Financial Update

TSX racks up modest loss as energy stocks improve; N.Y. markets surge
· TSX -53.88pts after a late-day rally that saw investors buy beaten up energy stocks despite a big drop in oil prices
· Dow +401.35pts also pulled off a late day comeback as investors examined mixed economic and earnings data for clues about the health of the economy.
· Dollar +.45cto $84.63US
· Oil -$4.69to $69.85US per barrel Oil prices that looked like they just would keep rising fell to a level less than half the record high of US$147.27 they reached this summer-to a 14 mth low
· Gold -$34.00 to $801.50US per ounce The volatility extended to the precious metals sector as investors looking for safety dumped gold in favour of cash.(reuters)

Bank of Canada set to cut interest rates another half-point next week: RBC

By The Canadian Press TORONTO - The Bank of Canada will likely lower its policy interest rate by half a percentage point next week, the Royal Bank of Canada's economics department said Thursday.

Citing "a deteriorating outlook for the U.S. economy, falling commodity prices and persistent financial market volatility," RBC said downside risks are increasing for Canada's economic outlook.

An Update on the first CMHC auction…
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Banks sell $5-billion of mortgages BOYD ERMAN Globe and Mail Update

Canadian banks sold $5-billion of mortgages to Canada Mortgage and Housing Corp. at a price that indicates the government will indeed make a big profit on its program to help banks jump-start lending.

CMHC will earn an average yield of 4.24 per cent on the mortgages it bought from banks Thursday. At the same time, the government sold $3-billion of five-year bonds to finance the purchase at a yield of 3.24 per cent. The 1 percentage point spread means the government will make $50-million a year in profit from the interest-rate differential on this batch of loans.

The federal government designed the program to help banks raise money for new loans, by taking old home loans off the balance sheet. The government plans more purchases totalling $20-billion, though many bankers would like Ottawa to ratchet up the program.

The loans the federal government is purchasing are insured, meaning the government shouldn't be putting taxpayer money at risk.

For the banks, getting funds at an interest rate of 4.24 per cent will be a big relief, given that interest rates from other methods of raising money are much higher in the credit squeeze.