Financial Update for April 15, 2009

First-time home buyers could find a welcoming market, but approach with caution article below

• TSX -54.00
• DOW -137.63
• Dollar +.36c to 82.37USD
• Oil -$.64 to $49.41US per barrel.
• Gold +$3.80 to $891.20USD per ounce
• Canadian 5 yr bond yields -.01bps to 1.84 four weeks ago it was 1.89. The spread between the 5 year bond yield and the Merix 5 year fixed rate is now 2.11%.
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html

Mortgage rates unlikely to fall further: Brookfield

Sean B. Pasternak, Bloomberg Financial Post Mortgage rates in Canada, which have plunged by almost 50% in the last year, aren't likely to fall further, said Phil Soper, chief executive of Brookfield Real Estate Services Fund.

"Certainly with the Bank of Canada's target rate set at virtually zero, there's very little room," Mr. Soper said Tuesday at a conference in Toronto on Canada's real estate market. The rate is "the lowest it's been in anyone in this room's lifetime."

Rates for home loans have been dropping during the biggest financial crisis since the Great Depression, with some lenders offering mortgages approaching 4%, Mr. Soper said. That compares with an average posted five-year rate of 7.5% a year ago, according to the Bank of Canada. He added that home prices in Canada aren't likely to rise "sharply" over the next two years.

Bank of Montreal, which sponsored the conference, lowered its rate for a five-year fixed-rate mortgage this month to 4.15%.

"We are approaching almost zero interest rates," at the Bank of Canada, said John Turner, the Toronto-based bank's director of mortgages. "The question becomes, how much upward pressure will there be as we come out of this recession?"

The Bank of Canada last month cut its benchmark lending rate to 0.5%, its lowest ever, and said it's preparing to use policies beyond interest rate moves to revive an economy hit by a recession and tight credit markets. The next rate announcement is April 21.

Canadian existing home sales rose in February for the first time since September as buyers took advantage of lower mortgage rates and prices, according to the Canadian Real Estate Association's Multiple Listing Service. Sales of existing homes rose 8.6% from January to 28,669 units.

Bank of Montreal senior economist Sal Guatieri predicted that Canada's housing market will decline further this year, without the "crash" experienced in the U.S.

First-time home buyers could find a welcoming market, but approach with caution
By Kristine Owram, The Canadian Press TORONTO - Real-estate experts say low mortgage rates and more affordable homes in many markets are drawing out first-time home buyers in droves, but one independent analyst says the correction in Canadian home prices hasn't been nearly as dramatic as some believe.

Phil Soper, chief executive of Brookfield Real Estate Services, which operates under the Royal LePage banner, said prices are falling and lenders are lowering their rates making the market more attractive to people looking to buy their first home.

"The uptick in first-time home buyer purchases across the country is quite astonishing," said Soper, speaking Tuesday at a BMO conference on Canada's housing market. "Affordability in places like Vancouver has improved for the first time in a very long time."

BMO senior economist Sal Guatieri said the average mortgage payment has fallen by one-third or $600 a month from its peak, while average resale home prices have fallen 14 per cent from their highs.

Guatieri said he expects resale prices to fall "moderately further" this year for a cumulative decline in prices of approximately 20 per cent.

But Peter Norman, a consultant with independent real-estate adviser Altus Group, said the dramatic drops in home prices seen in places like Vancouver, Edmonton and Calgary are the exception rather than the norm.

"This is not a housing adjustment period in Canada," Norman said in an interview.
"Certainly housing demand has slowed down because the economy is the pits, but housing supply has slowed down a lot as well as a result.... Outside of a couple of sub-markets there hasn't been much of a downward adjustment on price."

Still, other changes in the market are making this a good time to buy a first home - as long as the buyer can afford it, Norman said.

"There are a lot fewer of those stories of really rapidly selling houses, bidding wars, all that kind of stuff, so I think it can be a bit more of a sane market for somebody who's trying to buy right now," Norman said. "It may take away some of the anxiety or it may help you make a better decision."

And most importantly, overall affordability in the housing market has improved.

"If it wasn't for the recession and the aversion to financial risk that people have right now, it would probably be a very active market and a very good market," Norman said.

The Canadian Real Estate Association reported that house prices and sales continued to slide across Canada in February - the latest month for which data is available - compared to the same time last year, but activity was up for the first time since September.

The association said resale home prices fell 9.2 per cent across Canada in February to an average of $281,972 while sales fell 31 per cent to 25,373 units, the smallest year-over-year decline since October 2008. Seasonally adjusted sales fell 26.8 per cent.

Meanwhile, the number of homes that traded hands on the multiple listing service, or MLS, was up 8.6 per cent above seasonally adjusted levels in January.

Financial Update for April 14, 2009

TSX extends rally on commodity gains

Canada's got the best of both worlds. You’ve got the financials and all the resources kicking in," said Pyle. "So the litmus test now will be adding on to this week because now we're less than 200 points from the high we saw in January."

