New numbers give hope for early recovery
TSX+131.49
DOW -52.81
Dollar +1.21c to 87.69USD the strong performance on equity and commodity markets energized the Canadian dollar
Oil +$1.94 to $62.04US per barrel
Gold +$10.70 to $937.40USD per ounce
Canadian 5 yr bond yields -.01bps to 2.16
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
New numbers give hope for early recovery
JULIAN BELTRAME
THE CANADIAN PRESS
OTTAWA -- The hair-raising plunge in the world and Canadian economies this winter is showing signs of levelling off as new evidence emerged yesterday pointing to improving conditions.
Economic growth is still months away, say economists, but with each "less bad'' indicator that is posted, fear of continued free-fall is being replaced by cautious optimism.
"I'm in the glass half-full camp,'' said Bank of Montreal deputy chief economist Douglas Porter. "The way the financial markets are going, I think it's quite possible we'll see a recovery sooner than the end of the year. It seems the optimism is becoming more infectious around the world, and that's a good thing.''
The glass half-empty camp argues that financial markets, while much improved, remain risk adverse and that the recovery may be too dependent on temporary massive government stimulus to be sustained.
Yesterday saw more reasons to support a growing consensus that sees global economies starting to come out of the nightmare of the past few months.
* Canada's inflation rate fell to a near 15-year low of 0.4 per cent in April, a clear signal of economic weakness but because the plunge was due to a single-factor -- lower gasoline prices compared to last year -- the steep drop was not worrisome.
* The country's leading indicator of future economic activity rose 0.5 per cent last month over March, the first sign of life in eight months.
* As significant, a survey of 220 fund managers by Bank of America-Merrill Lynch showed the bulls are waking from their slumber, with 57 per cent of managers forecasting a stronger global economy in the next 12 months.
"The unrelenting gloom of a mere three months ago has been replaced by a fairly typical early-cyclical sentiment, with the only hint of potential irrational exuberance in emerging markets,'' the global investment bank said.
The May survey showed that fund managers are still reluctant to jump into the market with both feet as asset allocations remain underweight in securities by six per cent, but that is less than the minus-17 per cent number found in the April survey.
Merrill Lynch analysts said there is still a risk of "too much, too soon'' with the stock markets rally of the past two months, but noted that unlike last fall and early 2009, investors now appear willing to shrug off bad news in expectation the economy will indeed recover.
The past month has seen the emergence of a number of so-called "green shoots'' that point to an improving economic landscape.
After a correction last week, Toronto's stock exchange was back over the 10,000-point line this week.
More bad news is on the way as countries start reporting first-quarter gross domestic product retreats in the next few weeks.
Japan said yesterday its economy contracted a massive 15.2 per cent, the most since it began to keep records in 1955.
The Bank of Canada forecasts Canada's first quarter GDP contraction will top seven per cent when all the data is available in two weeks, also the worst performance since records began in 1961.
But these numbers represent a rear-view mirror of the economy, say analysts, something markets have already left behind.
Economists also judged that the Bank of Canada is now less likely to resort to extraordinary measures because the risk of further steep contraction has diminished.
In a speech Tuesday, Bank of Canada deputy governor John Murray said the bank's action of dropping the policy rate to 0.25 per cent -- and vowing to keep it there for the next year -- has succeeded in improving credit.
Thursday, May 21, 2009
Wednesday, May 20, 2009
Financial Update for May 20, 2009
TSX back in rally mode as oil hits US$60; N.Y. tepid on construction data
"We're into the third month of a very powerful rally - this could go on for months," observed Paul Thornton, investment adviser at Global Maxfin Capital. "This is going to be driven higher by the enormous amounts of cash that have been on the sidelines - people are afraid of missing this rally and the institutions have been big buyers."
TSX+338.10 to 10,100.95 reclaiming last week's losses, as higher oil prices boosted energy issues and as the TSX caught up with a rise by U.S. stocks on Monday when the TSX was closed.
