• TSX +52.71 to 12,000
• DOW -36.88
• Dollar +.24c to 97.87cUS
• Oil -.43 to $76.37US per barrel.
• Gold +$19.50 to $1,219.90 USD per ounce Safe-haven buying pushed gold prices to a new record high as traders pondered if the $1-trillion U.S. loan package would suffice to ensure long-term financial stability in the euro-zone.
Even recession didn't slow down Canadian's spending, report finds
By Julian Beltrame, The Canadian Press
OTTAWA - Neither recession, global uncertainty nor growing joblessness appears to have stayed Canadians' appetite for spending money they don't have.
A new report by the Certified General Accountants Association of Canada shows that household debt in the country kept rising through the recession and peaked in December at $1.41 trillion.
That's $41,740 on average per Canadian, or debt to income ratio of 144 per cent that is the worst among 20 advanced countries in the OECD.
"This report is another indication of Canadians' readiness to consume today and pay later," says association president Anthony Ariganello.
"The concern is do they understand the full cost of paying later?"
The Bank of Canada has also voiced similar concerns, with governor Mark Carney having repeatedly advised Canadians to ensure they will be able to meet their mortgage commitments once rates increase. Ottawa has put that cautionary principle into effect by stiffening the means test chartered banks must apply when issuing open-ended mortgages.
Most Canadians don't yet share that concern. The accountants' survey found that almost 60 per cent of Canadians whose debt had increased still felt they could manage it or take on more obligations.
But the accountants say many households could find themselves in difficulty when interest rates, as expected, begin to rise.
The report estimates that even a small two per cent increase in rates would mean that mid-income and higher income households would have to cut their outlays on non-essentials by between nine and 11 per cent.
The finding is similar to one reached by the Canadian Association of Accredited Mortgage Professionals in a survey results release Monday.
The survey showed that while Canadians appeared well positioned to absorb higher rates, there would be a significant number that would come under stress. The mortgage professionals estimated that 475,000 households would be challenged if mortgages rates rose to 5.25 per cent, and that 375,000 were already facing pressure paying their bills.
The most likely outcome for a debt squeeze is that households will stop spending on non-essentials, and that could ripple in a general slowing of economic growth.
Household spending, particularly in the housing sector, was a mainstay of the economy during the recession. But as interest rates grow, a bigger percentage of household income may need to be diverting into paying off debt, meaning less cash for other purchases, like autos, appliances, furniture and clothes.
BMO Capital Markets economist Sal Guatieri says that is the flip-side to the Bank of Canada's decision to slash rates to historic lows during the recession.
"That's why we did not experience a great recession," he noted. "That was the intention all along of the Bank of Canada, to get people borrow and spend. The problem is if that continued, Canada eventually would have a debt problem."
But that is why the central bank is preparing to reverse course and start increasing the cost of borrowing, he added.
Most analysts believe Carney will start moving on rates on June 1 with a small quarter-point hike. http://ca.news.finance.yahoo.com/s/11052010/2/biz-finance-recession-didn-t-slow-canadian-s-spending-report.html
Feds want tighter rules to ground fly-by-night movers
• By Dean Beeby, The Canadian Press
OTTAWA - The federal government is putting the moves on movers.
Industry Canada wants to tighten the rules for moving companies after a deluge of complaints from consumers who say they've been ripped off by crooked operators.
Armed with a cellphone and a Kijiji or Craigslist ad on the Internet, scam artists are preying on Canadians looking for cheap moving help, says the department.
"Complaints include holding furniture hostage at the destination until consumers pay more than the original estimate and producing new hidden costs such as packaging," says an internal document.
"In some cases, the belongings are not delivered but are dumped or remain in warehouses and storage facilities. Consumers in this market are particularly vulnerable to such practices because of the ability of movers to confiscate or ransom their belongings."
The Consumer Measures Committee, a federal-provincial group run by Industry Canada, launched a project last July to better monitor the household moving sector by analyzing consumer complaints.
"This work is in the very early stages of development and findings are not yet available," department spokesman Michael Hammond said.
Regulation of the moving sector is largely a provincial responsibility, even though some moves cross provincial boundaries. Eight provinces have highway traffic legislation that governs the household-goods moving trade, with Prince Edward Island and Newfoundland and Labrador the exceptions.
