There was barely a whimper when the price of oil raced passed key milestones this decade – $50 (U.S.) a barrel, $80, even $100.But with oil gaining strength at more than $130 a barrel, “shock” and “panic” have suddenly entered the popular lexicon. See article “A NEW KIND OF ENERGY CRISIS” below.
· TSX + 166.49
· Dow +45.68
· Dollar remains above par +.35c to $101.02
· Oil +$2.18 to $131.03US per barrel
· Gold -7.40US to $900.500US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
CIBC loses more than $1-billion TARA PERKINS Globe and Mail Update May 29, 2008 at 9:42 AM EDT
Canadian Imperial Bank of Commerce, the last big bank out of the gate with its second-quarter results, said Thursday it lost $1.11-billion, down from a profit of $807-million a year ago.
Bankers see signs of credit crunch easing
JOHN PARTRIDGE AND TARA PERKINS Globe and Mail Update
Both the Bank of Canada and one of the country's major commercial banks say the credit crunch is easing, although analysts argue it depends on how you measure the situation.
The central bank said Tuesday market conditions have improved, prompting a decision to cut by half the amount of cash it has been regularly lending commercial banks to keep the financial system liquid.
“The decision to reduce the amount of term financing outstanding reflects the general improvement in market conditions since the end of April, including funding conditions out to three months,” the central bank said in a statement.
Separately, Bank of Montreal chief executive Bill Downe said there are signs the impact of the crunch, which began with the U.S. subprime mortgage crisis last summer and has stung financial institutions around the world, is dissipating.
“Our outlook is improving as there are indications that concerns are easing in credit markets as credit spreads are trending towards more normal levels and we are encouraged by these developments,” Mr. Downe said as BMO reported a dip in profit for the second quarter.
Bank of Montreal said the global markets that banks tap for funds have improved in recent weeks. Spreads on investment grade corporate debt are decreasing, while the gap between the rates at which banks borrow money and treasury bill spreads have also been shrinking.
Also helping the outlook is the continuing support of central banks, which have been injecting liquidity into the market, BMO said.
The Bank of Canada said it will make $1 billion available in the next 28-day purchase and resale agreement auction when the previous $2 billion injection matures on May 29.
The central bank has been rolling over $4 billion in liquidity injections in $2-billion instalments on a regular basis since the beginning of the year.
Bank governor Mark Carney said last week the turbulence which hit credit markets last summer was easing, although he said he was not ready to declare the crisis over.
The bank said future roll-overs will be reviewed in light of conditions in financial markets.
Financial services analysts agreed the narrowing spreads between corporate and government bonds is a good sign.
However, Mario Mendonca at Genuity Capital markets in Toronto also offered a counterpoint.
If instead of looking at credit spreads, one looks at the “real economy,” the picture is nowhere near as bright, particularly the U.S. housing market, where the crunch began and which continues to deteriorate.
“So I think there are two sides to this,” Mr. Mendonca said. “You could look at what the bond market is saying in terms of credit spreads and call it ‘easing,' or you could look at the real economy and say ‘no, it isn't.'”
Michael Goldberg at Desjardins Securities expressed a similar view. “House prices in the U.S. are [still] falling, and that's not good,” he said.
However, it does look as if liquidity issues are “getting to be a little less severe,” and this means that in the second half of this fiscal year, Canada's banks will likely see a return to a more normal credit cycle “whose severity depends on how deep the economic downturn in the U.S. is.”
With files from The Canadian Press
A new kind of 'energy crisis'
Despite pain of high prices, there are no shortages or lineups
BARRIE MCKENNA AND RICHARD BLACKWELL From Thursday's Globe and Mail
There was barely a whimper when the price of oil raced passed key milestones this decade – $50 (U.S.) a barrel, $80, even $100.
But with oil gaining strength at more than $130 a barrel, “shock” and “panic” have suddenly entered the popular lexicon.
Ominous comparisons are being made to the devastating oil jolts of the 1970s. And a global economy that once seemed immune to expensive oil is getting antsy.
Sometimes violent protests swept across Europe and Asia this week. Even in the United States, where cars are a religion, Americans are driving less for the first time since 1979, spurning SUVs and embracing public transit.
Hundreds of truck drivers protested in London this week, adding their voices to global worries about rising gas prices.
