an interview.
"Those conditions are worsening, so it's going to get worse as the year goes on," she added.
Canadian Auto Workers economist Jim Stanford said the report confirms what the union and others have been saying for years.
Stanford added that the findings should send government alarms ringing because the manufacturing slump will eventually be felt in other sectors of the economy.
"We've lost 400,000 jobs since the peak in 2002, and we'll see another 400,000 losses in the next few years if the U.S. has a recession and the dollar stays high," he said, noting that his estimate of job losses is higher than the TD Bank's.
"The reason we've had more jobs created than lost is consumer spending and construction has continued growing while the export side has been contracting, and that dichotomy can't last forever," Stanford said.
"Sooner or later as we export less, our domestic economy will slow down."
The bank report titled "Is Canada's Job Machine Unstoppable?" presents a generally positive view of Canada's labour market.
It says the economy created a whopping 379,700 net jobs in 2007, pushing the unemployment rate to a 33-year low, and the employment rate to a new record high at 63.5 per cent of the adult population.
And though the situation is reversing this year in the face of the economic slowdown, Canada is unlikely to experience the job losses occurring in the United States, it said.
Instead, Canada is expected to add between 3,000 and 5,000 new jobs a month this year, a far cry from last year's 32,000 monthly average, but still a measure of growth.
"It's not going to be 2007 again, but are we expecting job losses? No," said Caranci.
But the report noted some troubling trends.
The tight labour market last year triggered the fastest average wage growth in a decade at 3.5 per cent, but that bounty went disproportionately to employees earning above $100,000 and to those in the hot economies in western Canada.
As well, employment growth has outstripped output growth, meaning that more Canadians are working to produce proportionately less.
Canadian labour productivity actually fell a steep three per cent in the fourth quarter, limiting growth for the year to 0.5 per cent, well below the quarter-century trend of 1.4 per cent annual growth.
Caranci said the numbers may overestimate the problem. She explains that several factors could have kept productivity down, including a growth in self-employed workers whose productivity is hard to gauge, strong labour growth in the relatively less productive younger and older age groups, and the fact that many workers have been hired in oil sands mega-projects that won't start producing oil for years.
· TSX + 112.35-(Reuters) - A record high for oil prices drove the Toronto Stock Exchange's main index higher
· Dow + 60.41 New York markets were also boosted by oil prices and some positive earnings reports.
· Dollar stayed strong +.05c to $ $98.13US
· Oil +2.03 to $113.79 US per barrel hitting a record price for the 2nd day in a row
· Gold +3.30US to $932US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Canada losing high-quality, high-productivity manufacturing jobs: report
By Julian Beltrame, The Canadian Press
OTTAWA - Canada is losing tens of thousands of its best and most productive workers in the manufacturing slump caused by stiff foreign competition, the high dollar and the U.S. recession, says a new bank report.
The Toronto-Dominion Bank estimates Canada lost 130,000 factory jobs in 2007 and will likely lose more this year as conditions worsen for manufacturers, particularly in Ontario and Quebec.
"In short, we are losing many of the high-quality, high-productivity jobs in manufacturing, not just the jobs in low-productivity industries," writes Beata Caranci, the bank's director of forecasting.
Prime Minister Stephen Harper and Finance Minister Jim Flaherty have often noted that Canada's strong job market has fortunately been able to replace those lost manufacturing jobs by strength in other areas of the economy.
But TD's nine-page report disputes the notion that these jobs are of the lower-end variety that would be lost to cheap-labour economies like China and India in any case, or that laid-off workers find comparable jobs elsewhere.
While many have found new jobs in the growing services sector, TD's report says on average the displaced workers wind up making about 25 per cent, or about $10,000 a year, less than what they were earning before.
The report found that 55 per cent of the 212,000 jobs lost in the sector in the past five years have been unionized, which tend to be higher paying and more productive.
"It's been an unfortunate set of circumstances. The auto sector for instance is facing a lot of global competitive pressure and slowing U.S. demand and that's been made worse by the fact we have a high Canadian dollar," said Caranci in an interview.
"Those conditions are worsening, so it's going to get worse as the year goes on," she added.
Canadian Auto Workers economist Jim Stanford said the report confirms what the union and others have been saying for years.
Stanford added that the findings should send government alarms ringing because the manufacturing slump will eventually be felt in other sectors of the economy.
"We've lost 400,000 jobs since the peak in 2002, and we'll see another 400,000 losses in the next few years if the U.S. has a recession and the dollar stays high," he said, noting that his estimate of job losses is higher than the TD Bank's.
"The reason we've had more jobs created than lost is consumer spending and construction has continued growing while the export side has been contracting, and that dichotomy can't last forever," Stanford said.
"Sooner or later as we export less, our domestic economy will slow down."
The bank report titled "Is Canada's Job Machine Unstoppable?" presents a generally positive view of Canada's labour market.
It says the economy created a whopping 379,700 net jobs in 2007, pushing the unemployment rate to a 33-year low, and the employment rate to a new record high at 63.5 per cent of the adult population.
And though the situation is reversing this year in the face of the economic slowdown, Canada is unlikely to experience the job losses occurring in the United States, it said.
Instead, Canada is expected to add between 3,000 and 5,000 new jobs a month this year, a far cry from last year's 32,000 monthly average, but still a measure of growth.
"It's not going to be 2007 again, but are we expecting job losses? No," said Caranci.
But the report noted some troubling trends.
The tight labour market last year triggered the fastest average wage growth in a decade at 3.5 per cent, but that bounty went disproportionately to employees earning above $100,000 and to those in the hot economies in western Canada.
As well, employment growth has outstripped output growth, meaning that more Canadians are working to produce proportionately less.
Canadian labour productivity actually fell a steep three per cent in the fourth quarter, limiting growth for the year to 0.5 per cent, well below the quarter-century trend of 1.4 per cent annual growth.
Caranci said the numbers may overestimate the problem. She explains that several factors could have kept productivity down, including a growth in self-employed workers whose productivity is hard to gauge, strong labour growth in the relatively less productive younger and older age groups, and the fact that many workers have been hired in oil sands mega-projects that won't start producing oil for years.
Tuesday, April 15, 2008
Financial Update
Oil rises to record close
U.S. foreclosures jump 57%
· TSX climbed higher + 55.57
· Dow continues downward-23.36
· Dollar bounced up +.37c to $ $98.08US
· Oil +1.62 to $111.76 US per barrel . Oil rose on Monday to a record close, bolstered by the
weaker dollar and supply disruptions ahead of the U.S. summer gasoline season.
· Gold +1.80US to $925.40US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Businesses foresee slower growth in sales and investment: Bank of Canada
Mon Apr 14, 2:39 PMBy Julian Beltrame, The Canadian Press
OTTAWA - The impact of tight money and the U.S. economic malaise is beginning to sap the confidence of Canadian businesses, says a new survey from the Bank of Canada.
While far from panicking over the worsening economic conditions, the 100 businesses polled in February and March suggested Canada's corporate world sees an easing trend developing in what they produce, sell and invest for the next 12 months.
"The increased pessimism about sales is unsurprising, given the heightened discussion of a possible U.S. recession that was evident over the survey period," said Rishi Sondhi, an economist with the Royal Bank.
The central bank survey released Monday dovetails with a Conference Board poll of chief executives in the United States showing American business confidence at the lowest level since late 2000, and firms saying they are scaling back on hiring.