Many provinces also have consumer protection laws, as does the federal government.
But industry players contacted by the committee in the last few months say officials want to end that patchwork coverage by harmonizing laws, regulations and practices across the country.
The 2006 census of Canada found that 1.2 million households had moved in the last five years. Some estimates say Canadians change addresses an average of 13 times through their lifetimes.
And the Canadian Council of Better Business Bureaus says complaints about movers were No. 7 on its Top 10 list of consumer beefs in 2009. Just over half of the 636 formal complaints about moving firms last year were settled.
An Industry Canada briefing note, obtained under the Access to Information Act, suggests about one of every four moves generates a consumer complaint.
The head of Canada's largest industry group, the Canadian Association of Movers, supports harmonization but says the best protection for consumers is education.
"You have people having all their life possessions destroyed, stolen, rifled through, held for ransom, overcharged," president John Levi said in an interview from the group's Mississauga, Ont., headquarters.
But even with tougher regulations "there's no government agency out there that can help you in a timely fashion."
Consumers are understandably intimidated by large men suddenly demanding more cash before unloading the truck, Levi said.
"There's sufficient legislation and regulation in place — if it were enforced."
The best defence is to do some research, he said.
The mover's association — with about 200 members, including big operators like Atlas, Allied, Mayflower, United, North American — certifies its firms after checking their standards and reputations, and having them sign a code of ethics.
The Better Business Bureau as well as Industry Canada posts consumer checklists and advice on moving on their websites. A joint consumer tips release is also planned shortly by the movers' association and the business bureau.
Better Business Bureaus across Canada fielded almost 98,000 inquiries about moving companies last year, the second-most common query after consumer questions about roofing contractors.
http://ca.news.finance.yahoo.com/s/09052010/2/biz-finance-feds-want-tighter-rules-ground-fly-night-movers.html
Wednesday, May 12, 2010
Tuesday, May 11, 2010
Financial Update For May 11, 2010
Time to lock in that mortgage rate?
• TSX +255.47 to 11,947 in a broad-based rally as investors were emboldened by a $1 trillion emergency rescue package out of Europe aimed at containing Greece's debt crisis
• DOW +404.71 to 10,785
• Dollar +1.83c to 97.63cUS
• Oil +1.69 to $76.80US per barrel. Energy producers were among the top gainers as the price of U.S. crude oil rallied more than 2 percent on the back of the aid plan.
• Gold -$9.60 to $1,200.40 USD per ounce as the better prospects for the European economy undercut safe haven buying of gold
Time to lock in that mortgage rate?
Andrew Allentuck, Financial Post Published: Thursday, May 06, 2010
Taking on a mortgage is a big commitment. Every buyer who uses a mortgage has the choice of floating or going with a fixed rate that often costs a couple of percentage points higher per year. Today, for example, one can get variable rates at an average rate of 2.34% while five year closed rates average 5.27%, according to Fiscal Agents Financial Services Group in Oakville, Ontario. Negotiated rates can be lower.
If rates never changed very much, there would be no contest – the floating rate deal would win. But rates do rise and fall and therein lies the borrower's dilemma.
Borrowers with kids and an aging car fear that their ability to pay interest rates twice or thrice the current floating rates are limited. "The test is liquidity and risk tolerance," says Derek Moran, a registered financial planner who heads Smarter Financial Planning Ltd. in Kelowna, B.C. "People with ample liquidity can afford to take a chance on rising mortgage rates. It follows that those who lack liquidity feel some pressure to avoid drastic interest rate increases."
The point is not merely academic, for Canada, in spite of recent mortgage rate increases, is still at a relatively low point of rates over the last four decades. "There is more room for rates to go up than down," Moran points out.
The cost of making a decision to float or go fixed varies with the rate differences.
In 2008, Moshe Milevsky, Associate Professor of Finance at the Schulich School of Business at York University, and Brandon Walker, a research associate at the Individual Finance and Insurance Decisions Centre in Toronto, published a study that measured the direct and opportunity costs of going with either choice. "Over the long run, homeowners really do pay extra for fixed rate mortgages," they concluded.
The reason is intuitive. Lenders do not want to take the chance that when they have to refinance a loan that they will be stuck paying more than they are getting.
