Financial Update

TSX +111.15 kicking off the week by surging higher, buoyed by firm oil prices and a jump by BCE Inc after Canada's top court backed the buyout of the telecom company....

· Dow -.33

· Dollar -.11c to $98.44.

· Oil +1.38 to $136.74US per barrel

· Gold -$16.50US to $887.20US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>


Bank of Canada ceases $1B in liquidity injections

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Record staff and Record news services The Bank of Canada says it won't renew a $1 billion term liquidity injection to chartered banks once it has matured on Thursday, a further sign that the central bank believes the credit crisis is easing in Canada. The central bank cited "continuing improvement in market conditions since the end of April'' for the decision. "Indicative measures of bank funding costs remain well below those in a number of other major currencies,'' the bank said in a statement. The bank has been providing two streams of $2 billion in cash injections through 28-day purchase-and-resale agreements since December, but has of late begun to reduce the rollovers to $1 billion upon reaching maturity. Yesterday's announcement effectively removes one stream with the second maturing on July 10.

CIBC likely to take another big hit after downgrades

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David Friend The Canadian Press

Canadian Imperial Bank of Commerce is likely to endure another multi-billion charge that could dig more than $2 billion out of its flesh in the third quarter, some industry watchers are predicting. Estimates ranged from $1 billion to more than $2 billion yesterday as analysts weighed in on Moody's downgrading monoline insurer XL Capital Assurance to junk late last week."We expect CIBC will write off its remaining fair value exposure to XLCA in its third-quarter 2008 results,'' Blackmont Capital analyst Brad Smith wrote in a note, putting the total writedown at $1 billion.

Financial Update

Oil and financials could weigh on TSX this week as Fed mulls interest rates

· TSX -209.48 as financial issues were hurt by inflation fears and worries over more U.S. mortgage-related problems, while consumer stocks also fell.

· Dow -220.40

· Dollar -.17c to $98.33.

· Oil +2.69 to $134.62US per barrel

· Gold -$.50US to $903.70US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

By Malcolm Morrison, The Canadian Press

TORONTO - Gains could be tough to find on the Toronto stock market this week as investors wonder how much further the oil sector can carry the TSX, while financial shares fight fresh headwinds.

Concerns around those two areas again stopped the Toronto market's main index from establishing itself above the 15,000 mark last week.

On Monday, traders will be looking for the market's reaction to the Supreme Court's decision to allow the takeover of BCE Inc. to go ahead and a statement by the banks financing the deal that they "expect that the transaction will close in accordance with the definitive agreement between BCE and the sponsors."

Shares of BCE have traded well below the $42.75 per share price offered by the group led by the Ontario Teachers' Pension Plan in recent weeks.

But investors will likely want to hold off on any big bets on the market ahead of the announcement on interest rates from the U.S. Federal Reserve on Wednesday.

"It's a Fed week," observed Michael Gregory, senior economist at BMO Capital Markets, adding that most analysts expect the U.S. central bank to leave its key interest rate unchanged at a four-year low of two per cent.

"I think they're very much on hold for awhile until they see how things pan out," Gregory said.

"I think they essentially indicated that (last) week with various Fed officials giving a sense that the market was getting way too ahead of itself in factoring in tightening."

But economists think there isn't much doubt that the Fed and other central banks will have to move rates upward sooner or later to prevent inflation from taking hold as near-record oil prices threaten to ripple through the economy.

"You talk about 2009, of course I think that's well within the cards," said Gregory.

Last week, the TSX composite index hit a record close of 15,073.13 before China moved to restrain fuel consumption by raising government-controlled prices and the energy sector stalled.

The index ended the week down 1.3 per cent, led by falling energy and financials.

The move by the Chinese government sent a chill through the Toronto market, where the oil sector has been largely responsible for the index's six per cent year-to-date gain.

The sector has surged 27 per cent so far this, but oil prices have been volatile.

"The fundamentals have put the market in such a position that even little things like (the Chinese announcement) cause huge price swings," said Gregory.

"We're at the point now where commodity price volatility has increased and will likely remain high going forward."

Meanwhile, the financial sector ended lower on a run of bad news at the end of the week.

This included a decision by Moody's Investors Service to downgrade the two biggest bond insurers, MBIA Inc. and Ambac Financial Group Inc., which underscored U.S. money-centre problems and heightened fears of bond-market instability.

