TSX logs third consecutive session of triple digit gains
· TSX +354.65pts (Reuters) jumped more than 3%,as investors gave an extra surge in the final minutes of trading, its 3rd straight day of healthy gains, led by commodity issues as market sentiment remained buoyant after Wednesday's rate cut by the U.S. Fed.
· Dow +189.73pts Also providing some support was preliminary data that showed U.S. 3rd-quarter GDP shrank less than forecast by economists.
· Dollar +.54c to $82.17US. The Canadian dollar continued its revival opening with a gain of more than 2c on top of Wednesday's startling 3.67-cent surge, though its upward momentum slackened as the day went on
· Oil -$1.54to $65.96US per barrel. demand fears pushed the price of gold and oil down.
· Gold -$15.50 to $738.50US per ounce
Although first article says house prices are falling, 2nd article explains it as only drop in some high priced markets pulling down National average
Canada's housing market is cooling: CMHC
Prices will edge up but building to decline Garry Marr, Financial Post
House prices are going to go up next year, albeit by a mere $200, according to Canada Mortgage and Housing Corp.
The Crown corporation warned that some moderation can be expected in the once red-hot housing sector for the rest of this year and into 2009.
The forecast comes as house prices have been falling nationally, according to the Canadian Real Estate Association. Canada's largest housing markets have experienced prices declines from a year ago for four straight months, with each percentage drop bigger than the next.
Now CMHC has waded into the debate with its own forecast that despite the recent trend, home sale prices should edge up this year.
It expects the average price of a home sold to rise to $306,500 from $305,707. By next year the average sale price is forecast to rise to $306,700.
"High employment levels, rising incomes and low mortgage rates have continued to provide a solid foundation for healthy housing markets this year," said Bob Dugan.
However, CMHC is clearly predicting a pullback and titled its latest report, "Housing market starting to ease."
It says for the first time in seven years the number of new homes built across the country will dip below 200,000.
The agency is forecasting 212,188 starts for this year which will be a drop from the 228,343 homes built in 2007. By 2009, the forecast is for 177,975 new homes to be built.
The prognosis is not much better for the sales of existing homes. After setting an all-time sales record of 523,701 transactions in 2007, sales are expected to drop to 452,225 in 2008 and 433,375 in 2009.
CMHC says those sales are "still strong" by historical standards.
House prices still rising in most markets: CREA
Dramatic drops in some cities weigh on national average Garry Marr, Financial Post
The Canadian Real Estate Association says the falling average sale price nationally is a reflection of a decline in sales in high-priced markets and notes prices are still rising in a majority of markets.
The Ottawa-based group, which represents more than 100 boards across the country, said the average sale price of an existing home fell 5.4% in September to $289,916 from $306,347 a year ago. But it noted prices are actually up in 65% of the boards it represents.
"The recent price declines in the Canadian housing market reflect lower activity in some of Canada's priciest housing markets that had posted large price increases. Price declines in the U.S. reflect a massive oversupply of housing due to soaring foreclosures and overbuilding," said Calvin Lindberg, the president of CREA.
Vancouver, the most expensive market in the country, has had year-over-year sales declines in the 40% range and many real estate analysts suggest the results are skewing the national number.
CREA said the supply of new homes reaching the market is also shrinking. It said there were 230,107 new listings in the third quarter on a seasonally adjusted basis, down 3.1% from the previous quarter which was the highest on record.
Despite the drop in supply, CREA is forecasting the national number for home prices will continue to decline.
"Price declines in some of Canada's more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower the rest of year and into 2009," said Gregory Klump, chief economist with CREA
Have a fun, safe and happy Halloween!
Friday, October 31, 2008
Financial Update
TSX logs third consecutive session of triple digit gains
· TSX +354.65pts (Reuters) jumped more than 3%,as investors gave an extra surge in the final minutes of trading, its 3rd straight day of healthy gains, led by commodity issues as market sentiment remained buoyant after Wednesday's rate cut by the U.S. Fed.
· Dow +189.73pts Also providing some support was preliminary data that showed U.S. 3rd-quarter GDP shrank less than forecast by economists.
· Dollar +.54c to $82.17US. The Canadian dollar continued its revival opening with a gain of more than 2c on top of Wednesday's startling 3.67-cent surge, though its upward momentum slackened as the day went on
· Oil -$1.54to $65.96US per barrel. demand fears pushed the price of gold and oil down.
· Gold -$15.50 to $738.50US per ounce
Although first article says house prices are falling, 2nd article explains it as only drop in some high priced markets pulling down National average
Canada's housing market is cooling: CMHC
Prices will edge up but building to decline Garry Marr, Financial Post
House prices are going to go up next year, albeit by a mere $200, according to Canada Mortgage and Housing Corp.
The Crown corporation warned that some moderation can be expected in the once red-hot housing sector for the rest of this year and into 2009.
The forecast comes as house prices have been falling nationally, according to the Canadian Real Estate Association. Canada's largest housing markets have experienced prices declines from a year ago for four straight months, with each percentage drop bigger than the next.
Now CMHC has waded into the debate with its own forecast that despite the recent trend, home sale prices should edge up this year.
It expects the average price of a home sold to rise to $306,500 from $305,707. By next year the average sale price is forecast to rise to $306,700.
"High employment levels, rising incomes and low mortgage rates have continued to provide a solid foundation for healthy housing markets this year," said Bob Dugan.
However, CMHC is clearly predicting a pullback and titled its latest report, "Housing market starting to ease."
It says for the first time in seven years the number of new homes built across the country will dip below 200,000.
The agency is forecasting 212,188 starts for this year which will be a drop from the 228,343 homes built in 2007. By 2009, the forecast is for 177,975 new homes to be built.
The prognosis is not much better for the sales of existing homes. After setting an all-time sales record of 523,701 transactions in 2007, sales are expected to drop to 452,225 in 2008 and 433,375 in 2009.
CMHC says those sales are "still strong" by historical standards.
House prices still rising in most markets: CREA
Dramatic drops in some cities weigh on national average Garry Marr, Financial Post
The Canadian Real Estate Association says the falling average sale price nationally is a reflection of a decline in sales in high-priced markets and notes prices are still rising in a majority of markets.
The Ottawa-based group, which represents more than 100 boards across the country, said the average sale price of an existing home fell 5.4% in September to $289,916 from $306,347 a year ago. But it noted prices are actually up in 65% of the boards it represents.
"The recent price declines in the Canadian housing market reflect lower activity in some of Canada's priciest housing markets that had posted large price increases. Price declines in the U.S. reflect a massive oversupply of housing due to soaring foreclosures and overbuilding," said Calvin Lindberg, the president of CREA.
Vancouver, the most expensive market in the country, has had year-over-year sales declines in the 40% range and many real estate analysts suggest the results are skewing the national number.
CREA said the supply of new homes reaching the market is also shrinking. It said there were 230,107 new listings in the third quarter on a seasonally adjusted basis, down 3.1% from the previous quarter which was the highest on record.
Despite the drop in supply, CREA is forecasting the national number for home prices will continue to decline.
"Price declines in some of Canada's more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower the rest of year and into 2009," said Gregory Klump, chief economist with CREAHave a fun, safe and happy Halloween!
· TSX +354.65pts (Reuters) jumped more than 3%,as investors gave an extra surge in the final minutes of trading, its 3rd straight day of healthy gains, led by commodity issues as market sentiment remained buoyant after Wednesday's rate cut by the U.S. Fed.
· Dow +189.73pts Also providing some support was preliminary data that showed U.S. 3rd-quarter GDP shrank less than forecast by economists.
· Dollar +.54c to $82.17US. The Canadian dollar continued its revival opening with a gain of more than 2c on top of Wednesday's startling 3.67-cent surge, though its upward momentum slackened as the day went on
· Oil -$1.54to $65.96US per barrel. demand fears pushed the price of gold and oil down.
· Gold -$15.50 to $738.50US per ounce
Although first article says house prices are falling, 2nd article explains it as only drop in some high priced markets pulling down National average
Canada's housing market is cooling: CMHC
Prices will edge up but building to decline Garry Marr, Financial Post
House prices are going to go up next year, albeit by a mere $200, according to Canada Mortgage and Housing Corp.
The Crown corporation warned that some moderation can be expected in the once red-hot housing sector for the rest of this year and into 2009.
The forecast comes as house prices have been falling nationally, according to the Canadian Real Estate Association. Canada's largest housing markets have experienced prices declines from a year ago for four straight months, with each percentage drop bigger than the next.
Now CMHC has waded into the debate with its own forecast that despite the recent trend, home sale prices should edge up this year.
It expects the average price of a home sold to rise to $306,500 from $305,707. By next year the average sale price is forecast to rise to $306,700.
"High employment levels, rising incomes and low mortgage rates have continued to provide a solid foundation for healthy housing markets this year," said Bob Dugan.
However, CMHC is clearly predicting a pullback and titled its latest report, "Housing market starting to ease."
It says for the first time in seven years the number of new homes built across the country will dip below 200,000.
The agency is forecasting 212,188 starts for this year which will be a drop from the 228,343 homes built in 2007. By 2009, the forecast is for 177,975 new homes to be built.
The prognosis is not much better for the sales of existing homes. After setting an all-time sales record of 523,701 transactions in 2007, sales are expected to drop to 452,225 in 2008 and 433,375 in 2009.
CMHC says those sales are "still strong" by historical standards.
House prices still rising in most markets: CREA
Dramatic drops in some cities weigh on national average Garry Marr, Financial Post
The Canadian Real Estate Association says the falling average sale price nationally is a reflection of a decline in sales in high-priced markets and notes prices are still rising in a majority of markets.
The Ottawa-based group, which represents more than 100 boards across the country, said the average sale price of an existing home fell 5.4% in September to $289,916 from $306,347 a year ago. But it noted prices are actually up in 65% of the boards it represents.
"The recent price declines in the Canadian housing market reflect lower activity in some of Canada's priciest housing markets that had posted large price increases. Price declines in the U.S. reflect a massive oversupply of housing due to soaring foreclosures and overbuilding," said Calvin Lindberg, the president of CREA.
Vancouver, the most expensive market in the country, has had year-over-year sales declines in the 40% range and many real estate analysts suggest the results are skewing the national number.
CREA said the supply of new homes reaching the market is also shrinking. It said there were 230,107 new listings in the third quarter on a seasonally adjusted basis, down 3.1% from the previous quarter which was the highest on record.
Despite the drop in supply, CREA is forecasting the national number for home prices will continue to decline.
"Price declines in some of Canada's more expensive housing markets will outweigh further price gains in other markets and continue pulling the national average price lower the rest of year and into 2009," said Gregory Klump, chief economist with CREAHave a fun, safe and happy Halloween!
Thursday, October 30, 2008
Financial Update
TSX rally continues! US Fed cuts rates! Loonie leaps skyward!
· TSX +349.93pts (Reuters) as energy and materials issues rose on stronger commodity prices, with gains supported by the U.S. Federal Reserve's half-point interest rate cut.
· Dow -74.16pts gains were lost in the closing moments after Fed noted the pace of economic activity had slowed since its last meeting
· Dollar +3.67c to $81.63US. one of its biggest single-day jumps in history as the value of the U.S. greenback eroded against other major currencies including the euro and British pound. At one point the loonie was up $4.50
· Oil +$4.77to $67.50US per barrel. "With the US rate decrease it affects the (U.S.) dollar. If the dollar goes down, oil goes up -- they are inversely related -- so that has been helping to push the market up in Toronto," Ibel said
· Gold +$13.50 to $752.80US per ounce
RBC survey finds home buying intentions hold steady (specific regional info at the bottom) TORONTO, Oct. 29 /CNW/ - A new RBC study conducted during the marketturmoil in October finds overall intentions to purchase a home in the next twoyears remain steady at 22 per cent and have not changed since January 2008. Aswell, renovation intentions are slightly higher than last year - up fourpercentage points as 70 per cent of respondents are planning to renovate ormake home improvements in the next two years.
"Despite recent economic events, we've noted that Canadians still believea home is a good investment and many are continuing with their homeimprovement plans," remarked Catherine Adams, RBC Royal Bank's vice-president,Home Equity Financing.
According to RBC's 5th Annual Renovation Survey, given the choice, mostCanadian homeowners would opt for hammers and paint brushes, rather thanpacking tape and cardboard boxes. Seventy five per cent of Canadian homeownerssay that, if their home needed major renovations, they would rather renovate,than sell and move.
While the majority of Canadians (55 per cent) would definitely continueto renovate even if housing prices were to drop, they appear to be a littlemore hesitant than they were in 2007 (66 per cent). Many Canadians seem to bechoosing to renovate rather than relocate, noted Adams.
Renovation Budgets Most Canadians planning renovations will spend less than $50,000 andindicate they plan to spend $10,801 on average - up about 10 per cent from$9,850 in 2007. The RBC survey also showed that 63 per cent of homeowners have renovatedin the past two years and more are establishing a realistic reno budget.Seven-in-ten had a budget and half (53 per cent) stuck to it. Even thoserenovators that did go over budget have pulled back significantly. The averagebudget excess was 24 per cent in 2008 compared to 74 per cent overage in 2007and 88 per cent in 2006.
To finance their reno expenditures, Canadians will be less likely to tapinto cash or savings than they have in the past (47 per cent in 2008,51 per cent in 2007 and 69 per cent in 2004). Only 28 per cent would considerusing the equity in their home, down from 41 per cent who said they wouldconsider it in 2007. More men (32 per cent) than women (24 per cent) wouldconsider borrowing against home equity for their renovation - the lowest costof all the borrowing options.
"When people are looking for a mortgage they're usually very costsensitive, and they seek advice about the best possible rate and productcombination. We don't always see those same savvy cost comparisons for homerenovations, even though many involve sizable expenses," added Adams.
When it comes to top mistakes or renovation disasters, Canadians who havecompleted a renovation in the past two years, blame going over budget (26 percent); using the wrong contractor or tradespeople (14 per cent); choosing thewrong products (12 per cent) and doing it myself (11 per cent).
Renovations by the Numbers
Intentions among Regions Average Spend
BC 69% (down from 70%) $10,064
Alberta 74% (up from 69%) $12,422
Sask/Man 71% (down from 75%) $ 9,742
Ontario 71% (up from 66%) $12,305
Quebec 67% (up from 64%) $ 8,463
Atlantic Canada 73% (up from 67%) $10,042
Renovate or Sell/Move
Region Renovate Sell
BC 75% 19%
Alberta 71% 23%
Sask/Man 75% 17%
Ontario 75% 19%
Quebec 74% 17%
Atlantic Canada 78% 15%
By Age:
- 18 to 34 - 70 per cent would renovate instead of sell (down from 75 per cent)
- 35 to 54 - 78 per cent would renovate, not sell (up from 75 per cent)
- 55 and above - 76 per cent would opt for renovations (up from 58 per cent)
These are some of the findings of two RBC polls conducted by Ipsos Reid.The online surveys are based on nationally balanced samples and were weightedaccording to 2006 Census Data.
The poll conducted between October 9 and 13 included 1,474 Canadians. Arandom, representative sample of this size would yield results consideredaccurate to within +/-2.6 percentage points, 19 times out of 20, of what theywould have been had the entire adult Canadian population been polled.
The second poll conducted between August 13 and 18, 2008 dealing withrenovation intentions included 3,733 Canadian homeowners. A random,representative sample of this size, would yield results considered accurate towithin +/-1.6 percentage points, 19 times out of 20, of what they would havebeen had the entire adult Canadian population been polled.
For full tabular results, please see the Ipsos Reid website atwww.ipsos.ca.
Downloadable graphics also available at www.rbc.com/newsroom.
Home renovation intentions trend upward in Ontario, finds RBC survey
TORONTO, Oct. 29 /CNW/ - Ontario homeowners are showing more enthusiasmfor home renovations, according to a new RBC survey. The poll, conducted byIpsos Reid, found that 71 per cent of Ontarians surveyed plan to renovatewithin the next two years, just above the national average of 70 per cent andup five percentage points from 2007. Of those polled, 75 per cent said that iftheir homes were in need of major renovations, they would still rather assumethe work themselves, than sell and move.
"Despite the current economic uncertainty, we can expect to see amoderate increase in renovation activity in Ontario over the next coupleyears," says Catherine Adams, vice-president, Home Equity Financing. "Forthose making renovation plans, it's important to carefully consider all thepotential costs involved, obtain quotes, look for the best financing optionsand set a realistic budget that you'll be able to stick to."
Among homeowners who have completed renovation projects in the last twoyears, the poll found that 67 per cent of respondents in Ontario had a budgetfor their renovations. Of those, 46 per cent said they went over budget, by anaverage of 25 per cent. In fact, Ontarians were more likely than homeowners inother regions to say going over budget was their biggest renovation mistake ordisaster (28 per cent). Despite budget overages, the majority of Ontarians(72 per cent) are likely to pay for most or all of their renovations with cashor savings.
The average amount that Ontario homeowners plan to spend on theirrenovations is also up over last year from $10,489 to $12,306 - well above thenational average of $10,853 and just shy of Alberta ($12,420) which has thelargest average budget spend in the country.
The most popular choices for renovations and home improvements amongOntarians include new floors (42 per cent), bathrooms (40 per cent), andexterior landscaping (36 per cent). Kitchen counter tops (30 per cent) anddecks and patios (26 per cent) were also among the most likely makeoverchoices.
Eco-friendly renovations
More than three-quarters of Ontario homeowners (78 per cent) would choosean environmentally-friendly approach if it would save money in the long run,even if it costs more now. Of those polled, 56 per cent would consider "livingoff the grid" - living in a self sufficient manner without reliance on publicutilities, while 67 per cent of Ontario homeowners would consider becoming'net zero' household, enabling their homes to produce at least as much energyas they use. The majority of Ontarians (78 per cent) believe that 'green'improvements would increase the value of their home.
Intentions among Regions Average Spend
Ontario 71% $12,306
BC 69% $10,064
Alberta 74% $12,422
Sask/Man 71% $ 9,743
Quebec 67% $ 8,463
Atlantic Canada 73% $10,042
Renovate or Sell/Move
Region Renovate Sell
Ontario 75% 19%
BC 75% 19%
Alberta 71% 23%
Sask/Man 75% 17%
Quebec 74% 17%
Atlantic Canada 78% 15%
These are some of the findings of an RBC poll conducted by Ipsos Reidbetween August 13 and August 18, 2008. The online survey is based on arandomly selected representative sample of 3,733 adult Canadian homeowners,including 1,423 Ontario residents. With a representative sample of this sizefor Ontario, the results are considered accurate to within 2.6 percentagepoints, 19 times out of 20, of what they would have been had the entire adultpopulation of Ontario been polled. These data were statistically weighted toensure the sample's regional and age/sex composition reflects that of theactual Canadian population according to the 2006 census data.