Mismatching what they lend with the cost of what they borrow can cut their profits and even lead to insolvency. So lenders attach what amounts to an interest rate insurance fee and bundle that into the price of money they lend on fixed terms.
Milevsky and Walker confirmed this explanation. "The study showed that a positive Maturity Value of Savings [the value of investing the difference between floating and fixed mortgages in 91-day T-bills] was positive the majority of the time, so the homeowner saved by using a variable-rate mortgage."
The amount of money that the homeowner can save by taking a chance on floating rates varied in the Milevsky and Walker study, depending on the time periods in question. But the average amount was impressive: $20,630 as of 2008. Put another way, floating allowed borrowers to cut the time it would take to pay off the mortgages by a year or more, in some cases as much as five years on 15-year amortizations.
Rational calculation and personal feeling are, of course, different things. A person with a fixed income and a great deal of debt may be reluctant to put a rate casino between himself and the lender and will therefore go with certainty, even at a high price.
It is also a matter of experience. "First time buyers tend to pay close attention to the cost of the mortgage," says Laura Parsons, Areas Manager of Specialized Sales – which includes mortgages, for the BMO Financial Group in Calgary. For them, the appeal of locking in is relatively high. Their mortgages are new, the amounts they owe are higher than they would be 10 or 15 years in future when the mortgage is substantially reduced, and their incomes, often early in their adult lives, are lower than they will be in future.
"First time home buyers are net debtors and they don't want to endanger their finances," suggests Adrian Mastracci, a portfolio manager and financial planner who heads KCM Wealth Management Inc. in Vancouver.
There are other strategies that the buyer can use to provide some rate insurance without taking on what Milevsky and Walker have demonstrated as the high cost of peace of mind.
"The buyer can take a variable rate mortgage but set payments higher than the minimum required" says Parsons. "That could be at the 5 year closed rate, which would mean a faster paydown and growing asset security while still keeping the low cost of the variable rate mortgage. Faster paydown is itself cost insurance if interest rates do rise."
Banks are nothing if not inventive in helping clients cope with the fixed versus floating dilemma. For example, TD Bank offers to give 5% of the amount borrowed on a five or six year fixed rate residential mortgage to the borrower. The program, aptly dubbed the "5% CashBack Mortgage," implicitly acknowledges that fixed rate loans can be more costly than variable rate ones.
For its part, RBC has a RateCapper Mortgage that builds on the initial low cost of a variable rate mortgage but limits the cost if rates shoot up. On a five year mortgage, the borrower will never pay more than the capped rate and if the variable rate, based on the prime rate, drops below the RateCapper mortgage maximum, the interest rate charged to the borrower also drops. The plan is a compromise and spreads interest rate risk. Many other lenders allow borrowers to mix fixed and variable rates, thus accomplishing a similar goal.
Plan selection, it turns out, is gender-related. According to a BMO survey, men, 44% of the time, are more likely than women to choose a fixed rate mortgage than women, who make that choice only 28% of the time. Women, it turns out, tend to make the better choice, for as BMO's analysis shows, "fixed rates were advantageous during only two periods – through the late 1970s and in the late 1980s, in both cases ahead of a period rising interest rates, as is the case now."
So where are interest rates headed? The yield curve, a line that links interest rates for periods of time from 1 day to 30 years, implies that rates will rise, but not very much.
There is no sense that we are returning to a period of double digit rates. Moreover, there are deflationary forces at work, notes Patricia Croft, chief economist of RBC Global Asset Management in Toronto. "The present crisis in European finance and the potential fizzling out of the present recovery in North American capital markets could presage falling inflation and even disinflation – the subsidence of rising prices and interest rates," she explains..
BMO forecasts that the rising Canadian dollar will put downward pressure on consumer prices, reflecting the fact that much of what Canadians eat and use is imported. Inflation could flare up, BMO's economists say, but there is a balanced risk of declining prices. For now, the Bank of Canada is being very cautious in its interest rate management commitments. For those who are strapped for cash, personal circumstance may dictate the choice of a fixed rate. But for everyone else, the folly of trying to make interest rate predictions over a business cycle and to predict both the short term rates and the long term rates along the yield curve should be apparent. No promises, of course, but the odds of saving money are with borrowers who choose variable rate plans or those that emulate them.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/story.html?id=2994048#ixzz0nWSeUpXO
• TSX +255.47 to 11,947 in a broad-based rally as investors were emboldened by a $1 trillion emergency rescue package out of Europe aimed at containing Greece's debt crisis
• DOW +404.71 to 10,785
• Dollar +1.83c to 97.63cUS
• Oil +1.69 to $76.80US per barrel. Energy producers were among the top gainers as the price of U.S. crude oil rallied more than 2 percent on the back of the aid plan.