And Citibank warned of more writedowns.

"I think there's more (bad news) out there somewhere," said Gregory, noting that investors remain cautious about banks and other financial service providers, especially in the United States.

"Yes these stocks are cheap but maybe there's a reason why they're cheap."

Financial Update

Lower oil prices sent TSX tumbling, helps send NY markets higher <http://ca.news.finance.yahoo.com/s/19062008/2/biz-finance-lower-oil-prices-sent-tsx-tumbling-helps-send.html> -

· TSX -282.98 The market also took a hit from financials in the wake of a much higher-than-expected 2.2% inflation report for May and more disquieting news from the banking sector in the United States as Citigroup warns of more “substantial” write-downs

· Dow +34.03

· Dollar -.28c to $98.50 as domestic data topped estimates, but a sharp drop in oil prices dragged the currency from the 2week high it reached early in the session.

· Oil -4.75 to $131.93US per barrel Oil, which influences the commodity-linked Loonie’s performance, tumbled $5 a barrel after China decided to raise domestic fuel prices which is likely to crimp demand

· Gold + $10.70US to $904.20US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

Hundreds swept up in U.S. mortgage fraud arrests

Report on Business The Globe and Mail

LARA JAKES JORDAN The Associated Press

WASHINGTON — The FBI says it has arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at over $1-billion (U.S.).

The U.S. Justice Department and FBI planned to announce the recent arrests — including apprehensions in Chicago, Atlanta, Miami, and suburban Maryland — at a news conference Thursday afternoon in Washington.

Two former Bear Stearns managers in New York were also included in the sweep, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.

More than 400 people are being charged in the sting that began March 1 and ended this week, authorities said. They include industry borrowers, loan originators and real estate agents. An estimated 50 people were arrested in the last two days alone.

Across the country, reports of mortgage fraud have soared over the past year as the subprime mortgage market collapsed and defaults and foreclosures soared.

Banks reported nearly 53,000 cases of suspected mortgage fraud last year, up from more than 37,000 a year earlier and about 10 times the level of reports in 2001 and 2002, according to the Treasury Department's Financial Crimes Enforcement Network.

The most common type of mortgage fraud was misstatement of income or assets, followed by forged documents, inflated appraisals and misrepresentation of a buyer's intent to occupy a property as a primary residence.

Over the last several months, the FBI has been investigating an estimated 1,300 mortgage fraud cases — including 19 involving subprime lending practices by U.S. financial institutions.

The Justice Department also is expected to ask Congress for more money to help combat mortgage fraud as part of a larger funding request to curb white collar crime and violent crime.

Financial Update

· TSX +4.30 setting another record high

· Dow -131.24

· Dollar -.10c to $98.22

· Oil +2.67 to $136.68US per barrel

· Gold + $6.60US to $890.90US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

A barrel of oil: $250

THE CANADIAN PRESS

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It promises to be a whole new world if oil prices continue their relentless upward spiral

June 19, 2008

Tamsyn Burgmann
The Canadian Press

TORONTO

When a wiry, bearded man tried to enlist Pennsylvania labourers to punch deep holes in the earth in 1859 in search of oil, they thought he was crazy.

But what may have appeared foolhardy to the workers seemed worth a shot to Edwin L. Drake, who went on to strike black gold, launching the modern petroleum industry.

Not even Drake could have predicted how oil would transform a civilization, let alone that one day, the head of the world's largest utility would forecast that the price of a barrel of oil could eventually skyrocket to $250 US -- possibly by as early as next year.

Though largely dismissed by industry analysts, the wild card $250-a-barrel scenario -- floated last week by Alexey Miller, chief executive of Russian gas producer Gazprom -- would have far-reaching implications and change life in Canada on nearly every level, experts and observers say.

"It would really rewrite the map of the way we live our lives,'' said Richard Worzel, a financial analyst, author and one of Canada's best-known futurists.

"You can pick any aspect of our lives, and it would change it significantly.''

Energy infuses everything Canadians do, from the most basic travel and home-heating needs to pervasive applications in food production, manufacturing and industry.

Such a sustained increase in oil prices would result in widespread inflation and dramatic lifestyle changes, Worzel said.

