There have been numerous inquiries as to why many lenders have cut back discounts or entirely cancelled their Variable Rate products. We are seeing continued margin compression in the ARM product and it is becoming more expensive for our wholesalers. The following article discusses also how the banks are back to balancing the pricing according to risk, as well as the attached article which says that although our housing market remains strong, high risk clients are now seeing rates priced accordingly.
· TSX +13.92 The CRTC has conditionally approved the $51.7-billion takeover of BCE, removing another obstacle to the biggest buyout deal in Canadian corporate history.
· Dow -15.37
· Dollar -.15c to $ $98.15US
· Oil prices soared as two big market drivers -- lower than expected fuel inventories and another slide in the U.S. dollar -- had traders buying in force for the first time in a week. Prices rose in a reversal from last week when falling demand for oil and a strengthening USdollar pulled oil down nearly 10 per cent from a record near $112.
· Oil +$1.68 to close at $107.58 US per barrel
· Gold -.20c to $948.80
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Canada's big banks show humble face as credit crisis wears on
Wed Mar 26, 4:48 PM
By David Friend, The Canadian Press
TORONTO - Canada's biggest banks, cast into gloom after a long period of brilliant earnings, are displaying some humility after months of uncertainty, surprises and writedowns tied to troubled credit markets.
"When you look at the history of banks around the world, they are phenomenal profit machines - except that every five to seven years they figure out a way to blow themselves up and set themselves back," Ed Clark, chief executive of Toronto-Dominion Bank, told an industry conference Wednesday.
"If you can just avoid those errors you in fact have the best investment you can find around the world," said Clark, who heads the only major Canadian bank that has dodged writedowns directly related to the U.S. structured debt turmoil.
Clark was among top bank executives who addressed the issue of the drawn-out impact of the credit crunch at a financial services conference Wednesday hosted by the National Bank
The banking sector has been ravaged by investors worried that problems at international institutions could increasingly ripple into Canada.
The Toronto Stock Exchange financial sector has fallen about 18 per cent from its peak in October, and the troubles of international banks are keeping analysts cautious.
After months of multibillion-dollar writedowns by Citigroup, UBS and other global players, a new research report from Oppenheimer and Co. cut first-quarter profit forecasts for American banks by 84 per cent on average.
"I have been struck by how many wounded players there are out there," Clark said.
"I'm less confident today that this will cure itself quickly. There is a chance that it could happen in the second half, but I think there's equally a chance that it will take the full period of 2008 to cure itself."
However, Bank of Montreal chief executive Bill Downe predicted that summer will bring "a shift back to the focus of people on the future and where the best investment opportunities will be" on the broader market.
"There's enormous stimulus coming in the U.S.," Downe said. "I think maybe the thing to focus on is the combination of the resolution of many of the issues that individual banks have."
The wrenching reduction of asset valuations on international credit markets "was a necessary step," Downe added. "The risk-return balance was not there - we all know that."
Royal Bank CEO Gord Nixon said his bank had some regrets about its approach to credit.
"Are there areas that I wish we stayed away from? Absolutely," he said.
But "being a bank, people forget that we're in the credit business. It is impossible to be a bank or a financial institution and not be long-credit."
He added that despite the market troubles, Royal Bank hasn't given up on exploring the possibility of acquisitions, even if they are probably unlikely at this point.
"I'm not sure that our shareholders would be supportive, even at today's prices and today's economic environment," he said.
"We're certainly spending some time looking at what sort of bolder opportunities might be available out there."
CIBC chief executive Gerry McCaughey kept most of his comments focused on reworking the bank's risk operations, which have come under sharp scrutiny. The bank took the biggest writedowns of Canadian financial institutions, worth nearly $3 billion at the end of the last quarter.
"We've gone through our risk management group, and our risk management policies and practices and we're reviewing all of those to make sure that they're completely up to date with evolving industry practices," he said.
"Over the course of the near future we are going to stay very focused on balance sheet strength, as long as the environment remains as uncertain."
McCaughey also revealed that the bank has a total exposure of US$25 billion to monoline insurers.
The amount was larger than most analysts expected, but it was also more diversified, which suggests CIBC would face less risk if one insurer were to run into trouble, and the bank had to writedown the losses.
The CEO also said that the bank won't consider buying back any shares in the near future.
"The marketplace has shown that there can be surprises out there and I want to make sure that before we engaged in a buyback that we were absolutely certain that we had it down pat," he told analysts.
The current attitude of the bank executives shows that while there's some hope a recovery is near, reality suggests it could take some more time.
"The conditions that they're staring into looking forward are looking quite dismal over the very near term and I suspect that everyone is just waiting with baited breath to see just how low the U.S. economy will swing," said Brad Smith of Blackmont Capital.
"That will obviously have implications for their business by itself. It's not a time to be overly optimistic."
Friday, March 28, 2008
Financial Update
Low supplies, falling dollar spur oil prices again
TORONTO (Reuters) - The Toronto Stock Exchange's main index pushed higher, driven by a resource rally that offset weak financials and jitters surrounding the buyout of telecom company BCE Inc .
TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index
· TSX +69.64
· Dow -109.74
· Dollar -.15c to $ $98.15US
· Oil prices soared as two big market drivers -- lower than expected fuel inventories and another slide in the U.S. dollar -- had traders buying in force for the first time in a week. Prices rose in a reversal from last week when falling demand for oil and a strengthening USdollar pulled oil down nearly 10 per cent from a record near $112.
· Oil +.4.68c to close at $105.90 US per barrel
· Gold $14.40 to $949
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Globe and Mail:
U.S. mortgage tax break has got to go
BARRIE MCKENNA
March 25, 2008
WASHINGTON -- It's the topic no one dares speak of amid all the hand-wringing about the great credit collapse of 2008.