· TSX +349.93pts (Reuters) as energy and materials issues rose on stronger commodity prices, with gains supported by the U.S. Federal Reserve's half-point interest rate cut.
· Dow -74.16pts gains were lost in the closing moments after Fed noted the pace of economic activity had slowed since its last meeting
· Dollar +3.67c to $81.63US. one of its biggest single-day jumps in history as the value of the U.S. greenback eroded against other major currencies including the euro and British pound. At one point the loonie was up $4.50
· Oil +$4.77to $67.50US per barrel. "With the US rate decrease it affects the (U.S.) dollar. If the dollar goes down, oil goes up -- they are inversely related -- so that has been helping to push the market up in Toronto," Ibel said
· Gold +$13.50 to $752.80US per ounce
RBC survey finds home buying intentions hold steady (specific regional info at the bottom) TORONTO, Oct. 29 /CNW/ - A new RBC study conducted during the marketturmoil in October finds overall intentions to purchase a home in the next twoyears remain steady at 22 per cent and have not changed since January 2008. Aswell, renovation intentions are slightly higher than last year - up fourpercentage points as 70 per cent of respondents are planning to renovate ormake home improvements in the next two years.
"Despite recent economic events, we've noted that Canadians still believea home is a good investment and many are continuing with their homeimprovement plans," remarked Catherine Adams, RBC Royal Bank's vice-president,Home Equity Financing.
According to RBC's 5th Annual Renovation Survey, given the choice, mostCanadian homeowners would opt for hammers and paint brushes, rather thanpacking tape and cardboard boxes. Seventy five per cent of Canadian homeownerssay that, if their home needed major renovations, they would rather renovate,than sell and move.
While the majority of Canadians (55 per cent) would definitely continueto renovate even if housing prices were to drop, they appear to be a littlemore hesitant than they were in 2007 (66 per cent). Many Canadians seem to bechoosing to renovate rather than relocate, noted Adams.
Renovation Budgets Most Canadians planning renovations will spend less than $50,000 andindicate they plan to spend $10,801 on average - up about 10 per cent from$9,850 in 2007. The RBC survey also showed that 63 per cent of homeowners have renovatedin the past two years and more are establishing a realistic reno budget.Seven-in-ten had a budget and half (53 per cent) stuck to it. Even thoserenovators that did go over budget have pulled back significantly. The averagebudget excess was 24 per cent in 2008 compared to 74 per cent overage in 2007and 88 per cent in 2006.
To finance their reno expenditures, Canadians will be less likely to tapinto cash or savings than they have in the past (47 per cent in 2008,51 per cent in 2007 and 69 per cent in 2004). Only 28 per cent would considerusing the equity in their home, down from 41 per cent who said they wouldconsider it in 2007. More men (32 per cent) than women (24 per cent) wouldconsider borrowing against home equity for their renovation - the lowest costof all the borrowing options.
"When people are looking for a mortgage they're usually very costsensitive, and they seek advice about the best possible rate and productcombination. We don't always see those same savvy cost comparisons for homerenovations, even though many involve sizable expenses," added Adams.
When it comes to top mistakes or renovation disasters, Canadians who havecompleted a renovation in the past two years, blame going over budget (26 percent); using the wrong contractor or tradespeople (14 per cent); choosing thewrong products (12 per cent) and doing it myself (11 per cent).
Renovations by the Numbers
Intentions among Regions Average Spend
BC 69% (down from 70%) $10,064
Alberta 74% (up from 69%) $12,422
Sask/Man 71% (down from 75%) $ 9,742
Ontario 71% (up from 66%) $12,305
Quebec 67% (up from 64%) $ 8,463
Atlantic Canada 73% (up from 67%) $10,042
Renovate or Sell/Move
Region Renovate Sell
BC 75% 19%
Alberta 71% 23%
Sask/Man 75% 17%
Ontario 75% 19%
Quebec 74% 17%
Atlantic Canada 78% 15%
By Age:
- 18 to 34 - 70 per cent would renovate instead of sell (down from 75 per cent)
- 35 to 54 - 78 per cent would renovate, not sell (up from 75 per cent)
- 55 and above - 76 per cent would opt for renovations (up from 58 per cent)
These are some of the findings of two RBC polls conducted by Ipsos Reid.The online surveys are based on nationally balanced samples and were weightedaccording to 2006 Census Data.
The poll conducted between October 9 and 13 included 1,474 Canadians. Arandom, representative sample of this size would yield results consideredaccurate to within +/-2.6 percentage points, 19 times out of 20, of what theywould have been had the entire adult Canadian population been polled.
The second poll conducted between August 13 and 18, 2008 dealing withrenovation intentions included 3,733 Canadian homeowners. A random,representative sample of this size, would yield results considered accurate towithin +/-1.6 percentage points, 19 times out of 20, of what they would havebeen had the entire adult Canadian population been polled.
For full tabular results, please see the Ipsos Reid website atwww.ipsos.ca.
Downloadable graphics also available at www.rbc.com/newsroom.
Home renovation intentions trend upward in Ontario, finds RBC survey
TORONTO, Oct. 29 /CNW/ - Ontario homeowners are showing more enthusiasmfor home renovations, according to a new RBC survey. The poll, conducted byIpsos Reid, found that 71 per cent of Ontarians surveyed plan to renovatewithin the next two years, just above the national average of 70 per cent andup five percentage points from 2007. Of those polled, 75 per cent said that iftheir homes were in need of major renovations, they would still rather assumethe work themselves, than sell and move.
"Despite the current economic uncertainty, we can expect to see amoderate increase in renovation activity in Ontario over the next coupleyears," says Catherine Adams, vice-president, Home Equity Financing. "Forthose making renovation plans, it's important to carefully consider all thepotential costs involved, obtain quotes, look for the best financing optionsand set a realistic budget that you'll be able to stick to."
Among homeowners who have completed renovation projects in the last twoyears, the poll found that 67 per cent of respondents in Ontario had a budgetfor their renovations. Of those, 46 per cent said they went over budget, by anaverage of 25 per cent. In fact, Ontarians were more likely than homeowners inother regions to say going over budget was their biggest renovation mistake ordisaster (28 per cent). Despite budget overages, the majority of Ontarians(72 per cent) are likely to pay for most or all of their renovations with cashor savings.
The average amount that Ontario homeowners plan to spend on theirrenovations is also up over last year from $10,489 to $12,306 - well above thenational average of $10,853 and just shy of Alberta ($12,420) which has thelargest average budget spend in the country.
The most popular choices for renovations and home improvements amongOntarians include new floors (42 per cent), bathrooms (40 per cent), andexterior landscaping (36 per cent). Kitchen counter tops (30 per cent) anddecks and patios (26 per cent) were also among the most likely makeoverchoices.
Eco-friendly renovations
More than three-quarters of Ontario homeowners (78 per cent) would choosean environmentally-friendly approach if it would save money in the long run,even if it costs more now. Of those polled, 56 per cent would consider "livingoff the grid" - living in a self sufficient manner without reliance on publicutilities, while 67 per cent of Ontario homeowners would consider becoming'net zero' household, enabling their homes to produce at least as much energyas they use. The majority of Ontarians (78 per cent) believe that 'green'improvements would increase the value of their home.
Intentions among Regions Average Spend
Ontario 71% $12,306
BC 69% $10,064
Alberta 74% $12,422
Sask/Man 71% $ 9,743
Quebec 67% $ 8,463
Atlantic Canada 73% $10,042
Renovate or Sell/Move
Region Renovate Sell
Ontario 75% 19%
BC 75% 19%
Alberta 71% 23%
Sask/Man 75% 17%
Quebec 74% 17%
Atlantic Canada 78% 15%
These are some of the findings of an RBC poll conducted by Ipsos Reidbetween August 13 and August 18, 2008. The online survey is based on arandomly selected representative sample of 3,733 adult Canadian homeowners,including 1,423 Ontario residents. With a representative sample of this sizefor Ontario, the results are considered accurate to within 2.6 percentagepoints, 19 times out of 20, of what they would have been had the entire adultpopulation of Ontario been polled. These data were statistically weighted toensure the sample's regional and age/sex composition reflects that of theactual Canadian population according to the 2006 census data.
Wednesday, October 29, 2008
Financial Update
North American stocks rally on bargain hunting
· TSX +614.29pts as investors flocked to commodity and financial stocks that were beaten down in Monday's steep fall, encouraged by strong earnings from several companies and signs that the frozen credit markets are starting to thaw (Reuters)
· Dow +889.35pts up more than 10%, on bargain-hunting and hopes the U.S. Federal Reserve and other central banks will cut rates further.
· Dollar +.37c to $77.96US. The rally in the Canadian dollar was aided largely by a rally in global stock markets and a slightly improved overall market sentiment. But the gain was held in check as investors continued to liquidate riskier assets in favor of the greenback, a practice that has weighed on the Canadian currency in recent weeks.
· Oil -$.49to $62.73US per barrel. as concerns about faltering demand offset OPEC comments suggesting the producer group could throttle back output again to support prices.(FP)
· Gold $-2.40 to $739.30US per ounce
IMF, EU agree to $25.1-billion package for Hungary ELIZABETH PIPER Reuters-Report on Business — The United States is expected to cut interest rates on Wednesday, a measure Japan, the European Central Bank and Britain are forecast to follow by the end of next week to bolster economies facing recession.
While dispensing with a repeat of the coordinated cuts made earlier this month, authorities fear the worst financial crisis in 80 years will usher in a long recession and are looking to individual rate reductions to soften the blow.
Hungary became the latest country to seek finance from global lenders, agreeing a rescue package worth $25.1-billion (U.S.) to shore up its currency and markets. The International Monetary Fund said if the crisis was prolonged and many more countries asked for help, it could need more money.
New rule on funds relieves pinched insurers
TARA PERKINS Globe and Mail Update
Canadian regulators have fast-tracked new rules that will give insurers a reprieve from the beating they've taken as a result of falling stock markets.
The Office of the Superintendent of Financial Institutions, which regulates banks and insurers, changed the rules yesterday that dictate how much money insurers must put aside for their segregated funds businesses.
Falling stock markets have forced insurers to sock away more capital now for payments they'll have to make to customers years down the road, putting added pressure on firms such as Manulife Financial Corp. The revised rules give companies more time to put aside funds for far-off obligations.
The capital requirements for segregated funds are now less onerous if the payments are more than five years away, which should reduce the capital requirements for all of the insurers in the fourth quarter of this year, said Genuity Capital Markets analyst Mario Mendonca, adding that Manulife will be the biggest winner.
Insurers said they welcome the changes.
They believe the revised rules more accurately reflect the actual risk with respect to the future payments that they have promised customers.
Manulife shares, which had fallen $17.83 from the start of the month to $21.17 on Monday, gained 10.96 per cent or $2.32 to close at $23.49 on the Toronto Stock Exchange yesterday after The Globe and Mail reported that OSFI was considering changes to the rules. Shares of Sun Life gained 14.34 per cent to close at $30.06 on what was generally a strong day on the market.
The revisions are a move in the opposite direction to regulators' general desire for financial institutions to preserve as much capital as possible in this economic environment.
One week ago, OSFI issued an advisory saying it wants banks and insurers to consult the regulator before any share buybacks. “OSFI is of the view that the current environment calls for increased conservatism in capital management,” it said at the time.
But insurers believe that the old capital rules for their segregated funds businesses were too strict. Manulife would likely have been required to put aside more than $2-billion in the fourth quarter for payments that mostly come due between seven and 30 years from now.
Segregated funds are products where insurers invest customers' money in a number of funds, and promise them regular payouts at some point in the future. When tumbling stock markets decrease the value of the funds, insurers are forced to put aside more capital to meet their future obligations. If markets rise, they can reverse that.
OSFI's revisions were released late yesterday afternoon and the exact impact on insurers' capital requirements this quarter is not clear.
In a letter to the industry, the regulator said it had planned to update the rules by 2011, but that market developments highlighted the need to move quickly.
When the rules were first developed, segregated fund guarantee contracts generally had a term of 10 years or less. Insurers have been pushing into the retirement planning market, and the contracts now largely have terms of 30 years, or even indefinite terms to the end of the customer's life.
OSFI said the old rules might not have sufficiently distinguished between the lower level of capital that should be required to support distant payment obligations and the higher level for payments that are closer to coming due. In addition, it said the rules made capital requirements “susceptible to dramatic swings that may not reflect changes in risk.”
The changes attempt to reduce the volatility in the requirements.
· TSX +614.29pts as investors flocked to commodity and financial stocks that were beaten down in Monday's steep fall, encouraged by strong earnings from several companies and signs that the frozen credit markets are starting to thaw (Reuters)
· Dow +889.35pts up more than 10%, on bargain-hunting and hopes the U.S. Federal Reserve and other central banks will cut rates further.
· Dollar +.37c to $77.96US. The rally in the Canadian dollar was aided largely by a rally in global stock markets and a slightly improved overall market sentiment. But the gain was held in check as investors continued to liquidate riskier assets in favor of the greenback, a practice that has weighed on the Canadian currency in recent weeks.
· Oil -$.49to $62.73US per barrel. as concerns about faltering demand offset OPEC comments suggesting the producer group could throttle back output again to support prices.(FP)
· Gold $-2.40 to $739.30US per ounce
IMF, EU agree to $25.1-billion package for Hungary ELIZABETH PIPER Reuters-Report on Business — The United States is expected to cut interest rates on Wednesday, a measure Japan, the European Central Bank and Britain are forecast to follow by the end of next week to bolster economies facing recession.
While dispensing with a repeat of the coordinated cuts made earlier this month, authorities fear the worst financial crisis in 80 years will usher in a long recession and are looking to individual rate reductions to soften the blow.
Hungary became the latest country to seek finance from global lenders, agreeing a rescue package worth $25.1-billion (U.S.) to shore up its currency and markets. The International Monetary Fund said if the crisis was prolonged and many more countries asked for help, it could need more money.
New rule on funds relieves pinched insurers
TARA PERKINS Globe and Mail Update
Canadian regulators have fast-tracked new rules that will give insurers a reprieve from the beating they've taken as a result of falling stock markets.
The Office of the Superintendent of Financial Institutions, which regulates banks and insurers, changed the rules yesterday that dictate how much money insurers must put aside for their segregated funds businesses.
Falling stock markets have forced insurers to sock away more capital now for payments they'll have to make to customers years down the road, putting added pressure on firms such as Manulife Financial Corp. The revised rules give companies more time to put aside funds for far-off obligations.
The capital requirements for segregated funds are now less onerous if the payments are more than five years away, which should reduce the capital requirements for all of the insurers in the fourth quarter of this year, said Genuity Capital Markets analyst Mario Mendonca, adding that Manulife will be the biggest winner.
Insurers said they welcome the changes.
They believe the revised rules more accurately reflect the actual risk with respect to the future payments that they have promised customers.
Manulife shares, which had fallen $17.83 from the start of the month to $21.17 on Monday, gained 10.96 per cent or $2.32 to close at $23.49 on the Toronto Stock Exchange yesterday after The Globe and Mail reported that OSFI was considering changes to the rules. Shares of Sun Life gained 14.34 per cent to close at $30.06 on what was generally a strong day on the market.
The revisions are a move in the opposite direction to regulators' general desire for financial institutions to preserve as much capital as possible in this economic environment.
One week ago, OSFI issued an advisory saying it wants banks and insurers to consult the regulator before any share buybacks. “OSFI is of the view that the current environment calls for increased conservatism in capital management,” it said at the time.
But insurers believe that the old capital rules for their segregated funds businesses were too strict. Manulife would likely have been required to put aside more than $2-billion in the fourth quarter for payments that mostly come due between seven and 30 years from now.
Segregated funds are products where insurers invest customers' money in a number of funds, and promise them regular payouts at some point in the future. When tumbling stock markets decrease the value of the funds, insurers are forced to put aside more capital to meet their future obligations. If markets rise, they can reverse that.
OSFI's revisions were released late yesterday afternoon and the exact impact on insurers' capital requirements this quarter is not clear.
In a letter to the industry, the regulator said it had planned to update the rules by 2011, but that market developments highlighted the need to move quickly.
When the rules were first developed, segregated fund guarantee contracts generally had a term of 10 years or less. Insurers have been pushing into the retirement planning market, and the contracts now largely have terms of 30 years, or even indefinite terms to the end of the customer's life.
OSFI said the old rules might not have sufficiently distinguished between the lower level of capital that should be required to support distant payment obligations and the higher level for payments that are closer to coming due. In addition, it said the rules made capital requirements “susceptible to dramatic swings that may not reflect changes in risk.”
The changes attempt to reduce the volatility in the requirements.
Monday, October 27, 2008
Financial Update
Market chaos “beyond volatile” Carl Weinberg, Chief Economist High Frequency Economics
· TSX -37.26pts (Reuters) A see-saw session saw the main index slump to hit a 4-year low and then bounce back in a late-session rebound that could lead to a strong opening on Monday.
· Dow -312.30pts if ever a 300 pt loss was a good thing, it was Friday as emergency trading halts were considered, as in Russia, where authorities closed the stock exchanges until Tuesday
· Dollar -1.08c to $78.56US.
· Oil -$3.69 to $64.15US per barrel. Canada's currency is headed for its worst monthly fall since at least 1950 (FP)
· Gold +15.80 to $729.10US per ounce
· TSX -37.26pts (Reuters) A see-saw session saw the main index slump to hit a 4-year low and then bounce back in a late-session rebound that could lead to a strong opening on Monday.
· Dow -312.30pts if ever a 300 pt loss was a good thing, it was Friday as emergency trading halts were considered, as in Russia, where authorities closed the stock exchanges until Tuesday
· Dollar -1.08c to $78.56US.
· Oil -$3.69 to $64.15US per barrel. Canada's currency is headed for its worst monthly fall since at least 1950 (FP)
· Gold +15.80 to $729.10US per ounce
Friday, October 24, 2008
Financial Update
· TSX +94.47pts (Reuters) Late day buying saved the day after a seesaw volatile session that saw the TSX swing nearly 580 points from trough to peak
· Dow +172.04pts closed higher as investors wrestled with fears about the economy but also hunted for bargains after 2 days of selling
· Dollar -.06c to $79.64US.
· Oil +1.09to $67.84US per barrel.
· Gold -20.50 to $714.70US per ounce
(Reuters)Finance Minister Jim Flaherty announced the creation of the Canadian Lenders Assurance Facility, guaranteeing wholesale borrowing by the country's banks.
Flaherty said the temporary program will support the banks "on commercial terms so there is no expected cost to Canadian taxpayers," while stressing that Canada's lending institutions are solid and "the Canadian housing market is sound."
