Financials, energy boost TSX
· TSX +100.26pts (Reuters) aftera late-session burst with the materials group boosted by strength in gold-mining issues as bullion prices rose. Financials and energy were also higher
· DOW -27.24pts
· Dollar +1.31c to $.84.85US.
· Oil -$.93to $41.70US per barrel.
· Gold +$12.80 to $854.50US per ounce a rally sparked by a weaker greenback as the U.S. deficit is expected to balloon on proposed economic stimulus packages aimed at lifting the economy from recession. "Gold is a very good refuge and safe haven," said John Ing, president of Maison Placements Canada.
· www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
v Banking regulator won't boost capital targets Doug Alexander, Bloomberg Canada's top banking regulator has no plans to raise the required levels of capital needed to be retained by the country's lenders, Superintendent Julie Dickson said.
"The Canadian banking system remains very well capitalized," Ms. Dickson, who heads the Office of the Superintendent of Financial Institutions, said during the conference hosted by RBC Capital Markets in Toronto. The regulator has no plans to raise its current targets, and "doing so now would also amplify the economic downturn," she said.
Canadian banks have raised about $6.7-billion (US$5.6-billion) in share sales in the past two months to bolster their balance sheets amid a global recession. Canadian lenders reported regulatory capital of 8.9% to 10.5% of assets at the end of October, above OSFI's 7% target. The so-called Tier 1 capital ratio is a measure of a bank's financial strength based on its equity as a percentage of risk-weighted assets. OSFI has a target for total capital ratio, which is 10%.
v TORONTO (Reuters) - The Bank of Canada hinted on Thursday that it would continue to lower interest rates this year but gave no indication of how deep the cuts would be as the global recession hits the Canadian economy. Deputy Governor Pierre Duguay said the bank continued to monitor developments in world markets to decide its next moves, amid market expectations of a rate cut on January 20.
v .Obama says drastic action needed to save U.S. economy Sheldon Alberts, Canwest News Washington Correspondent
WASHINGTON -- Appealing to an American public confronted daily with worsening economic news, U.S. president-elect Barack Obama warned Thursday the nation is headed for years of severe recession unless he wins approval for an unprecedented government stimulus package in the first weeks of his presidency.
Intensifying his campaign to build support for the economic rescue package, Mr. Obama said the U.S. government may soon be unable to prevent a long-lasting crisis without a huge injection of new spending and tax cuts to jolt the economy back to life.
"I don't believe it's too late to change course, but it will be, if we don't take dramatic action as soon as possible," Mr. Obama said at George Mason University in Fairfax, Va.
"If nothing is done, this recession could linger for years. The unemployment rate could reach double digits. Our economy could fall $1 trillion short of its full capacity. . . . In short, a bad situation could become dramatically worse."
It was the starkest language Obama has used to describe the deepening crisis, and was aimed at persuading Americans no entity other than the federal government is capable of restoring the country's economic health.
He was also hoping the dire message would increase pressure on Congress -- particularly Republicans and conservative Democrats - not to throw up roadblocks to block the passage of stimulus legislation by early February.
"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said. "And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."
Mr. Obama's speech comes a day after the Congressional Budget Office announced the 2009 U.S. budget deficit will soar to a record $1.2 trillion in 2009. And that's before the passage of the stimulus package, which is expected to cost close to $800 billion.
New U.S. unemployment statistics are due Friday, with predictions that another half million jobs were lost in December.
"There is no doubt that the cost of this plan will be considerable. It will certainly add to the budget deficit in the short term. But equally certain are the consequences of doing little or nothing at all, for that will lead to an even greater deficit of jobs, incomes and confidence in our economy," Mr. Obama said.
"Only government can break the vicious cycles that are crippling our economy -- where a lack of spending leads to lost jobs, which leads to even less spending, where an inability to lend and borrow stops growth and leads to even less credit."
Several polls have shown Americans, while deeply concerned about job safety and fearful of a potential depression, are also increasingly wary about the effectiveness of large-scale government stimulus plans.
There has been a widespread public perception that the $700-billion bailout of Wall Street last fall was unsuccessful, insofar as the nation's credit markets have remained exceedingly tight, and consumer loans remain difficult to obtain.
Mr. Obama pledged a "sweeping effort" to halt the nation's foreclosure crisis, and said he would use a "full arsenal of tools to get credit flowing again."
Mr. Obama offered no details about the precise cost of the stimulus package, though it's expected to include $300 billion in tax cuts. An initial proposal could be presented to Congress by week's end.
The initial reaction to Obama's plea from Republicans on Capitol Hill was mostly positive, although the co-operative tone was laced with expressions of caution about the size of the stimulus.
Senator Mitch McConnell, the Senate minority leader, said Obama must remain mindful of the "eye-popping" federal deficit.
"Given the deficit numbers, it really ought not to be a trillion-dollar spending bill. I think we can start by saying that," said Mr. McConnell.
Representative John Boehner, the GOP leader in the House of Representatives, said he was looking for Mr. Obama to find "the right balance" between jump-starting the economy and risking unending deficits.
"Yes, our economy needs help. But at the end of the day, how -- how much debt are we going to pile on future generations?" Boehner said.