DOW -29.23
Dollar +1.67c to 86.48USD the strong performance on equity and commodity markets energized the Canadian dollar
Oil +$2.69 + $.58 to $60.10US per barrel
Gold +$5 to $926.70USD per ounce
Canadian 5 yr bond yields +.04bps to 2.16
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
April Uptick
National Post Published: Saturday, May 16, 2009
The Canadian Real Estate Association said this week that the rebound in home sales and prices for April was stronger than expected. Seasonally adjusted national sales climbed 11.2% from March, the largest month-over-month gain in more than five years. The number of homes that changed hands (34,838), was higher than in any of the prior seven months.
Calgary led the rebound, with a 31% gain in sales over March, followed by Vancouver (30%), Montreal (15%) and Toronto (10%). Sales were up from March levels in 70% of markets across the country. Actual sales of 43,473 in April was down 11.8% from the same month a year ago.
The average sale price of $306,366 is 3.2% below April, 2008's, average. Inventory numbers were down 1.8%, to their lowest level since June, 2006, and 16.4% below the peak in May, 2008. The supply-versus-demand ratio is more balanced now in British Columbia, Alberta, Ontario and Quebec.
Home Depot beats estimates Bloomberg News Published: Tuesday, May 19, 2009
Home Depot Inc., the world's largest home-improvement retailer, posted profit that exceeded analysts' estimates after the company reduced costs.
Net income rose to US$514-million, or 30 U.S. cents a share, from US$356-million, or 21 U.S. cents, a year earlier, the Atlanta-based company said on Tuesday in a statement. Sales fell 9.7% to US$16.2 billion in the three months ended May 3.
Excluding some items, Home Depot's profit was 35 U.S. cents a share. Analysts anticipated earnings on that basis of 29 U.S. cents from revenue of US$15.8 billion, the average of estimates compiled by Bloomberg.
Sales in stores open at least a year fell 10.2% in the period. Colin McGranahan, an analyst with Sanford C. Bernstein & Co. in New York, estimated a decline of 11.7%.
Lowe's Cos., the company's smaller rival, reported first-quarter earnings on Monday that also topped analysts' estimates as it curbed discounts and boosted sales of more-profitable plants and flowers.
Couple pay 1p a month for mortgage after rates slashed
A couple are paying just 1p a month on their mortgage after the Bank of England slashed interest rates
Daily Telegraph
Ben Cameron and his wife Nicola are being charged the nominal sum after signing up for an interest-only tracker deal in December 2007.
Their mortgage with Cheltenham & Gloucester tied their payments to 1.01 per cent below the base rate, which then stood at 5.5 per cent.
Since then it has fallen to 0.5 per cent, cutting their monthly bill from around £1,500 ($2,674) to zero.
But the couple from Hampton, south west London are being charged 1p because their building society's computers cannot deal with payments of nothing.
Their case highlights the tens of thousands of homeowners who have had their repayments slashed by the series of rate cuts imposed by the Bank in an attempt to stimulate lending. Interest rates have been reduced six times since October last year.
But while most people who took out tracker deals pegged below the base rate are still spending hundreds of pounds a month to pay off the capital on their homes, the Camerons' interest-only deal means they are enjoying a zero interest loan.
Mr Cameron, 37, an estate agent, said that they were keeping the money they have saved to put more equity in their home when their mortgage deal comes up for renewal. They had originally paid a 20 per cent deposit on the £400,000 property.
"We fell incredibly lucky, we almost didn't go for it," he told the Evening Standard. "We look at our mortgage statements now and they look ridiculous, it's fantastic." The couple are expecting their first baby in June.
Since rates began falling lenders have withdrawn all tracker deals that are tied below the base rate. The most attractive tracker mortgage currently on the market is 2.39 per cent above the Bank's rate.