Mortgage deductibility. For many Americans, particularly the wealthy, it's the single largest tax break they get, saving them thousands of dollars and depleting the U.S. Treasury by as much as $100-billion (U.S.) a year.
It also may be a key reason we're in this mess.
Experts have pointed the finger at Alan Greenspan, easy money, mortgage brokers gone wild and the wise guy on Wall Street who figured out how to turn junk mortgages into a triple-A investment.
Too bad. It's a subject that needs to be discussed, as the aftershocks of this U.S.-made credit crunch reverberate around the world.
Most Canadians have no idea how generous this tax break can be, and how distorting it is to the economy, particularly the housing sector.
Think of mortgage deductibility as the kindling that fuelled the credit explosion.
Here's how it works: A taxpayer gets to deduct all interest payments on mortgages worth up to a total of $1-million. And the break doesn't just apply to a primary residence, but also to a second home, a yacht, or even a motor home.
On a $1-million mortgage, the deduction is worth more than $20,000 a year, or more than enough incentive to get that bigger, pricier home.
As if that weren't enough, homeowners can also deduct the interest on a home equity loan up to $100,000 - to buy a car, a big-screen TV or a diamond tiara (if that's what they're into).
The exemption encourages high-income earners to buy as much house as possible, and then to leverage it to the hilt. Ever wonder why so many homeowners opted for risky all-interest mortgages?
Mortgage deductibility encourages overbuilding, oversized homes, higher prices and speculation. It has helped turn Americans into credit junkies.
If the scenario sounds familiar it's because these are the features that marked the housing and credit bubble of the past five years.
Americans greedily gorged on monster homes and vacation condos - overinflating prices and sticking the bill on the U.S. Treasury. Some economists estimate that mortgage deductibility adds as much as 15 per cent to the cost of homes, most notably at the upper end of the price spectrum.
And it's regressive to boot. More than two-thirds of all U.S. taxpayers, including most renters, don't bother to itemize their deductions, typically because they don't earn enough to make it worthwhile. The third who take more than the standard deductions are almost all among the top third of income earners.
Sadly, challenging the merits of the mortgage tax giveaway is tantamount to political suicide. Most Americans consider mortgage deductibility a birthright, like home ownership itself. And a powerful army of lobbyists stands ready to beat back any attempt to end the tax break, including real estate agents, mortgage brokers and home builders.
People have tried. Back in 2005, President George W. Bush appointed a bipartisan panel of experts to look at ways to make the tax code simpler and fairer. Somewhat surprisingly, the group's centrepiece recommendation was a plan to phase out mortgage deductibility. "Why would you want an abnormally large subsidy for people who have abnormally large mortgages?" wondered one panel member, a former commissioner of the Internal Revenue Service.
It was a very good question. But predictably, the report was shelved, where it continues to gather dust.
Last summer, Congressman John Dingell, a Michigan Democrat, tried again, arguing that the mortgage tax break had bred McMansions and wasteful energy spending. His bill quickly fizzled.
In the inevitable post mortem that is sure to follow the current crisis, scrapping mortgage deductibility should be added to a growing reform to-do list.
U.S. authorities should review Wall Street compensation and risk management practices. They need to toughen mortgage lending standards.
And mortgage deductibility must go before the next real estate cycle begins.
We've all paid too high a price.
TORONTO (Reuters) - The Toronto Stock Exchange's main index pushed higher, driven by a resource rally that offset weak financials and jitters surrounding the buyout of telecom company BCE Inc .
TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index
· TSX +69.64
· Dow -109.74
· Dollar -.15c to $ $98.15US
· Oil prices soared as two big market drivers -- lower than expected fuel inventories and another slide in the U.S. dollar -- had traders buying in force for the first time in a week. Prices rose in a reversal from last week when falling demand for oil and a strengthening USdollar pulled oil down nearly 10 per cent from a record near $112.
· Oil +.4.68c to close at $105.90 US per barrel
· Gold $14.40 to $949
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Globe and Mail:
U.S. mortgage tax break has got to go
BARRIE MCKENNA
March 25, 2008
WASHINGTON -- It's the topic no one dares speak of amid all the hand-wringing about the great credit collapse of 2008.
Mortgage deductibility. For many Americans, particularly the wealthy, it's the single largest tax break they get, saving them thousands of dollars and depleting the U.S. Treasury by as much as $100-billion (U.S.) a year.
It also may be a key reason we're in this mess.
Experts have pointed the finger at Alan Greenspan, easy money, mortgage brokers gone wild and the wise guy on Wall Street who figured out how to turn junk mortgages into a triple-A investment.
Too bad. It's a subject that needs to be discussed, as the aftershocks of this U.S.-made credit crunch reverberate around the world.
Most Canadians have no idea how generous this tax break can be, and how distorting it is to the economy, particularly the housing sector.
Think of mortgage deductibility as the kindling that fuelled the credit explosion.
Here's how it works: A taxpayer gets to deduct all interest payments on mortgages worth up to a total of $1-million. And the break doesn't just apply to a primary residence, but also to a second home, a yacht, or even a motor home.
On a $1-million mortgage, the deduction is worth more than $20,000 a year, or more than enough incentive to get that bigger, pricier home.
As if that weren't enough, homeowners can also deduct the interest on a home equity loan up to $100,000 - to buy a car, a big-screen TV or a diamond tiara (if that's what they're into).
The exemption encourages high-income earners to buy as much house as possible, and then to leverage it to the hilt. Ever wonder why so many homeowners opted for risky all-interest mortgages?