Still, Mr. McConnell said he was encouraged with Obama's efforts to reach out to Republicans.
"It's clear to me from listening to the president, the new president, that he wants to include Republican ideas," he said.
Mr. Obama sought to allay fears his promised stimulus package will be hijacked by lawmakers eager to load up legislation with pork-barrel projects or wasteful spending.
"It is not just another public-works program," Mr. Obama said.
While some of the stimulus will be aimed at rebuilding crumbling transportation infrastructure, it will place heavy focus on modernizing the nation's health-care system and creating tens of thousands of "green jobs," he said.
The plan will include a goal to double the national output of alternative energy in three years, computerize medical records, and retrofit federal government buildings.
Most of the three million jobs the plan is designed to create will be in the private sector, Mr. Obama said.
"I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven't yet seen that translate into more jobs or higher incomes or renewed confidence in our economy," he said. "We'll invest in what works."
Friday, January 9, 2009
Thursday, January 8, 2009
Financial Update January 8th,2009
TSX falls hard
· TSX -350.77pts (Reuters) as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.
· DOW -245.40pts Startling job losses in the US and a warning from tech bellwether Intel Corp added to the gloomy investor sentiment and heightened fears of an extended recession.
· Dollar -1.01c to $.83.54US.
· Oil -$5.95to $42.63US per barrel. "Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that's why the price of oil has come down," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier
· Gold -$24.30 to $841.10US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
U.S. private-sector employers shed 693,000 jobs in December, a report by ADP Employer Services showed, suggesting more dire news to come in U.S. government jobs data due on Friday.
Canadian employment figures for December are also due on Friday and are to show the economy shed some 22,000 jobs. It will also likely underscore economists' forecasts that the economy is in for a rough ride through the first half of the year and will see little or no growth in 2009 as the recession takes hold.
David Friend The Canadian Press
Canadians should brace themselves for another year of economic woe that could top the misery that unfolded in the latter half of 2008, according to some of the country's leading bank economistsThe flood of dire financial challenges facing the United States is still working its way steadily across the border into Canada, TD Bank chief economist Don Drummond told a gathering at the Economic Club of Toronto yesterday.
"We shouldn't really be thankful for the end of 2008 because I think (it) will have proven to be a better year than 2009,'' he said.
"We'll have a rough fourth quarter, but it'll really hit in Canada in the first quarter, and we'll start to see a lot more variables that look somewhat like the United States.''
The dramatic economic decline will likely push Bank of Canada governor Mark Carney to further slash interest rates, to as low as 0.5 per cent, in an effort to fend off deepening economic problems, suggested Avery Shenfeld of CIBC.
"The Bank of Canada has been aggressively cutting interest rates and has more to do,'' he said at a news conference after the meeting.
However, he added that "going all the way to a zero interest rate might not be necessary, given that we're going to get the stimulus from both the U.S. actions and fiscal policy, and we also have a cheaper dollar.''
Last month, Canada's central bank slashed a key interest rate to 1.5 per cent, its lowest level in half a century.
The bank economists focused especially on the world economy, and how what started as a U.S. economic slowdown began to relentlessly expand in recent quarters.
"There is no question that the current situation is without precedent,'' said Bank of Montreal's Sherry Cooper.
"It is global, it is affecting sectors around the world and there is no place to hide.''
In Canada, the global economic meltdown will continue to affect the country for at least the first half of the year before it returns to moderate growth, the economists agreed.
A report from BMO Capital Markets suggested real GDP will contract just over two per cent, while unemployment will rise to eight per cent by the end of the year.
Home prices are also expected to erode further while consumer spending tightens, especially in auto sales, the BMO report said.
Cooper said she believes government policies and monetary stimulus will bring the country out of a recession, and that a recovery will start in the third quarter.
"At the end of the day we will have outperformed much of the rest of the world, certainly the rest of the G7,'' she said.
Canadians not deflated
Jacqueline Thorpe, Financial Post
Deflation may be public enemy number one among central bankers, monetary policy wonks and bond market aficionados, but a survey shows it has not even a blip on the average Canadian's radar screen.
The poll released Wednesday shows 50% of Canadians expect inflation to increase over the next year, versus 21% who expect the current recession to be deflationary.
The finding, contained in Pollara Inc.'s annual financial outlook survey, underscores the grip inflation continues to hold on the Canadian psyche. It could ultimately be a good thing, providing a bulwark against deflation -- a downward spiral in prices caused by consumers delaying purchases in anticipation of cheaper goods in the future. Deflation can become debilitating if it causes companies to cut production and employment, leading to ever-weaker output.
That inflation, rather than deflation, is still the main concern for Canadians could be understandable if the survey were conducted last summer when commodity prices were soaring and gasoline roared across $1 a litre, but the poll of 2,670 people was conducted between Dec. 11 and 15, 2008. That was after gas prices had tumbled, sale signs filled shopping malls, stock markets had tanked, house prices were beginning to fall and constant talk of depression and deflation filled the airwaves.
After decades of worrying about inflation, it could be that Canadians have not yet wrapped their heads around the idea that prices can also materially drop.