Staying alive: As recession deepens, businesses keep bankruptcy at bay
By Julian Beltrame, The Canadian Press
OTTAWA - The ability of Canadian businesses to survive the worst recession in decades is giving hope that the rebound from current massive job losses will be stronger than widely expected.
One of the biggest surprises of the downturn - unique to Canada - is that as the economy has slumped, the number of businesses declaring bankruptcy has also declined.
This has hardly ever happened before and although Canada is only seven months into a recession expected to last another half-year, it suggests that the corporate destruction of past recessions won't be a major factor this time around.
"This is the story of the recession so far," Benjamin Tal of CIBC World Markets said Tuesday.
"The recession is not over, so I would expect to see (business bankruptcy) numbers rising before it is over. But the fact we're starting from a very low point suggests that the number will not be very high compared to previous recessions."
The federal Office of the Superintendent of Bankruptcy reported last week that insolvencies in March totalled 14,244, up 51 per cent from March of last year. But while swelling numbers of individuals succumbed to their debts, business bankruptcies were down 10 per cent.
By comparison, five months into the downturns of 1982 and 1992 corporate bankruptcies were 15 to 20 per cent higher than pre-recession levels, Tal said in an analysis.
In the United States, he added, business bankruptcies now are about 40 per cent higher than a year ago.
For the first three months of 2009 - in which the Bank of Canada estimates the economy contracted at an annualized rate of 7.3 per cent, the worst on record - business bankruptcies were actually down 14 per cent from the corresponding period in 2008.
Not all Canadian businesses have been fortunate. This year has seen several high-profile Canadian bankruptcy filings, notably Nortel Networks (TSX: NT.TO) and AbitibiBowater (TSX: ABH.TO).
And consumer insolvencies were up 57 per cent in March over a year ago.
However, Tal says Canadian businesses, after years of profit, entered the recession with plenty of cash. As well, many have aggressively downsized - laying off workers to cut operating costs. In fact, over 300,000 jobs have disappeared in the past six months.
While that is bad news for workers, Tal says it portends well for the recovery, which most economists, including the Bank of Canada, forecast will begin late in 2009.
Fewer corporate bankruptcies could result in a quicker rebound in the employment market, which normally trails recoveries, says Tal.
"There's been a little bit of pre-emptive downsizing that is making the situation worse now, but it means the recovery will be faster because it is much easier to re-hire when you still exist," he observed.
Tuesday brought another indication that Canada is surviving the recession better than its southern neighbour.
Canada Mortgage and Housing Corp. projected the recession will cause housing starts to fall about 33 per cent this year to 141,900, but predicted that building will edge up in subsequent years - although not to the 200,000-plus rates seen in the past several years.
While that shows significant weakness, it is far ahead of the U.S. situation, where starts have crumbled to one-quarter of pre-recession levels. Nor are the Canadian numbers far off the demographic fundamentals, including population growth.
"Housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period," said CMHC chief economist Bob Dugan.
Dugan forecasts housing starts in the 150,000 to 180,000 range over the next four years.
"We're into the third month of a very powerful rally - this could go on for months," observed Paul Thornton, investment adviser at Global Maxfin Capital. "This is going to be driven higher by the enormous amounts of cash that have been on the sidelines - people are afraid of missing this rally and the institutions have been big buyers."
TSX+338.10 to 10,100.95 reclaiming last week's losses, as higher oil prices boosted energy issues and as the TSX caught up with a rise by U.S. stocks on Monday when the TSX was closed.
DOW -29.23
Dollar +1.67c to 86.48USD the strong performance on equity and commodity markets energized the Canadian dollar
Oil +$2.69 + $.58 to $60.10US per barrel
Gold +$5 to $926.70USD per ounce
Canadian 5 yr bond yields +.04bps to 2.16
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
April Uptick
National Post Published: Saturday, May 16, 2009
The Canadian Real Estate Association said this week that the rebound in home sales and prices for April was stronger than expected. Seasonally adjusted national sales climbed 11.2% from March, the largest month-over-month gain in more than five years. The number of homes that changed hands (34,838), was higher than in any of the prior seven months.