Fresh produce in the winter would be costly and difficult to come by, as would most products manufactured overseas, he said. Home-schooling and telecommuting would become commonplace, while manufacturers would develop new means of mobilizing their workforces.

"Half the workforce is wired with a BlackBerry now, anyway,'' said Robert J. Sawyer, an award-winning science-fiction author based in Mississauga.

With the proliferation of computers and high-speed broadband Internet access, Canadians and their families are already hard-wired for a more virtual lifestyle, Sawyer said.

"Instead of people in single-occupant vehicles pouring into the downtown and spending their money to do that, they're the ones telling their boss, 'I don't even want to come in, unless you're going to pay me to do that."'

Sawyer said he envisions a resurgence of national rail service for passengers looking to traverse the country.

Worzel said hybrid buses, high-occupancy vehicle lanes and carpooling would dramatically rise in popularity in the short term before Canadians, unable to bear the situation much longer, would be forced to make more dramatic lifestyle changes.

Real estate prices would soar in the cities, while the value of country homes would depreciate as people moved to a more compact, European model of living, he said.

The local pub would be a central social hub in a new, neighbourhood-oriented society, while smaller homes would become commonplace.

"We'd value our agricultural lands, and not pave them over,'' said economist David Foot, co-author of the bestselling book Boom, Bust & Echo.

Outrageous oil prices would finally push Canadians into truly more sustainable practices, as the gains from global trade are reversed and society turns back to local production, he said.

"The world isn't flat anymore, it becomes very lumpy,'' Foot said. "At last, we may be able to create jobs at home rather than in some other country.''

As consumption and production come together, Foot said, pollution might fall off as society comes face to face with the immediate environmental consequences faced in countries like China and India. Solar energy and wind power would move to the forefront.

A soaring Canadian dollar would likely result, however, decimating exports, spurring uneven growth and triggering political turmoil, said David Detomasi, an assistant business professor at Queen's University in Kingston.

"It would radically change the politics of Canada,'' said Detomasi, who predicted a widening of the gap between rich and poor, and increased polarization between Canada's so-called "have'' and "have-not'' provinces.

Nonetheless, said Sawyer, it's highly unlikely oil prices would ever hit $250 a barrel or that North Americans would ever have to give up oil entirely

Financial Update

US housing market has so far wiped out $3 trillion in home equity….

· TSX +124.55 notched a new record high close of 15,069pts racking up its third session of triple digit gains...
· Dow -108.78
· Dollar +.52c to $98.32
· Oil -$.60 to $134.01US per barrel
· Gold + $.70US to $884.30US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html

Economic outlook "subprime," no recession: report

(Reuters)By Jim Christie

SAN FRANCISCO (Reuters) - The economy will likely avoid a formal recession, but its outlook through the end of next year is decidedly "subprime" with the deep housing downturn restraining growth to just above 1 percent, a UCLA Anderson Forecast report released on Wednesday said.

A "witch's brew of the popping of the housing bubble, a wounded financial system and increasing inflationary pressures coming from rising commodity prices will keep the economy on a subprime growth path for the next several quarters," according to the forecasting unit's report.
Despite aggressive Federal Reserve interest rate cuts since last September intended to stimulate the U.S. economy, it will post "tepid" average gross domestic product growth rate of 1.2 percent from the third quarter of 2007 through the fourth quarter of 2009, the report said. It also sees the unemployment rate hitting 6 percent by the end of next year, up from 5.5 percent in May.

"Moreover, because both headline and core inflation will remain uncomfortably high over the next several quarters, we believe the Federal Reserve has ceased cutting interest rates and that the next change in policy will be to increase the federal funds rate starting in mid-2009," the report said.

The unit's economists expect the remainder of this year and 2009 to resemble recoveries from recessions in 1990-91 and 2000-01, each spurred largely by asset price declines, in commercial real estate in the former and stock prices after the Internet bubble burst in the latter.
CONSUMERS TAPPED OUT

The housing market's steep decline -- its worst tumble since the Great Depression, so far wiping out about $3 trillion in home equity -- coupled with gasoline prices topping $4 a gallon argues against a resurgence of brisk consumer spending in the near term.

"To be sure the $108 billion in tax rebates will certainly help in the third quarter, but in our view it will be analogous to a one quarter 'sugar rush' for the economy," the report said.

