Eyes turn to Bank of Canada as dollar continues to soar toward parity
Gold hits another all time high
• TSX -23.38 to 11,413(Reuters) as strength in commodity prices was not enough to offset a drop in banking shares
• DOW -14.74 Concern about a heavy slate of upcoming U.S. earnings reports also persuaded some investors to pocket profits.
• Dollar +.73c to 96.48.
• Oil +.88 to $74.15US per barrel. Hits another 2009 high
• Gold +$7.50 to $1,064.20USD per ounce hitting another all time high
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
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.
Eyes turn to Bank of Canada as dollar continues to soar toward parity
Canadian Press OTTAWA - The recent surge in the loonie could damage the pace of Canada's recovery, Prime Minister Stephen Harper warned Tuesday as pressure built on the Bank of Canada to intervene.
The Canadian dollar has risen more than five cents in the past two weeks, much of it in the last few days of trading.
It closed up 0.73 cents at 96.48 cents U.S. Tuesday from the central bank's posted rate Friday, although it had been above 97 cents for much of the day and was higher in overseas markets Monday when Canadian markets were closed for Thanksgiving.
Speaking in Vancouver, Harper said he was concerned, especially with the quick pace of the appreciation.
"As we said before, we're not out of the woods. There are many risks ... and obviously the value of the Canadian dollar is a risk to recovery," he said.
"I don't think it's a risk to choking off the recovery but if it goes up too rapidly it does have difficult effects on our economy."
The prime minister went on to say the currency is the responsibility of the Bank of Canada, but did not say what he believes governor Mark Carney should do, if anything.
Carney has taken to trying to jawbone the dollar down since it began its steady ascent from 76.53 cents on March 9 with little to show for it.
Avrim Lazar of the Forest Products Association of Canada said the time has come for Carney to match his words with action.
"This is not a penny mining stock we're talking about. It's our currency, the foundation of our economic growth," he said.
"I'm not going to tell Mark Carney how to do his business, but we're saying if you want to keep jobs in this country and you want to avoid destroying the recovery, he has to use the tools at his disposal."
The simplest way for the bank to intervene is to print Canadian dollars and use them to purchase the U.S. currency - in essence devaluing the loonie while increasing demand for the greenback.
Many economists have been forecasting the loonie would hit parity with the U.S. greenback in the middle of next year.
"It could happen middle of next week," said Derek Holt, vice-president of economics with Scotia Capital.
That is good news for consumers in Canada, who may see the prices of imported goods fall in what economists call a "back-door pay hike," and for vacationers or retirees who spend their winter months in the warm states.
However, a strong loonie is regarded as a net negative for the economy with about 35 per cent of the country's gross domestic product is tied of exports and three-quarters of those are destined for the U.S.
The Canadian Manufacturers and Exporters estimates a one per cent appreciation in the value of the loonie - roughly equivalent to one cent at current levels - reduces sales by about $2 billion, equating to about 25,000 jobs.
The bank's next opportunity to chime in on the dollar comes next week at its pre-scheduled policy rate announcement. Few Carney will intervene.
The problem is that Canada's currency is not the only one on the move. Since March 9, other so-called commodity plays have performed just as well, or as in the case of Australia, far better. The Aussie buck has risen about 43 per cent against the U.S. currency, to Canada's 26-per-cent appreciation.
"This is a freight train. There's only so much the Bank of Canada can do," said Douglas Porter, deputy chief economist with BMO Capital Markets.
Analysts say a number of factors are at play, including the fact that money seeking a safe haven in the world's most liquid currency during the crisis this past winter is moving elsewhere now that global growth appears to be resuming.
And the fundamentals favour Canada. Growth in China and other Asian countries is again leading to an increase in demand for commodities that Canada exports. As well, Canada is not as saddled with debt as the United States.
"Sentiment has turned very quickly, very negatively against the U.S. dollar. The market is very focused on the U.S. deficit and the plans for funding it... and the market is concerned about the general outlook for the U.S.," said Camilla Sutton, a currency analyst for Scotiabank.
In the past week, the loonie got additional turbo boosts from the surprisingly strong jobs gain reported on Friday - a net gain of 31,000 jobs - and the Australian central bank's decision to raise rates, leading to speculation the Bank of Canada would be among the next to move.
The loonie's strength, however, makes that even more improbable, noted Porter, since raising rates before the U.S. Federal Reserve does will only add more fuel to the loonie's boosters.