Mortgage deductibility encourages overbuilding, oversized homes, higher prices and speculation. It has helped turn Americans into credit junkies.
If the scenario sounds familiar it's because these are the features that marked the housing and credit bubble of the past five years.
Americans greedily gorged on monster homes and vacation condos - overinflating prices and sticking the bill on the U.S. Treasury. Some economists estimate that mortgage deductibility adds as much as 15 per cent to the cost of homes, most notably at the upper end of the price spectrum.
And it's regressive to boot. More than two-thirds of all U.S. taxpayers, including most renters, don't bother to itemize their deductions, typically because they don't earn enough to make it worthwhile. The third who take more than the standard deductions are almost all among the top third of income earners.
Sadly, challenging the merits of the mortgage tax giveaway is tantamount to political suicide. Most Americans consider mortgage deductibility a birthright, like home ownership itself. And a powerful army of lobbyists stands ready to beat back any attempt to end the tax break, including real estate agents, mortgage brokers and home builders.
People have tried. Back in 2005, President George W. Bush appointed a bipartisan panel of experts to look at ways to make the tax code simpler and fairer. Somewhat surprisingly, the group's centrepiece recommendation was a plan to phase out mortgage deductibility. "Why would you want an abnormally large subsidy for people who have abnormally large mortgages?" wondered one panel member, a former commissioner of the Internal Revenue Service.
It was a very good question. But predictably, the report was shelved, where it continues to gather dust.
Last summer, Congressman John Dingell, a Michigan Democrat, tried again, arguing that the mortgage tax break had bred McMansions and wasteful energy spending. His bill quickly fizzled.
In the inevitable post mortem that is sure to follow the current crisis, scrapping mortgage deductibility should be added to a growing reform to-do list.
U.S. authorities should review Wall Street compensation and risk management practices. They need to toughen mortgage lending standards.
And mortgage deductibility must go before the next real estate cycle begins.
We've all paid too high a price.
Financial Update
· TSX had another strong day recovering last week’s losses +302.50
· Dow -16.04
· TORONTO (Reuters) - The Canadian dollar eked out a tiny gain against the U.S. dollar on Tuesday, but fears of a spillover from the U.S. economic slowdown kept it from gaining more traction after domestic retail sales data came in above market expectations.
· Dollar +.05c to $ $98.30US
· Oil +.36c to close at $101.22 US per barrel
· Gold $16.30 to $934.60
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Consumer confidence in U.S. at 5-year low
Email the author
March 26, 2008
Eileen Alt Powell
The Associated Press
American consumers are gloomier about the economy than at any point since just before the U.S. invasion of Iraq, as slumping housing prices and soaring fuel costs depress consumer confidence to its lowest level in five years.
The Conference Board, a business-backed research group, said yesterday its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The March reading was far below the 73.0 expected by analysts surveyed by Thomson/IFR and was the worst reading since the gauge registered 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
Weakening consumer confidence foreshadows weakening consumer spending, which could hurt the already faltering economy.
Meanwhile, the Standard & Poor's/Case-Shiller home price index released yesterday indicated U.S. home prices fell 11.4 per cent in January, the steepest drop since data for the indicator was first collected in 1987. The latest decline means prices have been growing more slowly or dropping for 19 consecutive months.
The U.S. consumer confidence index has been weakening since July and Lynn Franco, director of the Conference Board's research centre, said further decline was likely. "Consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon,'' she added.
Brian Bethune, chief U.S. financial economist with Global Insight in Lexington, Mass., expects the April confidence reading to be dreary, too.
"We expect overall payroll employment to decline for the third consecutive month . . . and there is no immediate relief in sight for gasoline prices or other energy costs,'' he said in a research note.
That, he said, will mean "real consumer spending will barely creep forward in the first half of 2008,'' depressing the economy.
Economist Bernard Baumohl, executive director of the Economic Outlook Group in Princeton Junction, N.J., said consumers' pessimism "reflects the great anxiety that households have because there are just so many uncertainties that everyone faces.''
He believes the economy fell into recession in the current quarter and that growth probably won't resume until the second half of the year, after government stimulus programs have had a chance to work. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates to encourage consumer spending.
The Fed said yesterday it had received bids of $89 billion for $50 billion in short-term loans offered in its latest auction to banks. So far, the Fed has made $260 billion in such loans since December to help ease credit conditions.
Baumohl said government actions should help the economy resume growth later this year, but the recovery could be weak. "Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad. For most people, they won't be able to tell if the economy is growing one per cent or shrinking one per cent.''
The Conference Board said there were steep declines in two companion indexes. The present situation index, which looks at current conditions, slumped to 89.2 in March from 104.0 the month before. The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58.0 in February. The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal.
In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months. On the labour market, consumers expecting fewer jobs increased to 29 per cent in March from 28 per cent in February, while those expecting more jobs declined to 7.7 per cent from 8.9 per cent.
The Conference Board survey is based on a sample of 5,000 U.S. households
· Dow -16.04
· TORONTO (Reuters) - The Canadian dollar eked out a tiny gain against the U.S. dollar on Tuesday, but fears of a spillover from the U.S. economic slowdown kept it from gaining more traction after domestic retail sales data came in above market expectations.
· Dollar +.05c to $ $98.30US
· Oil +.36c to close at $101.22 US per barrel
· Gold $16.30 to $934.60
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Consumer confidence in U.S. at 5-year low
Email the author
March 26, 2008
Eileen Alt Powell
The Associated Press
American consumers are gloomier about the economy than at any point since just before the U.S. invasion of Iraq, as slumping housing prices and soaring fuel costs depress consumer confidence to its lowest level in five years.