Calgary led the rebound, with a 31% gain in sales over March, followed by Vancouver (30%), Montreal (15%) and Toronto (10%). Sales were up from March levels in 70% of markets across the country. Actual sales of 43,473 in April was down 11.8% from the same month a year ago.
The average sale price of $306,366 is 3.2% below April, 2008's, average. Inventory numbers were down 1.8%, to their lowest level since June, 2006, and 16.4% below the peak in May, 2008. The supply-versus-demand ratio is more balanced now in British Columbia, Alberta, Ontario and Quebec.
Home Depot beats estimates Bloomberg News Published: Tuesday, May 19, 2009
Home Depot Inc., the world's largest home-improvement retailer, posted profit that exceeded analysts' estimates after the company reduced costs.
Net income rose to US$514-million, or 30 U.S. cents a share, from US$356-million, or 21 U.S. cents, a year earlier, the Atlanta-based company said on Tuesday in a statement. Sales fell 9.7% to US$16.2 billion in the three months ended May 3.
Excluding some items, Home Depot's profit was 35 U.S. cents a share. Analysts anticipated earnings on that basis of 29 U.S. cents from revenue of US$15.8 billion, the average of estimates compiled by Bloomberg.
Sales in stores open at least a year fell 10.2% in the period. Colin McGranahan, an analyst with Sanford C. Bernstein & Co. in New York, estimated a decline of 11.7%.
Lowe's Cos., the company's smaller rival, reported first-quarter earnings on Monday that also topped analysts' estimates as it curbed discounts and boosted sales of more-profitable plants and flowers.
Couple pay 1p a month for mortgage after rates slashed
A couple are paying just 1p a month on their mortgage after the Bank of England slashed interest rates
Daily Telegraph
Ben Cameron and his wife Nicola are being charged the nominal sum after signing up for an interest-only tracker deal in December 2007.
Their mortgage with Cheltenham & Gloucester tied their payments to 1.01 per cent below the base rate, which then stood at 5.5 per cent.
Since then it has fallen to 0.5 per cent, cutting their monthly bill from around £1,500 ($2,674) to zero.
But the couple from Hampton, south west London are being charged 1p because their building society's computers cannot deal with payments of nothing.
Their case highlights the tens of thousands of homeowners who have had their repayments slashed by the series of rate cuts imposed by the Bank in an attempt to stimulate lending. Interest rates have been reduced six times since October last year.
But while most people who took out tracker deals pegged below the base rate are still spending hundreds of pounds a month to pay off the capital on their homes, the Camerons' interest-only deal means they are enjoying a zero interest loan.
Mr Cameron, 37, an estate agent, said that they were keeping the money they have saved to put more equity in their home when their mortgage deal comes up for renewal. They had originally paid a 20 per cent deposit on the £400,000 property.
"We fell incredibly lucky, we almost didn't go for it," he told the Evening Standard. "We look at our mortgage statements now and they look ridiculous, it's fantastic." The couple are expecting their first baby in June.
Since rates began falling lenders have withdrawn all tracker deals that are tied below the base rate. The most attractive tracker mortgage currently on the market is 2.39 per cent above the Bank's rate.
Staying alive: As recession deepens, businesses keep bankruptcy at bay
By Julian Beltrame, The Canadian Press
OTTAWA - The ability of Canadian businesses to survive the worst recession in decades is giving hope that the rebound from current massive job losses will be stronger than widely expected.
One of the biggest surprises of the downturn - unique to Canada - is that as the economy has slumped, the number of businesses declaring bankruptcy has also declined.
This has hardly ever happened before and although Canada is only seven months into a recession expected to last another half-year, it suggests that the corporate destruction of past recessions won't be a major factor this time around.
"This is the story of the recession so far," Benjamin Tal of CIBC World Markets said Tuesday.