The Bank of Canada survey found a growing number of businesses reporting that financing investment and expansion is becoming more difficult as a result of the global credit crunch, the third straight quarter that firms have reported more stringent credit.
"Reports of tighter credit conditions were widespread across sectors and regions, with most firms attributing the tightening to a market-wide repricing of risk," the central bank said Monday.
Forty-one per cent of the firms said credit conditions were tighter in the past quarter, against 17 per cent saying they were looser.
This was likely reflected in muted business investment plans, with 28 per cent of firms saying they expected to increase spending on new machinery and equipment in the next 12 months, while 27 per cent expected to spend less.
"Among firms planning to invest less, most of whom are based in Central and Eastern Canada, the most common reason cited was significant investment spending over the past year, followed by a desire to preserve cash given uncertainty about the economic outlook," the bank said.
As well, 38 per cent expect sales growth to slow this year, as opposed to 36 per cent that forecast their sales will increase at a faster pace. This is the first time a plurality of Canadian businesses have predicted slower sales growth in the bank survey since the fourth quarter of 2001, during the last U.S. recession.
And after several surveys showing demand in the economy was outpacing companies' ability to produce, the proportion of firms reporting capacity constraints fell from 60 per cent to 44 per cent, while the number of firms reporting labour shortages slipped to 30 per cent.
BMO economist Michael Gregory said the report shows tight credit conditions are plaguing the economy and the Bank of Canada will likely take action on April 22 by cutting rates another half-point.
However, RBC's Sondhi noted that firms were expecting their own output prices to increase at a faster pace over the next 12 months and that some firms expected to pass through higher input prices.
The companies said higher oil and food prices, along with the rising costs of imports from China, will contribute to increased production costs. As well, more firms believe Canada's inflation rate will exceed three per cent over the next two years.
But Sondhi agreed that the Bank of Canada appears more focused on the slowing economy than on inflationary risks, and predicted a 75-basis-point cut to the overnight rate to 2.75 per cent by midyear.
Published: Tuesday, April 15, 2008
U.S. foreclosure filings jumped 57% and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.
More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5% from February.
About US$460-billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32% from a year ago, a sign that more defaulting homeowners are "simply walking away and deeding their properties back to the foreclosing lender" rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement.
"We're not near the bottom of this at all," said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley. "The foreclosure process will accelerate throughout the year."
Rising foreclosures will add more inventory to an already glutted market, keep home prices down through at least next year and thwart efforts by Congress and President George W. Bush to help homeowners avoid default, Rosen said in an interview.
'Drag' on Prices
About 2.5 million foreclosed properties will be on the market this year and in 2009, Lehman Brothers Holdings Inc. analysts led by Michelle Meyer said in an April 10 report. U.S. home price declines will probably double to a national average of 20% by next year, with lower values most likely in metropolitan areas in California, Florida, Arizona and Nevada, mortgage insurer PMI Group Inc. said last week in a report.
Borrowers who owe more on their mortgages than their homes are worth may be buffeted by increasing job losses in a "very substantial recession," Rosen said. About 8.8 million borrowers had home mortgages that exceeded the value of their property, Moody's Economy.com said last week.
"At least 2 million jobs will be lost because of this recession, so we'll get a cumulative negative spiral," Rosen said. "A normal recession is 10 months. We think this one may be twice as long."
Bank seizures climbed 129% from a year earlier, according to RealtyTrac, which has a database of more than 1 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank repossessions. March was the 27th consecutive month of year-on-year monthly foreclosure increases. In February, foreclosure filings rose 60%.
A surge in defaults among subprime borrowers, those with poor or limited credit, spurred the collapse of the U.S. home loan market and has led more than 100 mortgage companies to stop lending, close or sell themselves. As the value of securities tied to mortgages plummeted, lenders and securities firms have reported writedowns and credit losses of at least US$245-billion since the beginning of 2007, according to data compiled by Bloomberg.
Nevada had the highest U.S. foreclosure rate in March at one for every 139 households, almost four times the national rate, RealtyTrac said. Filings there increased almost 62% from a year earlier to 7,659.
California had the second-highest rate at one filing for every 204 households, and the most filings for the 15th consecutive month at 64,711. Foreclosure filings more than doubled from a year earlier and were up about 21% from February.
Florida, Ohio
Florida had the third-highest rate, one filing for every 282 households, and ranked second in total filings at 30,254. Foreclosures increased 112% from a year earlier and decreased almost 7% from February, RealtyTrac said.
Ohio ranked third in filings at 11,273 and had the seventh- highest foreclosure rate, one for every 448 households. Georgia, Texas, Michigan, Arizona, Illinois, Nevada and Colorado also ranked among the top 10 states with the most filings, RealtyTrac said.
"The continued increase in new foreclosures implies an even larger drag on prices in 2008," Goldman Sachs Chief U.S. Economist Jan Hatzius wrote April 8. Home prices fell 8.9% in the fourth quarter, the biggest decline in 20 years as measured by the S&P/Case-Shiller home price index.
Some borrowers are "hanging on at the margins" in the face of resets, said Mark Goldman, a loan officer at Windsor Capital Mortgage Corp. in San Diego.
Goldman said one of his clients is a self-employed contractor whose adjustable-rate mortgage rose by two%age points two months ago. His mortgage payment has increased to US$7,200 from US$4,900.
"I've had people sitting in my office in tears because there are no loans available," said Goldman. "There are no loans for someone who's upside down on their house."
U.S. foreclosures jump 57%
· TSX climbed higher + 55.57
· Dow continues downward-23.36
· Dollar bounced up +.37c to $ $98.08US
· Oil +1.62 to $111.76 US per barrel . Oil rose on Monday to a record close, bolstered by the
weaker dollar and supply disruptions ahead of the U.S. summer gasoline season.
· Gold +1.80US to $925.40US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Businesses foresee slower growth in sales and investment: Bank of Canada
Mon Apr 14, 2:39 PMBy Julian Beltrame, The Canadian Press
OTTAWA - The impact of tight money and the U.S. economic malaise is beginning to sap the confidence of Canadian businesses, says a new survey from the Bank of Canada.
While far from panicking over the worsening economic conditions, the 100 businesses polled in February and March suggested Canada's corporate world sees an easing trend developing in what they produce, sell and invest for the next 12 months.
"The increased pessimism about sales is unsurprising, given the heightened discussion of a possible U.S. recession that was evident over the survey period," said Rishi Sondhi, an economist with the Royal Bank.
The central bank survey released Monday dovetails with a Conference Board poll of chief executives in the United States showing American business confidence at the lowest level since late 2000, and firms saying they are scaling back on hiring.
The Bank of Canada survey found a growing number of businesses reporting that financing investment and expansion is becoming more difficult as a result of the global credit crunch, the third straight quarter that firms have reported more stringent credit.
"Reports of tighter credit conditions were widespread across sectors and regions, with most firms attributing the tightening to a market-wide repricing of risk," the central bank said Monday.
Forty-one per cent of the firms said credit conditions were tighter in the past quarter, against 17 per cent saying they were looser.
This was likely reflected in muted business investment plans, with 28 per cent of firms saying they expected to increase spending on new machinery and equipment in the next 12 months, while 27 per cent expected to spend less.
"Among firms planning to invest less, most of whom are based in Central and Eastern Canada, the most common reason cited was significant investment spending over the past year, followed by a desire to preserve cash given uncertainty about the economic outlook," the bank said.