'The sky is not falling,' says BOC governor
Declines in housing market and commodities more rapid than expected
Jacqueline Thorpe, Financial Post
The Bank of Canada continues to believe Canada can avoid a recession this year and next, despite the protracted three-quarter recession it forecasts for the U.S. economy into 2009, a "mild" global recession, and "the deepest, broadest and most persistent financial crisis" the world has faced in decades.
The central bank forecasts real gross domestic product will expand 0.8% in the third quarter, followed by a contraction of 0.4% in the fourth quarter. Growth is expected to be flat in the first quarter of 2009 and to pick up to 0.8% in the second quarter.
Two successive quarters of contracting activity is technically considered a recession.
The bank believes Canada is starting from a better position of strength than many other countries going into the downturn, with a stronger labour market and better household and corporate balance sheets providing some support.
The "sky is not falling," bank governor Mark Carney said at a news conference after the document's release.
Still, it forecasts the economy will not do much better than flatline over the next couple of quarters as the global credit crisis will resolve slowly, putting the economy under strain.
Despite of the "healthy" position of Canadian financial institutions, the intensification of the global financial crisis has led to a "substantial" tightening of credit conditions in Canada, the bank said.
"Given the high degree of volatility and risk aversion in recent weeks, there is considerable uncertainty around any assessment of current credit conditions in Canada," the bank said. "In particular, it is difficult to measure the non-price factors that may limit the availability of credit."
Credit spreads between borrowing rates for financial institutions across curve and the expected overnight Bank of Canada interest rate spiked to around 200 basis points in early October.
While strong actions taken by central banks and governments to support financial institutions have lowered those spreads, the bank said they are likely only to recede slowly as confidence is gradually rebuilt.
Effective borrowing rates for financial institutions have, in fact, eased somewhat since August, thanks to the 225 basis points of cumulative interest rate cuts the bank has already implemented, the bank said.
"These indicative borrowing costs likely do not, however, adequately take account of the decreased availability coming from illiquid and risk-averse interbank markets," the bank admitted.
Non-financial firms, meanwhile, have had difficulty getting access to both short-term and long-term markets.
"Indeed, corporate debt and equity issuance have effectively stopped," the bank said.
The bank pointed out, however, that credit growth for Canadian households has slowed only slightly in recent months and there was little evidence terms or conditions have tightened significantly for household borrowers.
Still it sees growth of consumer spending receding after robust gains in recent years as real income declines with commodity prices, and household net worth takes a hit from sliding equity markets and a projected "modest" decline in house prices.
While it has been predicting a slowdown in housing activity and price gains for some time, the bank now says housing investment is declining more rapidly than it had expected. But it does not anticipate the same type of sharp housing contraction experienced by the United States.
The sharp decline in commodity prices has, like many, caught the Bank of Canada off-guard, and it is basing its projections on oil futures prices of US$81 to US$88 per barrel, though it projects a further 10% drop in non-energy commodity prices from current levels.
The bank has also revised down its estimate of Canada's potential output -- or the rate the economy can grow without generating inflation -- to 2.3% for 2008 and 2.4% in 2009.
The bank said it was encouraged by the loosening in global financial conditions in recent days. While one of the main risks to its outlook was that full recovery would take longer than expected, there is now the chance that measures governments and central banks have taken to restore liquidity and confidence will improve prospects more rapidly.
For the year as a whole, the bank repeated its Tuesday forecast that growth will average just 0.6% in 2008 and 0.6% in 2009 before picking up speed to 3.4% in 2010.
While the big jump in growth forecast for 2010 might seem sharp, it is not unusual by historical standards to see economies start to gain steam quickly once the worst of a crisis has past.
· Dow +172.04pts closed higher as investors wrestled with fears about the economy but also hunted for bargains after 2 days of selling
· Dollar -.06c to $79.64US.
· Oil +1.09to $67.84US per barrel.
· Gold -20.50 to $714.70US per ounce
(Reuters)Finance Minister Jim Flaherty announced the creation of the Canadian Lenders Assurance Facility, guaranteeing wholesale borrowing by the country's banks.
Flaherty said the temporary program will support the banks "on commercial terms so there is no expected cost to Canadian taxpayers," while stressing that Canada's lending institutions are solid and "the Canadian housing market is sound."
'The sky is not falling,' says BOC governor
Declines in housing market and commodities more rapid than expected
Jacqueline Thorpe, Financial Post
The Bank of Canada continues to believe Canada can avoid a recession this year and next, despite the protracted three-quarter recession it forecasts for the U.S. economy into 2009, a "mild" global recession, and "the deepest, broadest and most persistent financial crisis" the world has faced in decades.
The central bank forecasts real gross domestic product will expand 0.8% in the third quarter, followed by a contraction of 0.4% in the fourth quarter. Growth is expected to be flat in the first quarter of 2009 and to pick up to 0.8% in the second quarter.
Two successive quarters of contracting activity is technically considered a recession.
The bank believes Canada is starting from a better position of strength than many other countries going into the downturn, with a stronger labour market and better household and corporate balance sheets providing some support.
The "sky is not falling," bank governor Mark Carney said at a news conference after the document's release.
Still, it forecasts the economy will not do much better than flatline over the next couple of quarters as the global credit crisis will resolve slowly, putting the economy under strain.
Despite of the "healthy" position of Canadian financial institutions, the intensification of the global financial crisis has led to a "substantial" tightening of credit conditions in Canada, the bank said.
"Given the high degree of volatility and risk aversion in recent weeks, there is considerable uncertainty around any assessment of current credit conditions in Canada," the bank said. "In particular, it is difficult to measure the non-price factors that may limit the availability of credit."
Credit spreads between borrowing rates for financial institutions across curve and the expected overnight Bank of Canada interest rate spiked to around 200 basis points in early October.
While strong actions taken by central banks and governments to support financial institutions have lowered those spreads, the bank said they are likely only to recede slowly as confidence is gradually rebuilt.
Effective borrowing rates for financial institutions have, in fact, eased somewhat since August, thanks to the 225 basis points of cumulative interest rate cuts the bank has already implemented, the bank said.
"These indicative borrowing costs likely do not, however, adequately take account of the decreased availability coming from illiquid and risk-averse interbank markets," the bank admitted.
Non-financial firms, meanwhile, have had difficulty getting access to both short-term and long-term markets.
"Indeed, corporate debt and equity issuance have effectively stopped," the bank said.
The bank pointed out, however, that credit growth for Canadian households has slowed only slightly in recent months and there was little evidence terms or conditions have tightened significantly for household borrowers.
Still it sees growth of consumer spending receding after robust gains in recent years as real income declines with commodity prices, and household net worth takes a hit from sliding equity markets and a projected "modest" decline in house prices.
While it has been predicting a slowdown in housing activity and price gains for some time, the bank now says housing investment is declining more rapidly than it had expected. But it does not anticipate the same type of sharp housing contraction experienced by the United States.
The sharp decline in commodity prices has, like many, caught the Bank of Canada off-guard, and it is basing its projections on oil futures prices of US$81 to US$88 per barrel, though it projects a further 10% drop in non-energy commodity prices from current levels.
The bank has also revised down its estimate of Canada's potential output -- or the rate the economy can grow without generating inflation -- to 2.3% for 2008 and 2.4% in 2009.
The bank said it was encouraged by the loosening in global financial conditions in recent days. While one of the main risks to its outlook was that full recovery would take longer than expected, there is now the chance that measures governments and central banks have taken to restore liquidity and confidence will improve prospects more rapidly.
For the year as a whole, the bank repeated its Tuesday forecast that growth will average just 0.6% in 2008 and 0.6% in 2009 before picking up speed to 3.4% in 2010.
While the big jump in growth forecast for 2010 might seem sharp, it is not unusual by historical standards to see economies start to gain steam quickly once the worst of a crisis has past.
Thursday, October 23, 2008
Financial Update
Corporate earnings, tumbling oil prices give stock markets another pounding
Finance Minister Jim Flaherty is holding a press conference this morning before the markets open, announcing further steps to help Canada's banks weather the financial crisis, a package that's likely to include a pledge to backstop lending between financial institutions.
· TSX -558.92pts (Reuters) closed nearly 6% lower as resource issues sank along with commodity prices on concerns that a global economic slowdown will slash demand.
· Dow -514.45pts stocks tumbled to 5-year lows on recession fears after a run of disappointing profits and outlooks from major U.S. companies
· Dollar -2.69c to $79.70US A number of factors combined to push the Canadian dollar below 80 cents US for the first time in more than 3 years, but experts say it could actually help Canada weather a global economic slowdown. Canada's manufacturing sector suffered as the dollar soared above parity with the U.S. greenback over the past year, making Canadian goods more expensive for other countries and hurting export-based industries, the auto sector in particular.
· Oil -5.43to $66.79US per barrel.
· Gold -32.80 to $733.30US per ounce
(Reuters)NEW YORK -- Shares of Fannie Mae and Freddie Mac dove to their lowest levels in more than 18 years on mounting fears of a government bailout that would wipe out shareholders of the two U.S. housing finance giants. Freddie Mac executives are due to meet Treasury officials, possibly to get clarity about how the government will support the company and to reassure investors, according to The Wall Street Journal.
Fears the companies will need to be bailed out forced Freddie Mac to pay record high yield premiums on a US$3 billion debt sale on Tuesday. Freddie Mac's share slumped more than 24% to US$3.15, the lowest since 1990, and Fannie Mae shares slid more than 21% to US$4.74, the lowest since 1989.
Weakness in Canadian economy helping homebuyers
Garry Marr, Financial Post
There is some good news in the falling housing market, affordability is improving.
Desjardins Economic Studies says that after eight years of rising prices, housing costs are going down. "For the second quarter in a row we have had an increase in affordability," said Hélène Bégin, senior economist with Desjardins.
However, she warned consumers should not get too excited about the market conditions because affordability is still very close to the all-time low reached in 1990.
The Desjardins Affordability Index is calculated by determining the ratio between average household disposable income and the income needed to obtain a mortgage on an average-priced home, known as the qualifying income.
The report from Desjardins said its affordability index climbed to 110.7 last quarter after dropping close to 100 at the end of 2007. In the early 1990s, the affordability index was as low as 93.6. Desjardins says that affordability has increased by about 10% in the past two quarters because of falling home prices and lower mortgage rates.
The Canadian Real Estate Association said last week that the average price of a home sold in the country's major markets was $327,020, a 3.6% increase from a year ago. It was the second consecutive month prices had dropped on a year-over year basis.
Statistics Canada also said last month new homes prices grew only by 3.5% in June from a year earlier. It was the slowest rate of growth since March, 2002.
Desjardins noted that in the first half of the year, existing home prices rose by 4.4% compared to 10% a year earlier. The posted rate on a one-year mortgage also fell from 7.25% in March to 6.3% by the end of June. The posted rate on a five-year mortgage fell from 7.15% to 7.1% during the same period.
"House prices are just not going up as strongly as before and in some places in Western Canada, like Calgary, we have had some price drops. With the kind of return we have in Calgary, it has a big impact on affordability," said Ms. Bégin.
Prices in Calgary fell 7.8% in July from a year earlier, according to CREA. They were off 5.8% in Edmonton during the same period. Desjardins says affordability in Calgary improved by 7.5% over the last three months.
Even with the improved conditions, affordability is still off almost 30% from the peak reached in late in 2001. Long-term Desjardins thinks affordability will continue to improve. "Prices are going to go up slowly," said Ms. Bégin. "Out west we've seen a turning point where prices are going down."
The drop in prices is good news for home builders, according to the chief operating officer of the Canadian Home Builders' Association.
"If you were sitting in my chair what you would be experiencing is one very busy housing industry from coast to coast," said John Kenward. "There has been a slowing down in certain markets and builders in those market say it's a return to a more normal market place."
Finance Minister Jim Flaherty is holding a press conference this morning before the markets open, announcing further steps to help Canada's banks weather the financial crisis, a package that's likely to include a pledge to backstop lending between financial institutions.
· TSX -558.92pts (Reuters) closed nearly 6% lower as resource issues sank along with commodity prices on concerns that a global economic slowdown will slash demand.
· Dow -514.45pts stocks tumbled to 5-year lows on recession fears after a run of disappointing profits and outlooks from major U.S. companies
· Dollar -2.69c to $79.70US A number of factors combined to push the Canadian dollar below 80 cents US for the first time in more than 3 years, but experts say it could actually help Canada weather a global economic slowdown. Canada's manufacturing sector suffered as the dollar soared above parity with the U.S. greenback over the past year, making Canadian goods more expensive for other countries and hurting export-based industries, the auto sector in particular.
· Oil -5.43to $66.79US per barrel.
· Gold -32.80 to $733.30US per ounce
(Reuters)NEW YORK -- Shares of Fannie Mae and Freddie Mac dove to their lowest levels in more than 18 years on mounting fears of a government bailout that would wipe out shareholders of the two U.S. housing finance giants. Freddie Mac executives are due to meet Treasury officials, possibly to get clarity about how the government will support the company and to reassure investors, according to The Wall Street Journal.
Fears the companies will need to be bailed out forced Freddie Mac to pay record high yield premiums on a US$3 billion debt sale on Tuesday. Freddie Mac's share slumped more than 24% to US$3.15, the lowest since 1990, and Fannie Mae shares slid more than 21% to US$4.74, the lowest since 1989.
Weakness in Canadian economy helping homebuyers
Garry Marr, Financial Post
There is some good news in the falling housing market, affordability is improving.
Desjardins Economic Studies says that after eight years of rising prices, housing costs are going down. "For the second quarter in a row we have had an increase in affordability," said Hélène Bégin, senior economist with Desjardins.
However, she warned consumers should not get too excited about the market conditions because affordability is still very close to the all-time low reached in 1990.
The Desjardins Affordability Index is calculated by determining the ratio between average household disposable income and the income needed to obtain a mortgage on an average-priced home, known as the qualifying income.
The report from Desjardins said its affordability index climbed to 110.7 last quarter after dropping close to 100 at the end of 2007. In the early 1990s, the affordability index was as low as 93.6. Desjardins says that affordability has increased by about 10% in the past two quarters because of falling home prices and lower mortgage rates.
The Canadian Real Estate Association said last week that the average price of a home sold in the country's major markets was $327,020, a 3.6% increase from a year ago. It was the second consecutive month prices had dropped on a year-over year basis.
Statistics Canada also said last month new homes prices grew only by 3.5% in June from a year earlier. It was the slowest rate of growth since March, 2002.
Desjardins noted that in the first half of the year, existing home prices rose by 4.4% compared to 10% a year earlier. The posted rate on a one-year mortgage also fell from 7.25% in March to 6.3% by the end of June. The posted rate on a five-year mortgage fell from 7.15% to 7.1% during the same period.
"House prices are just not going up as strongly as before and in some places in Western Canada, like Calgary, we have had some price drops. With the kind of return we have in Calgary, it has a big impact on affordability," said Ms. Bégin.
Prices in Calgary fell 7.8% in July from a year earlier, according to CREA. They were off 5.8% in Edmonton during the same period. Desjardins says affordability in Calgary improved by 7.5% over the last three months.
Even with the improved conditions, affordability is still off almost 30% from the peak reached in late in 2001. Long-term Desjardins thinks affordability will continue to improve. "Prices are going to go up slowly," said Ms. Bégin. "Out west we've seen a turning point where prices are going down."
The drop in prices is good news for home builders, according to the chief operating officer of the Canadian Home Builders' Association.
"If you were sitting in my chair what you would be experiencing is one very busy housing industry from coast to coast," said John Kenward. "There has been a slowing down in certain markets and builders in those market say it's a return to a more normal market place."
Wednesday, October 22, 2008
Financial Update
TSX slides as commodities tumble, central bank warns of recession
· TSX -455.60pts (Reuters)After big gains for TSX main index on Friday and Monday, investors returned to their selling ways
· Dow -231.77pts as mixed earnings reports persuaded investors to take some profits from Monday's big runup.
· Dollar -1.38c to $82.39US skidded to its lowest close in more than 3 years versus the U.S. dollar on Tuesday as BofC cut its key overnight interest rate and suggested more rate cuts may be needed. Lower oil prices often weigh on the Canadian dollar also because Canada is a key supplier of oil to the United States.
· Oil -3.36to $70.89US per barrel. Alarmed by the rapid slide, the Organization of the Petroleum Exporting Countries, which controls 40% of the world's oil supply, is holding an extraordinary meeting Friday in Vienna. OPEC's president, Chakib Khelil, said the group is planning to announce an output reduction that analysts believe could total at least one million barrels a day
· Gold +21.50 to $766.60US per ounce
Canadian bond prices all finished higher due to a sharp selloff in equities and the likelihood of more rate cuts in Canada "Some of the optimism we had seen on Friday and Monday is perhaps reversing and so money is flowing back into bonds," said Carlos Leitao, chief economist at Laurentian Bank of Canada. "
"In normal times, when you don't have a global credit crisis, you would tend to see . . . one-month rates, two-month rates, three-month rates, six-month rates, they would all decline big time," said economist Michael Gregory of BMO Capital Markets. "These are not normal times and those rates are not reacting in the same way."
Why the Bank of Canada pulled its punch
Jacqueline Thorpe, Financial Post While all about have been losing their heads, the Bank of Canada seemed determined to keep its Tuesday.
The central bank cut its benchmark lending rate a quarter of a percentage point to 2.25%, forgoing the more forceful half-point cut many Bay Street economists had pushed for amid signs the dramatic steps it has already taken to battle the credit crisis is beginning to bear fruit.
The clearest sign yet came Tuesday when Canada's commercial banks followed the central bank's move with a cut in their prime lending rate to 4%. Prime is the benchmark for consumer and mortgage loan rates across the country but banks had previously been hesitant to follow the Bank of Canada's cuts because the global financial crisis had driven up their own borrowing rates.
"TD Canada Trust's decision to lower its prime ... reflects [Tuesday's] Bank of Canada rate change, as well as the decrease in our cost of funds due to government actions and market forces, allowing us to pass the benefits on to customers," said Tim Hockey, president and CEO of TD Canada Trust, in a statement.
To be sure, the Bank of Canada is not suddenly predicting blue skies ahead. Its statement was, in fact, downright bleak, including the bold pronouncement the United States was "already in recession" - a word U.S. Ben Bernanke, the U.S. Federal Reserve chairman, has himself yet to utter.
The global economy too appears to be heading for a "mild recession" the bank said, as it drastically slashed its outlook for Canadian growth to 0.6% this year and next from much more optimistic forecasts of 1.0% and 2.3% respectively in July.
Indeed, its list of downside risks to the Canadian economy was long: weaker global growth will reduce demand for exports; sliding commodity prices which will depress the flow of income into Canada and in turn domestic demand, while the credit crisis is bound to restrain business and housing investment.