"The recession is not over, so I would expect to see (business bankruptcy) numbers rising before it is over. But the fact we're starting from a very low point suggests that the number will not be very high compared to previous recessions."
The federal Office of the Superintendent of Bankruptcy reported last week that insolvencies in March totalled 14,244, up 51 per cent from March of last year. But while swelling numbers of individuals succumbed to their debts, business bankruptcies were down 10 per cent.
By comparison, five months into the downturns of 1982 and 1992 corporate bankruptcies were 15 to 20 per cent higher than pre-recession levels, Tal said in an analysis.
In the United States, he added, business bankruptcies now are about 40 per cent higher than a year ago.
For the first three months of 2009 - in which the Bank of Canada estimates the economy contracted at an annualized rate of 7.3 per cent, the worst on record - business bankruptcies were actually down 14 per cent from the corresponding period in 2008.
Not all Canadian businesses have been fortunate. This year has seen several high-profile Canadian bankruptcy filings, notably Nortel Networks (TSX: NT.TO) and AbitibiBowater (TSX: ABH.TO).
And consumer insolvencies were up 57 per cent in March over a year ago.
However, Tal says Canadian businesses, after years of profit, entered the recession with plenty of cash. As well, many have aggressively downsized - laying off workers to cut operating costs. In fact, over 300,000 jobs have disappeared in the past six months.
While that is bad news for workers, Tal says it portends well for the recovery, which most economists, including the Bank of Canada, forecast will begin late in 2009.
Fewer corporate bankruptcies could result in a quicker rebound in the employment market, which normally trails recoveries, says Tal.
"There's been a little bit of pre-emptive downsizing that is making the situation worse now, but it means the recovery will be faster because it is much easier to re-hire when you still exist," he observed.
Tuesday brought another indication that Canada is surviving the recession better than its southern neighbour.
Canada Mortgage and Housing Corp. projected the recession will cause housing starts to fall about 33 per cent this year to 141,900, but predicted that building will edge up in subsequent years - although not to the 200,000-plus rates seen in the past several years.
While that shows significant weakness, it is far ahead of the U.S. situation, where starts have crumbled to one-quarter of pre-recession levels. Nor are the Canadian numbers far off the demographic fundamentals, including population growth.
"Housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period," said CMHC chief economist Bob Dugan.
Dugan forecasts housing starts in the 150,000 to 180,000 range over the next four years.
Tuesday, May 19, 2009
Financial Update for May 19, 2009
TSX-86.35
DOW -62.68
Dollar -.73c to 84.81USD
Oil -$2.28 to $56.34US per barrel
Gold +$2.90 to $931.30USD per ounce
Canadian 5 yr bond yields +.01bps to 2.12
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
'Banking crisis over' says CIBC economist
Jobs and housing still must recover
May 16, 2009 JULIAN BELTRAME THE CANADIAN PRESS OTTAWA
The financial crisis that plunged the world into the worst recession in decades is showing signs of having righted itself.
A proclamation of the welcome development came at the same time that data showed the Canadian economy took another hard knock in March, with manufacturing sales falling 2.7 per cent, reversing a February pickup.
The cheerier harbinger is a steady reduction in global credit spreads -- the gaps between interest rates on low-risk government bonds and higher-yielding corporate and other debt -- which suggest that the financial meltdown is on course to being resolved.
"The banking crisis is over,'' declared the headline in a note yesterday from CIBC World Markets chief economist Avery Shenfeld.
"Nobody now expects there's another Lehman out there,'' Shenfeld wrote, referring to the mid-September collapse of U.S. investment bank Lehman Brothers, which jolted financial markets around the world.
"Nor will banks be pushed into a fire sale of assets that would depress valuations of like assets on other banks' balance sheets.''
The three-month London Interbank Offered Rate, a benchmark for lending between banks, was down 10 basis points on the week to 0.84 per cent, reducing bank funding costs.
Some base rates were the lowest since the U.S. subprime mortgage crisis erupted in the summer of 2007.