As well, 38 per cent expect sales growth to slow this year, as opposed to 36 per cent that forecast their sales will increase at a faster pace. This is the first time a plurality of Canadian businesses have predicted slower sales growth in the bank survey since the fourth quarter of 2001, during the last U.S. recession.
And after several surveys showing demand in the economy was outpacing companies' ability to produce, the proportion of firms reporting capacity constraints fell from 60 per cent to 44 per cent, while the number of firms reporting labour shortages slipped to 30 per cent.
BMO economist Michael Gregory said the report shows tight credit conditions are plaguing the economy and the Bank of Canada will likely take action on April 22 by cutting rates another half-point.
However, RBC's Sondhi noted that firms were expecting their own output prices to increase at a faster pace over the next 12 months and that some firms expected to pass through higher input prices.
The companies said higher oil and food prices, along with the rising costs of imports from China, will contribute to increased production costs. As well, more firms believe Canada's inflation rate will exceed three per cent over the next two years.
But Sondhi agreed that the Bank of Canada appears more focused on the slowing economy than on inflationary risks, and predicted a 75-basis-point cut to the overnight rate to 2.75 per cent by midyear.
Published: Tuesday, April 15, 2008
U.S. foreclosure filings jumped 57% and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.
More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and Florida had the highest foreclosure rates. Filings rose 5% from February.
About US$460-billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32% from a year ago, a sign that more defaulting homeowners are "simply walking away and deeding their properties back to the foreclosing lender" rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement.
"We're not near the bottom of this at all," said Kenneth Rosen, chairman of Rosen Real Estate Securities LLC, a hedge fund in Berkeley, California and chairman of the Fisher Center for Real Estate at the University of California at Berkeley. "The foreclosure process will accelerate throughout the year."
Rising foreclosures will add more inventory to an already glutted market, keep home prices down through at least next year and thwart efforts by Congress and President George W. Bush to help homeowners avoid default, Rosen said in an interview.
'Drag' on Prices
About 2.5 million foreclosed properties will be on the market this year and in 2009, Lehman Brothers Holdings Inc. analysts led by Michelle Meyer said in an April 10 report. U.S. home price declines will probably double to a national average of 20% by next year, with lower values most likely in metropolitan areas in California, Florida, Arizona and Nevada, mortgage insurer PMI Group Inc. said last week in a report.
Borrowers who owe more on their mortgages than their homes are worth may be buffeted by increasing job losses in a "very substantial recession," Rosen said. About 8.8 million borrowers had home mortgages that exceeded the value of their property, Moody's Economy.com said last week.
"At least 2 million jobs will be lost because of this recession, so we'll get a cumulative negative spiral," Rosen said. "A normal recession is 10 months. We think this one may be twice as long."
Bank seizures climbed 129% from a year earlier, according to RealtyTrac, which has a database of more than 1 million properties and monitors foreclosure filings including defaults notices, auction sale notices and bank repossessions. March was the 27th consecutive month of year-on-year monthly foreclosure increases. In February, foreclosure filings rose 60%.
Nevada Leads
A surge in defaults among subprime borrowers, those with poor or limited credit, spurred the collapse of the U.S. home loan market and has led more than 100 mortgage companies to stop lending, close or sell themselves. As the value of securities tied to mortgages plummeted, lenders and securities firms have reported writedowns and credit losses of at least US$245-billion since the beginning of 2007, according to data compiled by Bloomberg.
Nevada had the highest U.S. foreclosure rate in March at one for every 139 households, almost four times the national rate, RealtyTrac said. Filings there increased almost 62% from a year earlier to 7,659.
California had the second-highest rate at one filing for every 204 households, and the most filings for the 15th consecutive month at 64,711. Foreclosure filings more than doubled from a year earlier and were up about 21% from February.
Florida, Ohio
Florida had the third-highest rate, one filing for every 282 households, and ranked second in total filings at 30,254. Foreclosures increased 112% from a year earlier and decreased almost 7% from February, RealtyTrac said.
Ohio ranked third in filings at 11,273 and had the seventh- highest foreclosure rate, one for every 448 households. Georgia, Texas, Michigan, Arizona, Illinois, Nevada and Colorado also ranked among the top 10 states with the most filings, RealtyTrac said.
"The continued increase in new foreclosures implies an even larger drag on prices in 2008," Goldman Sachs Chief U.S. Economist Jan Hatzius wrote April 8. Home prices fell 8.9% in the fourth quarter, the biggest decline in 20 years as measured by the S&P/Case-Shiller home price index.
Some borrowers are "hanging on at the margins" in the face of resets, said Mark Goldman, a loan officer at Windsor Capital Mortgage Corp. in San Diego.
Goldman said one of his clients is a self-employed contractor whose adjustable-rate mortgage rose by two%age points two months ago. His mortgage payment has increased to US$7,200 from US$4,900.
"I've had people sitting in my office in tears because there are no loans available," said Goldman. "There are no loans for someone who's upside down on their house."
Monday, April 14, 2008
Financial Update
The best thing about 2008 is that there is only 8 ½ months left-top investment banker, name withheld
· TSX -226.55 Canadian Press The Toronto stock market ended with a triple-digit loss
Friday as disappointing earnings from usually reliable General Electric Co. cast a shadow
over stock markets and made investors fret over the quality of upcoming quarterly
results
· Dow -256.66 Wall Street index futures were negative and overseas stock markets were
down after big U.S. bank Wachovia Corp. announced it is cutting its dividend and raising $7
billion in new capital after a first-quarter net loss of $350 million. Canadian Press
· Dollar -.44c to $ $97.71US
· Oil +$0.03 to $110.14 US per barrel demand for oil will slip in the coming months amid a
global economic downturn, but prices may remain high because of uncertainty over supply.
· Gold -$4.70 to $923.60US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Bloomberg news Subprime Mortgages have proved to be a bigger catastrophe for captains of the insurance industry than any natural disaster. American International Group Inc cut the 2007 cash bonus for chief executive Martin Sullivan by 42% as the world’s largest insurer reported its biggest quarterly loss in 89 years. Ambac Financial Group Inc denied Robert Genader any bonus, slashed his cash compensation by 71% and then replaced him in Jan. Boards are holding CEO’s accountable for US$38 billion of subprime losses by slicing their salaries and bonuses by an average 20%. That compares with an average 8.2% increase for the CEO’s in 2005, when directors excused them for US$41.1 billion of costs from Hurricane Katrina
Housing prices inch up 0.3% in February: StatsCan
Last Updated: Friday, April 11, 2008 10:05 AM ET
CBC News <http://www.cbc.ca/news/credit.html>
New housing prices across Canada increased 0.3 per cent in February owing to rising labour and material costs, Statistics Canada reported Friday.
On a year-over-year basis, contractors' selling prices increased 6.2 per cent, down from the 6.5 per cent increase observed in February.
"The increase in new housing prices in Canada slowed in February, following two consecutive months in which the rate of growth was gaining speed," the federal agency said. "This deceleration continues the downward trend that started in September 2006."
Saskatchewan's strong housing market led the country, with builders citing the high cost of materials and a notable labour shortage, Statistics Canada said. Saskatoon recorded an annual price increase of 58.3 per cent — the city's largest recorded increase.
In monthly comparisons, new home prices in Saskatoon rose 4.3 per cent in February over January. Regina's new housing prices in February climbed seven per cent over January.