"In fact the combined effect of the waning effects of the tax rebates and the end of the investment incentives associated with the government's stimulus package in December, could very well lead to a decline in GDP in the first quarter of 2009," the report added.

On a broader note the report said growth in consumer spending, financed by the collapse in savings and increased borrowing from abroad, may have peaked.

"The weaker exchange value of the dollar is signaling that the game may be up making it more difficult for the U.S economy to continue to consume more than it produces."

Meanwhile, net exports are on the upswing, adding less than 1 percent to real GDP growth, but just enough to stave off recession, the report said.

The Federal Reserve appears to turning its attention toward traditional inflation concerns amid higher commodity prices. "What is worrying the Fed is that real interest rates are lower now than they were during the deflation scare of 2003-04," the report said.

"Most observers now believe that it was the very low real interest rates of that period that set the stage for the housing and credit bubbles that came later," it added. "As a result, we do not believe that the tepid economic growth we are forecasting will prevent the Fed from raising interest rates in mid-2009."

UCLA Anderson forecasters also expect tighter regulation of the financial services in place next year after the Federal Reserve's sponsored rescue of Bear Stearns and its opening of its discount window to Wall Street investment banks.

Those moves "permanently changed the role of the Federal Reserve in the economy," the report said. "We suspect that just as after the Panic of 1907 led Congress to create a national monetary commission that in turn recommended the creation of the Federal Reserve System in 1913, a similar commission will come into being next year."

"By the time the process is completed, it is highly likely that large investment banks, hedge funds, mutual funds and pension funds will come under the umbrella of a new regulatory regime."

Financial Update

· TSX +165.82
· Dow -38.27
· Dollar +.64c to $97.80
· Oil -$.25 to $134.61US per barrel
· Gold + $13.60US to $883.600US

Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html

Canadian real estate boom over, statistics indicate
Fri Jun 13, 5:30 PM

The real estate market has run out of steam, a report from the Canadian Real Estate Association (CREA) suggests.

"Canadian housing market activity continued to slide in May, confirming that the six-year housing boom has, indeed, fizzled, and the poor winter results were not just weather- and holiday-related," Bank of Montreal economic analyst Robert Kavcic said in a commentary.
He based his comment on the CREA monthly report on 25 major markets, released Friday, which shows that volumes and prices are slowing or falling compared to May 2007.

- Unit sales fell 16.9 per cent in May to 35,040.

- Total dollar volume fell 16 per cent to $11.8 billion.

- Average housing prices in May were up only 1.1 per cent, the smallest year-over-year increase in more than seven years.

"Rising food, fuel and home prices are denting consumer confidence," CREA chief economist Gregory Klump said in a news release.

But he noted there were more listings in May than ever, a record 54,029, up 2.2 per cent from April.

The drop in seasonally adjusted sales was driven by drops in Vancouver, Regina and Saskatoon, offsetting increases in Toronto, Ottawa and London-St. Thomas.

The average price of a May sale, $337,071, ranged from a high of $624,639 in Vancouver to a low of $139,936 in Thunder Bay, Ont.

Over the past year, the biggest percentage increase was in Regina - up 44.9 per cent to $235,458 - while the biggest drop was in Windsor-Essex, Ont., down 5.5 per cent to $159,682.
Prices fell by less than five per cent in Calgary and Edmonton and rose substantially in Saskatoon, Newfoundland and Labrador, and Saint John, N.B.

Financial Update

· TSX +176
· Dow +166
· Dollar -.57c to $97.16
· Oil -$1.88 to $134.86US per barrel
· Gold + $1.10US to $870.30US
Bond Rates: <http://www.bankofcanada.ca/en/rates/bonds.html> http://www.bankofcanada.ca/en/rates/bonds.html

Financial Update

· TSX fell further -113.93(Reuters) - Weak resource issues sent the TSX's main index
tumbling for the 5th day in a row as commodity prices spent much of the day in negative
territory
· Dow +57.81. stocks got a boost from stronger than expected retail sales, as well as the bid
for Anheuser-Busch, which would create the world's largest brewer.
· Dollar +.23c to $98.04
· Oil +.36 to $136.74US per barrel
· Gold - $10.50US to $869.20US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html

Mortgage rates rising after central bank move

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June 13, 2008 Record staff and news servicesBank of Montreal is hiking its residential mortgage rates by up to 85 basis points, joining Royal Bank, TD Canada Trust and CIBC in increasing the cost of borrowing to buy a home. The increases follow the Bank of Canada's decision to leave its benchmark overnight rate unchanged at three per cent. CIBC kicked off the current round of mortgage-rate adjustments on Wednesday. TD Bank raised its rates by as much as 85 basis points and Royal Bank said yesterday it will boost its rates by up to half a point.