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Warning that the United States is facing “a true energy crisis,“ Dow Chemical Co. chairman and chief executive officer Andrew Liveris said Wednesday that the chemical maker is raising prices by up to 20 per cent to cope with a quadrupling of its energy and fuel costs since 2002.
“For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy,” Mr. Liveris said.
He complained that U.S. industry is losing ground to competitors abroad and is facing “demand destruction” at home. But is this an energy crisis? That may be in the eye of the beholder.
Unlike a recession, which can be tracked and quantified, a crisis is about what an environment feels like. If you're an auto maker or an airline, you're in full crisis mode.
The sheer magnitude of the recent spike is impressive. Oil is up nearly 50 per cent this year and 85 per cent in the past two years. And adjusted for inflation, oil has never been this expensive.
But for pure shock value, the recent runup still pales compared to 1973.
That's when oil shot up nearly fivefold (to $12 a barrel from $2.50), or 1979, when the price of oil more than tripled (to $40 a barrel from $12).
There are no embargos, no shortages and no lack of crude to feed refineries – as there were in the 1970s – and this isn't yet a crisis, says Robert Ebel, a former energy specialist at the U.S. Central Intelligence Agency
The main threat now, he said, is inflation.
“It's basically a price problem,” said Mr. Ebel, a senior adviser at the Washington-based Center for Strategic and International Studies. “It's beginning to hurt. You see it at the grocery store. You see at the gas station. It's having an effect on every segment of the economy.
It's something people are going to have to adapt to.”
Unfortunately for truckers, consumers, manufacturers, even fishermen, experts such as Mr. Ebel insist there's little governments can do in the short term to relieve soaring prices. Reducing gas taxes, for example, would only boost demand and lead to even higher prices down the road.
In Britain, where truckers have blocked key highways in London this week to protest fuel prices, Prime Minister Gordon Brown warned that the “global economy is facing the “third great oil shock of recent decades.”
Writing in the Guardian newspaper, Mr. Brown called on world leaders to devise a “global strategy” at next month's Group of Eight meeting in Japan, including emergency talks with major oil-producing countries and a renewed push for efficiency and alternatives. “A global shock on this scale requires global solutions,” he said.
French President Nicolas Sarkozy called for a Europe-wide cut in fuel taxes as protesting fishermen blockaded an oil depot near Marseille.
In Canada, many executives are loath to describe the spike in prices as a “crisis,” although they acknowledge they're adjusting business plans to deal with the new reality.
“I don't know if I'd say it's a crisis, but it certainly keeps you awake,” said Colin MacDonald, CEO of Halifax-based Clearwater Seafoods Income Fund.
High fuel prices have driven up the cost of operating its fleet of fishing vessels. The company is trying to become more efficient by using larger and more efficient boats, he said, but fuel costs have still boosted the input price of its products by 30 to 40 cents (Canadian) a pound this year.
At the same time, the cost of moving processed fish to markets around the world is rising, because transport companies are adding surcharges to help defray their fuel costs. And supermarkets and restaurants are reluctant to pay more.
Tom Winkler, chief financial officer at the Vancouver Port Authority, said the volume of goods handled through the facility could be hurt if higher fuel prices – and resulting surcharges shipping companies charge their customers – result in fewer containers of goods moving from Asia to Canada.
But the squeeze hasn't yet reached a crisis point, he said.
Economists at CIBC World Markets predicted this week that higher oil prices will result in less movement of global freight as companies look for local suppliers of goods.
Other companies that are taking a major hit from high fuel prices are also trying to see a silver lining.
At bus line operator Greyhound Canada, high fuel prices “drive our costs up through the roof,” said Randy Padley, director of passenger services for Eastern Canada.
At the same time, however, high pump prices “also drive people from their vehicles to the bus, so it's a double-edged sword,” he said. And Greyhound has already raised ticket prices and will do so again if it becomes necessary.
At Big Rock Brewery in Calgary, high energy prices have a significant impact on transportation costs, CEO Edward McNally said. “The truckers have been raising prices for a year or more.”
But spiking energy costs are also affecting the price of aluminum cans, and indirectly making barley more expensive. Big Rock is hedging its barley purchases, which helps, but has not made similar moves with aluminum, Mr. McNally said.
It is also focusing on selling to local markets, where it has an advantage over big Canadian rivals and importers, which now pay sharply higher shipping costs to get their beer to market in Alberta.