The Conference Board, a business-backed research group, said yesterday its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The March reading was far below the 73.0 expected by analysts surveyed by Thomson/IFR and was the worst reading since the gauge registered 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
Weakening consumer confidence foreshadows weakening consumer spending, which could hurt the already faltering economy.
Meanwhile, the Standard & Poor's/Case-Shiller home price index released yesterday indicated U.S. home prices fell 11.4 per cent in January, the steepest drop since data for the indicator was first collected in 1987. The latest decline means prices have been growing more slowly or dropping for 19 consecutive months.
The U.S. consumer confidence index has been weakening since July and Lynn Franco, director of the Conference Board's research centre, said further decline was likely. "Consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon,'' she added.
Brian Bethune, chief U.S. financial economist with Global Insight in Lexington, Mass., expects the April confidence reading to be dreary, too.
"We expect overall payroll employment to decline for the third consecutive month . . . and there is no immediate relief in sight for gasoline prices or other energy costs,'' he said in a research note.
That, he said, will mean "real consumer spending will barely creep forward in the first half of 2008,'' depressing the economy.
Economist Bernard Baumohl, executive director of the Economic Outlook Group in Princeton Junction, N.J., said consumers' pessimism "reflects the great anxiety that households have because there are just so many uncertainties that everyone faces.''
He believes the economy fell into recession in the current quarter and that growth probably won't resume until the second half of the year, after government stimulus programs have had a chance to work. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates to encourage consumer spending.
The Fed said yesterday it had received bids of $89 billion for $50 billion in short-term loans offered in its latest auction to banks. So far, the Fed has made $260 billion in such loans since December to help ease credit conditions.
Baumohl said government actions should help the economy resume growth later this year, but the recovery could be weak. "Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad. For most people, they won't be able to tell if the economy is growing one per cent or shrinking one per cent.''
The Conference Board said there were steep declines in two companion indexes. The present situation index, which looks at current conditions, slumped to 89.2 in March from 104.0 the month before. The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58.0 in February. The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal.
In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months. On the labour market, consumers expecting fewer jobs increased to 29 per cent in March from 28 per cent in February, while those expecting more jobs declined to 7.7 per cent from 8.9 per cent.
The Conference Board survey is based on a sample of 5,000 U.S. households
Tuesday, March 25, 2008
Financial Update
Loonie, stocks jump after bank boosts bid
TORONTO (Reuters) - Rallying financial issues helped pull the Toronto Stock Exchange's main index strongly higher on Monday, amid increased confidence in the value of bank stocks and a rush of bargain-hunting. Monday was the first time in nearly four weeks that the TSX has marked two consecutive sessions of gains, while March has been punctuated by large triple-digit swings to both sides.
· TSX +244.08
· Dow +187.32
· Dollar -.53c to $ $98.24US
· Oil -.98c to close at $100.86 US per barrel
· Gold $4.19 to $923.79
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Email the author
March 25, 2008
Malcolm Morrison
The Canadian Press
TORONTO
Stock markets surged yesterday after JPMorgan Chase & Co. boosted its offer for rival Bear Stearns to $10 US a share from $2.
Toronto's S&P/TSX composite index closed below its high for the day, but still finished the session 244.08 points higher at 13,019.72.
Led by the financials sector, the advance was broad based with commodity stocks on the mend after turning in sharp losses last week on worries about lower demand.
In New York, the Dow Jones industrials gained 187.32 points to 12,548.64 as the U.S. market also saw a rare bit of good news from the housing sector.
"Financials have had quite a run from last week, it's impressive,'' said Vincent Delisle, portfolio manager at Scotiabank in Montreal.
"I don't know if the Bear Stearns deal coincides with the bottom, certainly last week's (interest rate cut) from the Fed and the Bear Stearns deal at 10 bucks is a positive surprise (but) from where it was trading a few weeks ago, it's still devastating.''
The TSX Venture Exchange added 19.42 points to 2,481.75 while the Canadian dollar moved up 0.53 of a cent to 98.24 cents US, after losing 3.6 per cent last week to its lowest levels in two months, on falling commodities and a burst of strength in the American currency.
The Nasdaq composite rose 68.64 points to 2,326.75 while the S&P 500 index added 20.37 points to 1,349.88.
The original price for Bear Stearns was part of a deal struck last week at the urging of the Federal Reserve and Treasury Department. The new offering has the backing of the Fed.
As part of the support for the revamped JPMorgan Chase offer, the Federal Reserve Bank of New York's $30 billion US special financing initially linked to the transaction was changed so that JPMorgan will take on the first $1 billion US of any losses suffered by Bear Stearns.
Bear Stearns shares rocketed $4.86 or 76 per cent to $11.25 US while JPMorgan shares advanced 58 cents to $46.55. National Association of Realtors also said yesterday that sales of existing homes rose by 2.9 per cent in February, after falling for six straight months.
TORONTO (Reuters) - Rallying financial issues helped pull the Toronto Stock Exchange's main index strongly higher on Monday, amid increased confidence in the value of bank stocks and a rush of bargain-hunting. Monday was the first time in nearly four weeks that the TSX has marked two consecutive sessions of gains, while March has been punctuated by large triple-digit swings to both sides.
· TSX +244.08
· Dow +187.32
· Dollar -.53c to $ $98.24US
· Oil -.98c to close at $100.86 US per barrel
· Gold $4.19 to $923.79
Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Email the author
March 25, 2008
Malcolm Morrison
The Canadian Press
TORONTO
Stock markets surged yesterday after JPMorgan Chase & Co. boosted its offer for rival Bear Stearns to $10 US a share from $2.