It could also be that with the domestic economy in relatively better shape than in the United States, Canadians simply do not see deflation posing as much of a threat as south of the border. There, the U.S. Federal Reserve has pulled out all the stops to try to prevent deflation, including cutting interest rates to nearly zero.
Meanwhile, it is hard for any average consumer to see lower prices as a threat.
"Nobody understands deflation can be bad for them because they don't recognize it could also involve their pay cheque," said Avery Shenfeld, senior economist at CIBC World Markets.
Mr. Shenfeld was among a panel economists who attended the release of the survey at an Economic Club of Toronto outlook on Wednesday.
"The reason prices are falling is usually that the economy is in a mess."
The Bank of Canada could take some heart in the perception that deflation is not considered as big a threat as policymakers or the media do. For deflation to become dangerous it has to seep into the consciousness, causing consumers to curtail purchases.
"Inflation expectations tend to be pretty sticky in both directions which is actually good thing for public policy," Mr. Shenfeld said.
While deflation is no big threat, the survey, with a margin of error of plus or minus two percentage points 19 times out of 20, shows Canadians see many economic demons over the next year: A record high 91% believe the economy is in recession; almost a third believe the recession will last 13 to 18 months; 68% believe employment will worsen while 31% believe either it somewhat likely or very likely someone in their household may lose a job.
Oddly, many Canadians still expect their personal financial situation to be maintained or even improved in 2009, said Michael Marzolini, chairman of Pollara. This could be because the Canadian unemployment rate has not dramatically soared yet.
Canadians are all government interventionists now, survey data show.
"The villains are on Wall Street or in Washington," Mr. Marzolini said of the average perception. "The current solution is direct government intervention, spending on infrastructure job retraining, tax cuts and even bailouts and protectionism. The private sector has become part of the problem. It has been seen to fail
· TSX -350.77pts (Reuters) as oil and gold shares slid with commodity prices and profit-taking set in after six sessions of gains.
· DOW -245.40pts Startling job losses in the US and a warning from tech bellwether Intel Corp added to the gloomy investor sentiment and heightened fears of an extended recession.
· Dollar -1.01c to $.83.54US.
· Oil -$5.95to $42.63US per barrel. "Oil by far was the biggest negative. People were looking for inventories to build, but they built a lot more than expectations and that's why the price of oil has come down," said Ian Nakamoto, director of research at MacDougall, MacDougall & MacTier
· Gold -$24.30 to $841.10US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
U.S. private-sector employers shed 693,000 jobs in December, a report by ADP Employer Services showed, suggesting more dire news to come in U.S. government jobs data due on Friday.
Canadian employment figures for December are also due on Friday and are to show the economy shed some 22,000 jobs. It will also likely underscore economists' forecasts that the economy is in for a rough ride through the first half of the year and will see little or no growth in 2009 as the recession takes hold.
David Friend The Canadian Press
Canadians should brace themselves for another year of economic woe that could top the misery that unfolded in the latter half of 2008, according to some of the country's leading bank economistsThe flood of dire financial challenges facing the United States is still working its way steadily across the border into Canada, TD Bank chief economist Don Drummond told a gathering at the Economic Club of Toronto yesterday.
"We shouldn't really be thankful for the end of 2008 because I think (it) will have proven to be a better year than 2009,'' he said.
"We'll have a rough fourth quarter, but it'll really hit in Canada in the first quarter, and we'll start to see a lot more variables that look somewhat like the United States.''
The dramatic economic decline will likely push Bank of Canada governor Mark Carney to further slash interest rates, to as low as 0.5 per cent, in an effort to fend off deepening economic problems, suggested Avery Shenfeld of CIBC.
"The Bank of Canada has been aggressively cutting interest rates and has more to do,'' he said at a news conference after the meeting.
However, he added that "going all the way to a zero interest rate might not be necessary, given that we're going to get the stimulus from both the U.S. actions and fiscal policy, and we also have a cheaper dollar.''
Last month, Canada's central bank slashed a key interest rate to 1.5 per cent, its lowest level in half a century.
The bank economists focused especially on the world economy, and how what started as a U.S. economic slowdown began to relentlessly expand in recent quarters.
"There is no question that the current situation is without precedent,'' said Bank of Montreal's Sherry Cooper.
"It is global, it is affecting sectors around the world and there is no place to hide.''
In Canada, the global economic meltdown will continue to affect the country for at least the first half of the year before it returns to moderate growth, the economists agreed.
A report from BMO Capital Markets suggested real GDP will contract just over two per cent, while unemployment will rise to eight per cent by the end of the year.
Home prices are also expected to erode further while consumer spending tightens, especially in auto sales, the BMO report said.
Cooper said she believes government policies and monetary stimulus will bring the country out of a recession, and that a recovery will start in the third quarter.
"At the end of the day we will have outperformed much of the rest of the world, certainly the rest of the G7,'' she said.
Canadians not deflated
Jacqueline Thorpe, Financial Post
Deflation may be public enemy number one among central bankers, monetary policy wonks and bond market aficionados, but a survey shows it has not even a blip on the average Canadian's radar screen.
The poll released Wednesday shows 50% of Canadians expect inflation to increase over the next year, versus 21% who expect the current recession to be deflationary.
