Financial Update

· TSX +219.38pts (Reuters) powered to its second triple-digit gain in a row as major banks climbed after releasing results that were not as bad as some analysts feared.
· Dow +212.67pts also showed very strong gains due to the unexpectedly robust economic data and decline in oil prices
· Dollar -.46c to $95.07US due to a drop in oil prices after the International Energy Agency pledged to dip into emergency stockpiles if Tropical Storm Gustav disrupted U.S. oil production. The Loonie has been linked increasingly to oil prices as Canada's importance as an energy producer has grown. Another factor was growing expectations that the Bank of Canada would have to cut its key lending rate to shore up softening economic growth
· Oil -$2.56 to $115.59US per barrel -3rd day of gains as Tropical Storm Gustav was expected to intensify into a hurricane that could threaten U.S. oil and natural gas production in the Gulf of Mexico.
· Gold +3.20 to $837.20US per ounce

Harper doesn't rule out recession

Globe and Mail Report on Business

INUVIK — Prime Minister Stephen Harper, who is expected to call an election as early as next week, did not rule out the possibility the Canadian economy may have slipped into recession but said Thursday that if so it would only be in a technical sense.

Mr. Harper was speaking on the eve of the release of second quarter GDP data, which will show whether Canada has had negative growth for two successive quarters – the most popular technical definition of a recession.

Most analysts expect slightly positive second-quarter growth after the first quarter's annualized reading of -0.3 per cent, but many say there is a risk it could be negative.

“People talk about a technical recession. Even if that's true, I don't think it's a real recession,” Mr. Harper told a news conference in the Arctic town of Inuvik, without confirming whether growth did in fact come in negative for two quarters.

“Somebody said a recession is when people start losing their jobs, and when your neighbour loses his job. There are job losses, but overall employment is pretty stable,” Mr. Harper said.

The economy remains strong and while employment numbers have softened they remained very high, he said.

Sensitive to the political ramifications if there is a recession, Mr. Harper said: “Look, I'm not trying to sugarcoat this. I said a year ago, and I said as we moved into the new year, that 2008 would be a year of significantly slower economic growth, because of the circumstances we have in the global economy and in the American economy.”

But he added: “At the same time I believe the fundamentals of Canada are strong, will get us through this [slow] growth, and if we make the right policy choices we will actually emerge from it with a very strong economy.”

He said it was not a time to go back to policies in the style of former Liberal Prime Minister Pierre Trudeau and impose taxes.

This was a reference to the Liberal Party's current proposal to introduce a carbon tax to fight climate change and offset it with income tax cuts and help for the poor.

Conservative sources have said that Harper would like to trigger an election next week, before Parliament returns from its summer recess on Sept. 15.

Statistics Canada will release the gross domestic product data on Friday at 8:30 a.m. EDT