Toronto's S&P/TSX composite index closed below its high for the day, but still finished the session 244.08 points higher at 13,019.72.
Led by the financials sector, the advance was broad based with commodity stocks on the mend after turning in sharp losses last week on worries about lower demand.
In New York, the Dow Jones industrials gained 187.32 points to 12,548.64 as the U.S. market also saw a rare bit of good news from the housing sector.
"Financials have had quite a run from last week, it's impressive,'' said Vincent Delisle, portfolio manager at Scotiabank in Montreal.
"I don't know if the Bear Stearns deal coincides with the bottom, certainly last week's (interest rate cut) from the Fed and the Bear Stearns deal at 10 bucks is a positive surprise (but) from where it was trading a few weeks ago, it's still devastating.''
The TSX Venture Exchange added 19.42 points to 2,481.75 while the Canadian dollar moved up 0.53 of a cent to 98.24 cents US, after losing 3.6 per cent last week to its lowest levels in two months, on falling commodities and a burst of strength in the American currency.
The Nasdaq composite rose 68.64 points to 2,326.75 while the S&P 500 index added 20.37 points to 1,349.88.
The original price for Bear Stearns was part of a deal struck last week at the urging of the Federal Reserve and Treasury Department. The new offering has the backing of the Fed.
As part of the support for the revamped JPMorgan Chase offer, the Federal Reserve Bank of New York's $30 billion US special financing initially linked to the transaction was changed so that JPMorgan will take on the first $1 billion US of any losses suffered by Bear Stearns.
Bear Stearns shares rocketed $4.86 or 76 per cent to $11.25 US while JPMorgan shares advanced 58 cents to $46.55. National Association of Realtors also said yesterday that sales of existing homes rose by 2.9 per cent in February, after falling for six straight months.
Monday, March 24, 2008
Financial Update
Loonie's down but not out, say economists
· TSX +66.26 pts
· Dow +261.66
The Canadian dollar sunk to its lowest level in two months ahead of the Easter long weekend, settling firmly below par as commodity prices came off the boil
· Dollar -.78c to $ $97.71US
Oil prices closed Thursday down 9% from Monday's record high of US$111.80 a barrel
· Oil -.70c to close at $101.84 US per barrel
.Gold, which is commonly used as a hedge against the US dollar, tumbled as the greenback rose, ending the week low after hitting a record high of US $1033.90 Monday
· Gold -$25.10 to $919.60
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html <http://www.bankofcanada.ca/en/rates/bonds.html>
Alia McMullen, Financial Post Published: Thursday, March 20, 2008
.Analysts say lower commodity prices over the course of 2008 will place downward pressure on the loonie amid concerns U.S. demand will fall as its economy weakens. But the past week's decline in the Canadian dollar is unlikely to continue, with the currency expected to linger near parity for at least another three months.
The loonie closed at US97.71 cents on Thursday. It was the currency's lowest close since Jan. 23, when it ended at US97.69 cents.
Douglas Porter, deputy chief economist at BMO Capital Markets said traders sold the commodities-driven loonie on the back of a shock decline in commodity prices, particularly oil and gold.
"It's a bit of a dangerous game these days," he said. "I doubt many people were looking for an 8% to 9% slide in commodity prices at the start of the week, and we have seen if anything, increasing volatility in a number of markets recently."
With traders away Friday for the Easter holiday weekend,. "We do think that the slowdown in the U.S. and the broader global economy will undermine commodity prices somewhat in the months ahead," Mr. Porter said.
However, he did not expect the loonie to continue to trend lower, with Canadian retail sales figures, due this Friday, expected to be strong, compared with a forecast for more weak U.S. housing data.
"Effectively we've seen the currency as swinging back and forth around parity since late last year and I'm not convinced we've broken out of that channel just yet," he said. "Through the second half of the year I think we might see a little more sustained softening in the currency and through 2009 when slower growth really starts to bite down on commodity prices."
Darren Richardson, corporate dealer at foreign exchange firm Canadian Forex said the U.S. dollar has had an upper edge since the U.S. Federal Reserve announced new measures to add liquidity to the credit system on Sunday, followed by a 75-basis point interest rate cut on Tuesday, which took U.S. rates down to 2.25%.
"Those definitely gave confidence back to the markets and opened an opportunity for the U.S. dollar. Commodity prices were the final trigger to help the U.S. dollar come back," Mr. Richardson said.
Despite the loonie's dive in recent days, he said the Canadian dollar would remain relatively strong.
"It's still in a very dominant position compared to the last 12 months," he said.
Close <http://www.financialpost.com/story.html?id=389352#close>
Thursday, March 20, 2008
Financial Update
Canadian dollar suffers biggest one-day drop since 1962
Sliding commodities send TSX plunging as commodity stocks retreat
· TSX -427.32 pts
· Dow lost all of Tuesdays surge -293 pts
· Dollar -$2.19 $98.49US
The April crude oil contract on the New York Mercantile Exchange lost 4.5 per cent, it's biggest one-day decline since 1991
· Oil -$4.82 to close at $104.60 US per barrel
Gold was slammed with its own biggest single day drop since June 2006, just less than a week after breaking the $1,000-an-ounce barrier for the first time and just two days since hitting a new record high.
· Gold -$59 to $945.30
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
By David Friend, The Canadian Press
TORONTO - The loonie had its biggest single-day plunge in nearly 46 years on Wednesday, falling 2.19 cents against the American dollar as a bleak outlook for the world's economies also pushed down the price of key commodities such as gold and oil.
Canada's dollar ended the day at 98.49 cents US - the lowest close in a month. The currency had also fallen sharply on Tuesday and continued lower throughout Wednesday's session, but the momentum picked up late in the afternoon.