All will lead to "sluggish" growth through the first quarter of next year, though the bank stopped short of forecasting a recession for Canada. Growth is expected to eventually pick up in 2009 and the forecast is for a 3.4% burst of speed in 2010.
Derek Holt, one of the more bearish analysts on the Street, said the statement could have been written to accompany a 75-basis-point cut, let alone the 50-basis-point cut he advocated.
"It was the dead-on right statement but the wrong headline," said Mr. Holt, who says a Canadian recession is a foregone conclusion and predicts 50 basis points of cuts next time round in December.
And yet, the bank held back its heavy fire-power.
It highlighted three reasons. First the recent sizeable depreciation of the Canadian dollar will provide an "important offset" to slower global growth and commodity prices, the bank said.
The loonie sank another US1.38¢ Tuesday to US82.39¢, bringing it down 20% from July.
Secondly, the bank pointed out it has already meted out much assistance - 2.25 percentage points of rate cuts since last December, including a half-point emergency cut in co-ordination with other central banks on Oct. 8, a move it called "extraordinary."
Other "extraordinary" measures major economies have announced to stabilize the financial system - including capital injections directly into banks in some countries - will be pivotal to resuming the flow of credit and Canada's economy and "strong" financial system will benefit directly, the bank has said.
The Bank of Canada itself has injected billions of dollars of liquidity into Canadian money markets, and is now accepting a wider array of collateral from institutions for borrowing. The government, meanwhile, has announced a plan to buy up to $25-billion in mortgages to free up space on bank balance sheets for lending.
Ottawa Tuesday informed Bay Street it would step up the plan. The government said it will buy up $7-billion in mortgages Thursday, following strong demand from banks in the first round, which saw institutions sell $5-billion in mortgage-backed securities to the government.
All these measures have eased borrowing costs considerably for Canadian banks. The rate on overnight borrowing between banks has dropped to about 2.62% from a peak in early September of 4.83%.
Bay Street is also pushing for Ottawa to guarantee new bank borrowing to help them better compete for financing with institutions from other countries that are receiving more government support.
While the message from the Bank of Canada Tuesday was be patient, it did indicate it could easily drop interest rates further if conditions warrant, saying some "further monetary stimulus will likely be required."
Close
Presented by
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 9 December 2008.
· TSX -455.60pts (Reuters)After big gains for TSX main index on Friday and Monday, investors returned to their selling ways
· Dow -231.77pts as mixed earnings reports persuaded investors to take some profits from Monday's big runup.
· Dollar -1.38c to $82.39US skidded to its lowest close in more than 3 years versus the U.S. dollar on Tuesday as BofC cut its key overnight interest rate and suggested more rate cuts may be needed. Lower oil prices often weigh on the Canadian dollar also because Canada is a key supplier of oil to the United States.
· Oil -3.36to $70.89US per barrel. Alarmed by the rapid slide, the Organization of the Petroleum Exporting Countries, which controls 40% of the world's oil supply, is holding an extraordinary meeting Friday in Vienna. OPEC's president, Chakib Khelil, said the group is planning to announce an output reduction that analysts believe could total at least one million barrels a day
· Gold +21.50 to $766.60US per ounce
Canadian bond prices all finished higher due to a sharp selloff in equities and the likelihood of more rate cuts in Canada "Some of the optimism we had seen on Friday and Monday is perhaps reversing and so money is flowing back into bonds," said Carlos Leitao, chief economist at Laurentian Bank of Canada. "
"In normal times, when you don't have a global credit crisis, you would tend to see . . . one-month rates, two-month rates, three-month rates, six-month rates, they would all decline big time," said economist Michael Gregory of BMO Capital Markets. "These are not normal times and those rates are not reacting in the same way."
Why the Bank of Canada pulled its punch
Jacqueline Thorpe, Financial Post While all about have been losing their heads, the Bank of Canada seemed determined to keep its Tuesday.
The central bank cut its benchmark lending rate a quarter of a percentage point to 2.25%, forgoing the more forceful half-point cut many Bay Street economists had pushed for amid signs the dramatic steps it has already taken to battle the credit crisis is beginning to bear fruit.
The clearest sign yet came Tuesday when Canada's commercial banks followed the central bank's move with a cut in their prime lending rate to 4%. Prime is the benchmark for consumer and mortgage loan rates across the country but banks had previously been hesitant to follow the Bank of Canada's cuts because the global financial crisis had driven up their own borrowing rates.
"TD Canada Trust's decision to lower its prime ... reflects [Tuesday's] Bank of Canada rate change, as well as the decrease in our cost of funds due to government actions and market forces, allowing us to pass the benefits on to customers," said Tim Hockey, president and CEO of TD Canada Trust, in a statement.
To be sure, the Bank of Canada is not suddenly predicting blue skies ahead. Its statement was, in fact, downright bleak, including the bold pronouncement the United States was "already in recession" - a word U.S. Ben Bernanke, the U.S. Federal Reserve chairman, has himself yet to utter.
The global economy too appears to be heading for a "mild recession" the bank said, as it drastically slashed its outlook for Canadian growth to 0.6% this year and next from much more optimistic forecasts of 1.0% and 2.3% respectively in July.
Indeed, its list of downside risks to the Canadian economy was long: weaker global growth will reduce demand for exports; sliding commodity prices which will depress the flow of income into Canada and in turn domestic demand, while the credit crisis is bound to restrain business and housing investment.
All will lead to "sluggish" growth through the first quarter of next year, though the bank stopped short of forecasting a recession for Canada. Growth is expected to eventually pick up in 2009 and the forecast is for a 3.4% burst of speed in 2010.
Derek Holt, one of the more bearish analysts on the Street, said the statement could have been written to accompany a 75-basis-point cut, let alone the 50-basis-point cut he advocated.
"It was the dead-on right statement but the wrong headline," said Mr. Holt, who says a Canadian recession is a foregone conclusion and predicts 50 basis points of cuts next time round in December.
And yet, the bank held back its heavy fire-power.
It highlighted three reasons. First the recent sizeable depreciation of the Canadian dollar will provide an "important offset" to slower global growth and commodity prices, the bank said.
The loonie sank another US1.38¢ Tuesday to US82.39¢, bringing it down 20% from July.
Secondly, the bank pointed out it has already meted out much assistance - 2.25 percentage points of rate cuts since last December, including a half-point emergency cut in co-ordination with other central banks on Oct. 8, a move it called "extraordinary."
Other "extraordinary" measures major economies have announced to stabilize the financial system - including capital injections directly into banks in some countries - will be pivotal to resuming the flow of credit and Canada's economy and "strong" financial system will benefit directly, the bank has said.
The Bank of Canada itself has injected billions of dollars of liquidity into Canadian money markets, and is now accepting a wider array of collateral from institutions for borrowing. The government, meanwhile, has announced a plan to buy up to $25-billion in mortgages to free up space on bank balance sheets for lending.
Ottawa Tuesday informed Bay Street it would step up the plan. The government said it will buy up $7-billion in mortgages Thursday, following strong demand from banks in the first round, which saw institutions sell $5-billion in mortgage-backed securities to the government.
All these measures have eased borrowing costs considerably for Canadian banks. The rate on overnight borrowing between banks has dropped to about 2.62% from a peak in early September of 4.83%.
Bay Street is also pushing for Ottawa to guarantee new bank borrowing to help them better compete for financing with institutions from other countries that are receiving more government support.
While the message from the Bank of Canada Tuesday was be patient, it did indicate it could easily drop interest rates further if conditions warrant, saying some "further monetary stimulus will likely be required."
Close
Presented by
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 9 December 2008.
Tuesday, October 21, 2008
Financial Update
Oct 21 9am Bank of Canada lowers overnight rate target by 1/4 percentage point to 2.25%
Stock Markets Soar
· TSX +688.91pts soared more than 7%in a broad-based rally as resource issues climbed on strength in underlying commodity prices.
· Dow +413.21pts
· Dollar -.48cto $83.77US .
· Oil +2.40to $74.25US per barrel jumped more than 3% lifted by expectations that OPEC ministers will agree to cut production at an emergency meeting set for Friday.
· Gold +2.50 to $787.60US per ounce
Fall in interbank rates raises hopes
Jamie McGeever/Richard Leong, Reuters LONDON/NEW YORK -- Global interbank rates fell sharply on Monday, fuelling hopes that central banks' massive efforts have succeeded in unlocking credits for cash-strapped banks and borrowers.
Other measures of credit stress ebbed to levels not seen in more than a month, prior to a worldwide rescue of the financial system whose foundation was shaken in the wake of the bankruptcy of Lehman Brothers.
U.S. Federal chairman Ben Bernanke said he was encouraged by the nascent improvement in credit conditions from measures to shore up the banking system and to ensure liquidity in certain securities like commercial paper. But it was too soon to conclude on their full impact, he told a Congressional panel.
Traders were guardedly optimistic, saying the jury is still out on whether money authorities have successfully navigated the credit market through the worst of the current crisis.
"We are still seeing a lot of difficulties to get through before we are out of the woods," said Martin Mitchell, head of government trading at Stifel Nicolaus & Co. in Baltimore, Maryland, "We are still concerned about Wall Street and consumers finding financing."
Governments around the world have pledged about US$3.3-trillion - about equal to the economic output of Germany - aimed at boosting interbank lending and shoring up their economies amid the global credit crisis.
Credit availability appeared to be on the rise after money markets plunged into near-chaos a month ago, which led to part and full government control of banks and financial companies in Europe and United States.
Less jittery banks charged each other less for dollars in the unsecured lending market. The London interbank offered rate for overnight dollars fell to a 4-year low near the Fed's target rate of 1.5%.
Traders widely expect the Fed to trim its target rate on overnight loans of surplus reserves between U.S. banks by at least another quarter percentage point after its two-day policy meeting next week.
More telling about a credit thaw was the plunge in longer rates suggesting banks grew more comfortable about lending rather than just hoarding cash.
The three-month Libor fell by 0.36 of a percentage point to 4.05875%, down 0.36 percentage point from Friday - the biggest one-day drop since late January.
Its spread over the expected three-month rate on the Fed's policy target rate, a closely-watched gauge of credit jitters, contracted below 300 basis points. At the height of the crisis earlier this month the spread was around 370 basis points.
Traders said a key catalyst for the drop in Monday's Libor fixings was one large U.S. bank lending up to US$20-billion in one-month dollar funds, pushing one-month interbank rates below 4% from around 5%.
The Wall Street Journal reported late on Friday JP Morgan led three U.S. banks pumping dollars into the system for European counterparts to access.
A particularly acute shortage of dollars in European and Asian trading hours since the collapse of Lehman Brothers in mid-September exacerbated the global credit crunch as banks hoarded dollars to bolster their own balance sheets rather than take the risk of lending it out.
More lending in the critical interbank market has spread to other credit areas.
The US$1.5-trillion U.S. commercial paper sector has improved, as creditworthy companies can raise money by selling these short-term IOU's at rates below the interbank market.
Overnight rates on unsecured CP dropped below 1% on Friday, while 30-year unsecured CP rates averaged as low as 1.43%, according to Fed data released on Monday.
More help is on the way in the CP market, where many companies had relied on funds for their day-to-day operations. The Fed will launch its program to buy high-quality CP next Monday.
Stock Markets Soar
· TSX +688.91pts soared more than 7%in a broad-based rally as resource issues climbed on strength in underlying commodity prices.
· Dow +413.21pts
· Dollar -.48cto $83.77US .
· Oil +2.40to $74.25US per barrel jumped more than 3% lifted by expectations that OPEC ministers will agree to cut production at an emergency meeting set for Friday.
· Gold +2.50 to $787.60US per ounce
Fall in interbank rates raises hopes
Jamie McGeever/Richard Leong, Reuters LONDON/NEW YORK -- Global interbank rates fell sharply on Monday, fuelling hopes that central banks' massive efforts have succeeded in unlocking credits for cash-strapped banks and borrowers.
Other measures of credit stress ebbed to levels not seen in more than a month, prior to a worldwide rescue of the financial system whose foundation was shaken in the wake of the bankruptcy of Lehman Brothers.
U.S. Federal chairman Ben Bernanke said he was encouraged by the nascent improvement in credit conditions from measures to shore up the banking system and to ensure liquidity in certain securities like commercial paper. But it was too soon to conclude on their full impact, he told a Congressional panel.
Traders were guardedly optimistic, saying the jury is still out on whether money authorities have successfully navigated the credit market through the worst of the current crisis.
"We are still seeing a lot of difficulties to get through before we are out of the woods," said Martin Mitchell, head of government trading at Stifel Nicolaus & Co. in Baltimore, Maryland, "We are still concerned about Wall Street and consumers finding financing."
Governments around the world have pledged about US$3.3-trillion - about equal to the economic output of Germany - aimed at boosting interbank lending and shoring up their economies amid the global credit crisis.
Credit availability appeared to be on the rise after money markets plunged into near-chaos a month ago, which led to part and full government control of banks and financial companies in Europe and United States.
Less jittery banks charged each other less for dollars in the unsecured lending market. The London interbank offered rate for overnight dollars fell to a 4-year low near the Fed's target rate of 1.5%.
Traders widely expect the Fed to trim its target rate on overnight loans of surplus reserves between U.S. banks by at least another quarter percentage point after its two-day policy meeting next week.
More telling about a credit thaw was the plunge in longer rates suggesting banks grew more comfortable about lending rather than just hoarding cash.
The three-month Libor fell by 0.36 of a percentage point to 4.05875%, down 0.36 percentage point from Friday - the biggest one-day drop since late January.
Its spread over the expected three-month rate on the Fed's policy target rate, a closely-watched gauge of credit jitters, contracted below 300 basis points. At the height of the crisis earlier this month the spread was around 370 basis points.
Traders said a key catalyst for the drop in Monday's Libor fixings was one large U.S. bank lending up to US$20-billion in one-month dollar funds, pushing one-month interbank rates below 4% from around 5%.
The Wall Street Journal reported late on Friday JP Morgan led three U.S. banks pumping dollars into the system for European counterparts to access.
A particularly acute shortage of dollars in European and Asian trading hours since the collapse of Lehman Brothers in mid-September exacerbated the global credit crunch as banks hoarded dollars to bolster their own balance sheets rather than take the risk of lending it out.
More lending in the critical interbank market has spread to other credit areas.
The US$1.5-trillion U.S. commercial paper sector has improved, as creditworthy companies can raise money by selling these short-term IOU's at rates below the interbank market.
Overnight rates on unsecured CP dropped below 1% on Friday, while 30-year unsecured CP rates averaged as low as 1.43%, according to Fed data released on Monday.
More help is on the way in the CP market, where many companies had relied on funds for their day-to-day operations. The Fed will launch its program to buy high-quality CP next Monday.
Monday, October 20, 2008
Financial Update
Solid Day on Bay St
Former U.S. president Bill Clinton praises Canadian banking system
· TSX +292.52pts bargain-hunting came in force and the benchmark index posted a weekly gain of 5.5 percent, finishing at 9,562.49
· Dow -127.04pts
· Dollar -.38cto $84.25US due to nagging uncertainty about the outlook for the global economy, but a rally in stock markets and commodities help to cushion its fall.
· Oil +2.00to $71.85US per barrel recovered some on speculation that OPEC could slash output in an effort to stop crude's downward spiral
· Gold -$16.40 to $785.10US per ounce
(Reuters) - Brace yourself, but there's more bad news coming for Toronto stocks. When companies release their third-quarter results over the next few weeks, the accompanying earnings forecasts are likely to provide some pretty gloomy reading and may drive prices down further. Market focus will not be on the earnings themselves.
"(Forecasts) are what the market at the bigger level is looking at. Whether XYZ company beats or misses by a nickel is not the biggest focus over the next two or three weeks," said Francis Campeau, broker at MF Global Canada. And any market drops made on those forecasts could mark thebottom of the current fall, and the much-talked-of buying opportunity may finally be here.
Canadian Press VANCOUVER - Former U.S. president Bill Clinton is praising Canada's banking system.
Clinton, who was in Vancouver yesterday to speak to a business group, says Canadians are very lucky to have a government and system that encourages one of the best banking communities in the world.
The two-term Democratic president says if Canada keeps it up, it will avoid the banking mess being experienced in the United States. Clinton says U.S. and foreign bankers now will have to rely less on innovative financial products for profits than on old-fashioned lending to help produce goods and services.
Clinton's viewpoint got a quick endorsement from Public Safety Minister Stockwell Day, who was also at the event.
Day said Canadians should be reassured that one of the greatest U.S. presidents when it comes to economics thinks Canada is on the right track.
Former U.S. president Bill Clinton praises Canadian banking system
· TSX +292.52pts bargain-hunting came in force and the benchmark index posted a weekly gain of 5.5 percent, finishing at 9,562.49
· Dow -127.04pts
· Dollar -.38cto $84.25US due to nagging uncertainty about the outlook for the global economy, but a rally in stock markets and commodities help to cushion its fall.
· Oil +2.00to $71.85US per barrel recovered some on speculation that OPEC could slash output in an effort to stop crude's downward spiral
· Gold -$16.40 to $785.10US per ounce
(Reuters) - Brace yourself, but there's more bad news coming for Toronto stocks. When companies release their third-quarter results over the next few weeks, the accompanying earnings forecasts are likely to provide some pretty gloomy reading and may drive prices down further. Market focus will not be on the earnings themselves.
"(Forecasts) are what the market at the bigger level is looking at. Whether XYZ company beats or misses by a nickel is not the biggest focus over the next two or three weeks," said Francis Campeau, broker at MF Global Canada. And any market drops made on those forecasts could mark thebottom of the current fall, and the much-talked-of buying opportunity may finally be here.
Canadian Press VANCOUVER - Former U.S. president Bill Clinton is praising Canada's banking system.
Clinton, who was in Vancouver yesterday to speak to a business group, says Canadians are very lucky to have a government and system that encourages one of the best banking communities in the world.
The two-term Democratic president says if Canada keeps it up, it will avoid the banking mess being experienced in the United States. Clinton says U.S. and foreign bankers now will have to rely less on innovative financial products for profits than on old-fashioned lending to help produce goods and services.
Clinton's viewpoint got a quick endorsement from Public Safety Minister Stockwell Day, who was also at the event.
Day said Canadians should be reassured that one of the greatest U.S. presidents when it comes to economics thinks Canada is on the right track.
Friday, October 17, 2008
Financial Update
TSX racks up modest loss as energy stocks improve; N.Y. markets surge
· TSX -53.88pts after a late-day rally that saw investors buy beaten up energy stocks despite a big drop in oil prices
· Dow +401.35pts also pulled off a late day comeback as investors examined mixed economic and earnings data for clues about the health of the economy.