New February home prices dropped 0.9 per cent in Edmonton and 0.3 per cent in Calgary from the previous month. The federal agency said the slowing housing market is shifting.
"With some migrants leaving the province, there are many resale houses on the market, making for slower new housing sales," Statistics Canada said.
Material, labour and land development costs helped drive up new home prices in Nova Scotia and Newfoundland and Labrador to record levels. St. John's recorded a year-over-year increase of 12.2 per cent while Halifax prices climbed 11.4 per cent.
New housing price increases
February 2007 - February 2008 (%)
January 2008 - February 2008 (%)
Canada
6.2
0.3
St. John's
12.2
2.9
Halifax
11.4
0
Charlottetown
2.4
0
Saint John, Fredericton and Moncton
2.1
-0.4
Quebec
4.0
0.5
Montreal
4.7
1.0
Ottawa–Gatineau
3.3
1.3
Toronto and Oshawa
4.4
0.3
Hamilton
3.6
0.8
St. Catharines–Niagara
5.3
1.9
Kitchener
2.0
-0.1
London
3.7
0
Windsor
0.3
0.3
Greater Sudbury and Thunder Bay
6.3
1.2
Winnipeg
14.5
0.1
Regina
28.6
7.0
Saskatoon
58.3
4.3
Calgary
5.2
-0.3
Edmonton
14.8
-0.9
Vancouver
6.6
0.2
Victoria
1.6
0
· TSX -226.55 Canadian Press The Toronto stock market ended with a triple-digit loss
Friday as disappointing earnings from usually reliable General Electric Co. cast a shadow
over stock markets and made investors fret over the quality of upcoming quarterly
results
· Dow -256.66 Wall Street index futures were negative and overseas stock markets were
down after big U.S. bank Wachovia Corp. announced it is cutting its dividend and raising $7
billion in new capital after a first-quarter net loss of $350 million. Canadian Press
· Dollar -.44c to $ $97.71US
· Oil +$0.03 to $110.14 US per barrel demand for oil will slip in the coming months amid a
global economic downturn, but prices may remain high because of uncertainty over supply.
· Gold -$4.70 to $923.60US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Bloomberg news Subprime Mortgages have proved to be a bigger catastrophe for captains of the insurance industry than any natural disaster. American International Group Inc cut the 2007 cash bonus for chief executive Martin Sullivan by 42% as the world’s largest insurer reported its biggest quarterly loss in 89 years. Ambac Financial Group Inc denied Robert Genader any bonus, slashed his cash compensation by 71% and then replaced him in Jan. Boards are holding CEO’s accountable for US$38 billion of subprime losses by slicing their salaries and bonuses by an average 20%. That compares with an average 8.2% increase for the CEO’s in 2005, when directors excused them for US$41.1 billion of costs from Hurricane Katrina
Housing prices inch up 0.3% in February: StatsCan
Last Updated: Friday, April 11, 2008 10:05 AM ET
CBC News <http://www.cbc.ca/news/credit.html>
New housing prices across Canada increased 0.3 per cent in February owing to rising labour and material costs, Statistics Canada reported Friday.
On a year-over-year basis, contractors' selling prices increased 6.2 per cent, down from the 6.5 per cent increase observed in February.
"The increase in new housing prices in Canada slowed in February, following two consecutive months in which the rate of growth was gaining speed," the federal agency said. "This deceleration continues the downward trend that started in September 2006."
Saskatchewan's strong housing market led the country, with builders citing the high cost of materials and a notable labour shortage, Statistics Canada said. Saskatoon recorded an annual price increase of 58.3 per cent — the city's largest recorded increase.
In monthly comparisons, new home prices in Saskatoon rose 4.3 per cent in February over January. Regina's new housing prices in February climbed seven per cent over January.
New February home prices dropped 0.9 per cent in Edmonton and 0.3 per cent in Calgary from the previous month. The federal agency said the slowing housing market is shifting.
"With some migrants leaving the province, there are many resale houses on the market, making for slower new housing sales," Statistics Canada said.
Material, labour and land development costs helped drive up new home prices in Nova Scotia and Newfoundland and Labrador to record levels. St. John's recorded a year-over-year increase of 12.2 per cent while Halifax prices climbed 11.4 per cent.
New housing price increases
February 2007 - February 2008 (%)
January 2008 - February 2008 (%)
Canada
6.2
0.3
St. John's
12.2
2.9
Halifax
11.4
0
Charlottetown
2.4
0
Saint John, Fredericton and Moncton
2.1
-0.4
Quebec
4.0
0.5
Montreal
4.7
1.0
Ottawa–Gatineau
3.3
1.3
Toronto and Oshawa
4.4
0.3
Hamilton
3.6
0.8
St. Catharines–Niagara
5.3
1.9
Kitchener
2.0
-0.1
London
3.7
0
Windsor
0.3
0.3
Greater Sudbury and Thunder Bay
6.3
1.2
Winnipeg
14.5
0.1
Regina
28.6
7.0
Saskatoon
58.3
4.3
Calgary
5.2
-0.3
Edmonton
14.8
-0.9
Vancouver
6.6
0.2
Victoria
1.6
0
Friday, April 11, 2008
Central Bank Expected to Lower Interest Rates 150 basis points to 2 percent by July
That would be three consecutive rate decreases of 50 bps beginning April 22nd. June 10th and July 15th are the next announcements.
· TSX +159.03 (Reuters) The Toronto Stock Exchange had an afternoon rally to help the TSX finish the day with triple-digit gains, despite declines in gold and mining stocks. The biggest drop was in MacDonald Dettwiler and Associates shares following the government's unprecedented move to block the sale of its satellite unit to rocket-maker Alliant Techsystems .
· Dow + 54.72 Wall Street investors shrugged off weak earnings reports to focus on optimism at major discount retailers. Wal-Mart Stores Inc. and Costco Wholesale Corp. reported sharp increases and indicated they expect sales to keep rising.
· Dollar -.01c to $ $98.15US
· Oil -$0.76 to close at $110.11 US per barrel Gold -5.30to $928.38US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
April 10 (Bloomberg) -- Canada's February trade surplus <http://www.bloomberg.com/apps/quote?ticker=CATBTOTB%3AIND> widened to the largest in nine months, led by increased exports of passenger cars and energy. The surplus widened to C$4.94 billion from a revised C$2.78 billion in January, Statistics Canada said <http://www.statcan.ca/Daily/English/080410/d080410a.htm> today in Ottawa. Exports rose 3.8 percent, the fastest in 11 months, as energy <http://www.bloomberg.com/apps/quote?ticker=CATBNRGX%3AIND> sales abroad rose to a record.
Canada, the world's eighth-biggest economy, is benefiting from high demand <http://www.bloomberg.com/apps/quote?ticker=CMCIPI3M%3AIND> for commodities such as oil and metals, helping the country ride out a slump in manufacturing. Still, the outlook for exports is likely to worsen in future months as the U.S. economic slowdown crimps demand for Canadian products, said Jacqui Douglas <http://search.bloomberg.com/search?q=Jacqui+Douglas&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1> , an economist at TD Securities in Toronto.
``I don't think the Bank of Canada is expecting this to continue,'' Douglas said of the widening surplus. ``The risk is that exports turn down sharply over the next few months.'' The central bank cut interest rates by half a point for the first time since 2001 on March 4, citing ``intensifying'' signs of a decline in exports on slower demand from the U.S. and the high Canadian currency.