• Gold -$9.60 to $1,200.40 USD per ounce as the better prospects for the European economy undercut safe haven buying of gold
Time to lock in that mortgage rate?
Andrew Allentuck, Financial Post Published: Thursday, May 06, 2010
Taking on a mortgage is a big commitment. Every buyer who uses a mortgage has the choice of floating or going with a fixed rate that often costs a couple of percentage points higher per year. Today, for example, one can get variable rates at an average rate of 2.34% while five year closed rates average 5.27%, according to Fiscal Agents Financial Services Group in Oakville, Ontario. Negotiated rates can be lower.
If rates never changed very much, there would be no contest – the floating rate deal would win. But rates do rise and fall and therein lies the borrower's dilemma.
Borrowers with kids and an aging car fear that their ability to pay interest rates twice or thrice the current floating rates are limited. "The test is liquidity and risk tolerance," says Derek Moran, a registered financial planner who heads Smarter Financial Planning Ltd. in Kelowna, B.C. "People with ample liquidity can afford to take a chance on rising mortgage rates. It follows that those who lack liquidity feel some pressure to avoid drastic interest rate increases."
The point is not merely academic, for Canada, in spite of recent mortgage rate increases, is still at a relatively low point of rates over the last four decades. "There is more room for rates to go up than down," Moran points out.
The cost of making a decision to float or go fixed varies with the rate differences.
In 2008, Moshe Milevsky, Associate Professor of Finance at the Schulich School of Business at York University, and Brandon Walker, a research associate at the Individual Finance and Insurance Decisions Centre in Toronto, published a study that measured the direct and opportunity costs of going with either choice. "Over the long run, homeowners really do pay extra for fixed rate mortgages," they concluded.
The reason is intuitive. Lenders do not want to take the chance that when they have to refinance a loan that they will be stuck paying more than they are getting.
Mismatching what they lend with the cost of what they borrow can cut their profits and even lead to insolvency. So lenders attach what amounts to an interest rate insurance fee and bundle that into the price of money they lend on fixed terms.
Milevsky and Walker confirmed this explanation. "The study showed that a positive Maturity Value of Savings [the value of investing the difference between floating and fixed mortgages in 91-day T-bills] was positive the majority of the time, so the homeowner saved by using a variable-rate mortgage."
The amount of money that the homeowner can save by taking a chance on floating rates varied in the Milevsky and Walker study, depending on the time periods in question. But the average amount was impressive: $20,630 as of 2008. Put another way, floating allowed borrowers to cut the time it would take to pay off the mortgages by a year or more, in some cases as much as five years on 15-year amortizations.
Rational calculation and personal feeling are, of course, different things. A person with a fixed income and a great deal of debt may be reluctant to put a rate casino between himself and the lender and will therefore go with certainty, even at a high price.
It is also a matter of experience. "First time buyers tend to pay close attention to the cost of the mortgage," says Laura Parsons, Areas Manager of Specialized Sales – which includes mortgages, for the BMO Financial Group in Calgary. For them, the appeal of locking in is relatively high. Their mortgages are new, the amounts they owe are higher than they would be 10 or 15 years in future when the mortgage is substantially reduced, and their incomes, often early in their adult lives, are lower than they will be in future.
"First time home buyers are net debtors and they don't want to endanger their finances," suggests Adrian Mastracci, a portfolio manager and financial planner who heads KCM Wealth Management Inc. in Vancouver.
There are other strategies that the buyer can use to provide some rate insurance without taking on what Milevsky and Walker have demonstrated as the high cost of peace of mind.
"The buyer can take a variable rate mortgage but set payments higher than the minimum required" says Parsons. "That could be at the 5 year closed rate, which would mean a faster paydown and growing asset security while still keeping the low cost of the variable rate mortgage. Faster paydown is itself cost insurance if interest rates do rise."