The finding, contained in Pollara Inc.'s annual financial outlook survey, underscores the grip inflation continues to hold on the Canadian psyche. It could ultimately be a good thing, providing a bulwark against deflation -- a downward spiral in prices caused by consumers delaying purchases in anticipation of cheaper goods in the future. Deflation can become debilitating if it causes companies to cut production and employment, leading to ever-weaker output.
That inflation, rather than deflation, is still the main concern for Canadians could be understandable if the survey were conducted last summer when commodity prices were soaring and gasoline roared across $1 a litre, but the poll of 2,670 people was conducted between Dec. 11 and 15, 2008. That was after gas prices had tumbled, sale signs filled shopping malls, stock markets had tanked, house prices were beginning to fall and constant talk of depression and deflation filled the airwaves.
After decades of worrying about inflation, it could be that Canadians have not yet wrapped their heads around the idea that prices can also materially drop.
It could also be that with the domestic economy in relatively better shape than in the United States, Canadians simply do not see deflation posing as much of a threat as south of the border. There, the U.S. Federal Reserve has pulled out all the stops to try to prevent deflation, including cutting interest rates to nearly zero.
Meanwhile, it is hard for any average consumer to see lower prices as a threat.
"Nobody understands deflation can be bad for them because they don't recognize it could also involve their pay cheque," said Avery Shenfeld, senior economist at CIBC World Markets.
Mr. Shenfeld was among a panel economists who attended the release of the survey at an Economic Club of Toronto outlook on Wednesday.
"The reason prices are falling is usually that the economy is in a mess."
The Bank of Canada could take some heart in the perception that deflation is not considered as big a threat as policymakers or the media do. For deflation to become dangerous it has to seep into the consciousness, causing consumers to curtail purchases.
"Inflation expectations tend to be pretty sticky in both directions which is actually good thing for public policy," Mr. Shenfeld said.
While deflation is no big threat, the survey, with a margin of error of plus or minus two percentage points 19 times out of 20, shows Canadians see many economic demons over the next year: A record high 91% believe the economy is in recession; almost a third believe the recession will last 13 to 18 months; 68% believe employment will worsen while 31% believe either it somewhat likely or very likely someone in their household may lose a job.
Oddly, many Canadians still expect their personal financial situation to be maintained or even improved in 2009, said Michael Marzolini, chairman of Pollara. This could be because the Canadian unemployment rate has not dramatically soared yet.
Canadians are all government interventionists now, survey data show.
"The villains are on Wall Street or in Washington," Mr. Marzolini said of the average perception. "The current solution is direct government intervention, spending on infrastructure job retraining, tax cuts and even bailouts and protectionism. The private sector has become part of the problem. It has been seen to fail
Wednesday, January 7, 2009
Financial Update
Flaherty says government, banks working to ensure people get loans
· TSX +186.58pts to 9,472 (Reuters) The strong start to 2009 trading continued for a 6th straight session, buoyed by strength across its three biggest sectors -- financials, energy, and materials. You're seeing confidence return back into the market. You're seeing an ability to shake off economic news that continues to be quite dismal," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver. "These gains are promising, but one still needs to be cautious."
· DOW +62.21pts on the increased likelihood of a government stimulus package
· Dollar +.52c to $.84.55US.
· Oil -$.23to $48.58US per barrel. as weak U.S. economic data triggered a bout of profit-taking.
· Gold +$8.20 to $866US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
The financial group shot up 3.6% today as Royal Bank of Canada became the third bank this week to launch a preferred share offering to bolster its capital ratios. Canada's biggest bank, announced a C$200 million preferred share offering, following offerings on Monday from Toronto-Dominion Bank and National Bank of Canada .
Budget will address credit concerns: Flaherty Paul Vieira, Eoin Callan and John Greenwood, Financial Post
The federal Finance Minister, Jim Flaherty, said Tuesday the coming Jan. 27 budget is expected to address concerns regarding access to credit, through measures analysts say could see taxpayers exposed to new market risks.
He made the acknowledgment after consultations with chief executives from Canada's big banks, indicating Ottawa has recognized lenders require additional support to make credit more freely available.
Mr. Flaherty said access to credit has emerged as the No. 1 concern after meetings with stakeholders as part of his cross-country budget consultation tour, which stopped in Montreal on Tuesday.
The measures are designed to juice a flagging economy through a combination of state loans and support for private sector lenders, and drew a grudging welcome from opposition leaders who see the budget as a make-or-break moment for the minority Conservative government.
"It was about time," said John McCallum, the Liberal party chief of economic strategy, who said government's "moves to date have been timid and cautious."
The Finance Minister said a working group of government, central bank and Bay Street representatives was being created to develop "policy options," some of which are expected to be finalized in the coming budget.
While the membership of the working group will be fluid, it will begin with a top-tier meeting in the coming weeks of bank chief executives and senior government officials accompanied by the heads of Crown corporations with the authority to make state loans.
That meeting will start a process of identifying businesses sectors where companies are being starved of loans and intervention may be required by entities like the Businesses Development Corporation, Export Development Corporation and Farm Credit Corporation.
For example, executives and officials might single out struggling companies in the forestry sector where they felt it might make sense for the state to step in and make a loan instead of a bank, people briefed on the plans said.