Wednesday, October 14, 2009
Tuesday, October 13, 2009
Financial Update For Oct. 13, 2009
TSX -47.59 Fri closed Mon(Reuters)
• DOW +78.07 +20.86
• Dollar +.71c to 95.76. on Friday-closed Mon
• Oil +.08 +$1.50 to $73.27 US per barrel.
• Gold -$7.60 +$8.200 to $1,056.70USD per ounce
• Canadian 5 yr bond yields +.17bps to 2.81. The spread, based on 5 yr rate of 4.09% is 1.18% after a huge spike in bond yields Friday, at one point being up 44 bps over 2 days, they settled up .17 bps. Four weeks ago the bond yield was 2.54%. RBC has already raised their rates by 35 BP.
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
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. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55
Most economists say recession is over and recovery is beginning
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
• DOW +78.07 +20.86
• Dollar +.71c to 95.76. on Friday-closed Mon
• Oil +.08 +$1.50 to $73.27 US per barrel.
• Gold -$7.60 +$8.200 to $1,056.70USD per ounce
• Canadian 5 yr bond yields +.17bps to 2.81. The spread, based on 5 yr rate of 4.09% is 1.18% after a huge spike in bond yields Friday, at one point being up 44 bps over 2 days, they settled up .17 bps. Four weeks ago the bond yield was 2.54%. RBC has already raised their rates by 35 BP.
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
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. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55
Most economists say recession is over and recovery is beginning
By Mae Anderson
NEW YORK — More than 80 per cent of economists believe the recession is over and an expansion has begun, but they expect the recovery will be slow as worries over unemployment and high federal debt persist.
That consensus comes from leading forecasters in a survey by the National Association for Business Economics released Monday.
“The survey found that the vast majority of business economists believe that the recession has ended but that the economic recovery is likely to be more moderate than those typically experienced following steep declines,” said association president-elect Lynn Reaser, chief economist at Point Loma Nazarene University.
The forecasters upgraded the economic outlook for the next several quarters, but cautioned that unemployment rates and the federal deficit are expected to remain high through the next year. Forecasters now expect the economy, as measured by gross domestic product, to advance at a 2.9 per cent pace in the second half of the year, after falling for four straight quarters for the first time on records dating to 1947. They expect a three per cent gain in 2010.
Still, the federal deficit has ballooned and the jobless rate is expected to lag behind, as employers remain cautious.
The unemployment rate rose to 9.8 per cent in September from 9.7 per cent, the Labour Department said earlier this month, the highest point in 26 years.
Forecasters expect the unemployment rate to continue to rise, to 10 per cent in the first quarter of next year, before edging down to 9.5 per cent by the end of 2010.
The recession, the worst since the 1930s, has eliminated a net total of 7.2 million jobs.
Worries about unemployment are likely to continue to constrain household spending. Personal consumption spending likely began rising in the second half of this year, but is expected to remain low in 2010. Still, Americans aren’t expected to save as much as they have in past decades. The savings rate is expected to be above the 2 per cent average of the past four years, but below the 9 per cent average in the 1970s and 1980s.
The housing recovery is one bright spot. Forecasters expect 2010 to be the first year since 2005 that the housing sector will contribute to overall growth. Home prices are expected to rise two per cent in 2010, but panellists do not believe that will stifle the housing recovery.
Inflation is expected to remain low due to the weak labour market and other factors. Thus, the association panel — which consists of 44 economists surveyed Sept. 2 through Sept. 24 — expects the federal funds rate to remain at its current record low near zero until late next spring, before a gradual rise begins.
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about rising inflation,” said Reaser.
The Associated Press
Thursday, October 8, 2009
Financial Update For Oct. 8, 2009
TSX sees third day of triple-digit gains • Gold hits another all time high• Home sales have now exceeded pre-recession levels
• TSX +101.91 (Reuters) on continuing strength in metals prices and investor confidence that the economic rebound has staying power.
• DOW -5.67
• Dollar -.25c to 94.13. as weakening oil prices and a mixed showing on stock markets dragged the unit lower....
• Oil -$1.31 to $69.57US per barrel. as investors focused on U.S. government data that showed Americans still have little appetite for more petroleum
• Gold +$4.70 to $1,044.40USD per ounce continued its upward climb to close at another record high
• Canadian 5 yr bond yields -.02bps to 2.52. The spread, based on 5 yr rate of 4.09% is 1.57%
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
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. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55
Hot housing market expected to cool by November
Reuters
TORONTO -- Low financing costs and pent-up demand helped restore Canadian existing home sales to pre-recession levels, but the red-hot pace will likely peter out before the year is out, a report showed on Wednesday.