Banks are nothing if not inventive in helping clients cope with the fixed versus floating dilemma. For example, TD Bank offers to give 5% of the amount borrowed on a five or six year fixed rate residential mortgage to the borrower. The program, aptly dubbed the "5% CashBack Mortgage," implicitly acknowledges that fixed rate loans can be more costly than variable rate ones.
For its part, RBC has a RateCapper Mortgage that builds on the initial low cost of a variable rate mortgage but limits the cost if rates shoot up. On a five year mortgage, the borrower will never pay more than the capped rate and if the variable rate, based on the prime rate, drops below the RateCapper mortgage maximum, the interest rate charged to the borrower also drops. The plan is a compromise and spreads interest rate risk. Many other lenders allow borrowers to mix fixed and variable rates, thus accomplishing a similar goal.
Plan selection, it turns out, is gender-related. According to a BMO survey, men, 44% of the time, are more likely than women to choose a fixed rate mortgage than women, who make that choice only 28% of the time. Women, it turns out, tend to make the better choice, for as BMO's analysis shows, "fixed rates were advantageous during only two periods – through the late 1970s and in the late 1980s, in both cases ahead of a period rising interest rates, as is the case now."
So where are interest rates headed? The yield curve, a line that links interest rates for periods of time from 1 day to 30 years, implies that rates will rise, but not very much.
There is no sense that we are returning to a period of double digit rates. Moreover, there are deflationary forces at work, notes Patricia Croft, chief economist of RBC Global Asset Management in Toronto. "The present crisis in European finance and the potential fizzling out of the present recovery in North American capital markets could presage falling inflation and even disinflation – the subsidence of rising prices and interest rates," she explains..
BMO forecasts that the rising Canadian dollar will put downward pressure on consumer prices, reflecting the fact that much of what Canadians eat and use is imported. Inflation could flare up, BMO's economists say, but there is a balanced risk of declining prices. For now, the Bank of Canada is being very cautious in its interest rate management commitments. For those who are strapped for cash, personal circumstance may dictate the choice of a fixed rate. But for everyone else, the folly of trying to make interest rate predictions over a business cycle and to predict both the short term rates and the long term rates along the yield curve should be apparent. No promises, of course, but the odds of saving money are with borrowers who choose variable rate plans or those that emulate them.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/story.html?id=2994048#ixzz0nWSeUpXO
Monday, May 10, 2010
Financial Update For May 10, 2010
Trading on emotion "The market realizes there is actually a country risk, Since Lehman's collapse the banks were in focus, now it is the credibility of countries.”
Housing starts expected to build on recovery data Today, Canada Mortgage and Housing Corp. reports its April housing-start figures
• TSX -150.00 to 11,692 Markets continued to sell off Friday as fears of a widening government debt crisis in Europe overshadowed strong job numbers. However markets surged around the world this morning after the European Union launched a loan plan at 3am in Brussels worth almost $1-trillion (U.S.) to reverse the losing war against the sovereign bonds of debt-choked countries that had threatened to sink the euro zone.
• DOW -139.80 to 10,380
• Dollar +.77c to 95.80cUS
• Oil -$2.00 to $75.11US per barrel."If the world is a risky place and growth is in question, that hits commodities and that hits Canada hard," said Patricia Croft, chief economist, RBC Global Management.
• Gold +$13.10 to $1,210.00 USD per ounce
•
Trading on emotion
Janet Whitman, Financial Post, with files from Bloomberg Published: Saturday, May 08, 2010
Gobsmacked traders and investors stared at their computer screens in disbelief on Thursday as stocks nosedived, wiping out a trillion dollars in market value in 10 stomach-churning minutes.
As panic spread that stocks were veering off a cliff, the market snapped back just as quickly, recouping most of its losses. Jittery investors haven't been so quick to recover.
On Friday -- a day after what is believed to be a technical glitch helped take the Dow Jones Industrial Average down a record 998.50 points -- stocks zigzagged in volatile trading as market participants tried to make sense of the turmoil.
The panicky reaction could be a sign of the summer to come as stressed investors trade on gut reactions instead of using their heads.
"We are chained to this problem of going up with greed and down with fear and the market either thrills or haunts us," said Somnath Basu, professor of finance at California Lutheran University in Thousand Oaks.