Financial Update

· TSX fell again -19.68 (Reuters) - The TSX main index closed lower for the 4th day in a
row, as support from agriculture and other resource companies was offset by worries over
inflation and growing talk of rising interest rates in Canada, the U.S. and Europe

· Dow also down -205.99.

· Dollar +.23c to $98.04

· Oil jumped+5.07 to $136.38US per barrel

· Gold recovered $11.80US to $879.70US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

April new-housing prices rise at slowest pace in more than two and a half years

Wed Jun 11, 10:02 AM The Canadian Press

OTTAWA - New housing prices increased at their slowest pace in more than two and a half years in April, despite strong markets in Nova Scotia, Saskatchewan and Newfoundland and Labrador.

Statistics Canada reports that nationally, contractors' selling prices rose 5.2 per cent between April 2007 and April 2008, after a year-over-year increase of 6.1 per cent in March.

It was the third straight month in which the increase has decelerated, and the slowest rate of growth since September 2005. Prices were unchanged between March and April.

Regionally, prices rose at the fastest pace in Saskatoon for the 12th straight month with a year-over-year price increase of 43.7 per cent.

A strengthening economy, coupled with increased material and labour costs, has contributed to record increases in Newfoundland and Labrador, where prices were up 16.3 per cent over April 2007.

Financial Update

· TSX fell slightly -8.79

· Dow recovered some of Fridays 400 point decline + 90.51 Around the world in
SHANGHAI, - Chinese stocks have plunged 7.7% following the central bank's latest credit-
tightening move.

· Dollar slipped further -.22c to $97.89

· Oil -4.10 to $134.35US per barrel the Group of Eight including Finance Ministers from
Canada will be looking for ways to stabilize runaway oil prices at their meeting in Japan
later this week.

· Gold $-.70US to $894.70US after jumping $23.80 on Friday,

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

Bank of Canada to cut rates again

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June 10, 2008 Julian Beltrame The Canadian Press

Bank of Canada governor Mark Carney had an easy decision to make yesterday. Facing a stumbling economy and possibly the world's most dormant inflation picture, the rookie central banker will trim interest rates 25 basis points and hope for the best.

It's a no brainer, say most economists, with 12 out of 12 agreeing in one survey.

The central bank's continued easing stance will take its key overnight rate to 2.75 per cent which, combined with the U.S. Federal Reserve's hint that it is through cutting its equivalent rate for now, has put downward pressure on the Canadian loonie.

The dollar slid below 98 cents US yesterday to close at 97.89 cents.

But while today's action appears a foregone conclusion, Carney's job is about to get significantly more complicated going forward, say economists, because no one knows to any degree of certainty what will happen next to the U.S. and Canadian economies.

"There's uncertainty with respect to the prospects of the U.S. economy.

"There is uncertainty about how credit markets will evolve, then you have oil,'' said TD Bank deputy chief economist Craig Alexander.

"The forecasts for oil range anywhere from $70 to $150 by the end of this year and from a point of view of the Canadian economy, boy does this have significant impact in terms of national income, inflation and relative economic performance.''

The TD Bank is one of the few forecasting institutions that believes Carney will go to the sidelines only briefly after Tuesday, then begin cutting again in the fall.

That's because, says Alexander, he believes the Canadian economy will continue to struggle for the remainder of the year, and that next year's recovery will be weaker than most assume.

The economy had a surprisingly weak first quarter, with a 0.3 per cent contraction that was well below the central bank's prediction of a one per cent advance. And with Canadian inflation still running below the central bank's target of two per cent, nothing is holding back Carney from his third rate cut since taking over in February.

Previously, he has twice cut rates by 50 basis points at a time -- deviating from the bank's usual changes in 25-point increments.