The last time the dollar had fallen this much was in May 1962 when John Diefenbaker's Conservative government pegged Canada's currency at 92.5 cents US, plus or minus one cent, after dollar volatility raged amidst a recession.
Commodity prices fell amid concerns that the troubles in the United States will spread throughout the world economy, including Asian countries that have been big buyers of Canadian resources.
"We've seen a fairly dramatic selloff in gold prices and as well with crude oil... that's put the Canadian dollar on the defensive at the same time," said George Davis, chief technical analyst at RBC Capital markets.
The slide came despite a report from the U.S. government that oil, gasoline and heating oil inventories were smaller than expected last week. Usually, smaller inventories tend to push up prices.
Gold was The price of bullion tumbled $59, or 5.9 per cent, to finish at $945.30 an ounce. On Monday, gold touched a record high of $1,034 an ounce.
Wednesday, March 19, 2008
Daily Financial Update
U.S. cuts rates again in effort to quell crisis
Gives the Bank of Canada more room to make further cuts in its overnight target rate also
· TSX recovered some of Mondays losses +184.56
· Dow +420.41 faring far better than TSX
· Dollar +.61c to $100.68US
· Oil +$3.74 to $109.42US per barrel
· Gold +1.80 continuing upward to close at $1003.20
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Email the author
March 19, 2008
Martin CrutsingerThe Associated PressWASHINGTON
The U.S. Federal Reserve slashed a key interest rate by three-fourths of a percentage point yesterday, moving aggressively to contain a credit crisis threatening to push the United States into a severe recession.
The latest action brought the federal funds rate -- the interest that banks charge each other -- down to 2.25 per cent, the lowest point since late 2004.
It marked the second cut of three-fourths of a percentage point this year.
The first occurred at an emergency meeting on Jan. 22 and was followed by a half-point cut at a regular meeting on Jan. 30.
The U.S. move gives the Bank of Canada more room to make further cuts in its overnight target rate, which currently stands at 3.75 per cent.
Many observers expect a half-point cut in Canadian short-term rates on April 22 and two more quarter-point cuts later in the year.
That would reduce Canadian borrowing costs by a full percentage point, in addition to previous reductions of a quarter-point in January and half a point on March 4.
After yesterday's cut, Fed chair Ben Bernanke and his colleagues have now cut the funds rate six times since last September, with the reductions becoming more aggressive since January as the central bank has faced growing turmoil in global financial markets.
In explaining its actions, the Fed said that it was having to navigate a difficult policy environment that included sluggish economic activity and rising inflation pressures.
The Fed statement said that "the outlook for economic activity has weakened further'' but that "inflation has been elevated'' with some signs that expectations of future inflation pressures are rising.
But the Fed signalled that it stood ready to cut rates further if necessary, saying that "downside risks to growth remain.''
Bernanke and other Fed officials have said in recent comments that they view the threat of economic weakness as a bigger risk at the moment than inflation given the risks to financial markets.
"Financial markets remain under considerable stress and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,'' the Federal Reserve Board said in its written statement.
In Jacksonville, Fla., yesterday, U.S. President George W. Bush said the government will take further action to help the sagging economy.
Gives the Bank of Canada more room to make further cuts in its overnight target rate also
· TSX recovered some of Mondays losses +184.56
· Dow +420.41 faring far better than TSX
· Dollar +.61c to $100.68US
· Oil +$3.74 to $109.42US per barrel
· Gold +1.80 continuing upward to close at $1003.20
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Email the author
March 19, 2008
Martin CrutsingerThe Associated PressWASHINGTON
The U.S. Federal Reserve slashed a key interest rate by three-fourths of a percentage point yesterday, moving aggressively to contain a credit crisis threatening to push the United States into a severe recession.
The latest action brought the federal funds rate -- the interest that banks charge each other -- down to 2.25 per cent, the lowest point since late 2004.
It marked the second cut of three-fourths of a percentage point this year.
The first occurred at an emergency meeting on Jan. 22 and was followed by a half-point cut at a regular meeting on Jan. 30.
The U.S. move gives the Bank of Canada more room to make further cuts in its overnight target rate, which currently stands at 3.75 per cent.
Many observers expect a half-point cut in Canadian short-term rates on April 22 and two more quarter-point cuts later in the year.
That would reduce Canadian borrowing costs by a full percentage point, in addition to previous reductions of a quarter-point in January and half a point on March 4.
After yesterday's cut, Fed chair Ben Bernanke and his colleagues have now cut the funds rate six times since last September, with the reductions becoming more aggressive since January as the central bank has faced growing turmoil in global financial markets.
In explaining its actions, the Fed said that it was having to navigate a difficult policy environment that included sluggish economic activity and rising inflation pressures.
The Fed statement said that "the outlook for economic activity has weakened further'' but that "inflation has been elevated'' with some signs that expectations of future inflation pressures are rising.
But the Fed signalled that it stood ready to cut rates further if necessary, saying that "downside risks to growth remain.''
Bernanke and other Fed officials have said in recent comments that they view the threat of economic weakness as a bigger risk at the moment than inflation given the risks to financial markets.
"Financial markets remain under considerable stress and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,'' the Federal Reserve Board said in its written statement.
In Jacksonville, Fla., yesterday, U.S. President George W. Bush said the government will take further action to help the sagging economy.