"None of it's driven by reasonable thinking. People forget and go chase returns and then when the markets start crashing they get scared and start getting out. They're not thinking that stocks should be held for 20 or 30 years."
Prof. Basu, an expert in "behavioural economics," said he anticipates a series of mini stock-market bubbles and crashes leading to bigger bubbles and crashes as people let their emotions rule their investment decisions.
Before their tumble this week, stocks were up around 70% from the lows they reached at the height of the financial crisis in 2008.
"Is that driven by fundamentals or irrational exuberance?" asked Prof. Basu. "Many economic indicators are not showing the same thing. We don't know what's going to happen when the US$2-trillion in stimulus and bailout money stops working. Maybe the stock-market gain was premature, because people were tired of being in the dumps."
At this stage, it's still unclear how a technical glitch might have sparked a sell-off that led to one of the craziest 10 minutes in stock-trading history.
Barack Obama, the U.S. president, said U.S. regulatory authorities are probing the wild swing in stocks that appears to have been exacerbated as investors shrugged off surprisingly strong gains in employment in Canada. The TSX index dropped 4.24% for the week, its worst performance since July last year.
"It might be an opportunity to look at some companies that got knocked lower, but people are more afraid to invest when they see this kind of thing going on," said Peter Cohan, an economic analyst and professor of management at Babson College in Wellesley, Mass.
"The smart thing to do is buy here by a torrent of computerized selling in a market that was already on edge over concerns that Greece's debt woes could drag down the rest of Europe and slow global economic growth.
"In my view, there was no emotion in it at all," said Mr. Cohan of Babson. "High-frequency trading and flash trading accounted for 60% of the volume. We don't know yet what triggered all of that buying and selling. The majority of the volatility had nothing to do with human emotion at all. It had to do with what was programmed in the computers."
Regardless of the cause, investors do seem to be gripped once again by fear and emotion at a level not seen since the height of the financial crisis.
The dramatic sell-off sent the market's so-called fear gauge -- formerly known as the Chicago Board Options Exchange volatility index, or VIX -- to its biggest surge in three years.
The index surged again yesterday, reaching a high for the year and a record 86% increase for the week amid concerns European leaders won't be able to control Greece's debt crisis.
"The market realizes there is actually a country risk," said Achim Matzke, head of global index and technical research at Commerzbank AG in Frankfurt. "Since Lehman's collapse the banks were in focus, now it is the credibility of countries." Read more: http://www.nationalpost.com/story.html?id=3003011#ixzz0nWWeHztC
Housing starts expected to build on recovery data
; 'Housing starts have risen 80% from their cyclical lows'
Derek Abma, Financial Post
If record job gains from April weren't enough to convince you the Canadian economy is on solid ground, a few more measures are coming down the pipe over the next week that could support the case.
"In Canada, we're in the home stretch of reports on what was evidently a very strong first quarter, and the early news on Q2," CIBC World Markets chief economist Avery Shenfeld said in a research note on Friday, which followed Statistics Canada's report that 108,700 additional people found work last month-- about four times what was expected.
Today, Canada Mortgage and Housing Corp. reports its April housing-start figures. Economists anticipate an annualized rate of 205,000, up from a revised figure of 200,900 in March. The last figure marked a small decline from the previous month, on a seasonally adjusted basis, but things have come a long way since the market bottomed out at 112,000 in April 2009.
"To date, housing starts have risen a massive 80% from their cyclical lows, retracing over half of the peak-to-trough drop," Millan Mulraine, senior strategist with TD Securities, said in a report released on Friday.
Mr. Mulraine, who's forecasting a start level of 210,000 for April, attributes some of the current strength to homebuyers looking to avoid the new harmonized sales taxes taking effect in Ontario and British Columbia in July. He also noted that April was warmer than usual, helping along construction efforts.
Another big report comes Wednesday in the form of merchandise trade data for March. Economists anticipate a Canadian surplus -- the amount exported minus what's imported -- of $1.6-billion, up from $1.4-billion in February. If right, it would mark the fourth straight surplus.
CIBC World Markets economist Krishen Rangasamy credited improved economic conditions globally as probably helping Canada maintain it trading-surplus streak in March, including greater demand for vehicles in the United States.