The Bank of Canada lowered rates to an all-time low with an aim to cushion the Canadian economy from external shocks. Instead, this aggressive easing has "proved to be more of a trampoline for resale housing markets," Toronto-Dominion Bank economist Pascal Gauthier said.
As of August, 50-60% of pent-up demand has been absorbed, and if the current pace persists, the demand will dry up by November, TD estimated in its Resale Housing Market Outlook. A sharp shift in consumer confidence has contributed to the rebound, combining with low and favourable interest rates that made home ownership affordable for many Canadians.
Between 45,000 and 53,000 potential sales late last year failed to materialize because consumer confidence froze up during the worst of the global financial crisis, TD estimated.
No other Canadian economic indicator in the past few months has recovered as strongly, and in fact, home sales have now exceeded pre-recession levels and matched the lofty volumes of 2007, TD said.
"After plummeting by nearly a third in the second half of last year, the seasonally-adjusted level of sales had climbed back by 61% as of August," the report said.
Overall, TD estimates national existing home sales will rise 2.4% to 445,000 units in 2009 from a year earlier, with the average price climbing 2.1% to $310,000. In 2010, sales are seen rising 2.2% to 455,000 units, while prices jump 5%. But in 2011, TD projects eroding affordability will dampen sales but the average price will still add a modest 2%.
TD also looked at nine Canadian cities and their prospects for existing home sales. All cities coast-to-coast were forecast to show gains from this year to 2010, but then retreat the following year.
On Tuesday, TD released a report that suggested the Bank of Canada could raise interest rates sooner and more aggressively than forecast if real estate strength did not cool.
• TSX +101.91 (Reuters) on continuing strength in metals prices and investor confidence that the economic rebound has staying power.
• DOW -5.67
• Dollar -.25c to 94.13. as weakening oil prices and a mixed showing on stock markets dragged the unit lower....
• Oil -$1.31 to $69.57US per barrel. as investors focused on U.S. government data that showed Americans still have little appetite for more petroleum
• Gold +$4.70 to $1,044.40USD per ounce continued its upward climb to close at another record high
• Canadian 5 yr bond yields -.02bps to 2.52. The spread, based on 5 yr rate of 4.09% is 1.57%
• http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
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. Ideally lenders are looking for a *NEW spread between 1.35 and 1.55
Hot housing market expected to cool by November
Reuters
TORONTO -- Low financing costs and pent-up demand helped restore Canadian existing home sales to pre-recession levels, but the red-hot pace will likely peter out before the year is out, a report showed on Wednesday.
The Bank of Canada lowered rates to an all-time low with an aim to cushion the Canadian economy from external shocks. Instead, this aggressive easing has "proved to be more of a trampoline for resale housing markets," Toronto-Dominion Bank economist Pascal Gauthier said.
As of August, 50-60% of pent-up demand has been absorbed, and if the current pace persists, the demand will dry up by November, TD estimated in its Resale Housing Market Outlook. A sharp shift in consumer confidence has contributed to the rebound, combining with low and favourable interest rates that made home ownership affordable for many Canadians.
Between 45,000 and 53,000 potential sales late last year failed to materialize because consumer confidence froze up during the worst of the global financial crisis, TD estimated.
No other Canadian economic indicator in the past few months has recovered as strongly, and in fact, home sales have now exceeded pre-recession levels and matched the lofty volumes of 2007, TD said.
"After plummeting by nearly a third in the second half of last year, the seasonally-adjusted level of sales had climbed back by 61% as of August," the report said.
Overall, TD estimates national existing home sales will rise 2.4% to 445,000 units in 2009 from a year earlier, with the average price climbing 2.1% to $310,000. In 2010, sales are seen rising 2.2% to 455,000 units, while prices jump 5%. But in 2011, TD projects eroding affordability will dampen sales but the average price will still add a modest 2%.
TD also looked at nine Canadian cities and their prospects for existing home sales. All cities coast-to-coast were forecast to show gains from this year to 2010, but then retreat the following year.
On Tuesday, TD released a report that suggested the Bank of Canada could raise interest rates sooner and more aggressively than forecast if real estate strength did not cool.
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