"We're in a bit of a special situation compared to a lot of other central banks,'' said Stephen Malyon, a currency strategist with Scotia Capital, of Canada's non-existent inflation. "That won't last forever.''

What could restrain the Bank of Canada in the future is the fear of inflation returning. With prices rising at close to four per cent in the U.S., Federal Reserve chair Ben Bernanke has signalled he is through cutting for now, despite last week's employment report that showed the country losing another 49,000 net jobs.

Financial Update

Home ownership and mortgage debt highest in decades

· TSX fell again slightly -38.15 the falling resource groups were largely responsible for the
benchmark's slide. The heavyweight energy sector, which frequently dictates the
market's direction, followed the oil price to give up 1 %.

· Dow -12.37.

· Dollar slipped further -.95c to $98.20

· Oil -2.01 to $122.30US per barrel The US Energy Department reported demand for
gasoline fell by 1.4%over the last 4weeks while gasoline inventories rose by 2.9 million
barrels last week.

· Gold $-1.70US to $879.90US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>

Bankruptcies reach highest level in four years

Record staff and news services TORONTO

Personal bankruptcies in Canada rose to their highest level in more than four years in April, newly released statistics show, as a battered manufacturing sector took its toll on Ontario and Quebec. Across the country, 8,035 consumers declared bankruptcy in April along with 592 businesses, bringing the 12-month national total to 87,929, says a study released yesterday by the Office of the Superintendent of Bankruptcy.

More are buying outside their means

Grant Surridge, Financial Post Published: Wednesday, June 04, 2008

The data, culled from the most recent census, also show that those spending more than an third of their income on shelter costs rose slightly.

Of the 12.4 million households in Canada, about 68% own their home, the highest rate since 1971.

The percentage of Canadians renting fell two points to 31% in the five years leading up to 2006. That means about 3.9-million households rented.

About 60% of people who owned their home had a mortgage, the statistics agency said. That marks the highest level since 1981.

The rise in mortgages likely reflects more incentives now available to entice first time home buyers, said Jim Rawson, regional manager for Invis in Toronto.

"Younger people are stretching themselves," he said in an interview, although he said they are still qualifying for the mortgages.

Less than 4% of owned households were condominiums in the 1981 census. By 2006, that figure had jumped to 11%.

The figures also likely reflect a trend in which Baby Boomers are delaying paying off their mortgages and spending money on things like long-term vacations, Mr. Rawson said.
Close <http://www.financialpost.com/most_popular/story.html?id=563494#close

Financial Update

Toronto stocks sideswiped by falling commodities

· TSX fell after a roller coaster session -85.57

· Dow -100.97 as investors worried that the financial sector is still suffering badly from the credit crisis, received another indication the long string of interest rate cuts is over, while General Motors Corp. announced the closure of its pickup truck plant in Oshawa, Ont., and three other factories.

· Dollar slipped slipped further -.73c to $99.15

· Oil -3.45 to $124.31US per barrel

· Gold -11.30US to $881.60US

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>


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Financial difficulties can hit at any time and can be due to a variety of causes. For example, a downturn in the economy, loss of a job, a marriage breakup, a serious illness or accident, death of a wage earner in your household, or a significant increase in mortgage interest rates at renewal time, etc.

To learn more about the program, go to . http://www.genworth.ca/mi/eng/home_ownership/homeownerassistance.html

Financial Update

U.S. problems shake Canadian confidence

· TSX +99.45
· Dow -134.50
· Dollar slipped below par -.82c to $99.88
· Oil +.41 to $127.76US per barrel
· Gold +5.60US to $892.90US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html

Brenda Bouw and Joshua ClippertonThe Canadian Press

Economic storm clouds over the United States are casting an ominous shadow over the border and Canadians are increasingly nervous about the price of gas, food and other goods.
But while caution is the byword, many say they're not ready to lock down their wallets just yet and the still-busy malls and shops suggest the country is weathering the economic inclemency better that its southern neighbour. "Anywhere you go, it's always crowded,'' said Amal Matr, out shopping in downtown Toronto with her daughter yesterday.

Although the cost of living is obviously rising, Matr said she doesn't think record fuel prices have so far affected the way people live their lives or how they spend at retailers.