Thursday, May 29, 2008
Financial Update
Oil drops below US $129 a barrel on demand concerns
· TSX -236.44 Tumbling resource shares led the Toronto Stock Exchange's main index
sharply lower
· Dow +68.72
· Dollar remains above par -.14c to $100.67
· Oil -3.34 to $128.85US per barrel falling sharply on a growing sense that soaring gas and
oil prices have cut demand for fuel during the normally busy summer driving season. Oil
prices were also pressured by the U.S. dollar, which gained ground against the euro.
Investors who buy commodities such as oil as a hedge against inflation when the dollar
falls tend to sell when the greenback strengthens. Also, a rising dollar makes oil more
expensive to investors overseas
· Gold -17.90US to $907.70US
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Better deals ahead expected for Canadian home buyers
New listings at record high
Alia McMullen, Financial Post Published: Saturday, May 24, 2008
Canada's housing market might still be expensive, but sellers are going to lose some of their negotiating power over the course of the year as housing supply floods onto the market.
The number of homes for sale in April was double that of the number that were sold as new listings reached a record high, the Canadian Real Estate Association's monthly Multiple Listing Service figures showed.
Residential listings for April jumped 2.8% from the previous month to a seasonally adjusted 77,248 units, while home sales rose 1.2% to 36,614 units. It was the first time monthly sales had increased this year.
The rise in supply, which comes on the back of years of under supply, caused house price growth to continue to moderate from recent highs. The national average house price was up 4% from a year earlier to $317,619-- the smallest annual gain in six years.
"Price increases are now maintaining at levels that are historically more consistent with the Canadian real estate market," Calvin Lindber, president of CREA said.
British Columbia remained the most expensive province, with the average house price up 10.7% over the year to $478,004, followed by Alberta, which fell 0.5% to $353,515. Prices rose 4.8% in Ontario to $314,041 and 4.3% in Quebec to $217,683. Prince Edward Island was the cheapest province, following a 9.8% annual decline to an average $121,807.
Amy Goldbloom, economist at RBC Financial Group said the latest results reflected the mid-point of a balanced housing market that was likely to soften gradually this year.
"As we see more supply coming to market, sellers are going to certainly lose some of their negotiating power, so the bidding wars that we've seen over the last couple of years, particularly in markets like the core area of Toronto, they're going to certainly slow," Ms. Goldbloom said.
She said there would be better opportunities for buyers as supply increases amid cheaper finance as a result of recent interest rate cuts. However, the market generally remained expensive and sales would likely continue to slow.
"The hit to affordability has certainly taken a toll on sales. People have simply been priced out of the market and that's become very evident in overheated markets in Calgary and Edmonton," Ms. Goldbloom said.
Although new listings in Calgary and Edmonton declined in April after posting record levels in March.
Derek Holt, economist at Scotia Capital said the ratio of listings to sales in Calgary and Edmonton had declined rapidly since last fall, dropping from about 90% to 40%.
"That speed of adjustment abruptly turned it away from a deep sellers market towards a marginal buyers market, so that's why they've seen prices come off their peak and why we think that they face a further housing correction in Alberta," he said.
Mr. Holt said while supply was expected to continue to enter the market, Canada would not experience the inventory overhang plaguing the U. S. housing sector.
He said Canada has not experienced the same factors that have driven the excess in U. S. supply, including the flood of foreclosed properties that have entered the market.
· TSX -236.44 Tumbling resource shares led the Toronto Stock Exchange's main index
sharply lower
· Dow +68.72
· Dollar remains above par -.14c to $100.67
· Oil -3.34 to $128.85US per barrel falling sharply on a growing sense that soaring gas and
oil prices have cut demand for fuel during the normally busy summer driving season. Oil
prices were also pressured by the U.S. dollar, which gained ground against the euro.
Investors who buy commodities such as oil as a hedge against inflation when the dollar
falls tend to sell when the greenback strengthens. Also, a rising dollar makes oil more
expensive to investors overseas
· Gold -17.90US to $907.70US
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Better deals ahead expected for Canadian home buyers
New listings at record high
Alia McMullen, Financial Post Published: Saturday, May 24, 2008
Canada's housing market might still be expensive, but sellers are going to lose some of their negotiating power over the course of the year as housing supply floods onto the market.
The number of homes for sale in April was double that of the number that were sold as new listings reached a record high, the Canadian Real Estate Association's monthly Multiple Listing Service figures showed.
