Financial Update

Toronto stock market tops 15,000 points for the first time ever propelled by higher oil prices

· TSX hits new record +63.14 to 15.047 pts. On May 11, 2007, it first crossed 14,000,
closing that day at 14,003.82.
· Dow -199.48 in contrast, has felt the effect of waning credit and its economic fallout far
more keenly than the TSX, as worries over the impact prices will have on the consumer
deepened, while a key inflation indicator rose more than expected.
· Dollar was boosted slightly to .81c $1.008
· Oil +$2.02 to $129.07US per barrel extended its red-hot advance, coming close to $130 a
barrel.
· Gold +14.50+US to $919.50US

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


Prices rise more than expected in April

HEATHER SCOFFIELD Globe and Mail Update
OTTAWA — Inflation was still benign in Canada in April, but prices rose more than analysts had projected, up 1.7 per cent from a year earlier, Statistics Canada said.
The 1.7 per cent increase was a pick-up in total inflation compared to March, when prices rose 1.4 per cent, and was the first such acceleration since last November.

Analysts had expected a 1.4 per cent rise in prices in April from a year earlier, and a 0.4 per cent increase on the month.

On the month, total inflation rose 0.8 per cent – much more than analysts had expected, with a consensus forecast of 0.4 per cent compared to March.

Core inflation, which excludes the most volatile items such as energy prices and some food, rose 1.5 per cent from a year earlier, and 0.3 per cent compared to March. Core inflation, too, was higher than economists had projected.

Food prices, which have shown little movement in Canada recently despite rampant food inflation elsewhere in the world, climbed significantly in April, rising 1.2 per cent from a year earlier. Excluding restaurants, however, food bought from stores rose 0.9 per cent in April, which is more than noted in previous months but is still a slower pace than total inflation, Statscan noted.

The main culprit was bakery products, with prices rising 10.4 per cent on the year – the steepest increase since November, 1981.

Fresh vegetable prices continued sliding, on the other hand, mainly because of the strong Canadian dollar and because there was a spike in prices a year ago due to frost in California, Statscan said.

“Food inflation may have finally come to roost in Canada, although we would need to see this trend continue over several more months before we could say that for sure,” said economists at Bank of Nova Scotia.

The main driver for higher prices in total inflation, however was gasoline, and fewer discounts for cars.

Gasoline prices were 11.6 per cent higher in April compared to a year ago, with the highest increases in the Prairie provinces. On the month, gasoline rose 6.0 per cent.

As for the price of cars, it fell 6.6 per cent compared to a year ago, but this was less than the 7.1 per cent decline noted in March, and so it added to inflationary pressure overall.

Falling car prices have been responsible for much of Canada's low inflation rate recently, and that trend will likely resume in May, as auto makers reinstate incentives for consumers, said the Scotiabank economists.