· Dollar +.45cto $84.63US
· Oil -$4.69to $69.85US per barrel Oil prices that looked like they just would keep rising fell to a level less than half the record high of US$147.27 they reached this summer-to a 14 mth low
· Gold -$34.00 to $801.50US per ounce The volatility extended to the precious metals sector as investors looking for safety dumped gold in favour of cash.(reuters)
Bank of Canada set to cut interest rates another half-point next week: RBC
By The Canadian Press TORONTO - The Bank of Canada will likely lower its policy interest rate by half a percentage point next week, the Royal Bank of Canada's economics department said Thursday.
Citing "a deteriorating outlook for the U.S. economy, falling commodity prices and persistent financial market volatility," RBC said downside risks are increasing for Canada's economic outlook.
An Update on the first CMHC auction…
----------------------------------------------------
Banks sell $5-billion of mortgages BOYD ERMAN Globe and Mail Update
Canadian banks sold $5-billion of mortgages to Canada Mortgage and Housing Corp. at a price that indicates the government will indeed make a big profit on its program to help banks jump-start lending.
CMHC will earn an average yield of 4.24 per cent on the mortgages it bought from banks Thursday. At the same time, the government sold $3-billion of five-year bonds to finance the purchase at a yield of 3.24 per cent. The 1 percentage point spread means the government will make $50-million a year in profit from the interest-rate differential on this batch of loans.
The federal government designed the program to help banks raise money for new loans, by taking old home loans off the balance sheet. The government plans more purchases totalling $20-billion, though many bankers would like Ottawa to ratchet up the program.
The loans the federal government is purchasing are insured, meaning the government shouldn't be putting taxpayer money at risk.
For the banks, getting funds at an interest rate of 4.24 per cent will be a big relief, given that interest rates from other methods of raising money are much higher in the credit squeeze.
· TSX -53.88pts after a late-day rally that saw investors buy beaten up energy stocks despite a big drop in oil prices
· Dow +401.35pts also pulled off a late day comeback as investors examined mixed economic and earnings data for clues about the health of the economy.
· Dollar +.45cto $84.63US
· Oil -$4.69to $69.85US per barrel Oil prices that looked like they just would keep rising fell to a level less than half the record high of US$147.27 they reached this summer-to a 14 mth low
· Gold -$34.00 to $801.50US per ounce The volatility extended to the precious metals sector as investors looking for safety dumped gold in favour of cash.(reuters)
Bank of Canada set to cut interest rates another half-point next week: RBC
By The Canadian Press TORONTO - The Bank of Canada will likely lower its policy interest rate by half a percentage point next week, the Royal Bank of Canada's economics department said Thursday.
Citing "a deteriorating outlook for the U.S. economy, falling commodity prices and persistent financial market volatility," RBC said downside risks are increasing for Canada's economic outlook.
An Update on the first CMHC auction…
----------------------------------------------------
Banks sell $5-billion of mortgages BOYD ERMAN Globe and Mail Update
Canadian banks sold $5-billion of mortgages to Canada Mortgage and Housing Corp. at a price that indicates the government will indeed make a big profit on its program to help banks jump-start lending.
CMHC will earn an average yield of 4.24 per cent on the mortgages it bought from banks Thursday. At the same time, the government sold $3-billion of five-year bonds to finance the purchase at a yield of 3.24 per cent. The 1 percentage point spread means the government will make $50-million a year in profit from the interest-rate differential on this batch of loans.
The federal government designed the program to help banks raise money for new loans, by taking old home loans off the balance sheet. The government plans more purchases totalling $20-billion, though many bankers would like Ottawa to ratchet up the program.
The loans the federal government is purchasing are insured, meaning the government shouldn't be putting taxpayer money at risk.
For the banks, getting funds at an interest rate of 4.24 per cent will be a big relief, given that interest rates from other methods of raising money are much higher in the credit squeeze.
Thursday, October 16, 2008
Financial Update
Don't panic: a market meltdown survival guide Financial Post Article below
· TSX -631.83pts
· Dow -733.08 pts –
· Dollar +1.91cto $84.18US.
· Oil -$4.09to $74.54US per barrel
· Gold -$.80 to $835.50US per ounce
Ottawa may make millions on CMHC plan for banks TARA PERKINS AND BOYD ERMAN
Globe and Mail
The federal government stands to make hundreds of millions of dollars off of its new program to buy mortgages from banks.
The government today is launching the first purchase of $5-billion of mortgages from Canada's banks as part of a program to buy $25-billion of home loans from banks to give them cash to make new loans.
It is taking advantage of its ability to borrow cheaply to buy the mortgages, which will pay a higher rate of interest. The difference will be the government's profit.
Ottawa doesn't have a forecast of its likely take, but given current market prices and the guidance that the Finance Department has provided to bankers on the prices to be paid, the federal government may expect to earn about $250-million a year. That could rise to $1-billion if the government increases the size of the mortgage purchases to $100-billion, as some in the banking sector suggest could be done.
Those potential profits are significant at a time when Ottawa projects its surplus will fall to $1.3-billion for the year ended March, 2010.
While government officials say any profit isn't the point, earning money on the program does drive home the message that Ottawa has been sending: The program isn't a bailout at taxpayers' expense.
“The goal is not to make money for the government,” said a Finance Department official who spoke on condition of anonymity. While the program is an efficient way to support lending in Canada by providing reliable funding to banks, it is important that the banks pay a competitive rate to tap into the funds, the official said.
“This is not a subsidy for banks.”
The credit crunch, which first erupted more than a year ago, has made it more expensive for banks to raise long-term funding to finance mortgages.
Finance Minister Jim Flaherty announced the initiative last Friday to have government-owned Canada Mortgage and Housing Corp. buy up loans from banks. The loans are solid, but by taking them off bank balance sheets in return for cash, the banks will theoretically be able to make new loans.
Ottawa has committed to buy up to $25-billion in total, but has not yet set the dates for the remaining purchases. Participants expect the government to carry out four more purchases of $5-billion each.
The purchases will be conducted by so-called reverse auction, where banks will essentially have to tell the government how much they will pay in the form of interest to move the loans off their balance sheets. The government will accept the most profitable bids.
Mortgage lenders can submit up to three bids for various amounts, but no one lender can sell more than $1.25-billion of loans to the government.
The government will establish a minimum acceptable yield, or interest rate. That minimum is expected to be above the yield on comparable five-year Canada Mortgage Bonds that CMHC sells to investors.
Banks are expected to place bids somewhere above the minimum, with more-stressed banks giving the government a better deal as they try to ensure they can raise cash.
John Manley, a former deputy prime minister and finance minister, said he was surprised Ottawa didn't pick up the program earlier.
“They make money on it, it increases liquidity in the system – why don't you answer the phone when people suggest things?” he said, pointing out that banks had been suggesting the program for some time.
One bank chief executive officer said that, even as the financial crisis worsens, Canada is in a unique position where it can establish programs to ease the flow of funds that don't put taxpayers on the hook. A shortage of government bonds and an excess of mortgages sitting on the banks' books make this an easy program to increase if necessary, he said.
Don't panic: a market meltdown survival guide
Joshua Zumbrun, Forbes Financial Post
Washington, D.C. -- It's been a bad week on Wall Street. The Dow has been avalanching downward, and the July to September summary of 401(k) statements in people's mailboxes look like black diamond ski slopes. It's a lousy time to be an investment banker, or a hedge fund manager, or planning a December retirement.
So Forbes.com asked some of the nation's foremost experts in financial crisis what people should do in a moment like this. Their message (and picture this in large, friendly letters): DON'T PANIC.
"Sit still," says Robert Aliber, a professor of international economics and finance at the University of Chicago. Mr. Aliber helped write the book on manias, panics and crashes. Literally. He co-authored the most recent edition of Charles Kindleberger's classic Manias, Panics and Crashes which chronicles and anatomizes crashes from tulip mania to the Great Depression to the dot-com bubble.
"By and large what we have is a liquidity crisis," says Mr. Aliber. Banks depend more than anyone on the constant availability of credit, and they're in a much worse position than they were a year ago. But should a freezing of liquidity cause a 40% drop for all stocks? A recession would cut into firms' profits but not by that much, says Mr. Aliber. That means there are a lot of cheap stocks out there.
In the long term, economists agree. Markets have always recovered in the past. But a famous bit of dismal science wisdom is that in the long term we are all dead. What about in the here and now?
"I would worry about a crash on Monday, but it could also be a huge buying opportunity," says Robert Shiller, the Yale economics professor who wrote Irrational Exuberance and The Subprime Solution and has made much of his career studying bubbles. Even if the majority of businesses are fundamentally OK, that doesn't stop people from overreacting. Irrational exuberance on the way up and irrational panic on the way down are all part of market psychology.
"One question is how big a role patriotism pays in their thinking. You don't want to be part of a market panic," says Mr. Shiller. "There's a moral issue in not pulling out."
There's also the issue of not being the sucker who sells at the very bottom of a market.
Stefan Nagel, an assistant professor of finance at Stanford recently co-wrote a paper on this very topic titled "Inexperienced Investors and Bubbles." Harvard's Robin Greenwood and Nagel found that inexperienced investors, in terms of age, are particularly likely to focus too heavily on recent returns.
After the lousy returns of the 1970s, inexperienced investors were more reluctant to invest in stocks. They missed out when stocks returned. After the boom years of the '90s, inexperienced investors were more likely to increase their stock exposure. When the dot-com bubble burst, they got burned.
"We don't have the latest numbers on the current situation yet, but, based on the historical experience, it seems likely that it is particularly inexperienced investors who are rushing for the exit at the moment," says Mr. Nagel.
It's another old market maxim, and it's as true on the way down as it is on the way up: Past performance is no guarantee of future results.
In the past four weeks, the Dow Jones industrial average has lost 26% of its value. In the past year, it's lost 40%. And despite comparisons to the Great Depression, the economists who talked to Forbes.com see nothing nearly that severe.
People don't panic forever. And compared with watching CNBC all day, the economists are optimists. That's the pain of being an academic, always the Cassandra: pessimistic when times are good (because there's always a fall coming) and optimistic when times are bad (because things always recover).
But they're not just optimistic because a crisis boosts book sales. "I borrowed money to buy stocks," confides Mr. Aliber, with a hint of excitement. "They've lost money since earlier in the week, but I'm going to make a bundle."
· TSX -631.83pts
· Dow -733.08 pts –
· Dollar +1.91cto $84.18US.
· Oil -$4.09to $74.54US per barrel
· Gold -$.80 to $835.50US per ounce
Ottawa may make millions on CMHC plan for banks TARA PERKINS AND BOYD ERMAN
Globe and Mail
The federal government stands to make hundreds of millions of dollars off of its new program to buy mortgages from banks.
The government today is launching the first purchase of $5-billion of mortgages from Canada's banks as part of a program to buy $25-billion of home loans from banks to give them cash to make new loans.
It is taking advantage of its ability to borrow cheaply to buy the mortgages, which will pay a higher rate of interest. The difference will be the government's profit.
Ottawa doesn't have a forecast of its likely take, but given current market prices and the guidance that the Finance Department has provided to bankers on the prices to be paid, the federal government may expect to earn about $250-million a year. That could rise to $1-billion if the government increases the size of the mortgage purchases to $100-billion, as some in the banking sector suggest could be done.
Those potential profits are significant at a time when Ottawa projects its surplus will fall to $1.3-billion for the year ended March, 2010.
While government officials say any profit isn't the point, earning money on the program does drive home the message that Ottawa has been sending: The program isn't a bailout at taxpayers' expense.
“The goal is not to make money for the government,” said a Finance Department official who spoke on condition of anonymity. While the program is an efficient way to support lending in Canada by providing reliable funding to banks, it is important that the banks pay a competitive rate to tap into the funds, the official said.
“This is not a subsidy for banks.”
The credit crunch, which first erupted more than a year ago, has made it more expensive for banks to raise long-term funding to finance mortgages.
Finance Minister Jim Flaherty announced the initiative last Friday to have government-owned Canada Mortgage and Housing Corp. buy up loans from banks. The loans are solid, but by taking them off bank balance sheets in return for cash, the banks will theoretically be able to make new loans.
Ottawa has committed to buy up to $25-billion in total, but has not yet set the dates for the remaining purchases. Participants expect the government to carry out four more purchases of $5-billion each.
The purchases will be conducted by so-called reverse auction, where banks will essentially have to tell the government how much they will pay in the form of interest to move the loans off their balance sheets. The government will accept the most profitable bids.
Mortgage lenders can submit up to three bids for various amounts, but no one lender can sell more than $1.25-billion of loans to the government.
The government will establish a minimum acceptable yield, or interest rate. That minimum is expected to be above the yield on comparable five-year Canada Mortgage Bonds that CMHC sells to investors.
Banks are expected to place bids somewhere above the minimum, with more-stressed banks giving the government a better deal as they try to ensure they can raise cash.
John Manley, a former deputy prime minister and finance minister, said he was surprised Ottawa didn't pick up the program earlier.
“They make money on it, it increases liquidity in the system – why don't you answer the phone when people suggest things?” he said, pointing out that banks had been suggesting the program for some time.
One bank chief executive officer said that, even as the financial crisis worsens, Canada is in a unique position where it can establish programs to ease the flow of funds that don't put taxpayers on the hook. A shortage of government bonds and an excess of mortgages sitting on the banks' books make this an easy program to increase if necessary, he said.
Don't panic: a market meltdown survival guide
Joshua Zumbrun, Forbes Financial Post
Washington, D.C. -- It's been a bad week on Wall Street. The Dow has been avalanching downward, and the July to September summary of 401(k) statements in people's mailboxes look like black diamond ski slopes. It's a lousy time to be an investment banker, or a hedge fund manager, or planning a December retirement.
So Forbes.com asked some of the nation's foremost experts in financial crisis what people should do in a moment like this. Their message (and picture this in large, friendly letters): DON'T PANIC.
"Sit still," says Robert Aliber, a professor of international economics and finance at the University of Chicago. Mr. Aliber helped write the book on manias, panics and crashes. Literally. He co-authored the most recent edition of Charles Kindleberger's classic Manias, Panics and Crashes which chronicles and anatomizes crashes from tulip mania to the Great Depression to the dot-com bubble.
"By and large what we have is a liquidity crisis," says Mr. Aliber. Banks depend more than anyone on the constant availability of credit, and they're in a much worse position than they were a year ago. But should a freezing of liquidity cause a 40% drop for all stocks? A recession would cut into firms' profits but not by that much, says Mr. Aliber. That means there are a lot of cheap stocks out there.
In the long term, economists agree. Markets have always recovered in the past. But a famous bit of dismal science wisdom is that in the long term we are all dead. What about in the here and now?
"I would worry about a crash on Monday, but it could also be a huge buying opportunity," says Robert Shiller, the Yale economics professor who wrote Irrational Exuberance and The Subprime Solution and has made much of his career studying bubbles. Even if the majority of businesses are fundamentally OK, that doesn't stop people from overreacting. Irrational exuberance on the way up and irrational panic on the way down are all part of market psychology.
"One question is how big a role patriotism pays in their thinking. You don't want to be part of a market panic," says Mr. Shiller. "There's a moral issue in not pulling out."
There's also the issue of not being the sucker who sells at the very bottom of a market.
Stefan Nagel, an assistant professor of finance at Stanford recently co-wrote a paper on this very topic titled "Inexperienced Investors and Bubbles." Harvard's Robin Greenwood and Nagel found that inexperienced investors, in terms of age, are particularly likely to focus too heavily on recent returns.
After the lousy returns of the 1970s, inexperienced investors were more reluctant to invest in stocks. They missed out when stocks returned. After the boom years of the '90s, inexperienced investors were more likely to increase their stock exposure. When the dot-com bubble burst, they got burned.
"We don't have the latest numbers on the current situation yet, but, based on the historical experience, it seems likely that it is particularly inexperienced investors who are rushing for the exit at the moment," says Mr. Nagel.
It's another old market maxim, and it's as true on the way down as it is on the way up: Past performance is no guarantee of future results.
In the past four weeks, the Dow Jones industrial average has lost 26% of its value. In the past year, it's lost 40%. And despite comparisons to the Great Depression, the economists who talked to Forbes.com see nothing nearly that severe.
People don't panic forever. And compared with watching CNBC all day, the economists are optimists. That's the pain of being an academic, always the Cassandra: pessimistic when times are good (because there's always a fall coming) and optimistic when times are bad (because things always recover).
But they're not just optimistic because a crisis boosts book sales. "I borrowed money to buy stocks," confides Mr. Aliber, with a hint of excitement. "They've lost money since earlier in the week, but I'm going to make a bundle."
Wednesday, October 15, 2008
Financial Update
TSX +890.50pts The benchmark index soared more than 1,600 points, or 18%, to its biggest gain ever shortly after markets opened, following big rises on world stock markets Monday as investor jitters about the stability of the financial system eased.
· Dow -76.62 pts – Initially up, markets cheered a U.S. plan to inject $250b into banks, following similar measures in Europe, a move designed to get banks lending to each other again.-ending down as investors focused on a dismal outlook for earnings and the economy
· Dollar +1.40to $86.09US. Strengthening prices for some commodities, such as copper, and a softening U.S. dollar energized the staggering loonie
· Oil -2.56to $78.63US per barrel
· Gold -$2.60 to $836.30US per ounce
Canadian government unlikely to follow U.S. lead and buy financial shares
By David Friend, The Canadian Press
TORONTO - Canada's government is unlikely to buy shares in the country's domestic banks because they are in much better shape than their American and European counterparts, which have required massive assistance from their governments, market observers say.
National Bank analyst Robert Sedran said Tuesday that Canadian banks have emerged relatively unscathed by the U.S. subprime problems because of more conservative lending practices.
"The banks in Canada have strong balance sheets and are doing fine," he said Tuesday in a phone interview.
However, Sedran said there is a need to ensure that Canadian banks aren't put at a disadvantage by other countries injecting capital into their local institutions, such as the $250-billion share purchase plan unveiled by George W. Bush.
On Tuesday, Bush said the U.S. government would buy shares in the big American banks as part of the $700-billion bailout package designed to jolt the economy back into growth.
The decision raised some concern that capital would flow towards government-backed banks because they appear more secure, and possibly away from institutions that don't have that guarantee. Sedran said government-backed risk has an appeal over corporate risk and could ultimately steal some confidence from the Canadian banking system.
"Capital is mobile in this global market," Sedran said. "You need to protect the Canadian banks from a competitive positioning perspective so that they're not unnecessarily disadvantaged."
However Laurence Booth, a professor at the Rotman School of Management, says Canadian banks are already better capitalized than the American and British banks.
And the federal government in Ottawa has made efforts to aid Canada's financial system without fully putting its hands into their operations.
On Friday, the Canadian government announced it will buy up to C$25 billion in residential mortgages to give the chartered banks more cash for loans. The first round of purchases is scheduled to be $5 billion on Thursday, two days after the federal election.
