TSX -40.64
• DOW +65.67
• Dollar -.85c to 94.35cUS
• Oil -$.67 to $69.87US per barrel.
• Gold -$6.30 to $1,119.50USD per ounce
Positive economic growth likely in 2010 and 2011, says RBC Economics
The Canadian Press - After a challenging year, the economy is set for a recovery in 2010, according to a new forecast by RBC Economics.
It says although the economy contracted at an average of 2.5 per cent this year, the stage is set for positive growth in 2010. RBC predicts real gross domestic product will rise by 2.6 per cent next and will continue to expand in 2011, at a 3.9 per cent clip. The report suggests the peak of stimulus spending will occur in 2010, with improving credit conditions fuelling growth next year and in 2011.
In addition, consumer spending is projected to increase by 2.3 per cent next year before accelerating to 2.7 per cent in 2011.
However, the bank says the jobless rate is expected to remain high at about 8.7 per cent in 2010 before falling to 7.8 per cent in 2011.
"With the financial crisis behind us and the U.S. economy on the mend, Canada's economic growth is expected to rise steadily throughout the next year," said Craig Wright, RBC senior vice-president and chief economist.
"While challenges remain, a peak in stimulus and infrastructure spending across the federal, provincial and municipal governments, along with low interest rates, should result in a sustained recovery."
Flaherty notes stimulus money flowing as recovery kicks in
By Nelson Wyatt
MONTREAL — Federal stimulus projects are starting to snowball just as the economy is recovering from the global financial meltdown, Finance Minister Jim Flaherty said Friday.
Flaherty says cash will flow faster in 2010 for federally funded construction projects, now that numerous engineering studies and environmental assessments are being completed.
“They are snowballing, if I can put it that way,” he said in Quebec City.
“They are gathering momentum as we go forward, as engineering studies are done, as environmental assessments are done. So there’ll be a lot of cash flow next year into the Canadian economy.”
Earlier this year, in the depths of the recession, Ottawa earmarked billions for infrastructure projects.
The opposition spent months warning that the money wasn’t going out quickly enough, while the government made procedural changes to speed up the delivery process.
The Liberals say Flaherty’s comments now prove the stimulus process encountered hiccups.
“He’s admitting that we were right all along,” Liberal critic John McCallum said in an interview. “Very little of the money has gotten out.”
He drew parallels with the government’s treatment of allegations of prisoner abuse in Afghanistan.
“This is a dishonest government,” McCallum said. “They told Canadians lies about (Afghanistan) detainees and about the infrastructure money.
“And then when irrefutable facts came out to demonstrate these were lies, they spin the story in a different way. In both cases, the facts now show that they were not telling the truth on infrastructure just as they were not telling the truth on detainees.”
He said it would have been possible to get the money out faster if the government had followed a Liberal plan to transfer gas taxes directly to municipalities, who would have been able to move ahead with already approved projects.
The finance minister, meanwhile, said there are encouraging signs that the recession is petering out.
“We have seen improvements in business confidence, certainly. We are seeing an increase — some increases — in private-sector investment, although we are not comfortable yet that we’re at a place where we can stop the stimulus measures,” Flaherty told a news conference.
“The job situation has also stabilized in the last several months, which is always encouraging.”
Dale Orr, a Toronto-based economic consultant, said Flaherty had “put a bit of flesh” on earlier statements which left the impression projects were going forward and there was immediate economic growth.
“The starting point for a lot of these programs is exactly what he’s now mentioning,” Orr said.
Douglas Porter, deputy chief economist with BMO Capital Markets, said Flaherty seemed to be sticking to his message “that there isn’t going to be a whole lot of new measures next year.
“In fact, next year’s budget may be extremely thin.”
Porter said one of the biggest criticisms of fiscal policy is that by the time the problem is identified and the money starts to be spent, the economy has already started to recover.
“This may well be a case where the maximum effect of the fiscal stimulus actually hits after the economy has started to emerge from recession.”
Monday, December 14, 2009
Friday, December 11, 2009
Financial Update For Dec. 11, 2009
• TSX +75.35 following the release of some encouraging economic data.
• DOW +68.78 as investors sorted through a bevy of reports on jobs, housing, net worth and the deficit
• Dollar +.37c to 95.21cUS
• Oil -$.13c to $70.48US per barrel.
• Gold +$6.00 to $1,126.00USD per ounce
U.S. trade deficit narrows as exports surge to highest level in nearly a year; oil imports dip
Martin Crutsinger, The Associated Press WASHINGTON - The U.S. trade deficit unexpectedly narrowed in October as exports from the United States surged to the highest level in nearly a year.
The U.S. Commerce Department said Thursday that the American trade deficit with the rest of the world fell to US$32.9 billion in October, 7.6 per cent below a revised September deficit of $35.7 billion.