"It's always busy,'' said Matr. "Last weekend we went to Canada's Wonderland (amusement park) and it was full. The parking lot was full. I don't think it's affecting anybody.''

The Conference Board reported yesterday that Canadian consumers' confidence in the economy is falling, hitting its lowest level in seven years in May.

The think-tank's confidence index fell seven points in May to 85.8, the lowest level since the survey switched to a monthly reading in December 2001.

When asked if they felt that their family would be better off financially in six months, 26.1 per cent of respondents agreed -- 4.4 percentage points lower than in the prior month.

The number of those who felt their families' financial situation would deteriorate over the next six months increased 4.2 percentage points to 17.1 per cent in May.

A rise in gas prices is likely one of the factors behind the dip in confidence, the board noted, although predicted hikes in the prices of other commodities such as food have also caused worry.
The last time consumer confidence fell sharply was in the fall of 2005 after Hurricane Katrina caused a spike in oil prices.

At Toronto's Eaton Centre yesterday, many shoppers agreed fuel prices were among the foremost concerns on their minds.

"I think everyone's watching their pennies because of the price of gas and the all the other things that are going up,'' explained shopper Rose Reffell.

"I think all the economies are suffering, so I don't think we're any worse than the States or Great Britain or anywhere else," she said.

Economy shrinks for first time in five years Grant Surridge, Financial Post

The Canadian economy shrank unexpectedly during the first three months of 2008, marking the first quarterly decline in almost five years.

The gross domestic product fell at an annualized rate of 0.3% in the first quarter, Statistics Canada said, the first decline since the second quarter of 2003. The drop was well below the roughly 0.4% annualized growth economists were predicting.

The Canadian economy began losing steam in the second half of last year as exports started to decline.

It then contracted in the first quarter because of widespread cutbacks in manufacturing related to rising inventories, most notably in the auto sector, the statistics agency said. Poor weather also hampered economic activity in the quarter.

A drop in inventories, much of it occurring at car dealerships, took the biggest chunk out of the gross domestic product. Consumer spending managed to hold strong, rising 3.2% in the quarter.
Douglas Porter, deputy chief economist with BMO Capital Markets, said the softness in real GDP gives a "highly distorted picture" of how the broader economy is faring, because real income growth remains bouyant. "Still, the weak results keep the door wide open for at least one more rate trim by the Bank of Canada in June."

The decline in Canada contrasts with the 0.9% annualized GDP growth reported south of the border for the first quarter.

For the month of March alone, the economy shrank 0.2%. That comes on the heels of a 0.3% drop in February.

With the quarter ending on successive monthly drops, CIBC World Markets economist Avery Shenfeld said the lack of momentum points to risks that the second quarter "won't be a whole lot better."

More gloom in the U.S. economy

The Associated Press NEW YORK

Dark clouds continue to hang over the U.S. economy: The manufacturing sector shrank for the fourth consecutive month, construction spending has been falling for more than two years, future orders are down and prices are skyrocketing.

The few bright spots, such as strong exports, may be the only things preventing a protracted recession, analysts said yesterday.

"It's exports, and, of course, government spending, that's keeping us above water,'' said John Silvia, chief economist at Wachovia Corp.

The Institute for Supply Management said yesterday that its manufacturing index rose to 49.6 from 48.6 per cent in April. It was below a reading of 50, signaling that business for machine-tool makers, chemical producers, food companies and many other industries is contracting.
And it appears activity could continue to shrink. Order backlogs, an indication of future work, fell 5.5 percentage points lower than April.

The report is "not a number that gives you a clear signal that things are going to improve dramatically, but given the overall report, it gives you some optimism,'' said Oscar Gonzalez, an economist at John Hancock Financial Services. "At least by this report, the economy is not heading into a severe recession.''

Wall Street took little comfort in the data. Stocks fell in late trading.

The ISM index showed some of the most pronounced weakness is in businesses related to construction, as the worst housing slump in decades shows no sign of abating.

The Commerce Department reported that construction activity fell 0.4 per cent in April, following a 0.6 per cent decline in March. Spending has not increased since last September.

Private residential housing construction dropped by 2.3 per cent last month, the 26th consecutive monthly decline. Private nonresidential building rose by 1.6 per cent, however.