• TSX +98.50 to finish higher for a 3rd straight session, extending the “spring rally’ to a 6th week, with financial issues buoyed by optimism that quarterly U.S. bank results this week will show the sector has stabilized after being shaken hard in the global financial crisis.
• DOW -25.57Traders were uneasy after a New York Times report that the U.S. Treasury has directed GM to lay the groundwork for a potential bankruptcy filing by June 1.
• Dollar +.39c to 82.01USD
• Oil -$1.19 to $50.05US per barrel.
• Gold +$12.50 to $895.80USD per ounce
• Canadian 5 yr bond yields -.01bps to 1.85 four weeks ago it was 1.86. The spread between the 5 year bond yield and the Merix 5 year fixed rate is now 2.09%.
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html


Wells Fargo to post record US$3B profit Wants to repay US$25-billion bailout cash Jonathan Stempel And Elinor Comlay, Reuters

Wells Fargo & Co. said it expects to post a record US$3-billion first-quarter profit, causing its shares to soar and providing a welcome jolt to the broader stock market and banking sector.

The fourth-largest U. S. bank is the first major U. S. lender to indicate how it fared in the January-March period.

Coming as the government performs "stress tests" on 19 major banks, the preliminary quarterly results suggest that lenders focused on traditional banking activities may handle the recession better than analysts and investors expect.

"In this terrible environment, to exceed on the upside is going to raise the bar pretty high," said Matt McCormick, an analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

Wells Fargo said quarterly profit after preferred stock dividends was US$2.3-billion to US$2.4-billion, or US55¢ per share, on revenue of about US$20-billion.
Analysts on average expected profit of US25¢ per share on revenue of US$18.81-billion, Reuters said. Wells Fargo expects to report full quarterly results on April 22.

Financial Update for April 13, 2009

Banks, oils power TSX to fifth weekly gain

"We had some pretty dismal jobs numbers in Canada as unemployment rose to 8%, but that's been overshadowed by positive sentiment surrounding the financial sector," said Elvis Picardo, analyst and strategist at Global Securities in Vancouver. "Since the financial sector has been front and center in the midst of this turmoil, any improvement reflects positively on the rest of the economy and the rest of the equity markets."

• TSX +217.84 to 9,187.12 as financial issues got a lift from upbeat news from the U.S. banking sector and higher oil prices boosted energy shares.
• DOW +246.27
• Dollar +.80c to 81.62USD
• Oil +$2.86 to $52.24US per barrel.
• Gold -$2.60 to $882.50USD per ounce
• Canadian 5 yr bond yields +.04bps to 1.86 four weeks ago it was 1.90
• http://www.financialpost.com/markets/market_data/money-yields-can_us.html

Obama says U.S. economy beginning to show 'glimmers of hope'

Fri Apr 10, 3:37 PM Liz Sidoti, The Associated Press

WASHINGTON - U.S. President Barack Obama said Friday the economy is showing "glimmers of hope" despite continuing stresses, and he signalled more steps to brighten the business climate.

Obama commented to reporters after meeting at the White House with members of his economic team, including Treasury Secretary Timothy Geithner, economic adviser Larry Summers and Federal Reserve Chairman Ben Bernanke.

"What we're starting to see is glimmers of hope across the economy," the president said, although he also noted that the economy is "still under severe stress."
"Whatever we do ultimately has to translate into economic growth and jobs," Obama said.

He said there has been a significant uptick in the number of homeowners seeking to refinance their mortgages, which will put money back into their pockets. He said a 20-per-cent increase last month in the Small Business Administration's largest program means that small companies, often prized as the backbone of the economy, "are starting to get money."

But Obama also pointed to the high rate of joblessness - which climbed to a 25-year high of 8.5 per cent in March - and acknowledged that "we've still got a lot of work to do."

"We're starting to see progress," he declared, "and if we stick with it, if we don't flinch in the face of some difficulties, then I feel absolutely convinced that we are going to get this economy back on track."

Obama said he and his advisers discussed the stability of the financial system and a program to help banks clear their books of bad assets that have made normal lending difficult if not impossible.

Friday's meeting was Obama's first with his economic team since his return this week from an overseas trip partly focused on the global economic slump. He participated in a meeting in London of leaders from the 20 wealthiest and developing economies.

The backdrop for the meeting was the still-fragile economy that has begun to show hints of a possible recovery, including a strong profit forecast from Wells Fargo and Co., a drop in claims for unemployment benefits and predictions of solid April sales from several retailers.

Also promising were less jittery stock investors, shoppers and homebuyers, slowly thawing credit markets that were once frozen and stabilizing economic indicators that had been going from bad to worse.

All that has at least one Obama adviser sounding cautiously optimistic.
"There has been a substantial anecdotal flow over the last six to eight weeks of things that felt a little bit better," Summers, director of Obama's National Economic Council, said Thursday.

"The sense of a ball falling off a table, which is what the economy has felt like since the middle of last fall, I think we can be reasonably confident that that is going to end within the next few months, and we will no longer have that sense of a free-fall."