Finance Minister Jim Flaherty also said last week that the government is prepared to do "whatever we have to do" to protect Canada's financial system, though he declined to outline any plans.
However, some observers say Flaherty has only provided a vague outline of a plan, compared to other countries that have provided significant disclosure.
"Everyone else had all these details, specific plans - even numbers - and all we got from the Canadian side was that we'd make sure our banks aren't disadvantaged," said Chris Blumas, an analyst at Morningstar.
Prime Minister Stephen Harper has defended the way that the Conservative government handled the economic crisis and their insistence that the domestic economy is relatively stable compared to the United States.
"The No. 1 job of the next prime minister of Canada is to protect this country's economy - our earnings, savings, and jobs, at a time of global economic uncertainty," he told supporters on Monday at a rally in P.E.I.
Liberal party leader Stephane Dion has announced a 30-day plan to address the Canadian economy, and boost the struggling manufacturing sector in Ontario.
NDP Leader Jack Layton has suggested that Canadian banking regulations undergo a comprehensive review.
· Dow -76.62 pts – Initially up, markets cheered a U.S. plan to inject $250b into banks, following similar measures in Europe, a move designed to get banks lending to each other again.-ending down as investors focused on a dismal outlook for earnings and the economy
· Dollar +1.40to $86.09US. Strengthening prices for some commodities, such as copper, and a softening U.S. dollar energized the staggering loonie
· Oil -2.56to $78.63US per barrel
· Gold -$2.60 to $836.30US per ounce
Canadian government unlikely to follow U.S. lead and buy financial shares
By David Friend, The Canadian Press
TORONTO - Canada's government is unlikely to buy shares in the country's domestic banks because they are in much better shape than their American and European counterparts, which have required massive assistance from their governments, market observers say.
National Bank analyst Robert Sedran said Tuesday that Canadian banks have emerged relatively unscathed by the U.S. subprime problems because of more conservative lending practices.
"The banks in Canada have strong balance sheets and are doing fine," he said Tuesday in a phone interview.
However, Sedran said there is a need to ensure that Canadian banks aren't put at a disadvantage by other countries injecting capital into their local institutions, such as the $250-billion share purchase plan unveiled by George W. Bush.
On Tuesday, Bush said the U.S. government would buy shares in the big American banks as part of the $700-billion bailout package designed to jolt the economy back into growth.
The decision raised some concern that capital would flow towards government-backed banks because they appear more secure, and possibly away from institutions that don't have that guarantee. Sedran said government-backed risk has an appeal over corporate risk and could ultimately steal some confidence from the Canadian banking system.
"Capital is mobile in this global market," Sedran said. "You need to protect the Canadian banks from a competitive positioning perspective so that they're not unnecessarily disadvantaged."
However Laurence Booth, a professor at the Rotman School of Management, says Canadian banks are already better capitalized than the American and British banks.
And the federal government in Ottawa has made efforts to aid Canada's financial system without fully putting its hands into their operations.
On Friday, the Canadian government announced it will buy up to C$25 billion in residential mortgages to give the chartered banks more cash for loans. The first round of purchases is scheduled to be $5 billion on Thursday, two days after the federal election.
Finance Minister Jim Flaherty also said last week that the government is prepared to do "whatever we have to do" to protect Canada's financial system, though he declined to outline any plans.
However, some observers say Flaherty has only provided a vague outline of a plan, compared to other countries that have provided significant disclosure.
"Everyone else had all these details, specific plans - even numbers - and all we got from the Canadian side was that we'd make sure our banks aren't disadvantaged," said Chris Blumas, an analyst at Morningstar.
Prime Minister Stephen Harper has defended the way that the Conservative government handled the economic crisis and their insistence that the domestic economy is relatively stable compared to the United States.
"The No. 1 job of the next prime minister of Canada is to protect this country's economy - our earnings, savings, and jobs, at a time of global economic uncertainty," he told supporters on Monday at a rally in P.E.I.
Liberal party leader Stephane Dion has announced a 30-day plan to address the Canadian economy, and boost the struggling manufacturing sector in Ontario.
NDP Leader Jack Layton has suggested that Canadian banking regulations undergo a comprehensive review.
Tuesday, October 14, 2008
Financial Update
World stock markets soar Markets around the world sprung to life as nations expanded their efforts to save the world’s financial system. On Monday 5 central banks - including the U.S.
Federal Reserve and the European Central Bank - unveiled new measures to thaw frozen credit markets and bolster funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.
Today is Federal Election day in Canada-Take time from your busy day to VOTE!
· TSX -535.02pts Friday Last week, the TSX lost more than 16% of its value, one of the worst weeks ever for the Canadian market, on investor worries about falling commodity prices and a spreading economic recession. When trading resumes Tuesday, the Toronto market is expected to post major gains following the Wall Street jump.
· Dow -128pts Friday +936.42 pts Monday- storming back from last week's devastating losses, after major governments' plans to support the global banking system reassured distraught investors. by far outstripping its previous record one-day point gain, 499.19, set during the waning days of the dot-com boom..
· Dollar -2.59c to $87.28US. Friday
· Oil +3.49to $81.19US per barrel rebounding from a 13 mth low
· Gold -16.50 to $838.90US per ounce Gold rose in Europe on Monday as the US dollar weakened, boosting the precious metal's appeal as an alternative investment, and as oil prices climbed.
EU announces $2.3 trillion US bailout plan
Angela Charlton and Emma Vandore The Associated Press PARIS
European governments overcame their differences to put $2.3 trillion US on the line yesterday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis.
The pledges by six countries that use the euro and Britain helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.
The amount -- pledged by Germany, Britain, France, the Netherlands, Spain, Portugal and Austria -- dwarfs the $700 billion rescue package put together by U.S. President George W.
Bush's administration, although not all the European money will necessarily be spent.
It represented Europe's most unified response yet to the financial crisis, after weeks where European governments often acted at cross purposes and sniped at each other -- a piecemeal approach that failed to stop steep and frightening slides on financial markets.
"The time of each one for itself is fortunately over," French President Nicolas Sarkozy said, following a cabinet meeting that approved France's spending in the framework of the scheme.
"United Europe has pledged more than the United States," added the French leader, who has taken a lead in corralling European governments to act together.
The money pledged by European governments will not go into a collective pot. Instead, governments were deciding individually how much to commit to supporting their own banks under broad guidelines agreed at a summit on Sunday.
The sums are considered a maximum, and might not all be spent if the financial crisis eases.
About $341 billion of the European pledges was earmarked to be spent on recapitalizing banks by buying stakes.
The money pledges put a price tag on the package agreed to Sunday by the 15 countries that use the euro currency. They agreed to individually guarantee bank refinancing until the end of next year, rescue important failing banks through emergency cash injections and take other swift measures to encourage banks to lend to each other again.
Stocks markets rebounded yesterday after the European decision and other weekend efforts to find solutions to the financial crisis, which has crushed major banks in both the U.S. and Europe and battered stock exchanges worldwide.
Germany's DAX rose 518.14 points, or 11.4 per cent, to close at 5,062.45, while France's CAC-40 was up 355.01 points, or 11.2 per cent, at 3,531.50. Britain's FTSE 100 was 324.84 points, or 8.3 per cent, higher at 4,256.90, despite some hefty falls in the banks that have accepted government help.
Also helping markets was a joint move by the U.S. Federal Reserve, the European Central Bank and the Swiss National Bank to provide unlimited short-term credit in U.S. dollars to financial institutions. The Bank of Japan said it was considering similar measures.
Europe's biggest economy, Germany, put together a rescue package worth as much as $671 billion to shore up the country's financial system.
Sarkozy said the French government would provide up to $491 billion to help banks, most of that in guarantees for bank refinancing. The Netherlands put up $273 billion to guarantee interbank loans.
Austria's government offered up to $116 billion. Spain said it would guarantee up to $135 billion in a bank bond issuance this year. Portugal guaranteed $27 billion -- nearly 12 per cent of annual GDP -- to encourage Portuguese banks to lend to each other.
Italy did not earmark a specific amount but Finance Minister Giulio Tremonti told reporters the government would offer "as much as necessary."
The European moves are modelled on Britain's $88-billion plan to partly nationalize major banks. Prime Minister Gordon Brown has also promised to guarantee a further $438 billion worth of interbank loans to restore confidence in the financial sector.
The head of the International Monetary Fund welcomed the European decision despite the high price it is expected to impose on state budgets.
The Associated Press
Federal Reserve and the European Central Bank - unveiled new measures to thaw frozen credit markets and bolster funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.
Today is Federal Election day in Canada-Take time from your busy day to VOTE!
· TSX -535.02pts Friday Last week, the TSX lost more than 16% of its value, one of the worst weeks ever for the Canadian market, on investor worries about falling commodity prices and a spreading economic recession. When trading resumes Tuesday, the Toronto market is expected to post major gains following the Wall Street jump.
· Dow -128pts Friday +936.42 pts Monday- storming back from last week's devastating losses, after major governments' plans to support the global banking system reassured distraught investors. by far outstripping its previous record one-day point gain, 499.19, set during the waning days of the dot-com boom..
· Dollar -2.59c to $87.28US. Friday
· Oil +3.49to $81.19US per barrel rebounding from a 13 mth low
· Gold -16.50 to $838.90US per ounce Gold rose in Europe on Monday as the US dollar weakened, boosting the precious metal's appeal as an alternative investment, and as oil prices climbed.
EU announces $2.3 trillion US bailout plan
Angela Charlton and Emma Vandore The Associated Press PARIS
European governments overcame their differences to put $2.3 trillion US on the line yesterday in guarantees and other emergency measures to save the banking system in their most unified response yet to the global financial crisis.
The pledges by six countries that use the euro and Britain helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.
The amount -- pledged by Germany, Britain, France, the Netherlands, Spain, Portugal and Austria -- dwarfs the $700 billion rescue package put together by U.S. President George W.
Bush's administration, although not all the European money will necessarily be spent.
It represented Europe's most unified response yet to the financial crisis, after weeks where European governments often acted at cross purposes and sniped at each other -- a piecemeal approach that failed to stop steep and frightening slides on financial markets.
"The time of each one for itself is fortunately over," French President Nicolas Sarkozy said, following a cabinet meeting that approved France's spending in the framework of the scheme.
"United Europe has pledged more than the United States," added the French leader, who has taken a lead in corralling European governments to act together.
The money pledged by European governments will not go into a collective pot. Instead, governments were deciding individually how much to commit to supporting their own banks under broad guidelines agreed at a summit on Sunday.
The sums are considered a maximum, and might not all be spent if the financial crisis eases.
About $341 billion of the European pledges was earmarked to be spent on recapitalizing banks by buying stakes.
The money pledges put a price tag on the package agreed to Sunday by the 15 countries that use the euro currency. They agreed to individually guarantee bank refinancing until the end of next year, rescue important failing banks through emergency cash injections and take other swift measures to encourage banks to lend to each other again.
Stocks markets rebounded yesterday after the European decision and other weekend efforts to find solutions to the financial crisis, which has crushed major banks in both the U.S. and Europe and battered stock exchanges worldwide.
Germany's DAX rose 518.14 points, or 11.4 per cent, to close at 5,062.45, while France's CAC-40 was up 355.01 points, or 11.2 per cent, at 3,531.50. Britain's FTSE 100 was 324.84 points, or 8.3 per cent, higher at 4,256.90, despite some hefty falls in the banks that have accepted government help.
Also helping markets was a joint move by the U.S. Federal Reserve, the European Central Bank and the Swiss National Bank to provide unlimited short-term credit in U.S. dollars to financial institutions. The Bank of Japan said it was considering similar measures.
Europe's biggest economy, Germany, put together a rescue package worth as much as $671 billion to shore up the country's financial system.
Sarkozy said the French government would provide up to $491 billion to help banks, most of that in guarantees for bank refinancing. The Netherlands put up $273 billion to guarantee interbank loans.
Austria's government offered up to $116 billion. Spain said it would guarantee up to $135 billion in a bank bond issuance this year. Portugal guaranteed $27 billion -- nearly 12 per cent of annual GDP -- to encourage Portuguese banks to lend to each other.
Italy did not earmark a specific amount but Finance Minister Giulio Tremonti told reporters the government would offer "as much as necessary."
The European moves are modelled on Britain's $88-billion plan to partly nationalize major banks. Prime Minister Gordon Brown has also promised to guarantee a further $438 billion worth of interbank loans to restore confidence in the financial sector.
The head of the International Monetary Fund welcomed the European decision despite the high price it is expected to impose on state budgets.
The Associated Press
Friday, October 10, 2008
Financial Update
Flaherty announces measures to stabilize lending industry
CBC News
Finance Minister Jim Flaherty on Friday announced new measures to ease pressure on financial institutions and stabilize the lending market, in an attempt to assuage concerns over the burgeoning global financial crisis.
Flaherty told reporters in Ottawa his government would buy $25 billion in insured mortgage pools from financial institutions for the purpose of maintaining long-term credit.
"This program is an efficient cost-effective and safe way to support lending in Canada that comes at no fiscal cost to taxpayers," he said.
Flaherty said the action would "make loans and mortgages more available and more affordable for ordinary Canadians and businesses."
On Thursday, Flaherty said he had no doubts over the health of Canada's banks, adding the government has no plan to undertake a massive government bailout similar to those mounted by the United States and other Western countries.
CBC News
Finance Minister Jim Flaherty on Friday announced new measures to ease pressure on financial institutions and stabilize the lending market, in an attempt to assuage concerns over the burgeoning global financial crisis.
Flaherty told reporters in Ottawa his government would buy $25 billion in insured mortgage pools from financial institutions for the purpose of maintaining long-term credit.
"This program is an efficient cost-effective and safe way to support lending in Canada that comes at no fiscal cost to taxpayers," he said.
Flaherty said the action would "make loans and mortgages more available and more affordable for ordinary Canadians and businesses."
On Thursday, Flaherty said he had no doubts over the health of Canada's banks, adding the government has no plan to undertake a massive government bailout similar to those mounted by the United States and other Western countries.
Financial Update
Stocks tumble in classic 'bear market' pattern
*Bear MarketA market in which stock prices are falling. The rule of thumb is at least 20%.
However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely investor psychology will turn from optimism to the pessimism that usually accompanies a bear market
Within bull markets you buy on the dips but in a bear market you sell on the rallies and that's what we're seeing. So the bear market mentality is still very firmly entrenched and still gripping the markets(CP)
· TSX -456.13pts
· Dow -678.91pts.exactly 1 yr after hitting a record high, the Dow moved below the 9,000 mark for the first time since Aug,03, led by sharp declines in financial and energy stocks
· Dollar -1.78c to $87.28US.
· Oil -$2.36 to $88.95US per barrel
· Gold -20.00 to $883.10US per ounce
OTTAWA -- Canada's unemployment rate was unchanged at 6.1% in September, as a record 107,000 jobs were added to the economy, Statistics Canada said Friday.
Last month's job growth was the biggest increase in 30 years, and defied economists' expectations for an actual decline in employment -- following a drop in July and just small gain in August.
There were 96,600 part-time jobs added in September and 10,300 full- time positions.
"Five provinces accounted for the overall employment increase this September: Ontario, Quebec, Alberta, Saskatchewan and Nova Scotia," Statistics Canada said. "There were widespread gains by industry in September.
"The largest increase in employment came from health care and social assistance, followed by business, building and other support services, and manufacturing. Employment also increased in transportation and warehousing, agriculture and construction."
*Bear MarketA market in which stock prices are falling. The rule of thumb is at least 20%.
However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely investor psychology will turn from optimism to the pessimism that usually accompanies a bear market
Within bull markets you buy on the dips but in a bear market you sell on the rallies and that's what we're seeing. So the bear market mentality is still very firmly entrenched and still gripping the markets(CP)
· TSX -456.13pts
· Dow -678.91pts.exactly 1 yr after hitting a record high, the Dow moved below the 9,000 mark for the first time since Aug,03, led by sharp declines in financial and energy stocks
· Dollar -1.78c to $87.28US.
· Oil -$2.36 to $88.95US per barrel
· Gold -20.00 to $883.10US per ounce
OTTAWA -- Canada's unemployment rate was unchanged at 6.1% in September, as a record 107,000 jobs were added to the economy, Statistics Canada said Friday.
Last month's job growth was the biggest increase in 30 years, and defied economists' expectations for an actual decline in employment -- following a drop in July and just small gain in August.
There were 96,600 part-time jobs added in September and 10,300 full- time positions.
"Five provinces accounted for the overall employment increase this September: Ontario, Quebec, Alberta, Saskatchewan and Nova Scotia," Statistics Canada said. "There were widespread gains by industry in September.
"The largest increase in employment came from health care and social assistance, followed by business, building and other support services, and manufacturing. Employment also increased in transportation and warehousing, agriculture and construction."
Thursday, October 9, 2008
Financial Update
Close, but no recession for Canada, forecasters agree The International Monetary Fund, projected that Canada next year will have the fastest growing economy of the G7 major industrial countries, at 1.2%, (article below)
Home building stays resilient in Canada Housing construction in September moved unexpectedly higher, to an annualized rate of 217,600 new units, said CMHC. (Article attached)
· TSX +225.84pts after a coordinated move by central banks, including the Bank of Canada, the U.S. Federal Reserve, and for the first time China, to cut short-term interest rates by half a % point in hopes of preventing a further financial crisis
· Dow -189.01pts. U.S. stocks closed down for a 6th straight session after heavy and volatile trade amid uncertainty about whether the lower interest rates would avert recession. The equity sell-off has destroyed some $12 trillion of global stock market wealth in the past 12 months, according to the market capitalization loss on MSCI's main world equity index-$4.6 trillion in the past 3 weeks
· Dollar -1.25c to $89.06US. falling below .90c for the first time since Apr 07
· Oil -$1.11 to $88.95US per barrel
· Gold +24.70 to $903.10US per ounce
Close, but no recession, at least in Canada. Eric Beauchesne, Canwest News Service
That was the good news amid all the bad in economic forecasts Wednesday, including declarations by several that the U.S. economy is already in recession and one that without further action by authorities the U.S. faces a 1930s style depression.
The forecasts -- by a bank and a think-tank in Canada, and the International Monetary Fund in Washington and think tanks in New York -- were released as North American markets were gyrating between triple-digit losses and gains in volatile trading in the wake of a co-ordinated round of deep half-point interest rate cuts by half a dozen central banks, including the U.S.
Federal Reserve and the Bank of Canada.
"There are pre-depression conditions," New York-based High Frequency Economics in a report in which it joined other analysts in predicting a further half-point cut in U.S. rates later this month, and in which it called for near zero interest rates as well as a more activity fiscal policy by the U.S., such as a major increase in spending on infrastructure there as offering the most effective antidote.