TD Securities, a division of Toronto-Dominion Bank, expects the central bank to lower interest rates 150 basis points to 2 percent by July, starting with a 50 basis point reduction at the next announcement on April 22.
ABCP investors say they were duped, defrauded by financial community
Julian Beltrame, The Canadian Press
OTTAWA - The breakdown of the $32-billion asset-backed commercial paper system amounted to criminal fraud on "duped" innocent investors that no-one in Canada appears prepared to investigate or prosecute, a House of Commons committee was told Thursday.
"It's a free ride in Canada for financial crime," said Larry Elford, a former Alberta financial adviser who now heads an investment advocacy group.
"The law simply does not apply to the financial industry."
In the first public hearing on the financial markets crisis that unfolded from the U.S. subprime meltdown last summer, the House finance committee heard a litany of horror stories from investors unwittingly caught up in the secretive, arcane world of high finance.
Speaking in Toronto, Finance Minister Jim Flaherty said the commercial paper fiasco was more evidence that Canada's system of independent provincial and territorial regulators, such as the Ontario Securities Commission, does not work.
"We have 13 securities regulators in Canada, which, quite frankly, makes no sense and makes for a great deal of inefficiency," he said. "This another reason why we need to move forward with a national securities regulator in Canada."
But while several financial analysts at the committee hearings also said a national regulator would help, they cautioned that the new oversight body should be mandated to look after only the interests of investors.
"The current financial regulatory system is broken and offers no protection to Canadian investors," said Diane Urquhart, a Toronto-area independent financial analyst.
Elford said current provincial regulators have a conflict of interest and too close ties with the financial industry.
"They not only fail to protect consumers, but they give Canadians a false sense of security," said Elford. "We are sitting ducks. If one finds a law being broken, there is simply no police agency to call that does not have a conflict of interest."
Investors who say they have hundreds of thousands of dollars in savings in jeopardy told the legislators they were "duped" by financial institutions that advertised their investment vehicles as safe, and that they have lost faith in the regulatory bodies.
One Victoria investor, Wynne Miles, 58, who described herself as self-employed and with no pension, had placed her life savings in what she supposed were government treasury bills, only to find out in July they had been transferred into non-bank ABCP without her knowledge.
And retired Alberta farmer Murray Candlish told a similar story about how his $350,000 in savings was invested in a triple-A rated trust he was assured was as secure as the Canadian banking system.
"Now our dreams are slowly disappearing as the value of our investment erodes," Candlish told the committee.
The first-person testimonials held MPs from all four parties in thrall for most of the two hours and surprised some, who said they assumed investors knew what they were getting into.
"It's been like a red light going on for us," said Bloc Quebecois MP Paul Crete.
Crete said the finance committee has made the ABCP matter a priority for future hearings, which will begin after investors vote on a plan to settle issue on April 25.
"We have to have people from banks, regulators, others who can tell us why this crisis is there and what are the solutions to this problem."
Thursday's witnesses, who included investors and investment experts, had no trouble pinpointing the problem.
Even now, they said, the system is protecting itself, citing Tuesday's proposed "relief plan" by Canaccord Capital Inc. (TSX: CCI.TO <http://ca.finance.yahoo.com/q?s=CCI.TO> ) to repurchase up to $138 million of the debt held by 1,430 of its individual clients holding less than $1 million in the investment.
Miles points out that investor acceptance comes with strings. "The requirement that we waive our rights to sue is unacceptable," she said. "I feel as if I am being offered an ultimatum and that makes me very angry. We have been wronged." She said she will reject the offer if she was forced to waive her rights.
Some of the witnesses said that the system is so broken that eight months after the commercial paper was frozen, some Canadians still don't know that part of their investments may be in ABCP.
Liberal finance critic John McCallum, a former chief economist with the Royal Bank, said the allegations need to be investigated, but he was not prepared apportion blame at this time.
"I can't stand here today and say who's to blame, but we have heard disturbing allegations about regulators who may be in the pockets of the regulated," he said. "We need to find out what went wrong in this particular disaster and what we can do to make sure that future crises are less likely to happen."
That would be three consecutive rate decreases of 50 bps beginning April 22nd. June 10th and July 15th are the next announcements.
· TSX +159.03 (Reuters) The Toronto Stock Exchange had an afternoon rally to help the TSX finish the day with triple-digit gains, despite declines in gold and mining stocks. The biggest drop was in MacDonald Dettwiler and Associates shares following the government's unprecedented move to block the sale of its satellite unit to rocket-maker Alliant Techsystems .
· Dow + 54.72 Wall Street investors shrugged off weak earnings reports to focus on optimism at major discount retailers. Wal-Mart Stores Inc. and Costco Wholesale Corp. reported sharp increases and indicated they expect sales to keep rising.
· Dollar -.01c to $ $98.15US
· Oil -$0.76 to close at $110.11 US per barrel Gold -5.30to $928.38US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
April 10 (Bloomberg) -- Canada's February trade surplus <http://www.bloomberg.com/apps/quote?ticker=CATBTOTB%3AIND> widened to the largest in nine months, led by increased exports of passenger cars and energy. The surplus widened to C$4.94 billion from a revised C$2.78 billion in January, Statistics Canada said <http://www.statcan.ca/Daily/English/080410/d080410a.htm> today in Ottawa. Exports rose 3.8 percent, the fastest in 11 months, as energy <http://www.bloomberg.com/apps/quote?ticker=CATBNRGX%3AIND> sales abroad rose to a record.
Canada, the world's eighth-biggest economy, is benefiting from high demand <http://www.bloomberg.com/apps/quote?ticker=CMCIPI3M%3AIND> for commodities such as oil and metals, helping the country ride out a slump in manufacturing. Still, the outlook for exports is likely to worsen in future months as the U.S. economic slowdown crimps demand for Canadian products, said Jacqui Douglas <http://search.bloomberg.com/search?q=Jacqui+Douglas&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1> , an economist at TD Securities in Toronto.
``I don't think the Bank of Canada is expecting this to continue,'' Douglas said of the widening surplus. ``The risk is that exports turn down sharply over the next few months.'' The central bank cut interest rates by half a point for the first time since 2001 on March 4, citing ``intensifying'' signs of a decline in exports on slower demand from the U.S. and the high Canadian currency.
TD Securities, a division of Toronto-Dominion Bank, expects the central bank to lower interest rates 150 basis points to 2 percent by July, starting with a 50 basis point reduction at the next announcement on April 22.
ABCP investors say they were duped, defrauded by financial community
Julian Beltrame, The Canadian Press
OTTAWA - The breakdown of the $32-billion asset-backed commercial paper system amounted to criminal fraud on "duped" innocent investors that no-one in Canada appears prepared to investigate or prosecute, a House of Commons committee was told Thursday.
"It's a free ride in Canada for financial crime," said Larry Elford, a former Alberta financial adviser who now heads an investment advocacy group.
"The law simply does not apply to the financial industry."
In the first public hearing on the financial markets crisis that unfolded from the U.S. subprime meltdown last summer, the House finance committee heard a litany of horror stories from investors unwittingly caught up in the secretive, arcane world of high finance.
Speaking in Toronto, Finance Minister Jim Flaherty said the commercial paper fiasco was more evidence that Canada's system of independent provincial and territorial regulators, such as the Ontario Securities Commission, does not work.