"The merchandise trade report for March will likely add to earlier data that presages (Canadian economic) growth of around 5.7% (annualized) for the first quarter," Mr. Rangasamy said. "But the party won't last forever for exporters, given the lagged effects of a strong Canadian dollar and the expected slowdown in the U.S. economy later in the year."
Speaking of the auto industry, Statistics Canada on Friday will release data on domestic new-vehicle sales for March. A 4% monthly decline is expected following an 8.1% jump in February.
The federal agency will also release March figures for manufacturing sales that day. A one% rise in the value of factory transactions is expected by economists after the slim 0.1% gain in February.
"Canadian manufacturing-sector activity has been on a breathtaking run lately, with sales rising for six consecutive months on the back of strong domestic and foreign demand," Mr. Mulraine said.
Mr. Mulraine is in line the consensus of economists in his March manufacturing forecast, citing transportation equipment as well as products made of petroleum and coal as helping to fuel the gains.
Besides these reports, a number of Canadian companies, such as George Weston and Jazz Air, will release quarterly earnings. As well, the United States will see data on March wholesale trade toomorrow, its own March trade data on Wednesday and April retail sales on Friday.
Read more: http://www.financialpost.com/story.html?id=3007517#ixzz0nWZkq2Sr
Housing starts expected to build on recovery data Today, Canada Mortgage and Housing Corp. reports its April housing-start figures
• TSX -150.00 to 11,692 Markets continued to sell off Friday as fears of a widening government debt crisis in Europe overshadowed strong job numbers. However markets surged around the world this morning after the European Union launched a loan plan at 3am in Brussels worth almost $1-trillion (U.S.) to reverse the losing war against the sovereign bonds of debt-choked countries that had threatened to sink the euro zone.
• DOW -139.80 to 10,380
• Dollar +.77c to 95.80cUS
• Oil -$2.00 to $75.11US per barrel."If the world is a risky place and growth is in question, that hits commodities and that hits Canada hard," said Patricia Croft, chief economist, RBC Global Management.
• Gold +$13.10 to $1,210.00 USD per ounce
•
Trading on emotion
Janet Whitman, Financial Post, with files from Bloomberg Published: Saturday, May 08, 2010
Gobsmacked traders and investors stared at their computer screens in disbelief on Thursday as stocks nosedived, wiping out a trillion dollars in market value in 10 stomach-churning minutes.
As panic spread that stocks were veering off a cliff, the market snapped back just as quickly, recouping most of its losses. Jittery investors haven't been so quick to recover.
On Friday -- a day after what is believed to be a technical glitch helped take the Dow Jones Industrial Average down a record 998.50 points -- stocks zigzagged in volatile trading as market participants tried to make sense of the turmoil.
The panicky reaction could be a sign of the summer to come as stressed investors trade on gut reactions instead of using their heads.
"We are chained to this problem of going up with greed and down with fear and the market either thrills or haunts us," said Somnath Basu, professor of finance at California Lutheran University in Thousand Oaks.
"None of it's driven by reasonable thinking. People forget and go chase returns and then when the markets start crashing they get scared and start getting out. They're not thinking that stocks should be held for 20 or 30 years."
Prof. Basu, an expert in "behavioural economics," said he anticipates a series of mini stock-market bubbles and crashes leading to bigger bubbles and crashes as people let their emotions rule their investment decisions.
Before their tumble this week, stocks were up around 70% from the lows they reached at the height of the financial crisis in 2008.
"Is that driven by fundamentals or irrational exuberance?" asked Prof. Basu. "Many economic indicators are not showing the same thing. We don't know what's going to happen when the US$2-trillion in stimulus and bailout money stops working. Maybe the stock-market gain was premature, because people were tired of being in the dumps."
At this stage, it's still unclear how a technical glitch might have sparked a sell-off that led to one of the craziest 10 minutes in stock-trading history.
Barack Obama, the U.S. president, said U.S. regulatory authorities are probing the wild swing in stocks that appears to have been exacerbated as investors shrugged off surprisingly strong gains in employment in Canada. The TSX index dropped 4.24% for the week, its worst performance since July last year.