Pointing to narrowing credit spreads and improved interbank lending, Shenfeld said a turning point in the U.S. crisis was reached with the Obama administration's rescue measures.
Bank of Montreal economist Sal Guatieri said he also was encouraged by narrowing credit spreads.
"It means borrowing costs will be coming down for a wide range of borrowers, because a lot of variable-rate mortgages and a lot of personal and business loans are tied to the LIBOR rates,'' he said.
Guatieri cautioned that weakness remains in the economy and he is not ready to declare an all-clear until he sees improvement in job creation and housing, particularly in the United States.
Yesterday's data on Canadian manufacturing showed that the recovery will not be a "neat, straight-line'' move, noted economist Derek Holt of Scotia Capital.
The surprising 2.7 per cent tumble in factory sales in March left them down 23 per cent from their peak last July, despite a bounce in auto shipments following assembly-plant shutdowns in January and February.
The retreat was widespread, and with more auto sector retrenchment on stream, the manufacturing picture only looks bleaker down the road.
"Manufacturers are reining in production, but not as quickly as sales are plummeting,'' said Grant Bishop at TD Economics.
"Downward pressure on Canadian manufacturers will continue throughout the next two quarters.''
DOW -62.68
Dollar -.73c to 84.81USD
Oil -$2.28 to $56.34US per barrel
Gold +$2.90 to $931.30USD per ounce
Canadian 5 yr bond yields +.01bps to 2.12
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
'Banking crisis over' says CIBC economist
Jobs and housing still must recover
May 16, 2009 JULIAN BELTRAME THE CANADIAN PRESS OTTAWA
The financial crisis that plunged the world into the worst recession in decades is showing signs of having righted itself.
A proclamation of the welcome development came at the same time that data showed the Canadian economy took another hard knock in March, with manufacturing sales falling 2.7 per cent, reversing a February pickup.
The cheerier harbinger is a steady reduction in global credit spreads -- the gaps between interest rates on low-risk government bonds and higher-yielding corporate and other debt -- which suggest that the financial meltdown is on course to being resolved.
"The banking crisis is over,'' declared the headline in a note yesterday from CIBC World Markets chief economist Avery Shenfeld.
"Nobody now expects there's another Lehman out there,'' Shenfeld wrote, referring to the mid-September collapse of U.S. investment bank Lehman Brothers, which jolted financial markets around the world.
"Nor will banks be pushed into a fire sale of assets that would depress valuations of like assets on other banks' balance sheets.''
The three-month London Interbank Offered Rate, a benchmark for lending between banks, was down 10 basis points on the week to 0.84 per cent, reducing bank funding costs.
Some base rates were the lowest since the U.S. subprime mortgage crisis erupted in the summer of 2007.
Pointing to narrowing credit spreads and improved interbank lending, Shenfeld said a turning point in the U.S. crisis was reached with the Obama administration's rescue measures.
Bank of Montreal economist Sal Guatieri said he also was encouraged by narrowing credit spreads.
"It means borrowing costs will be coming down for a wide range of borrowers, because a lot of variable-rate mortgages and a lot of personal and business loans are tied to the LIBOR rates,'' he said.
Guatieri cautioned that weakness remains in the economy and he is not ready to declare an all-clear until he sees improvement in job creation and housing, particularly in the United States.
Yesterday's data on Canadian manufacturing showed that the recovery will not be a "neat, straight-line'' move, noted economist Derek Holt of Scotia Capital.
The surprising 2.7 per cent tumble in factory sales in March left them down 23 per cent from their peak last July, despite a bounce in auto shipments following assembly-plant shutdowns in January and February.
The retreat was widespread, and with more auto sector retrenchment on stream, the manufacturing picture only looks bleaker down the road.
"Manufacturers are reining in production, but not as quickly as sales are plummeting,'' said Grant Bishop at TD Economics.
"Downward pressure on Canadian manufacturers will continue throughout the next two quarters.''
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