Tuesday, March 18, 2008
Financial Update
· TSX -300.69 rebounding slightly from its drop of 455 pts earlier in the day
· Dow +21 faring better and regaining its earlier drop of 200pts
· Dollar dropped briefly below par ending -$1.33 to settle at $100.07US as US oil prices slid
· Oil –had its largest one day drop in 7 mths falling 4% before recovering to -$4 to $106.74US per barrel
· Gold offered a haven +$7.50 to US$1,008.20US an ounce, after an overnight record high of US$1,033.90US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Thursday, March 13, 2008
Financial Update
U.S. gas prices hit new record of $3.25/gallon as oil jumps to $110 as U.S. dollar falls to a new low
Canadian dollar gains on record high oil prices
· TSX -47.18
· Dow -46.57
TORONTO (Reuters) - The Canadian dollar rode record oil prices to a higher close against a besieged U.S. dollar
· Dollar +.32c to remain just above par at $100.99US
In part, the US dollar is falling in anticipation of another interest rate cut by the Federal Reserve next week. Lower rates tend to weaken the dollar.
U.S. crude prices climbed to a record $110.20 a barrel, giving support to the commodity-linked Canadian dollar.
· Oil after topping $110US per barrel closed just below +.$1.17 to $109.92US per barrel
· Gold +4.60 to $978.800US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
The record high oil prices were also partly responsible for the higher bond prices, said Max Clarke, an economist at IDEAglobal in New York."For the most part, it (oil) does provide general sluggishness in the American economy and that puts upward pressure on bonds."
Bank of Canada sees more subprime losses globally
Wed Mar 12, 6:25 PM
OTTAWA (Reuters) - The Bank of Canada said on Wednesday the U.S. housing turmoil is not over yet and that it expects more writedowns on subprime-related debt by banks worldwide.
In testimony to a Senate banking committee, Bank of Canada Senior Deputy Governor Paul Jenkins said Canadian financial markets were facing "less intense" liquidity pressures than in the United States and elsewhere.
"One of the issues the financial system globally is still grappling with is indeed this issue of the size of losses -- writedowns -- that will have to be taken," Jenkins said in response to a question from a Senator.
"And then you get into the issue of the need for recapitalization of these institutions, and so from that global perspective, I would say that there probably will indeed be some further writedowns."
Jenkins declined to comment on possible losses by Canadian financial institutions.
He said coordinated action by the U.S. Federal Reserve, the Bank of Canada and three other central banks, announced on Tuesday, aimed at ensuring access to hundreds of billions worth of central bank cash by financial institutions facing funding shortages.
Canada's central bank offered 28-day lending rather than the overnight loans it usually provides.
"With that, we're trying to address what we call liquidity pressures in certain funding markets that we're seeing further out the yield curve than just overnight," Jenkins said.
"These funding pressures, these liquidity pressures, have been more intense in the United States than here in Canada."
The key lesson taken from the global credit woes is the need for greater transparency in structured credit products, allowing investors to value them properly, Jenkins said.
The Bank of Canada is taking concrete steps toward promoting more transparency by laying out proposed criteria for accepting asset-backed commercial paper as collateral for its lending facilities, he said.
In addition to demanding that the ABCP it accepts be of high quality, it is also pushing for more disclosure on the assets underlying the product.
It has asked for feedback from primary dealers and plans to announce the terms for accepting ABCP as collateral by the end of March.
"We are trying through this exercise to encourage more standardized transparent documentation of these products," Jenkins said.
Jenkins, who was joined by Deputy Governor John Murray, did not comment on the outlook for monetary policy or the Canadian economy in an appearance that focused on internal barriers to trade within Canada.
Have a great day!
Canadian dollar gains on record high oil prices
· TSX -47.18
· Dow -46.57
TORONTO (Reuters) - The Canadian dollar rode record oil prices to a higher close against a besieged U.S. dollar
· Dollar +.32c to remain just above par at $100.99US
In part, the US dollar is falling in anticipation of another interest rate cut by the Federal Reserve next week. Lower rates tend to weaken the dollar.
U.S. crude prices climbed to a record $110.20 a barrel, giving support to the commodity-linked Canadian dollar.
· Oil after topping $110US per barrel closed just below +.$1.17 to $109.92US per barrel
· Gold +4.60 to $978.800US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
The record high oil prices were also partly responsible for the higher bond prices, said Max Clarke, an economist at IDEAglobal in New York."For the most part, it (oil) does provide general sluggishness in the American economy and that puts upward pressure on bonds."
Bank of Canada sees more subprime losses globally
Wed Mar 12, 6:25 PM
OTTAWA (Reuters) - The Bank of Canada said on Wednesday the U.S. housing turmoil is not over yet and that it expects more writedowns on subprime-related debt by banks worldwide.
In testimony to a Senate banking committee, Bank of Canada Senior Deputy Governor Paul Jenkins said Canadian financial markets were facing "less intense" liquidity pressures than in the United States and elsewhere.
"One of the issues the financial system globally is still grappling with is indeed this issue of the size of losses -- writedowns -- that will have to be taken," Jenkins said in response to a question from a Senator.
"And then you get into the issue of the need for recapitalization of these institutions, and so from that global perspective, I would say that there probably will indeed be some further writedowns."
Jenkins declined to comment on possible losses by Canadian financial institutions.
He said coordinated action by the U.S. Federal Reserve, the Bank of Canada and three other central banks, announced on Tuesday, aimed at ensuring access to hundreds of billions worth of central bank cash by financial institutions facing funding shortages.
Canada's central bank offered 28-day lending rather than the overnight loans it usually provides.
"With that, we're trying to address what we call liquidity pressures in certain funding markets that we're seeing further out the yield curve than just overnight," Jenkins said.
"These funding pressures, these liquidity pressures, have been more intense in the United States than here in Canada."
The key lesson taken from the global credit woes is the need for greater transparency in structured credit products, allowing investors to value them properly, Jenkins said.