"It might be an opportunity to look at some companies that got knocked lower, but people are more afraid to invest when they see this kind of thing going on," said Peter Cohan, an economic analyst and professor of management at Babson College in Wellesley, Mass.
"The smart thing to do is buy here by a torrent of computerized selling in a market that was already on edge over concerns that Greece's debt woes could drag down the rest of Europe and slow global economic growth.
"In my view, there was no emotion in it at all," said Mr. Cohan of Babson. "High-frequency trading and flash trading accounted for 60% of the volume. We don't know yet what triggered all of that buying and selling. The majority of the volatility had nothing to do with human emotion at all. It had to do with what was programmed in the computers."
Regardless of the cause, investors do seem to be gripped once again by fear and emotion at a level not seen since the height of the financial crisis.
The dramatic sell-off sent the market's so-called fear gauge -- formerly known as the Chicago Board Options Exchange volatility index, or VIX -- to its biggest surge in three years.
The index surged again yesterday, reaching a high for the year and a record 86% increase for the week amid concerns European leaders won't be able to control Greece's debt crisis.
"The market realizes there is actually a country risk," said Achim Matzke, head of global index and technical research at Commerzbank AG in Frankfurt. "Since Lehman's collapse the banks were in focus, now it is the credibility of countries." Read more: http://www.nationalpost.com/story.html?id=3003011#ixzz0nWWeHztC
Housing starts expected to build on recovery data
; 'Housing starts have risen 80% from their cyclical lows'
Derek Abma, Financial Post
If record job gains from April weren't enough to convince you the Canadian economy is on solid ground, a few more measures are coming down the pipe over the next week that could support the case.
"In Canada, we're in the home stretch of reports on what was evidently a very strong first quarter, and the early news on Q2," CIBC World Markets chief economist Avery Shenfeld said in a research note on Friday, which followed Statistics Canada's report that 108,700 additional people found work last month-- about four times what was expected.
Today, Canada Mortgage and Housing Corp. reports its April housing-start figures. Economists anticipate an annualized rate of 205,000, up from a revised figure of 200,900 in March. The last figure marked a small decline from the previous month, on a seasonally adjusted basis, but things have come a long way since the market bottomed out at 112,000 in April 2009.
"To date, housing starts have risen a massive 80% from their cyclical lows, retracing over half of the peak-to-trough drop," Millan Mulraine, senior strategist with TD Securities, said in a report released on Friday.
Mr. Mulraine, who's forecasting a start level of 210,000 for April, attributes some of the current strength to homebuyers looking to avoid the new harmonized sales taxes taking effect in Ontario and British Columbia in July. He also noted that April was warmer than usual, helping along construction efforts.
Another big report comes Wednesday in the form of merchandise trade data for March. Economists anticipate a Canadian surplus -- the amount exported minus what's imported -- of $1.6-billion, up from $1.4-billion in February. If right, it would mark the fourth straight surplus.
CIBC World Markets economist Krishen Rangasamy credited improved economic conditions globally as probably helping Canada maintain it trading-surplus streak in March, including greater demand for vehicles in the United States.
"The merchandise trade report for March will likely add to earlier data that presages (Canadian economic) growth of around 5.7% (annualized) for the first quarter," Mr. Rangasamy said. "But the party won't last forever for exporters, given the lagged effects of a strong Canadian dollar and the expected slowdown in the U.S. economy later in the year."
Speaking of the auto industry, Statistics Canada on Friday will release data on domestic new-vehicle sales for March. A 4% monthly decline is expected following an 8.1% jump in February.
The federal agency will also release March figures for manufacturing sales that day. A one% rise in the value of factory transactions is expected by economists after the slim 0.1% gain in February.
"Canadian manufacturing-sector activity has been on a breathtaking run lately, with sales rising for six consecutive months on the back of strong domestic and foreign demand," Mr. Mulraine said.
Mr. Mulraine is in line the consensus of economists in his March manufacturing forecast, citing transportation equipment as well as products made of petroleum and coal as helping to fuel the gains.
Besides these reports, a number of Canadian companies, such as George Weston and Jazz Air, will release quarterly earnings. As well, the United States will see data on March wholesale trade toomorrow, its own March trade data on Wednesday and April retail sales on Friday.
Read more: http://www.financialpost.com/story.html?id=3007517#ixzz0nWZkq2Sr
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