The work of the joint industry-government group will quickly be passed to less senior figures, and is seen as a way to overcome gaps in information and allow policymakers and the financial sector to respond quickly to pinch points across the country where lack of credit could aggravate the economic downturn.
Ottawa is also looking to intervene in the moribund market for securitized credit such as commercial paper to get funds flowing again.
"We have had discussions about ways in which we can accomplish the goal of making sure the commercial paper works and functions. Those discussions are ongoing and there are a number of policy options there," Mr. Flaherty said, adding he expected the budget to "address" these matters.
Mark Carney, Governor of the Bank of Canada, is expected to take the lead in shaping further state intervention in this sphere.
Finn Poschmann, vice-president of research at the C.D. Howe Institute, said Ottawa's options are straightforward: it could guarantee short-term commercial paper; or buy it up directly from issuers who are having trouble otherwise placing their paper.
"We have not gone down this route before," Mr. Poschmann said. "Either way, this would involve taxpayer exposure to new credit market risks."
Maintaining a functioning market where banks and companies can turn to investors to back fresh loans -- fueling credit card spending, auto financing and small businesses -- is seen as crucial to determining the severity and duration of the economic downturn underway.
Securitized debt, such as credit card loans, typically gets turned into asset-backed commercial and term paper -- a substantial market in Canada valued at over $50-billion. But since the beginning of the credit crunch, demand for these assets has plummeted, causing the market to shrink and raising the cost of financing for consumers and businesses.
Particularly squeezed are non-financial companies, most notably car leasing firms, which rely on commercial paper to fund operations.
There is also concern on Bay Street that if the market continues to erode, some banks could be forced to take the assets back onto their balance sheets, potentially requiring them to raise more capital.
CNW :Correction, not crash for Canadian real estate market in 2009; Average house prices forecast to fall 3.0 per cent
- Historically low interest rates, stable local economies and increasing affordability should support Canada's residential real estate market during transitioning period -
>> TORONTO, Jan. 6 /CNW/ - After experiencing a significant reset in 2008 -a reaction to continuous dire news surrounding the health of the globaleconomy combined with a cooling from the previous years' fervid activitylevels - Canada's resale real estate market should see only modest price andunit sales corrections take place across the country during 2009. Bothnational average house prices and the number of homes sold is expected todecline this year, according to the Royal LePage 2009 Market Survey Forecastreleased today.
Nationally, average house prices are forecast to dip by 3.0 per cent fromlast year to $295,000, while transactions are projected to fall to 416,000(-3.5 %) unit sales in 2009. In spite of this cooling trend on a nationallevel, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did muchto dampen consumer confidence during the latter part of 2008, causing a markedslowdown in house sales activity. However, as a more rational understanding ofthe issues gains ground, together with a wide range of announced correctivemeasures, consumer confidence is anticipated to recover, prompting real estateactivity to pick up once again in the latter half of 2009. Further, Canada in2009 enjoys a stronger economic foundation than most countries and that shouldtemper the housing market correction. The combination of low inflation,reasonable employment levels and improving housing affordability, driven inpart by low mortgage rates, are anticipated to stimulate demand in the comingmonths.
"While Canada's housing market is anticipated to continue to move througha period of adjustment over the next six months, we should expect modestlylower home prices, not a U.S.-style collapse, which was brought on by astructural failure of the entire American credit system," said Phil Soper,president and chief executive of Royal LePage Real Estate Services. "Mostconsumers are not aware that nationally, Canadian housing market activitypeaked in 2007 and has been adjusting lower since. We are well into thisinevitable cyclical correction."
Added Soper: "While a grey cloud hangs over some markets, the sky is notfalling. In recent years, Canada has been a difficult place to be a purchaserof real estate, particularly for first-time buyers. When real estate marketscorrect, inventory levels rise, providing buyers choices instead offrustrating bidding wars. In 2009, appropriately-priced homes will still sellfor fair value."
The housing market is expected to perform quite differently from regionto region across the country. In many mid-sized cities where home pricesremain below the national average, such as Regina and Winnipeg, prices areexpected to increase moderately through 2009, as home ownership remainsparticularly affordable. The most significant price decreases are forecast forCanada's most expensive city, Vancouver, which has experienced above averageprice increases for most of the decade. The correction is a natural cyclicalreaction to an extended period of high price appreciation. Vancouver'sfundamentals, including growing population figures and the positive economicspinoffs expected from the 2010 Olympics, remain very positive.
Observed Soper: "For several years, Vancouver experienced aggressiveprice run-ups in response to overwhelming levels of demand - conditions, whicheventually reached a tipping point. While buyers will be acquiring propertiesfor less in 2009, it is important to note that prices are coming down fromall-time record levels."
Secondary Ontario markets heavily populated by people working in themanufacturing sectors are also anticipated to experience greater than averagedeclines in house prices and activity levels in 2009. In contrast, real estatein Montreal and Ottawa is poised to remain stable, with average house pricesrelatively flat through 2009.
After moving through a period of correction that started in 2007, wellbefore other regions in the country, both Calgary and Edmonton's housingmarkets are anticipated to return to a growth state later in 2009,characterized by stable average house prices and increased unit sales. Despiteslowdowns and delay with some major energy projects, Alberta's economy remainsone of the strongest in Canada.