"We have 13 securities regulators in Canada, which, quite frankly, makes no sense and makes for a great deal of inefficiency," he said. "This another reason why we need to move forward with a national securities regulator in Canada."
But while several financial analysts at the committee hearings also said a national regulator would help, they cautioned that the new oversight body should be mandated to look after only the interests of investors.
"The current financial regulatory system is broken and offers no protection to Canadian investors," said Diane Urquhart, a Toronto-area independent financial analyst.
Elford said current provincial regulators have a conflict of interest and too close ties with the financial industry.
"They not only fail to protect consumers, but they give Canadians a false sense of security," said Elford. "We are sitting ducks. If one finds a law being broken, there is simply no police agency to call that does not have a conflict of interest."
Investors who say they have hundreds of thousands of dollars in savings in jeopardy told the legislators they were "duped" by financial institutions that advertised their investment vehicles as safe, and that they have lost faith in the regulatory bodies.
One Victoria investor, Wynne Miles, 58, who described herself as self-employed and with no pension, had placed her life savings in what she supposed were government treasury bills, only to find out in July they had been transferred into non-bank ABCP without her knowledge.
And retired Alberta farmer Murray Candlish told a similar story about how his $350,000 in savings was invested in a triple-A rated trust he was assured was as secure as the Canadian banking system.
"Now our dreams are slowly disappearing as the value of our investment erodes," Candlish told the committee.
The first-person testimonials held MPs from all four parties in thrall for most of the two hours and surprised some, who said they assumed investors knew what they were getting into.
"It's been like a red light going on for us," said Bloc Quebecois MP Paul Crete.
Crete said the finance committee has made the ABCP matter a priority for future hearings, which will begin after investors vote on a plan to settle issue on April 25.
"We have to have people from banks, regulators, others who can tell us why this crisis is there and what are the solutions to this problem."
Thursday's witnesses, who included investors and investment experts, had no trouble pinpointing the problem.
Even now, they said, the system is protecting itself, citing Tuesday's proposed "relief plan" by Canaccord Capital Inc. (TSX: CCI.TO <http://ca.finance.yahoo.com/q?s=CCI.TO> ) to repurchase up to $138 million of the debt held by 1,430 of its individual clients holding less than $1 million in the investment.
Miles points out that investor acceptance comes with strings. "The requirement that we waive our rights to sue is unacceptable," she said. "I feel as if I am being offered an ultimatum and that makes me very angry. We have been wronged." She said she will reject the offer if she was forced to waive her rights.
Some of the witnesses said that the system is so broken that eight months after the commercial paper was frozen, some Canadians still don't know that part of their investments may be in ABCP.
Liberal finance critic John McCallum, a former chief economist with the Royal Bank, said the allegations need to be investigated, but he was not prepared apportion blame at this time.
"I can't stand here today and say who's to blame, but we have heard disturbing allegations about regulators who may be in the pockets of the regulated," he said. "We need to find out what went wrong in this particular disaster and what we can do to make sure that future crises are less likely to happen."
Wednesday, April 9, 2008
Financial Update
Market sentiment was shaken by a report from the International Monetary Fund that forecast write-down losses related to the credit crisis could reach $945 billion.
· TSX -17.48 (Reuters) The Toronto Stock Exchange's main index snapped its six-day
winning streak and closed slightly lower on Tuesday, hurt by softer commodities and
recurrent worries over the impact of the U.S. economic slowdown.
· Dow -35.99
· Dollar -.39c to $ $98.69US
· Oil -$0.59 to close at $108.50 US per barrel Retail gasoline prices pulled back slightly
from record levels yesterday and gave some consumers a small break, but a new
government forecast said gas could reach as high as $4 US a gallon in the United States
during the summer driving season
· Gold -8.70 to $914US Shares of gold producers lost 1.7 percent as the price of bullion was
stung by profit-taking. Barrick Gold was among the day's biggest weighted decliners
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Mortgage crisis 'in final innings,' CEO predicts
MARY ALTAFFER, THE ASSOCIATED PRESS
Joe Bel Bruno The Associated PressMorgan Stanley chief executive John Mack said yesterday that Wall Street is facing the most difficult conditions that he has seen in 40 years, but he feels the global credit crisis might be "in the final innings.''
Mack, who easily won re-election to Morgan Stanley's board along with 10 other directors, said at the investment bank's annual meeting that he still plans to "go slow'' because of the market's turbulence. The bank wrote down billions of dollars worth of securities linked to risky subprime mortgages and other debt since last year.
"We're keeping powder dry,'' he said. "We feel the risks on the market, the run on Bear Stearns, and we think it is important to have very liquid positions and we're working toward that.''
He expects more bad news will come out as the world's banks recover from the subprime mortgage crisis, particularly from "overseas and some small retail banks in this country.''
However, Mack said he thinks the market is turning and that could provide opportunity.
In fact, Mack said that Morgan Stanley is seeing opportunities in the same mortgage market that caused Wall Street's pain this year.
"I don't know if this is the bottom or close to the bottom, but at some point it will be wise to invest there,'' he said.
Mack faced a tough test at this year's annual meeting after three pension funds aligned themselves against the nomination of Morgan Stanley's slate of directors. However, all secured easy re-election, according to preliminary tallies.
Bill Patterson, executive director of CtW Investment Group, said more is needed to ensure Morgan Stanley and other banks don't take excessive risks.
· TSX -17.48 (Reuters) The Toronto Stock Exchange's main index snapped its six-day
winning streak and closed slightly lower on Tuesday, hurt by softer commodities and
recurrent worries over the impact of the U.S. economic slowdown.
· Dow -35.99
· Dollar -.39c to $ $98.69US
· Oil -$0.59 to close at $108.50 US per barrel Retail gasoline prices pulled back slightly
from record levels yesterday and gave some consumers a small break, but a new
government forecast said gas could reach as high as $4 US a gallon in the United States
during the summer driving season
· Gold -8.70 to $914US Shares of gold producers lost 1.7 percent as the price of bullion was
stung by profit-taking. Barrick Gold was among the day's biggest weighted decliners
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Mortgage crisis 'in final innings,' CEO predicts
MARY ALTAFFER, THE ASSOCIATED PRESS
Joe Bel Bruno The Associated PressMorgan Stanley chief executive John Mack said yesterday that Wall Street is facing the most difficult conditions that he has seen in 40 years, but he feels the global credit crisis might be "in the final innings.''
Mack, who easily won re-election to Morgan Stanley's board along with 10 other directors, said at the investment bank's annual meeting that he still plans to "go slow'' because of the market's turbulence. The bank wrote down billions of dollars worth of securities linked to risky subprime mortgages and other debt since last year.
"We're keeping powder dry,'' he said. "We feel the risks on the market, the run on Bear Stearns, and we think it is important to have very liquid positions and we're working toward that.''
He expects more bad news will come out as the world's banks recover from the subprime mortgage crisis, particularly from "overseas and some small retail banks in this country.''
However, Mack said he thinks the market is turning and that could provide opportunity.
In fact, Mack said that Morgan Stanley is seeing opportunities in the same mortgage market that caused Wall Street's pain this year.
"I don't know if this is the bottom or close to the bottom, but at some point it will be wise to invest there,'' he said.
Mack faced a tough test at this year's annual meeting after three pension funds aligned themselves against the nomination of Morgan Stanley's slate of directors. However, all secured easy re-election, according to preliminary tallies.