The Bank of Canada is taking concrete steps toward promoting more transparency by laying out proposed criteria for accepting asset-backed commercial paper as collateral for its lending facilities, he said.
In addition to demanding that the ABCP it accepts be of high quality, it is also pushing for more disclosure on the assets underlying the product.
It has asked for feedback from primary dealers and plans to announce the terms for accepting ABCP as collateral by the end of March.
"We are trying through this exercise to encourage more standardized transparent documentation of these products," Jenkins said.
Jenkins, who was joined by Deputy Governor John Murray, did not comment on the outlook for monetary policy or the Canadian economy in an appearance that focused on internal barriers to trade within Canada.
Have a great day!
Wednesday, March 12, 2008
Daily Financial Updates
Forecast sees no recession in Ontario
· TSX regained some ground +339.44
· Dow +416.66
· Dollar +.34c to remain just above par at $100.67US
· Oil after briefly topping $109US per barrel rests just below +.85c to $108.75US per barrel Gas was $1.22 litre in Nfld yesterday
· Gold +4.30 to $974.20US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Increased construction costs push up price of new homes
March 12, 2008
The Canadian Press-OTTAWA
The cost of new housing accelerated for the second straight month in January. Nationally, builders' selling prices rose 6.5 per cent between January 2007 and January 2008, Statistics Canada said yesterday. Prices were up 0.6 per cent from December. The agency said the increase was due to increased costs for material and labour, as well as strong market conditions and increased demand for land. Prices in the Kitchener census metropolitan area rose 2.4 per cent on a year-over-year basis and 1.3 per compared to December.
Forecast sees no recession in Ontario
Maria BabbageThe Canadian Press-TORONTO
Ontario won't slide into a recession despite the expectation of additional manufacturing layoffs in the "near future,'' the Conference Board of Canada said yesterday.
A soaring Canadian dollar and slowing U.S. market will continue to plague the province, where the economy is expected to grow 2.1 per cent this year and 2.9 per cent in 2009, the board said in its provincial economic forecast report.
Those predictions are higher than most forecasts put forward by big bank economists and Finance Minister Dwight Duncan, who is projecting growth of 1.2 per cent this year and 2.3 per cent in 2009.
The board's outlook is more optimistic because it's not predicting a U.S. recession, said Mari-Christine Bernard, associate director of the board's provincial reports .
"It's no surprise that weakness in the U.S. economy will challenge the manufacturing sector in Ontario,'' she said. "If it's a lot weaker than what we predict, yes, the 2.1 per cent might be on the high side.''
Ontario is still on track to post a surplus this year, said a spokesperson for Duncan, who will table the next provincial budget March 25.
"Going forward, we will be cautious in our growth and revenue forecasts recognizing that both Ottawa and B.C., are predicting real declines in revenues for the coming year,'' said Steve Erwin.
Ontario and Quebec "will be challenged by the sombre outlook in the United States -- although neither province is expected to slip into recession,'' the report said.
Planned auto production cuts and delays in operations at the new Toyota plant in Woodstock, Ont., will "significantly hinder'' export growth in Ontario, according to the board's outlook.
"Until the U.S. economy gets back on its feet, we're going to see a weakness in the manufacturing sector in Ontario,'' Bernard said.
· TSX regained some ground +339.44
· Dow +416.66
· Dollar +.34c to remain just above par at $100.67US
· Oil after briefly topping $109US per barrel rests just below +.85c to $108.75US per barrel Gas was $1.22 litre in Nfld yesterday
· Gold +4.30 to $974.20US per ounce
· Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html
Increased construction costs push up price of new homes
March 12, 2008
The Canadian Press-OTTAWA
The cost of new housing accelerated for the second straight month in January. Nationally, builders' selling prices rose 6.5 per cent between January 2007 and January 2008, Statistics Canada said yesterday. Prices were up 0.6 per cent from December. The agency said the increase was due to increased costs for material and labour, as well as strong market conditions and increased demand for land. Prices in the Kitchener census metropolitan area rose 2.4 per cent on a year-over-year basis and 1.3 per compared to December.
Forecast sees no recession in Ontario
Maria BabbageThe Canadian Press-TORONTO
Ontario won't slide into a recession despite the expectation of additional manufacturing layoffs in the "near future,'' the Conference Board of Canada said yesterday.
A soaring Canadian dollar and slowing U.S. market will continue to plague the province, where the economy is expected to grow 2.1 per cent this year and 2.9 per cent in 2009, the board said in its provincial economic forecast report.
Those predictions are higher than most forecasts put forward by big bank economists and Finance Minister Dwight Duncan, who is projecting growth of 1.2 per cent this year and 2.3 per cent in 2009.
The board's outlook is more optimistic because it's not predicting a U.S. recession, said Mari-Christine Bernard, associate director of the board's provincial reports .
"It's no surprise that weakness in the U.S. economy will challenge the manufacturing sector in Ontario,'' she said. "If it's a lot weaker than what we predict, yes, the 2.1 per cent might be on the high side.''
Ontario is still on track to post a surplus this year, said a spokesperson for Duncan, who will table the next provincial budget March 25.
"Going forward, we will be cautious in our growth and revenue forecasts recognizing that both Ottawa and B.C., are predicting real declines in revenues for the coming year,'' said Steve Erwin.
Ontario and Quebec "will be challenged by the sombre outlook in the United States -- although neither province is expected to slip into recession,'' the report said.
Planned auto production cuts and delays in operations at the new Toyota plant in Woodstock, Ont., will "significantly hinder'' export growth in Ontario, according to the board's outlook.
"Until the U.S. economy gets back on its feet, we're going to see a weakness in the manufacturing sector in Ontario,'' Bernard said.
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