Spending on shopping centres, office buildings and hotels gained despite the slump in business and vacation travel caused by the slowing economy and rising costs for gas and air tickets.

For manufacturers, prices continue to rise for everything from adhesives to scrap metal. The ISM's index of prices, which rose in May, is now the highest it has been since April 2004. Costs climbed for all commodities except zinc and methanol.

The rising cost of food and fuel, and the added inflation they could spark, may prompt the Federal Reserve to maintain interest rates at current levels when its policy-setting committee meets on June 25.

The Fed last lowered rates to two per cent in April, signalling the campaign that reduced rates seven times could be ending.

While inflation has battered U.S. consumers, the weak dollar has made U.S. exports cheaper for foreign buyers; as a result, exports grew at a 2.8 per cent pace in the first quarter, boosting businesses throughout the economy

Financial Update

Economists shrug off signs recession may be looming
· TSX regained Thursdays loss +137.56
· Dow -7.9
· Dollar +.40c to $100.70
· Oil +.73 to $127.352US per barrel
· Gold +10.10US to $887.30US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html

PAUL CHIASSON, THE CANADIAN PRESS

The Canadian Press

Federal Finance Minister Jim Flaherty smiles during a news conference following a meeting with his provincial and territorial counterparts Friday, May 30, 2008 in Montreal. Flaherty said that he and his provincial counterparts remain optimistic about the economy and believe Canada won't fall into its first recession in 16 years. THE CANADIAN PRESS/Paul Chiasson

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Despite first negative quarter in five years, economy is expected to bounce back
May 31, 2008 Eric Shackleton The Canadian Press

An auto industry strike, manufacturing cuts and winter storms have dragged the Canadian economy to its first quarterly decline in real gross domestic product in five years.
During the January to March period, the economy shrank by 0.3 per cent year over year "due to widespread cutbacks in manufacturing, most notably in motor vehicles,'' Statistics Canada said yesterday.

Excluding the auto industry, which has been battered by job cuts at the Detroit Three automakers -- it estimated GDP grew by 0.1 per cent.

Nonetheless, many economists played down the potential for recession.

"We all expected a lacklustre first quarter,'' Aron Gampel, deputy chief economist at Scotia Economics, said in an interview.

"We'll probably see a bounceback in Q2, showing basically that the economy may be on the slow track but certainly hasn't gone into reverse on a more sustained basis,'' he said.

Canada's national economy has been slowing down since last summer as weakness in the United States housing and auto sectors and the impact of a high dollar have cut exports of everything from lumber, cars and auto parts to steel, cement, newsprint and other types of materials.
That's led to layoffs in Canada's industrial heartland in Ontario and Quebec.

But at the same time, the western provinces are booming because of record high oil prices and an improved natural gas outlook as well as soaring demand from Asian markets for coal, wheat, fertilizer, grains and other products, he said.

In addition, Canadian consumers continue to spend because of low interest rates and a still-strong housing market.

Carolyn Kwan, senior economist at Merrill Lynch Canada, said a "technical" recession might be in the making.

"We have the first contraction in five years and momentum going into the second quarter, so it would not be surprising to see negative GDP results which would fit the technical definition of a recession," she said

"When average people think of a recession they think the economy is falling apart, and this is not happening in Canada -- at least not yet."

With Flaherty continuing to urge Ontario to join him in cutting business taxes to stimulate jobs, Duncan countered with caustic comments about Ottawa's single-track approach.

Flaherty and the Ontario government have been fighting for months about how best to boost the economy, with the federal Conservatives focused on corporate tax cuts as the remedy while Ontario's Liberal government seeks federal money to help attract job-creating investments from automakers and other companies.

"There are some strengths in the economy, but what struck me was the relative strength of the U.S. economy to the Canadian economy, and it (shows) to me that we haven't had a federal partner,'' Duncan said.

The provincial minister pointed to a proposal for a new Ford Canada engine factory in Windsor that he said won't happen without Ottawa's financial aid.

"Corporate tax cuts are not going to lower the dollar, corporate tax cuts are not going to lower the price of oil, corporate tax cuts are not going to strengthen the U.S. economy," Duncan said.
Flaherty also got nowhere on his attempts to bring provinces on board to create a national securities regulator to replace the 13 different provincial and territorial commissions and regulations that he said are discouraging investment.