Here, Bay Street's benchmark TSX eventually ended up with a gain of more than 225 points to back over 10,000, while the blue-chip Dow Jones industrial average in the final minutes plunged back into the red to end the day down nearly 190 points, and remaining well below the 10,000 mark.
The Canadian dollar, meanwhile, continued to lose ground to the U.S. dollar, slipping below 90 cents US for the first time in 18 months to close at 89.06 cents US as oil sank below US$89.
Finance Minister Jim Flaherty -- in comments to reporters in Toronto and a statement later -- applauded the united response of central banks to the deepening financial crisis.
"This significant action will provide timely support for the Canadian economy," Mr. Flaherty said, adding he will work with his G7 counterparts and central bankers at their meeting this week in Washington for further co-ordination in dealing with the crisis.
However, Canadian commercial banks -- instead of matching the Bank of Canada interest rate cut as they would normally do -- passed on only half the rate relief to their customers, and then only after a delay of several hours, with quarter-point reductions in their prime rates to 4.5% from 4.75%. That's the rate traditionally offered to blue-chip borrowers, and the rate to which other floating consumer loans and mortgages are tied.
"Continuing market turmoil has steadily driven up the cost of borrowing for financial institutions," said Tim Hockey, CEO of TD Canada Trust, which was the first financial institution to cut its prime rate by a quarter point. "This makes it challenging to match the Bank of Canada rate cut at this time."
National Bank of Canada economist Paul-Andre Pinsonnault, in warning that the commercial banks may not match the central bank rate cut, noted that the spread between the prime rate and a measure of what banks pay for funds has narrowed by about a third to 1.16 percentage points from a historical norm of 1.64.
The rate cuts by central banks in Asia, Europe and North America, as well as a £50-billion ($96-billion) financial sector rescue by the British government, came as forecasters were slashing their forecasts for economic growth around the world and here, although all predicted Canada will avoid recession.
RBC, Canada's largest financial institution, said the "persistent turmoil in financial markets and disappointing economic trends over the past two quarters" prompted it to cut its forecast for growth here to 0.9% from 1.4%, and project only a modest rebound to 1.5% in 2009.
"The U.S. economy now appears to be in recession with Europe, the U.K. and Japan also sinking fast," RBC said. "While Canada is in better position with its financial sector less heavily impaired, overall growth will be substantially weaker than previously anticipated."
"The continued weakness in the U.S. economy is expected to dampen growth in Canada," said RBC's chief economist Craig Wright. "However, this pressure on our growth will be tempered by strong commodity prices which are contributing to robust export revenues and providing support to Canadian domestic spending via a boost to incomes."
Canada has also enjoyed strong growth in national income, which have boosted consumer spending, business investment and purchases of imports and is benefitting from what are still relatively high commodity prices, it said.
Job growth has also slowed and Canada's housing market is cooling, but it is not expected to suffer a U.S. style meltdown as Canadian mortgage markets did not see the excesses that afflicted the U.S. housing sector, it said.
Global Insight, an economic think-tank, also cut its growth projections for Canada while declaring the U.S. is in recession.
"The U.S. economy is forecast to now be in recession," it said, adding that it's no longer just a "mild" recession and projecting the contraction in that giant economy will run from the third quarter of this year through the first quarter of next year.
Meanwhile, it cut its forecast for growth in Canada's economy this year to 0.6% from 0.8% and next year to 0.9% from 1.7%.
However, there will not be two consecutive quarters in which the economy contracts.
"While a recession is most often defined as two consecutive quarters of negative growth, we should not take too much comfort in the ‘no recession' forecast," it added. "This is a very weak forecast of economic growth."
The International Monetary Fund, meanwhile, projected that Canada next year will have the fastest growing economy of the G7 major industrial countries, at 1.2%, despite virtually no growth of just 0.1% in the U.S., Canada's main export market.
Home building stays resilient in Canada Housing construction in September moved unexpectedly higher, to an annualized rate of 217,600 new units, said CMHC. (Article attached)
· TSX +225.84pts after a coordinated move by central banks, including the Bank of Canada, the U.S. Federal Reserve, and for the first time China, to cut short-term interest rates by half a % point in hopes of preventing a further financial crisis
· Dow -189.01pts. U.S. stocks closed down for a 6th straight session after heavy and volatile trade amid uncertainty about whether the lower interest rates would avert recession. The equity sell-off has destroyed some $12 trillion of global stock market wealth in the past 12 months, according to the market capitalization loss on MSCI's main world equity index-$4.6 trillion in the past 3 weeks
· Dollar -1.25c to $89.06US. falling below .90c for the first time since Apr 07
· Oil -$1.11 to $88.95US per barrel
· Gold +24.70 to $903.10US per ounce
Close, but no recession, at least in Canada. Eric Beauchesne, Canwest News Service
That was the good news amid all the bad in economic forecasts Wednesday, including declarations by several that the U.S. economy is already in recession and one that without further action by authorities the U.S. faces a 1930s style depression.
The forecasts -- by a bank and a think-tank in Canada, and the International Monetary Fund in Washington and think tanks in New York -- were released as North American markets were gyrating between triple-digit losses and gains in volatile trading in the wake of a co-ordinated round of deep half-point interest rate cuts by half a dozen central banks, including the U.S.
Federal Reserve and the Bank of Canada.
"There are pre-depression conditions," New York-based High Frequency Economics in a report in which it joined other analysts in predicting a further half-point cut in U.S. rates later this month, and in which it called for near zero interest rates as well as a more activity fiscal policy by the U.S., such as a major increase in spending on infrastructure there as offering the most effective antidote.
Here, Bay Street's benchmark TSX eventually ended up with a gain of more than 225 points to back over 10,000, while the blue-chip Dow Jones industrial average in the final minutes plunged back into the red to end the day down nearly 190 points, and remaining well below the 10,000 mark.
The Canadian dollar, meanwhile, continued to lose ground to the U.S. dollar, slipping below 90 cents US for the first time in 18 months to close at 89.06 cents US as oil sank below US$89.
Finance Minister Jim Flaherty -- in comments to reporters in Toronto and a statement later -- applauded the united response of central banks to the deepening financial crisis.
"This significant action will provide timely support for the Canadian economy," Mr. Flaherty said, adding he will work with his G7 counterparts and central bankers at their meeting this week in Washington for further co-ordination in dealing with the crisis.
However, Canadian commercial banks -- instead of matching the Bank of Canada interest rate cut as they would normally do -- passed on only half the rate relief to their customers, and then only after a delay of several hours, with quarter-point reductions in their prime rates to 4.5% from 4.75%. That's the rate traditionally offered to blue-chip borrowers, and the rate to which other floating consumer loans and mortgages are tied.
"Continuing market turmoil has steadily driven up the cost of borrowing for financial institutions," said Tim Hockey, CEO of TD Canada Trust, which was the first financial institution to cut its prime rate by a quarter point. "This makes it challenging to match the Bank of Canada rate cut at this time."
National Bank of Canada economist Paul-Andre Pinsonnault, in warning that the commercial banks may not match the central bank rate cut, noted that the spread between the prime rate and a measure of what banks pay for funds has narrowed by about a third to 1.16 percentage points from a historical norm of 1.64.
The rate cuts by central banks in Asia, Europe and North America, as well as a £50-billion ($96-billion) financial sector rescue by the British government, came as forecasters were slashing their forecasts for economic growth around the world and here, although all predicted Canada will avoid recession.
RBC, Canada's largest financial institution, said the "persistent turmoil in financial markets and disappointing economic trends over the past two quarters" prompted it to cut its forecast for growth here to 0.9% from 1.4%, and project only a modest rebound to 1.5% in 2009.
"The U.S. economy now appears to be in recession with Europe, the U.K. and Japan also sinking fast," RBC said. "While Canada is in better position with its financial sector less heavily impaired, overall growth will be substantially weaker than previously anticipated."
"The continued weakness in the U.S. economy is expected to dampen growth in Canada," said RBC's chief economist Craig Wright. "However, this pressure on our growth will be tempered by strong commodity prices which are contributing to robust export revenues and providing support to Canadian domestic spending via a boost to incomes."
Canada has also enjoyed strong growth in national income, which have boosted consumer spending, business investment and purchases of imports and is benefitting from what are still relatively high commodity prices, it said.
Job growth has also slowed and Canada's housing market is cooling, but it is not expected to suffer a U.S. style meltdown as Canadian mortgage markets did not see the excesses that afflicted the U.S. housing sector, it said.
Global Insight, an economic think-tank, also cut its growth projections for Canada while declaring the U.S. is in recession.
"The U.S. economy is forecast to now be in recession," it said, adding that it's no longer just a "mild" recession and projecting the contraction in that giant economy will run from the third quarter of this year through the first quarter of next year.
Meanwhile, it cut its forecast for growth in Canada's economy this year to 0.6% from 0.8% and next year to 0.9% from 1.7%.
However, there will not be two consecutive quarters in which the economy contracts.
"While a recession is most often defined as two consecutive quarters of negative growth, we should not take too much comfort in the ‘no recession' forecast," it added. "This is a very weak forecast of economic growth."
The International Monetary Fund, meanwhile, projected that Canada next year will have the fastest growing economy of the G7 major industrial countries, at 1.2%, despite virtually no growth of just 0.1% in the U.S., Canada's main export market.
Tuesday, October 7, 2008
Financial Update
Panic hammers markets- suffers a dead cat bounce "It's a wait-and-see kind of game, and extreme volatility ... and I mean extreme," said Lex Kerkovius, senior research analyst at McLean & Partners Wealth Management in Calgary.
· TSX -572.93pts to 10,230 Stocks fell hard right off the open (initially down -1200 pts)as the emergency rescue of two big European banks and a move by several European governments to guarantee bank deposits ignited fears of a global recession- its biggest intraday % loss since the market crash of October 1987 and its biggest point loss ever (Reuters)
· Dow -369.88pts. A seemingly endless parade of bleak U.S. economic data also served to push New York markets lower. The Dow Jones lost 817.75 points over the week
· Dollar -1.48c to $90.98US.
· Oil -$6.07 to $87.81US per barrel
· Gold +33.80 to $862.70US per ounce
Big 5 foresee little growth
Different from a ‘typical recession,’ Canadian economists say
By David Frieson
Economists from Canada's Big Five banks expect little or no growth in the near future, warning yesterday that the domestic economy's current gloom will deepen into something worse than a recession.
The word "recession'' wouldn't describe the deep structural problems affecting everything from the U.S. housing sector to the Canadian oil industry, said Bank of Nova Scotia chief economist Warren Jestin.
"You have to invent a new word to describe what we're in now,'' he said after the banks presented their perspectives at the Economic Club.
"It's being driven through the financial markets into the real economy. All of those things suggest that it's entirely different than what you might expect from a typical recession.''
In their most recent economics forecast, Scotiabank economists predict recessions for both the U.S. and Canada, economic slides that will require central bankers in both countries to cut interest rates by at least a full percentage point.
All agree that a slide in commodity prices bodes ill for the Canadian economy, which is heavily dependent on the production and export of oil and gas, metals and minerals.
Drops in oil and metals prices have hit the already teetering Toronto Stock Exchange hard.
Yesterday it took an agonizing 1,200-point fall before recovering somewhat to sit around 700 points in the red as oil dropped to trade around the $90 US mark.
And Bank of Montreal economist Doug Porter said prices will continue to take a beating over the next year, dragging Western Canada's formerly booming economy in particular down with them.
"You're going to be seeing Western Canada come back down to the rest of us with a thud, especially if commodity prices keep doing what they've done in the last three months,'' he said.
"It's almost as if the markets are pricing in a much harder landing for commodity prices. I think that's reasonable if you don't get some thawing in the credit markets relatively soon.''
Porter said the direction of Canada's economy depends on whether the financial-sector troubles in the United States start to settle down.
The Canadian Press
· TSX -572.93pts to 10,230 Stocks fell hard right off the open (initially down -1200 pts)as the emergency rescue of two big European banks and a move by several European governments to guarantee bank deposits ignited fears of a global recession- its biggest intraday % loss since the market crash of October 1987 and its biggest point loss ever (Reuters)
· Dow -369.88pts. A seemingly endless parade of bleak U.S. economic data also served to push New York markets lower. The Dow Jones lost 817.75 points over the week
· Dollar -1.48c to $90.98US.
· Oil -$6.07 to $87.81US per barrel
· Gold +33.80 to $862.70US per ounce
Big 5 foresee little growth
Different from a ‘typical recession,’ Canadian economists say
By David Frieson
Economists from Canada's Big Five banks expect little or no growth in the near future, warning yesterday that the domestic economy's current gloom will deepen into something worse than a recession.
The word "recession'' wouldn't describe the deep structural problems affecting everything from the U.S. housing sector to the Canadian oil industry, said Bank of Nova Scotia chief economist Warren Jestin.
"You have to invent a new word to describe what we're in now,'' he said after the banks presented their perspectives at the Economic Club.
"It's being driven through the financial markets into the real economy. All of those things suggest that it's entirely different than what you might expect from a typical recession.''
In their most recent economics forecast, Scotiabank economists predict recessions for both the U.S. and Canada, economic slides that will require central bankers in both countries to cut interest rates by at least a full percentage point.
All agree that a slide in commodity prices bodes ill for the Canadian economy, which is heavily dependent on the production and export of oil and gas, metals and minerals.
Drops in oil and metals prices have hit the already teetering Toronto Stock Exchange hard.
Yesterday it took an agonizing 1,200-point fall before recovering somewhat to sit around 700 points in the red as oil dropped to trade around the $90 US mark.
And Bank of Montreal economist Doug Porter said prices will continue to take a beating over the next year, dragging Western Canada's formerly booming economy in particular down with them.
"You're going to be seeing Western Canada come back down to the rest of us with a thud, especially if commodity prices keep doing what they've done in the last three months,'' he said.
"It's almost as if the markets are pricing in a much harder landing for commodity prices. I think that's reasonable if you don't get some thawing in the credit markets relatively soon.''
Porter said the direction of Canada's economy depends on whether the financial-sector troubles in the United States start to settle down.
The Canadian Press
Monday, October 6, 2008
Financial Update
TSX ends week of carnage
"Fear makes people perceive more risk and make risk-adverse choices," says Jennifer Lerner, director of the Laboratory for Decision Research at Harvard University.. Translation: sell, sell sell.
· TSX -97.10pts to 10,803 after a $700b bailout plan for U.S. banks passed Congress, ending a dismal week that saw two separate 800-plus point declines on the Toronto Stock Exchange. The Toronto market ended down 1,322.64 points or 11% last week - an equity loss of $150 billion - after tumbling oil prices and revised earnings estimates for fertilizer makers sent commodity stocks plunging. (Reuters)
· Dow -157.47pts. A seemingly endless parade of bleak U.S. economic data also served to push New York markets lower. The Dow Jones lost 817.75 points over the week
· Dollar -.14c to $92.60US.
· Oil -.09 to $93.88US per barrel
· Gold -10.10 to $828.90US per ounce
Two banks to manage mortgage rescue deals
WASHINGTON— The U.S. reasury Department has picked two financial institutions to manage a program it unveiled last month to provide support for beleaguered mortgage-backed securities. The U.S. government announced yesterday it was hiring Barclays Global Investors of San Francisco and State Street Bank and Trust Co. of Boston to manage its program to purchase mortgage-backed securities
Bank rescues unravel
Eoin Callan, Financial Post
Carefully-woven government plans to rescue banks deemed too big to fail came apart at the seams yesterday as private institutions refused to back deals brokered by politicians.
Berlin admitted it had a "mess" on its hands as banks backed out of a deal to save one of the country's largest financial institutions.
In New York, a merger to create the biggest retail branch network in America descended deeper into chaos as Citigroup secured a court injunction blocking the takeover of Wachovia by Wells Fargo, pitting the largest banks in the country against each other.
The rifts further threaten the stability of the international banking network and came as world leaders struggled to divine a common approach to the unprecedented disaster unfolding in the financial system. European leaders emerged from crisis talks in Paris led by Nicholas Sarkozy with conflicting plans about how to save their country's banks as agreement on a continent-wide strategy eluded them.
Governments are widely intent on preventing further bank collapses after the failure of U.S. institutions caused shockwaves across the world. But they are divided and somewhat uncertain over how to achieve this goal as they confront corporate calamities for which no play book exists.
The discord comes as the deepening international crisis increasingly takes its toll on Canada, putting the country's banking system under strain and squeezing corporate loans.
The Bank of Canada has been forced to take escalating measures to improve liquidity by pumping billions into the country's financial network and agreeing to accept collateral from banks that no one else wants.
A freeze up in financing for securitized commercial lending threatens to make loans for businesses harder to get, while mortgage conditions begin to tighten and a risk develops that consumer loans could be curtailed.
The White House said it would act quickly to relieve pressure in the banking system through speedy implementation of a $700-billion bail-out package signed by U.S. President George W. Bush. But an earlier federally-brokered deal to rescue Wachovia remained in limbo as New-York Justice Charles Ramos granted a request from Citigroup to temporarily block the sale of Wachovia to Wells Fargo.
Citigroup has won the right to continue exclusive talks with Wachovia about a takeover that has already been signed off and financially backed by Washington, after the failing U.S. lender secretly made a conflicting agreement to be bought by Wells Fargo for 80 per cent more.
There were also fissures between banks in the effort to save Germany's Hypo Real Estate Holding, as a government-sponsored $49 billion rescue collapsed as banks withdrew their support in the face of a rising tab.
"We will see how we can clean up the mess that has been presented to us," said a German finance ministry official.
German Chancellor Angela Merkel was among the leaders who gathered in Paris for crisis talks also attended by Britain, Italy and the European Central Bank.
French President Nicolas Sarkozy indicated there was unanimity on the need to save banks from collapse.
"We are taking a solemn commitment to back banking and financial institutions," he said.
But there was no apparent agreement on a Europe-wide bail-out plan or how cross-border collapses would be handled.
"Fear makes people perceive more risk and make risk-adverse choices," says Jennifer Lerner, director of the Laboratory for Decision Research at Harvard University.. Translation: sell, sell sell.
· TSX -97.10pts to 10,803 after a $700b bailout plan for U.S. banks passed Congress, ending a dismal week that saw two separate 800-plus point declines on the Toronto Stock Exchange. The Toronto market ended down 1,322.64 points or 11% last week - an equity loss of $150 billion - after tumbling oil prices and revised earnings estimates for fertilizer makers sent commodity stocks plunging. (Reuters)
· Dow -157.47pts. A seemingly endless parade of bleak U.S. economic data also served to push New York markets lower. The Dow Jones lost 817.75 points over the week
· Dollar -.14c to $92.60US.