Residential listings for April jumped 2.8% from the previous month to a seasonally adjusted 77,248 units, while home sales rose 1.2% to 36,614 units. It was the first time monthly sales had increased this year.
The rise in supply, which comes on the back of years of under supply, caused house price growth to continue to moderate from recent highs. The national average house price was up 4% from a year earlier to $317,619-- the smallest annual gain in six years.
"Price increases are now maintaining at levels that are historically more consistent with the Canadian real estate market," Calvin Lindber, president of CREA said.
British Columbia remained the most expensive province, with the average house price up 10.7% over the year to $478,004, followed by Alberta, which fell 0.5% to $353,515. Prices rose 4.8% in Ontario to $314,041 and 4.3% in Quebec to $217,683. Prince Edward Island was the cheapest province, following a 9.8% annual decline to an average $121,807.
Amy Goldbloom, economist at RBC Financial Group said the latest results reflected the mid-point of a balanced housing market that was likely to soften gradually this year.
"As we see more supply coming to market, sellers are going to certainly lose some of their negotiating power, so the bidding wars that we've seen over the last couple of years, particularly in markets like the core area of Toronto, they're going to certainly slow," Ms. Goldbloom said.
She said there would be better opportunities for buyers as supply increases amid cheaper finance as a result of recent interest rate cuts. However, the market generally remained expensive and sales would likely continue to slow.
"The hit to affordability has certainly taken a toll on sales. People have simply been priced out of the market and that's become very evident in overheated markets in Calgary and Edmonton," Ms. Goldbloom said.
Although new listings in Calgary and Edmonton declined in April after posting record levels in March.
Derek Holt, economist at Scotia Capital said the ratio of listings to sales in Calgary and Edmonton had declined rapidly since last fall, dropping from about 90% to 40%.
"That speed of adjustment abruptly turned it away from a deep sellers market towards a marginal buyers market, so that's why they've seen prices come off their peak and why we think that they face a further housing correction in Alberta," he said.
Mr. Holt said while supply was expected to continue to enter the market, Canada would not experience the inventory overhang plaguing the U. S. housing sector.
He said Canada has not experienced the same factors that have driven the excess in U. S. supply, including the flood of foreclosed properties that have entered the market.
Financial Update
Speculation the Loonie may fly higher
· TSX + 35.21
· Dow -145.99 on Friday-closed Monday for Memorial Day
· Dollar remains above par -.38c to $100.81
· Oil +$1.36 to $132.19US per barrel
· Gold +7.70US to $925.60US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Canada now has more workers in stores than factories
Julian Beltrame The Canadian Press
For the first time ever, more Canadians are involved in selling products than producing them.
A Statistics Canada report yesterday showing retail sales rose 5.8 per cent last year contained the added curiosity that for the first time, more people were employed in retail sales than in manufacturing.
The sales increase was the second strongest in five years and underlined the growing importance of domestic demand as the lynch pin of Canadian growth, with the red-hot West, particularly Saskatchewan and Alberta, leading the wave.
But the flip side of the coin is that as the service sector has shone, manufacturing -- especially the auto and forestry sectors -- has gone from bad to worse, so much so that there are now more people working in car dealerships, and at the local supermarket or department store than in factories and mills. Statistics Canada said yesterday that there were 1,790,000 retail jobs on average last year, compared to 1,784,700 in manufacturing.
Speculation the loonie may fly higher
Email the author
May 24, 2008 Julian Beltrame The Canadian Press
Is the Canadian loonie preparing to take flight again?
While betting on the up and down movements of a currency is risky, some economists are beginning to move off their bearish outlook for the Canadian dollar and contemplating that the loonie may be readying a move to higher ground, well above parity.
"One could make the case that the loonie is undervalued at today's oil prices,'' says Bank of Montreal deputy chief economist Douglas Porter. "Partly, this likely reflects the fact that the foreign exchange market, for one, simply doesn't believe today's oil prices will last.
"Another factor may have also been that the Bank of Canada may cut (interest rates) further, but the U.S. Federal Reserve looks done,'' he added.
For several years, the Canadian dollar has generally moved in tandem with prices of commodities Canada has in abundance, particularly oil.
But the Canadian dollar hasn't gathered much strength during the surge from $95 US oil at the end of 2007, Porter noted. It only moved past parity with the U.S. currency when oil cracked the $130 level this week.