Looking east, Halifax's real estate market is expected to experience verymodest price appreciation through 2009. After experiencing strong priceincreases over the last year and a half, the market has hit its capacity forabsorbing rising prices and activity levels. The city's diversified array ofindustries is expected to bolster the economy and continue to create solidemployment opportunities, stabilizing home values.
Canadians have been confused and justifiably skeptical of the efforts ofthe worlds' central banks and governments to combat the global economiccrisis. There is broad belief, however, that Canada's financial house is inbetter shape than many peer countries, particularly the U.S. While the federaland most provincial governments have been slow to implement economic stimuluspackages, they enjoy broad public support in principle. Together with theactions taken by the Bank of Canada, the positive impact on consumerconfidence stemming from infrastructure spending announcements and otherstimulus programs is expected to be significant.
Concluded Soper: "We believe that the Canadian economy will struggleearly in 2009, but that conditions will progress continually throughout theyear. Improving credit markets, the stimulative impact from a weaker Canadiandollar, together with the implementation of large fiscal stimulus initiatives,set the stage for a return to growth in the second half of 2009."
<<>>
Global Economic Woes
No country is impervious to the current economic woes being felt aroundthe world. The poor performance of the equity markets and the constant streamof pessimistic economic news had a very negative impact on housing activity inCanada in 2008. Consumer confidence is expected to slowly recover during 2009as the impact of the many corrective actions introduced and announced takesroot.
Tempered, but continued growth in emerging economies, particularly China,India and Brazil, should mitigate the downside risk to Canadian commodityexporters.
Foreclosure Figures in Canada
Foreclosure rates in Canada are expected to increase, but remain verylimited, especially when compared to the U.S. experience, where a broadstructural failure of the credit system occurred. Canada's relativelyinsignificant subprime market, and in turn, the low number of Canadianscontractually committed to very risky mortgages, should result in aforeclosure rate of insufficient volume to impact house prices or transactionactivity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in2009, but remain at long-term healthy levels. Some areas in Ontario, and to alesser extent Quebec, that have high levels of manufacturing jobs, mayexperience greater than national average unemployment. Areas in Alberta tiedto the energy sector may see short-term employment declines, but theprovince's tight overall labour market is expected to mitigate the downside.
Interest Rates
The Bank of Canada's overnight target-lending rate, already at very lowlevels, is expected to be reduced again early in 2009. This should bode wellfor home buyers in 2009 as loosening credit spreads allow banks to offer moreaggressively priced mortgages.
<< 2009 Market Survey Forecast - Average House Prices
------------------------------------------------------------------------- 2009 2008 Market 09/08% Forecast Projected 2008/2007 2007 2006 -------------------------------------------------------------------------
Halifax 1.0% $234,300 $232,000 7.2% $216,339 $203,178
-------------------------------------------------------------------------
Montreal -1.0% $254,400 $257,000 4.3% $246,500 $215,659
-------------------------------------------------------------------------
Ottawa 0.0% $291,000 $291,000 6.6% $273,058 $257,481
-------------------------------------------------------------------------
Toronto -4.0% $364,800 $380,000 0.8% $377,029 $352,388
-------------------------------------------------------------------------
Winnipeg 4.0% $204,900 $197,000 20.5% $163,500 $151,983
-------------------------------------------------------------------------
Regina 6.0% $243,300 $229,500 38.6% $165,613 $131,851
-------------------------------------------------------------------------
Calgary -1.0% $402,000 $406,000 -1.9% $414,066 $346,675
-------------------------------------------------------------------------
Edmonton 0.0% $333,000 $333,000 -1.7% $338,636 $250,915
-------------------------------------------------------------------------
Vancouver -9.0% $540,100 $593,500 4.0% $570,795 $509,876
-------------------------------------------------------------------------
Canada -3.0% $295,000 $304,000 -1.1% $307,265 $276,974
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· TSX +186.58pts to 9,472 (Reuters) The strong start to 2009 trading continued for a 6th straight session, buoyed by strength across its three biggest sectors -- financials, energy, and materials. You're seeing confidence return back into the market. You're seeing an ability to shake off economic news that continues to be quite dismal," said Elvis Picardo, an analyst and strategist at Global Securities in Vancouver. "These gains are promising, but one still needs to be cautious."
· DOW +62.21pts on the increased likelihood of a government stimulus package
· Dollar +.52c to $.84.55US.
· Oil -$.23to $48.58US per barrel. as weak U.S. economic data triggered a bout of profit-taking.
· Gold +$8.20 to $866US per ounce
www.bankofcanada.ca/en/rates/bond-look.html Canadian bond prices
The financial group shot up 3.6% today as Royal Bank of Canada became the third bank this week to launch a preferred share offering to bolster its capital ratios. Canada's biggest bank, announced a C$200 million preferred share offering, following offerings on Monday from Toronto-Dominion Bank and National Bank of Canada .
Budget will address credit concerns: Flaherty Paul Vieira, Eoin Callan and John Greenwood, Financial Post
The federal Finance Minister, Jim Flaherty, said Tuesday the coming Jan. 27 budget is expected to address concerns regarding access to credit, through measures analysts say could see taxpayers exposed to new market risks.