· Oil -.09 to $93.88US per barrel
· Gold -10.10 to $828.90US per ounce
Two banks to manage mortgage rescue deals
WASHINGTON— The U.S. reasury Department has picked two financial institutions to manage a program it unveiled last month to provide support for beleaguered mortgage-backed securities. The U.S. government announced yesterday it was hiring Barclays Global Investors of San Francisco and State Street Bank and Trust Co. of Boston to manage its program to purchase mortgage-backed securities
Bank rescues unravel
Eoin Callan, Financial Post
Carefully-woven government plans to rescue banks deemed too big to fail came apart at the seams yesterday as private institutions refused to back deals brokered by politicians.
Berlin admitted it had a "mess" on its hands as banks backed out of a deal to save one of the country's largest financial institutions.
In New York, a merger to create the biggest retail branch network in America descended deeper into chaos as Citigroup secured a court injunction blocking the takeover of Wachovia by Wells Fargo, pitting the largest banks in the country against each other.
The rifts further threaten the stability of the international banking network and came as world leaders struggled to divine a common approach to the unprecedented disaster unfolding in the financial system. European leaders emerged from crisis talks in Paris led by Nicholas Sarkozy with conflicting plans about how to save their country's banks as agreement on a continent-wide strategy eluded them.
Governments are widely intent on preventing further bank collapses after the failure of U.S. institutions caused shockwaves across the world. But they are divided and somewhat uncertain over how to achieve this goal as they confront corporate calamities for which no play book exists.
The discord comes as the deepening international crisis increasingly takes its toll on Canada, putting the country's banking system under strain and squeezing corporate loans.
The Bank of Canada has been forced to take escalating measures to improve liquidity by pumping billions into the country's financial network and agreeing to accept collateral from banks that no one else wants.
A freeze up in financing for securitized commercial lending threatens to make loans for businesses harder to get, while mortgage conditions begin to tighten and a risk develops that consumer loans could be curtailed.
The White House said it would act quickly to relieve pressure in the banking system through speedy implementation of a $700-billion bail-out package signed by U.S. President George W. Bush. But an earlier federally-brokered deal to rescue Wachovia remained in limbo as New-York Justice Charles Ramos granted a request from Citigroup to temporarily block the sale of Wachovia to Wells Fargo.
Citigroup has won the right to continue exclusive talks with Wachovia about a takeover that has already been signed off and financially backed by Washington, after the failing U.S. lender secretly made a conflicting agreement to be bought by Wells Fargo for 80 per cent more.
There were also fissures between banks in the effort to save Germany's Hypo Real Estate Holding, as a government-sponsored $49 billion rescue collapsed as banks withdrew their support in the face of a rising tab.
"We will see how we can clean up the mess that has been presented to us," said a German finance ministry official.
German Chancellor Angela Merkel was among the leaders who gathered in Paris for crisis talks also attended by Britain, Italy and the European Central Bank.
French President Nicolas Sarkozy indicated there was unanimity on the need to save banks from collapse.
"We are taking a solemn commitment to back banking and financial institutions," he said.
But there was no apparent agreement on a Europe-wide bail-out plan or how cross-border collapses would be handled.
Friday, October 3, 2008
Financial Update
Toronto Stocks plunge sharply in panic selloff
· TSX -813.97pts to 10,900 down nearly 7% to its lowest level in more than 2 years, battered by concerns over the outlook for fertilizer producers and a drop in oil and gold prices.
The plunge in shares of big fertilizer producers came amid worries that the U.S. credit crisis could hamper farmers' ability to get cash for next year's planting season. It marked the latest in a series of shock waves emanating from Wall Street's turmoil and the related slowdown in the global economy
· Dow -348.22pts.
· Dollar -1.56c to $92.60US.
· Oil -4.56 to $93.97US per barrel
· Gold -41.70 to $839US per ounce
Bailout hopes rise as more 'no' votes switch
By Julie Hirschfeld Davis, The Associated Press WASHINGTON - A wave of converts from the U.S. House of Representatives jumped aboard the $700 billion financial industry bailout Thursday on the eve of a make-or-break second vote, as lawmakers responded to an awakening among voters to the pain ahead of them if stability is not restored to the tottering economy.
Republicans and Democrats alike said appeals from credit-starved small businessmen and the Senate's addition of $110 billion in tax breaks had persuaded them to drop their opposition.
Wells Fargo to buy Wachovia
Jaime Sturgeon, Financial Post Wells Fargo & Co. said Friday that it would purchase Wachovia Corp. in an all stock transaction for US$15.1-billion and issue up to US$20-billion in stock to pay for the transaction. The combined company will have 10,761 retail locations, US$258-billion in mutual fund assets and US$1.42-trillion in net assets.
The deal, which is free and clear of federal oversight, is for Wachovia's entire business. It breaks up a Washington-brokered offer from Citigroup to acquire the regional bank's retail operations for US$2.2-bilion on Monday.
· TSX -813.97pts to 10,900 down nearly 7% to its lowest level in more than 2 years, battered by concerns over the outlook for fertilizer producers and a drop in oil and gold prices.
The plunge in shares of big fertilizer producers came amid worries that the U.S. credit crisis could hamper farmers' ability to get cash for next year's planting season. It marked the latest in a series of shock waves emanating from Wall Street's turmoil and the related slowdown in the global economy
· Dow -348.22pts.
· Dollar -1.56c to $92.60US.
· Oil -4.56 to $93.97US per barrel
· Gold -41.70 to $839US per ounce
Bailout hopes rise as more 'no' votes switch
By Julie Hirschfeld Davis, The Associated Press WASHINGTON - A wave of converts from the U.S. House of Representatives jumped aboard the $700 billion financial industry bailout Thursday on the eve of a make-or-break second vote, as lawmakers responded to an awakening among voters to the pain ahead of them if stability is not restored to the tottering economy.
Republicans and Democrats alike said appeals from credit-starved small businessmen and the Senate's addition of $110 billion in tax breaks had persuaded them to drop their opposition.
Wells Fargo to buy Wachovia
Jaime Sturgeon, Financial Post Wells Fargo & Co. said Friday that it would purchase Wachovia Corp. in an all stock transaction for US$15.1-billion and issue up to US$20-billion in stock to pay for the transaction. The combined company will have 10,761 retail locations, US$258-billion in mutual fund assets and US$1.42-trillion in net assets.
The deal, which is free and clear of federal oversight, is for Wachovia's entire business. It breaks up a Washington-brokered offer from Citigroup to acquire the regional bank's retail operations for US$2.2-bilion on Monday.
Thursday, October 2, 2008
Financial Update
America stares recession in the face
Alia McMullen, Financial Post A "catastrophic" drop in U.S. manufacturing activity in September left no doubt in the minds of stunned economists Wednesday that the U.S. recession had well and truly arrived, and it could be severe.
The sharp contraction in activity was the starkest example yet that the credit crisis was having a devastating effect on business amid other evidence that limited access to credit and high debt financing costs were killing merger and acquisition activity and potentially damaging company profits. Mike Englund, chief economist at Action Economics in Boulder, Colo., said the figures reinforced his view that the National Bureau of Economic Research would eventually deem all of 2008 as a period of recession.
· TSX -38.39pts
· Dow -19.59pts. a disappointing economic report on the manufacturing sector and more troubles in the battered auto industry, weighed on the markets most of Wednesday, suggesting the United States has slipped into a recession that could last some time
· Dollar +.19c to $94.16US.
· Oil -2.11 to $98.53US per barrel
· Gold +$6.50 to $880.70US per ounce
More voices join chorus calling for rate cuts
Julian Beltrame The Canadian Press OTTAWA
The Bank of Canada is being urged to jump into the fray of the financial market meltdown by aggressively cutting interest rates.
The tight credit environment, due to upheaval in the U.S. financial industry, has fundamentally altered the outlook for both the global and Canadian economies, analysts say.
They add that the key issue now is not whether Canada's central bank should lower rates, but if it should take the rare step of acting before its scheduled announcement date of Oct. 21.
It's been nearly half a year since the Bank of Canada adjusted its overnight lending rate, which has been set at three per cent since April 22, when it made an aggressive half-point cut.
"I think under normal circumstances, if we didn't have the political (election campaign) and we didn't have this bailout package going through the U.S. Congress, we might be in a situation where the central banks would already be cutting now,'' said Douglas Porter, deputy chief economist for BMO Capital Markets.
In the U.S., a $700-billion financial rescue plan was approved by the Senate last night and expected to go to the House for approval before week's end.
The vast majority of economists backed Bank of Canada governor Mark Carney last month when he held firm on interest rates, although Scotiabank's Derek Holt called for a half-point cut.
Regardless of the relative health of auto industry sales in Canada, the downturn south of the border is worrisome for Ontario-based car, truck and parts makers that export most of their volume across the border to the United States.
Economists are expecting to see real blood on the floor tomorrow when the next U.S. employment report is released, forecasting upward of 150,000 job losses for September.
A big danger, say economists, is that lenders may be so spooked that they totally freeze credit, depriving businesses of funds needed to carry on operations or expand, and also depriving consumers of loans for such things as mortgages or cars.
In a speech last week, Carney warned that Canada would be impacted by a U.S. slump, particularly the auto and forestry sectors that depend on exporting to American consumers
Alia McMullen, Financial Post A "catastrophic" drop in U.S. manufacturing activity in September left no doubt in the minds of stunned economists Wednesday that the U.S. recession had well and truly arrived, and it could be severe.
The sharp contraction in activity was the starkest example yet that the credit crisis was having a devastating effect on business amid other evidence that limited access to credit and high debt financing costs were killing merger and acquisition activity and potentially damaging company profits. Mike Englund, chief economist at Action Economics in Boulder, Colo., said the figures reinforced his view that the National Bureau of Economic Research would eventually deem all of 2008 as a period of recession.
· TSX -38.39pts
· Dow -19.59pts. a disappointing economic report on the manufacturing sector and more troubles in the battered auto industry, weighed on the markets most of Wednesday, suggesting the United States has slipped into a recession that could last some time
· Dollar +.19c to $94.16US.
· Oil -2.11 to $98.53US per barrel
· Gold +$6.50 to $880.70US per ounce
More voices join chorus calling for rate cuts
Julian Beltrame The Canadian Press OTTAWA
The Bank of Canada is being urged to jump into the fray of the financial market meltdown by aggressively cutting interest rates.
The tight credit environment, due to upheaval in the U.S. financial industry, has fundamentally altered the outlook for both the global and Canadian economies, analysts say.
They add that the key issue now is not whether Canada's central bank should lower rates, but if it should take the rare step of acting before its scheduled announcement date of Oct. 21.
It's been nearly half a year since the Bank of Canada adjusted its overnight lending rate, which has been set at three per cent since April 22, when it made an aggressive half-point cut.
"I think under normal circumstances, if we didn't have the political (election campaign) and we didn't have this bailout package going through the U.S. Congress, we might be in a situation where the central banks would already be cutting now,'' said Douglas Porter, deputy chief economist for BMO Capital Markets.
In the U.S., a $700-billion financial rescue plan was approved by the Senate last night and expected to go to the House for approval before week's end.
The vast majority of economists backed Bank of Canada governor Mark Carney last month when he held firm on interest rates, although Scotiabank's Derek Holt called for a half-point cut.
Regardless of the relative health of auto industry sales in Canada, the downturn south of the border is worrisome for Ontario-based car, truck and parts makers that export most of their volume across the border to the United States.
Economists are expecting to see real blood on the floor tomorrow when the next U.S. employment report is released, forecasting upward of 150,000 job losses for September.
A big danger, say economists, is that lenders may be so spooked that they totally freeze credit, depriving businesses of funds needed to carry on operations or expand, and also depriving consumers of loans for such things as mortgages or cars.
In a speech last week, Carney warned that Canada would be impacted by a U.S. slump, particularly the auto and forestry sectors that depend on exporting to American consumers
Wednesday, October 1, 2008
Financial Update
To quote the infamous Bette Davis, … "hang on to your hats, boys, it’s going to be a bumpy ride."
· TSX +467.83ptssome of the bounce is attributed to bargain hunters rushing in for quality stocks, and also to buying associated with fund managers rebalancing their portfolios ahead of the end of the quarter
· Dow +485.21pts. U.S. stocks also reversed course sharply, as the Dow Jones industrial average leaped 4.68%
· Dollar -1.82c to $93.97US.
· Oil +4.27 to $100.64US per barrel with a growing consensus among investors that the U.S. Congress will resurrect a failed financial bailout plan. The Senate is set to vote Wednesday on a $700-billion US financial bailout plan that was narrowly defeated Monday in the House of Representatives.
· Gold -$14.00 to $874.20US per ounce Gold retreated sharply as a rally in stocks and a higher dollar erased the previous session's gains, but gold should rise in the near term because of its safe-haven appeal amid financial turmoil, traders said.
September, 2008: 30 days that rocked the world "Now what?" asked Carl Weinberg, chief economist at High Frequency Economics. "Analysis eludes us. We have no prior experience to fall back on that might possibly help us frame the consequences of Congress's inaction on either the economy or financial markets."
What's the best strategy as mortgage rates rise?
ROB CARRICK
Globe and Mail Update
September 30, 2008 at 12:15 PM EDT
The credit crunch has hit home with yet another move by the big banks to jack up the cost of mortgages.
Mortgage brokers report that the big banks and other lenders have stopped offering variable-rate mortgages with a discount off the prime rate.
It was common in the first half of 2007 to get a variable-rate mortgage at prime minus a full percentage point, said Jim Tourloukis of Advent Mortgages in Markham, Ont. Since then, the discount had gradually fallen to 0.4 of a percentage point as of last week.
“As of yesterday, virtually everybody was offering variable-rate mortgages at prime,” Mr. Tourloukis said. “In other words, no more discounting.”
Forced to pay more to raise the money they lend out to customers, the banks have set fixed mortgage rates far higher than they would be under normal circumstances. Now, variable-rate mortgages have been affected as well. What's the right strategy for borrowers?
Your choices: a variable-rate mortgage at 4.75 per cent, which is the current prime rate at all major lenders, or a discounted five-year mortgage at rates in the low 5-per-cent range.
The lower variable rate means you'll save money in the near term, but it also opens you up to the risk that rising interest rates will boost your borrowing costs somewhere down the line.
“If I'm the average Joe, I would be taking the five-year rate right now because I don't know what's going on out there and I don't want to risk my house,” Mr. Tourloukis said. “I don't think rates are going to go up, but I don't want to worry about it.”
Mr. Tourloukis said about 90 per cent of his clients were going with variable-rate mortgages prior to this week, and he expects the same big majority to swing over to fixed-rate mortgages going forward.
The problem with fixed-rate mortgages – almost everyone picks the five-year term – is that you'll have to work hard to get a good deal. Posted five-year rates at major lenders are around 7.2 per cent, and some banks are posting “special” discounted rates of 6.14 per cent on their websites.
However, Mr. Tourloukis said he was able to get five-year mortgages as low as 4.99 per cent. Alternative banks and credit unions have been offering rates as low as 4.99 to 5.45 per cent.
Brian Matthey, a mortgage broker in Kingston, Ont., said five-year mortgages would be going for about 4.35 per cent today under normal circumstances in financial markets. He stressed the importance of shopping around for a mortgage right now and not settling for whatever discount your bank is willing to dole out.
“The banks are going to freewheel as they need to in terms of what they offer their clients,” Mr. Matthey said.
· TSX +467.83ptssome of the bounce is attributed to bargain hunters rushing in for quality stocks, and also to buying associated with fund managers rebalancing their portfolios ahead of the end of the quarter
· Dow +485.21pts. U.S. stocks also reversed course sharply, as the Dow Jones industrial average leaped 4.68%
· Dollar -1.82c to $93.97US.
· Oil +4.27 to $100.64US per barrel with a growing consensus among investors that the U.S. Congress will resurrect a failed financial bailout plan. The Senate is set to vote Wednesday on a $700-billion US financial bailout plan that was narrowly defeated Monday in the House of Representatives.
· Gold -$14.00 to $874.20US per ounce Gold retreated sharply as a rally in stocks and a higher dollar erased the previous session's gains, but gold should rise in the near term because of its safe-haven appeal amid financial turmoil, traders said.
September, 2008: 30 days that rocked the world "Now what?" asked Carl Weinberg, chief economist at High Frequency Economics. "Analysis eludes us. We have no prior experience to fall back on that might possibly help us frame the consequences of Congress's inaction on either the economy or financial markets."
What's the best strategy as mortgage rates rise?
ROB CARRICK
Globe and Mail Update
September 30, 2008 at 12:15 PM EDT
The credit crunch has hit home with yet another move by the big banks to jack up the cost of mortgages.
Mortgage brokers report that the big banks and other lenders have stopped offering variable-rate mortgages with a discount off the prime rate.
It was common in the first half of 2007 to get a variable-rate mortgage at prime minus a full percentage point, said Jim Tourloukis of Advent Mortgages in Markham, Ont. Since then, the discount had gradually fallen to 0.4 of a percentage point as of last week.
“As of yesterday, virtually everybody was offering variable-rate mortgages at prime,” Mr. Tourloukis said. “In other words, no more discounting.”
Forced to pay more to raise the money they lend out to customers, the banks have set fixed mortgage rates far higher than they would be under normal circumstances. Now, variable-rate mortgages have been affected as well. What's the right strategy for borrowers?
Your choices: a variable-rate mortgage at 4.75 per cent, which is the current prime rate at all major lenders, or a discounted five-year mortgage at rates in the low 5-per-cent range.
The lower variable rate means you'll save money in the near term, but it also opens you up to the risk that rising interest rates will boost your borrowing costs somewhere down the line.
“If I'm the average Joe, I would be taking the five-year rate right now because I don't know what's going on out there and I don't want to risk my house,” Mr. Tourloukis said. “I don't think rates are going to go up, but I don't want to worry about it.”
Mr. Tourloukis said about 90 per cent of his clients were going with variable-rate mortgages prior to this week, and he expects the same big majority to swing over to fixed-rate mortgages going forward.
The problem with fixed-rate mortgages – almost everyone picks the five-year term – is that you'll have to work hard to get a good deal. Posted five-year rates at major lenders are around 7.2 per cent, and some banks are posting “special” discounted rates of 6.14 per cent on their websites.
However, Mr. Tourloukis said he was able to get five-year mortgages as low as 4.99 per cent. Alternative banks and credit unions have been offering rates as low as 4.99 to 5.45 per cent.
Brian Matthey, a mortgage broker in Kingston, Ont., said five-year mortgages would be going for about 4.35 per cent today under normal circumstances in financial markets. He stressed the importance of shopping around for a mortgage right now and not settling for whatever discount your bank is willing to dole out.
“The banks are going to freewheel as they need to in terms of what they offer their clients,” Mr. Matthey said.
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