A good sign for the loonie's prospects was Scotiabank's commodities report Thursday that forecast crude oil prices in the $135 to $140 range for the rest of the decade, based on a shortage of new non-OPEC production and rising demand from emerging economies in Asia.
Scotiabank currency analyst Stephen Malyon said the bank is forecasting the loonie to finish the year at $1.01 US and 2009 at $1.06, but said it will likely revise the forecast upward next week on the growing perception that high oil and high commodity prices are here to stay.
"I think the Canadian dollar has a lot of things going for it, from a structurally sound economy, and the fact we're a commodity exporter amid a cyclical bull market in commodities,'' he said.
Of course, there are other factors that have come into play in the relative pricing of the loonie.
The Canadian dollar is directly impacted by the interest rate spread between Canada and United States and was lifted last fall when the Fed moved aggressively to cut rates in expectation of a serious economic slowdown.
As important is recent language coming from both central banks which suggests the Fed is heading for the sidelines, while the Canadian bank remains on an easing trend.
There is also the relative purchasing power of both currencies, which suggests that the loonie remains the weaker sister.
· TSX + 35.21
· Dow -145.99 on Friday-closed Monday for Memorial Day
· Dollar remains above par -.38c to $100.81
· Oil +$1.36 to $132.19US per barrel
· Gold +7.70US to $925.60US
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Canada now has more workers in stores than factories
Julian Beltrame The Canadian Press
For the first time ever, more Canadians are involved in selling products than producing them.
A Statistics Canada report yesterday showing retail sales rose 5.8 per cent last year contained the added curiosity that for the first time, more people were employed in retail sales than in manufacturing.
The sales increase was the second strongest in five years and underlined the growing importance of domestic demand as the lynch pin of Canadian growth, with the red-hot West, particularly Saskatchewan and Alberta, leading the wave.
But the flip side of the coin is that as the service sector has shone, manufacturing -- especially the auto and forestry sectors -- has gone from bad to worse, so much so that there are now more people working in car dealerships, and at the local supermarket or department store than in factories and mills. Statistics Canada said yesterday that there were 1,790,000 retail jobs on average last year, compared to 1,784,700 in manufacturing.
Speculation the loonie may fly higher
Email the author
May 24, 2008 Julian Beltrame The Canadian Press
Is the Canadian loonie preparing to take flight again?
While betting on the up and down movements of a currency is risky, some economists are beginning to move off their bearish outlook for the Canadian dollar and contemplating that the loonie may be readying a move to higher ground, well above parity.
"One could make the case that the loonie is undervalued at today's oil prices,'' says Bank of Montreal deputy chief economist Douglas Porter. "Partly, this likely reflects the fact that the foreign exchange market, for one, simply doesn't believe today's oil prices will last.
"Another factor may have also been that the Bank of Canada may cut (interest rates) further, but the U.S. Federal Reserve looks done,'' he added.
For several years, the Canadian dollar has generally moved in tandem with prices of commodities Canada has in abundance, particularly oil.
But the Canadian dollar hasn't gathered much strength during the surge from $95 US oil at the end of 2007, Porter noted. It only moved past parity with the U.S. currency when oil cracked the $130 level this week.
A good sign for the loonie's prospects was Scotiabank's commodities report Thursday that forecast crude oil prices in the $135 to $140 range for the rest of the decade, based on a shortage of new non-OPEC production and rising demand from emerging economies in Asia.
Scotiabank currency analyst Stephen Malyon said the bank is forecasting the loonie to finish the year at $1.01 US and 2009 at $1.06, but said it will likely revise the forecast upward next week on the growing perception that high oil and high commodity prices are here to stay.
"I think the Canadian dollar has a lot of things going for it, from a structurally sound economy, and the fact we're a commodity exporter amid a cyclical bull market in commodities,'' he said.
Of course, there are other factors that have come into play in the relative pricing of the loonie.
The Canadian dollar is directly impacted by the interest rate spread between Canada and United States and was lifted last fall when the Fed moved aggressively to cut rates in expectation of a serious economic slowdown.
As important is recent language coming from both central banks which suggests the Fed is heading for the sidelines, while the Canadian bank remains on an easing trend.
There is also the relative purchasing power of both currencies, which suggests that the loonie remains the weaker sister.
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