Bill Patterson, executive director of CtW Investment Group, said more is needed to ensure Morgan Stanley and other banks don't take excessive risks.
Tuesday, April 8, 2008
Financial Update
· TSX +76.82 (Reuters) - The Toronto stock market ended the day higher, but well off earlier gains, as mining and metals stocks held investors attention
· Dow +3.01 New York reacted to a potential US$5-billion injection for mortgage lender
Washington Mutual Inc logging triple-digit gains near midday before sliding to end relatively
flat.
· Dollar -.39c to $ $98.69US
· Oil +$2.86 to close at $109.09US per barrel · Gold +13.70 to $922.70US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
<http://www.bankofcanada.ca/en/rates/bonds.html>
Statistics Canada reported that building permits slid for a fourth straight month, falling one per cent in February due to collapsing non-residential construction plans in Ontario.
Financial Post
U.S. home-funding company Fannie Mae to require minimum credit score for loans
Fannie Mae has told lenders that it will require a minimum credit score for the loans it buys, tightening mortgage standards to protect itself from record foreclosures sweeping the country. Lawmakers have been pressuring the largest U.S. home-funding company, along with its rival Freddie Mac, to more aggressively buy home loans in a bid to lower mortgage rates and prop up housing. However, the two government-chartered companies are battling their own problems as home loans sour. In response to soaring mortgage defaults, they are increasing fees, restricting the loans they purchase and trying to preserve and raise capital. The latest steps are part of amended underwriting practices for loans Fannie Mae buys, aimed at adjusting prices to reflect heightened housing market risk and protecting the company's capital.Close
<http://www.nationalpost.com/todays_paper/story.html?id=418691#close>
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· Dow +3.01 New York reacted to a potential US$5-billion injection for mortgage lender
Washington Mutual Inc logging triple-digit gains near midday before sliding to end relatively
flat.
· Dollar -.39c to $ $98.69US
· Oil +$2.86 to close at $109.09US per barrel · Gold +13.70 to $922.70US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
<http://www.bankofcanada.ca/en/rates/bonds.html>
Statistics Canada reported that building permits slid for a fourth straight month, falling one per cent in February due to collapsing non-residential construction plans in Ontario.
Financial Post
U.S. home-funding company Fannie Mae to require minimum credit score for loans
Fannie Mae has told lenders that it will require a minimum credit score for the loans it buys, tightening mortgage standards to protect itself from record foreclosures sweeping the country. Lawmakers have been pressuring the largest U.S. home-funding company, along with its rival Freddie Mac, to more aggressively buy home loans in a bid to lower mortgage rates and prop up housing. However, the two government-chartered companies are battling their own problems as home loans sour. In response to soaring mortgage defaults, they are increasing fees, restricting the loans they purchase and trying to preserve and raise capital. The latest steps are part of amended underwriting practices for loans Fannie Mae buys, aimed at adjusting prices to reflect heightened housing market risk and protecting the company's capital.Close
<http://www.nationalpost.com/todays_paper/story.html?id=418691#close>
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Monday, April 7, 2008
Financial Update
Toronto keeps triple-digit gains while New York battles bad jobs report
· TSX +116.9 (Reuters) - The Toronto stock market rose to its highest levels since late February as it ended the week with a triple-digit gain, while New York ended flat as it lost a battle to overcome dismal jobs data. Canada’s overall employment picture was mildly positive with unemployment edging up only 1/5th % to 6% and 14,600 net new jobs.
· Dow -16.61 U.S. employers cut 80,000 jobs, the most in 5 years and the 3rd straight month of job losses. The American unemployment rate jumped to 5.1 per cent from 4.8 per cent. The U.S. economy has given up jobs the 1st 3 months of this yr, and this adds to the belief that the U.S. is already in recession
· Dollar -.48c to $ $98.08US
· Oil +$2.40 to close at $106.23 US per barrel
· Gold +4 to $909US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
MONTREAL (Reuters) – SMALL GUY CRACKS THE ABCP WHIP Irate investors saddled with some C$350 million of frozen asset-backed commercial paper investments want all of their money back, and signs are that Bay Street will have to placate them to prevent the collapse of its workout plan for all C$33 billion of the strange stuff.
Even though as a group they represent only 1% of the value of the ABCP that falls under the plan, retail investors get 1 vote each just like everyone else, and they far outnumber the big corporate players. For the restructuring plan to pass, a majority of investors at an April 25 meeting need to vote for it. But by voting in favor of the deal, small investors would give up the right to sue their brokers and banks in return for a promise to get an unknown amount of money back sometime down the road.
Please also find attached above an excellent article for you and your clients discussing variable rates vs fixed rates. The decision should not be based on the rate, but on the clients tolerance for risk, and their ability to withstand rises in a mortgage payment. Anyone wishing to take variable at Merix may fix their mortgage payment higher to avoid seeing changes when prime fluctuates.
Canada's mortgage rates set to go south
Cuts Predicted
Keith Woolhouse, Canwest News Service Published: Thursday, April 03, 2008
Canada's mortgage rates are heading down. At a time when stock markets are volatile and with the economy and income growth slowing, the positive news for those planning to get into the housing market or whose loans are up for renewal is that it's going to cost less to finance a mortgage.
Economists, who are on top of the eddies that influence the borrowing and lending of money, and mortgage brokers, who tap funds for buyers, all agree that in the months ahead it's going to be cheaper to borrow. What they don't agree on is where rates will bottom out.
All the forecasts point to the Bank of Canada reducing its key overnight lending rate currently at 3.5%. Chartered banks use the rate as a guide for their own prime rate that, in turn, dictates the cost of borrowing.
The 12-month outlook for the central bank's overnight lending rate suggests it will flatten out between 2.5% and 3%. If the banks follow the Bank of Canada down with its rate-cutting policy, consumers could see the posted five-year fixed rate, currently at 7.29%, drop to about 6.3%, and mortgage brokers offer around 5%. Variable rates would be under 5%. Consumers should not be misled by the posted rate. While it was at 7.29%, banks were readily offering 5.9%.
Current rates are higher than they should be, says Daniel Martel, president of G. R. Gauthier Financial Services Inc. In mid-March, his Ottawa-based company's five-year rate was 5.39% but Mr. Martel felt that it should be around 4.6%, based on the government bond market prior to the collapse in the subprime mortgage industry, when banks sought a 1.2-point cushion. He blamed the high rate on banks' desire to recover their losses in the subprime market and to appease shareholders.
"The banks claim the rates are higher than they should be because their cost of borrowing is higher, which I don't agree with. I think it's more the banks recouping their losses," he said.
Each percentage point makes a difference. One percentage point on a $100,000 mortgage with a five-year term, amortized over 25 years, costs $62 more per month ($744 a year).
A homeowner with a $250,000 mortgage with a rate of 6% pays $155 more a month ($1,860 a year) than his neighbour who has a rate of 5%.
Many factors influence the course of rates, and not all of them are homegrown. One of the biggest influences lies south of the border with the powerful Federal Reserve Board, which dictates U.S. interest rates.
The U.S. economy, left reeling by subprime mortgage defaults, tightening credit and a falling dollar, is getting bleaker. It is seeking to revitalize its economy and ward off the effects of a recession by continuing to cut rates. Because of the spillover effect from a weaker U.S economy, the Bank of Canada has little choice but to stay in step with U.S. monetary policy. CIBC's Jeff Rubin believes the bank will gradually reduce its rate to 3% as it follows the U.S. Federal Reserve downward. "While the Bank of Canada may not match the Federal Reserve Board basis point for basis point, it will, nevertheless, be following the Fed in direction," he said.