He made the acknowledgment after consultations with chief executives from Canada's big banks, indicating Ottawa has recognized lenders require additional support to make credit more freely available.
Mr. Flaherty said access to credit has emerged as the No. 1 concern after meetings with stakeholders as part of his cross-country budget consultation tour, which stopped in Montreal on Tuesday.
The measures are designed to juice a flagging economy through a combination of state loans and support for private sector lenders, and drew a grudging welcome from opposition leaders who see the budget as a make-or-break moment for the minority Conservative government.
"It was about time," said John McCallum, the Liberal party chief of economic strategy, who said government's "moves to date have been timid and cautious."
The Finance Minister said a working group of government, central bank and Bay Street representatives was being created to develop "policy options," some of which are expected to be finalized in the coming budget.
While the membership of the working group will be fluid, it will begin with a top-tier meeting in the coming weeks of bank chief executives and senior government officials accompanied by the heads of Crown corporations with the authority to make state loans.
That meeting will start a process of identifying businesses sectors where companies are being starved of loans and intervention may be required by entities like the Businesses Development Corporation, Export Development Corporation and Farm Credit Corporation.
For example, executives and officials might single out struggling companies in the forestry sector where they felt it might make sense for the state to step in and make a loan instead of a bank, people briefed on the plans said.
The work of the joint industry-government group will quickly be passed to less senior figures, and is seen as a way to overcome gaps in information and allow policymakers and the financial sector to respond quickly to pinch points across the country where lack of credit could aggravate the economic downturn.
Ottawa is also looking to intervene in the moribund market for securitized credit such as commercial paper to get funds flowing again.
"We have had discussions about ways in which we can accomplish the goal of making sure the commercial paper works and functions. Those discussions are ongoing and there are a number of policy options there," Mr. Flaherty said, adding he expected the budget to "address" these matters.
Mark Carney, Governor of the Bank of Canada, is expected to take the lead in shaping further state intervention in this sphere.
Finn Poschmann, vice-president of research at the C.D. Howe Institute, said Ottawa's options are straightforward: it could guarantee short-term commercial paper; or buy it up directly from issuers who are having trouble otherwise placing their paper.
"We have not gone down this route before," Mr. Poschmann said. "Either way, this would involve taxpayer exposure to new credit market risks."
Maintaining a functioning market where banks and companies can turn to investors to back fresh loans -- fueling credit card spending, auto financing and small businesses -- is seen as crucial to determining the severity and duration of the economic downturn underway.
Securitized debt, such as credit card loans, typically gets turned into asset-backed commercial and term paper -- a substantial market in Canada valued at over $50-billion. But since the beginning of the credit crunch, demand for these assets has plummeted, causing the market to shrink and raising the cost of financing for consumers and businesses.
Particularly squeezed are non-financial companies, most notably car leasing firms, which rely on commercial paper to fund operations.
There is also concern on Bay Street that if the market continues to erode, some banks could be forced to take the assets back onto their balance sheets, potentially requiring them to raise more capital.
CNW :Correction, not crash for Canadian real estate market in 2009; Average house prices forecast to fall 3.0 per cent
- Historically low interest rates, stable local economies and increasing affordability should support Canada's residential real estate market during transitioning period -
>> TORONTO, Jan. 6 /CNW/ - After experiencing a significant reset in 2008 -a reaction to continuous dire news surrounding the health of the globaleconomy combined with a cooling from the previous years' fervid activitylevels - Canada's resale real estate market should see only modest price andunit sales corrections take place across the country during 2009. Bothnational average house prices and the number of homes sold is expected todecline this year, according to the Royal LePage 2009 Market Survey Forecastreleased today.
Nationally, average house prices are forecast to dip by 3.0 per cent fromlast year to $295,000, while transactions are projected to fall to 416,000(-3.5 %) unit sales in 2009. In spite of this cooling trend on a nationallevel, price and activity gains are anticipated in some provinces.
Emotional reaction to recent economic and political instability did muchto dampen consumer confidence during the latter part of 2008, causing a markedslowdown in house sales activity. However, as a more rational understanding ofthe issues gains ground, together with a wide range of announced correctivemeasures, consumer confidence is anticipated to recover, prompting real estateactivity to pick up once again in the latter half of 2009. Further, Canada in2009 enjoys a stronger economic foundation than most countries and that shouldtemper the housing market correction. The combination of low inflation,reasonable employment levels and improving housing affordability, driven inpart by low mortgage rates, are anticipated to stimulate demand in the comingmonths.
"While Canada's housing market is anticipated to continue to move througha period of adjustment over the next six months, we should expect modestlylower home prices, not a U.S.-style collapse, which was brought on by astructural failure of the entire American credit system," said Phil Soper,president and chief executive of Royal LePage Real Estate Services. "Mostconsumers are not aware that nationally, Canadian housing market activitypeaked in 2007 and has been adjusting lower since. We are well into thisinevitable cyclical correction."