David Rosenberg at Merrill Lynch in New York forecasts that the Fed needs to get its Fed Fund rate down to 1%. "This may sound aggressive, but Fed easing cycles in recessions almost always see the prior tightening cycle completely unwind. The serious nature of the current housing deflation and credit crunch makes the case for an aggressive easing in policy all the more compelling," he says.
The Bank of Canada's next opportunity to adjust its overnight lending rate is on April 22. On April 30, the Federal Reserve Board has the opportunity to do the same. Those are two dates to watch.
Close <http://www.nationalpost.com/Story.html?id=418670#close>
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<http://ad.ca.doubleclick.net/click%3Bh=v8/3699/3/0/%2a/a%3B195845541%3B0-0%3B0%3B18317761%3B21-88/31%3B25451901/25469758/1%3B%3B~aopt%3D2/2/a8/0%3B~sscs%3D%3fhttp:/www.frugalcolour.com/>
· TSX +116.9 (Reuters) - The Toronto stock market rose to its highest levels since late February as it ended the week with a triple-digit gain, while New York ended flat as it lost a battle to overcome dismal jobs data. Canada’s overall employment picture was mildly positive with unemployment edging up only 1/5th % to 6% and 14,600 net new jobs.
· Dow -16.61 U.S. employers cut 80,000 jobs, the most in 5 years and the 3rd straight month of job losses. The American unemployment rate jumped to 5.1 per cent from 4.8 per cent. The U.S. economy has given up jobs the 1st 3 months of this yr, and this adds to the belief that the U.S. is already in recession
· Dollar -.48c to $ $98.08US
· Oil +$2.40 to close at $106.23 US per barrel
· Gold +4 to $909US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
MONTREAL (Reuters) – SMALL GUY CRACKS THE ABCP WHIP Irate investors saddled with some C$350 million of frozen asset-backed commercial paper investments want all of their money back, and signs are that Bay Street will have to placate them to prevent the collapse of its workout plan for all C$33 billion of the strange stuff.
Even though as a group they represent only 1% of the value of the ABCP that falls under the plan, retail investors get 1 vote each just like everyone else, and they far outnumber the big corporate players. For the restructuring plan to pass, a majority of investors at an April 25 meeting need to vote for it. But by voting in favor of the deal, small investors would give up the right to sue their brokers and banks in return for a promise to get an unknown amount of money back sometime down the road.
Please also find attached above an excellent article for you and your clients discussing variable rates vs fixed rates. The decision should not be based on the rate, but on the clients tolerance for risk, and their ability to withstand rises in a mortgage payment. Anyone wishing to take variable at Merix may fix their mortgage payment higher to avoid seeing changes when prime fluctuates.
Canada's mortgage rates set to go south
Cuts Predicted
Keith Woolhouse, Canwest News Service Published: Thursday, April 03, 2008
Canada's mortgage rates are heading down. At a time when stock markets are volatile and with the economy and income growth slowing, the positive news for those planning to get into the housing market or whose loans are up for renewal is that it's going to cost less to finance a mortgage.
Economists, who are on top of the eddies that influence the borrowing and lending of money, and mortgage brokers, who tap funds for buyers, all agree that in the months ahead it's going to be cheaper to borrow. What they don't agree on is where rates will bottom out.
All the forecasts point to the Bank of Canada reducing its key overnight lending rate currently at 3.5%. Chartered banks use the rate as a guide for their own prime rate that, in turn, dictates the cost of borrowing.
The 12-month outlook for the central bank's overnight lending rate suggests it will flatten out between 2.5% and 3%. If the banks follow the Bank of Canada down with its rate-cutting policy, consumers could see the posted five-year fixed rate, currently at 7.29%, drop to about 6.3%, and mortgage brokers offer around 5%. Variable rates would be under 5%. Consumers should not be misled by the posted rate. While it was at 7.29%, banks were readily offering 5.9%.
Current rates are higher than they should be, says Daniel Martel, president of G. R. Gauthier Financial Services Inc. In mid-March, his Ottawa-based company's five-year rate was 5.39% but Mr. Martel felt that it should be around 4.6%, based on the government bond market prior to the collapse in the subprime mortgage industry, when banks sought a 1.2-point cushion. He blamed the high rate on banks' desire to recover their losses in the subprime market and to appease shareholders.
"The banks claim the rates are higher than they should be because their cost of borrowing is higher, which I don't agree with. I think it's more the banks recouping their losses," he said.
Each percentage point makes a difference. One percentage point on a $100,000 mortgage with a five-year term, amortized over 25 years, costs $62 more per month ($744 a year).
A homeowner with a $250,000 mortgage with a rate of 6% pays $155 more a month ($1,860 a year) than his neighbour who has a rate of 5%.
Many factors influence the course of rates, and not all of them are homegrown. One of the biggest influences lies south of the border with the powerful Federal Reserve Board, which dictates U.S. interest rates.
The U.S. economy, left reeling by subprime mortgage defaults, tightening credit and a falling dollar, is getting bleaker. It is seeking to revitalize its economy and ward off the effects of a recession by continuing to cut rates. Because of the spillover effect from a weaker U.S economy, the Bank of Canada has little choice but to stay in step with U.S. monetary policy. CIBC's Jeff Rubin believes the bank will gradually reduce its rate to 3% as it follows the U.S. Federal Reserve downward. "While the Bank of Canada may not match the Federal Reserve Board basis point for basis point, it will, nevertheless, be following the Fed in direction," he said.
David Rosenberg at Merrill Lynch in New York forecasts that the Fed needs to get its Fed Fund rate down to 1%. "This may sound aggressive, but Fed easing cycles in recessions almost always see the prior tightening cycle completely unwind. The serious nature of the current housing deflation and credit crunch makes the case for an aggressive easing in policy all the more compelling," he says.
The Bank of Canada's next opportunity to adjust its overnight lending rate is on April 22. On April 30, the Federal Reserve Board has the opportunity to do the same. Those are two dates to watch.
Close <http://www.nationalpost.com/Story.html?id=418670#close>
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Wednesday, April 2, 2008
Daily Update
It's not something that's fundamentally changed, it's just the sentiment, as we've seen, really bounces around from day to day in this environment, and today has been one of the days where it's been positive all around," Elvis Picardo, investment strategist at Northern Securities Inc said.
· TSX +90.59(Reuters) The Toronto Stock Exchange's main index drove higher as banking issues were buoyed by signs of greater stability in financial markets.
· Dow +391.47
· Dollar +.46c to $ $97.88US
· Oil -.60c to close at $100.98 US per barrel
· Gold tumbled further -$33.30 to $882.90
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
U.S. auto sales dropped in March as consumers held back
By Dee-Ann Durbin, The Associated Press
DETROIT - Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they're getting what they anticipated.
Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover.
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U.S. auto sales dropped in March as consumers held back
By Dee-Ann Durbin, The Associated Press
DETROIT - Automakers began 2008 expecting the worst year for U.S. auto sales in a decade. So far, they're getting what they anticipated.
Sales dropped by double digits in March, even for usual stalwarts like Toyota. And with fragile consumer confidence, falling home values, tightening credit and high energy prices, it may be some time before auto sales recover.
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