Added Soper: "While a grey cloud hangs over some markets, the sky is notfalling. In recent years, Canada has been a difficult place to be a purchaserof real estate, particularly for first-time buyers. When real estate marketscorrect, inventory levels rise, providing buyers choices instead offrustrating bidding wars. In 2009, appropriately-priced homes will still sellfor fair value."
The housing market is expected to perform quite differently from regionto region across the country. In many mid-sized cities where home pricesremain below the national average, such as Regina and Winnipeg, prices areexpected to increase moderately through 2009, as home ownership remainsparticularly affordable. The most significant price decreases are forecast forCanada's most expensive city, Vancouver, which has experienced above averageprice increases for most of the decade. The correction is a natural cyclicalreaction to an extended period of high price appreciation. Vancouver'sfundamentals, including growing population figures and the positive economicspinoffs expected from the 2010 Olympics, remain very positive.
Observed Soper: "For several years, Vancouver experienced aggressiveprice run-ups in response to overwhelming levels of demand - conditions, whicheventually reached a tipping point. While buyers will be acquiring propertiesfor less in 2009, it is important to note that prices are coming down fromall-time record levels."
Secondary Ontario markets heavily populated by people working in themanufacturing sectors are also anticipated to experience greater than averagedeclines in house prices and activity levels in 2009. In contrast, real estatein Montreal and Ottawa is poised to remain stable, with average house pricesrelatively flat through 2009.
After moving through a period of correction that started in 2007, wellbefore other regions in the country, both Calgary and Edmonton's housingmarkets are anticipated to return to a growth state later in 2009,characterized by stable average house prices and increased unit sales. Despiteslowdowns and delay with some major energy projects, Alberta's economy remainsone of the strongest in Canada.
Looking east, Halifax's real estate market is expected to experience verymodest price appreciation through 2009. After experiencing strong priceincreases over the last year and a half, the market has hit its capacity forabsorbing rising prices and activity levels. The city's diversified array ofindustries is expected to bolster the economy and continue to create solidemployment opportunities, stabilizing home values.
Canadians have been confused and justifiably skeptical of the efforts ofthe worlds' central banks and governments to combat the global economiccrisis. There is broad belief, however, that Canada's financial house is inbetter shape than many peer countries, particularly the U.S. While the federaland most provincial governments have been slow to implement economic stimuluspackages, they enjoy broad public support in principle. Together with theactions taken by the Bank of Canada, the positive impact on consumerconfidence stemming from infrastructure spending announcements and otherstimulus programs is expected to be significant.
Concluded Soper: "We believe that the Canadian economy will struggleearly in 2009, but that conditions will progress continually throughout theyear. Improving credit markets, the stimulative impact from a weaker Canadiandollar, together with the implementation of large fiscal stimulus initiatives,set the stage for a return to growth in the second half of 2009."
<<>>
Global Economic Woes
No country is impervious to the current economic woes being felt aroundthe world. The poor performance of the equity markets and the constant streamof pessimistic economic news had a very negative impact on housing activity inCanada in 2008. Consumer confidence is expected to slowly recover during 2009as the impact of the many corrective actions introduced and announced takesroot.
Tempered, but continued growth in emerging economies, particularly China,India and Brazil, should mitigate the downside risk to Canadian commodityexporters.
Foreclosure Figures in Canada
Foreclosure rates in Canada are expected to increase, but remain verylimited, especially when compared to the U.S. experience, where a broadstructural failure of the credit system occurred. Canada's relativelyinsignificant subprime market, and in turn, the low number of Canadianscontractually committed to very risky mortgages, should result in aforeclosure rate of insufficient volume to impact house prices or transactionactivity.
Employment Rates
Across the country, employment rates are expected to erode somewhat in2009, but remain at long-term healthy levels. Some areas in Ontario, and to alesser extent Quebec, that have high levels of manufacturing jobs, mayexperience greater than national average unemployment. Areas in Alberta tiedto the energy sector may see short-term employment declines, but theprovince's tight overall labour market is expected to mitigate the downside.
Interest Rates
The Bank of Canada's overnight target-lending rate, already at very lowlevels, is expected to be reduced again early in 2009. This should bode wellfor home buyers in 2009 as loosening credit spreads allow banks to offer moreaggressively priced mortgages.
<< 2009 Market Survey Forecast - Average House Prices
------------------------------------------------------------------------- 2009 2008 Market 09/08% Forecast Projected 2008/2007 2007 2006 -------------------------------------------------------------------------
Halifax 1.0% $234,300 $232,000 7.2% $216,339 $203,178
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Montreal -1.0% $254,400 $257,000 4.3% $246,500 $215,659
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Ottawa 0.0% $291,000 $291,000 6.6% $273,058 $257,481
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Toronto -4.0% $364,800 $380,000 0.8% $377,029 $352,388
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Winnipeg 4.0% $204,900 $197,000 20.5% $163,500 $151,983
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Regina 6.0% $243,300 $229,500 38.6% $165,613 $131,851
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Calgary -1.0% $402,000 $406,000 -1.9% $414,066 $346,675
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Edmonton 0.0% $333,000 $333,000 -1.7% $338,636 $250,915
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Vancouver -9.0% $540,100 $593,500 4.0% $570,795 $509,876
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Canada -3.0% $295,000 $304,000 -1.1% $307,265 $276,974
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