Economists had expected the October U.S. trade deficit to increase to $36.8 billion and, in fact, there was an increased U.S. trade deficits with Canada and China - two of the country's biggest trading partners. Statistics Canada reported from Ottawa that exports to the United States grew 3.6 per cent while imports fell 3.1 per cent. As a result, the U.S. trade deficit with Canada jumped 30.8 per cent to US$2 billion, the U.S. Commerce Department reported from Washington
Bank of Canada concerned about government, household debt
By Julian Beltrame, The Canadian Press
OTTAWA - Mounting governmental and household debt are posing new risks to the stability of financial systems, the Bank of Canada said Thursday in its most recent analysis.
The central bank's semi-annual "Financial System Review" finds that overall conditions have improved in the short term since it last reported in June.
But it adds that record-high debt by Canadian households pose an elevated medium-term risk if a second financial or economic shock were to materialize.
Bank of Canada governor Mark Carney has warned in the past about Canadians getting in over their heads with large mortgage commitments that don't appear problematic given today's low interest rates.
The bank repeats the warning in its systems review, stressing that rates aren't going to remain at historic lows forever and mortgage payments will rise.
This is both a potential problem for households and banks, the report states.
"When borrowing funds, especially in the form of mortgages, households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the report stresses.
And the bank says lenders, such as the chartered banks, should be careful about extending mortgage loans even if they are insured.
That's because a borrower's default on mortgages would impact other loans.
The Bank of Canada notes that its review of potential risks is not intended as a prediction of what is likely to occur, but an early warning system of potential risks.
In this regard, one risk that is emerging is massive debt being taken on by governments throughout the world as they try to cope with the fall-out the deep recession.
The deteriorating fiscal positions leaves many governments vulnerable to future economic shocks, in that they are left with fewer resources.
The bank adds that the ability of governments to address current account imbalances - one of the believed root causes of the global downturn - would be hindered by the debt overload.
Although Canada remains in a fiscally strong position in relation to many other economies, with a debt-to-gross domestic product ratio projected to peak at about 35 per cent, it too would be impacted by the problems of others.
"Our financial system would be affected indirectly," the bank says, "since higher borrowing costs facing those countries with large financing needs would mute the global recovery."
"In addition, disorderly fluctuations in exchange rates could cause financial stress for Canadian businesses, financial institutions, and households."
The central bank says the outlook for the global economy has improved since June, but cautions that growth "is nonetheless likely to remain subdued for some time."
This makes global economies more vulnerable to any new shock that may emerge, the bank states.
• DOW +68.78 as investors sorted through a bevy of reports on jobs, housing, net worth and the deficit
• Dollar +.37c to 95.21cUS
• Oil -$.13c to $70.48US per barrel.
• Gold +$6.00 to $1,126.00USD per ounce
U.S. trade deficit narrows as exports surge to highest level in nearly a year; oil imports dip
Martin Crutsinger, The Associated Press WASHINGTON - The U.S. trade deficit unexpectedly narrowed in October as exports from the United States surged to the highest level in nearly a year.
The U.S. Commerce Department said Thursday that the American trade deficit with the rest of the world fell to US$32.9 billion in October, 7.6 per cent below a revised September deficit of $35.7 billion.
Economists had expected the October U.S. trade deficit to increase to $36.8 billion and, in fact, there was an increased U.S. trade deficits with Canada and China - two of the country's biggest trading partners. Statistics Canada reported from Ottawa that exports to the United States grew 3.6 per cent while imports fell 3.1 per cent. As a result, the U.S. trade deficit with Canada jumped 30.8 per cent to US$2 billion, the U.S. Commerce Department reported from Washington
Bank of Canada concerned about government, household debt
By Julian Beltrame, The Canadian Press
OTTAWA - Mounting governmental and household debt are posing new risks to the stability of financial systems, the Bank of Canada said Thursday in its most recent analysis.
The central bank's semi-annual "Financial System Review" finds that overall conditions have improved in the short term since it last reported in June.
But it adds that record-high debt by Canadian households pose an elevated medium-term risk if a second financial or economic shock were to materialize.
Bank of Canada governor Mark Carney has warned in the past about Canadians getting in over their heads with large mortgage commitments that don't appear problematic given today's low interest rates.
The bank repeats the warning in its systems review, stressing that rates aren't going to remain at historic lows forever and mortgage payments will rise.
This is both a potential problem for households and banks, the report states.
"When borrowing funds, especially in the form of mortgages, households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates," the report stresses.
And the bank says lenders, such as the chartered banks, should be careful about extending mortgage loans even if they are insured.
That's because a borrower's default on mortgages would impact other loans.
The Bank of Canada notes that its review of potential risks is not intended as a prediction of what is likely to occur, but an early warning system of potential risks.
In this regard, one risk that is emerging is massive debt being taken on by governments throughout the world as they try to cope with the fall-out the deep recession.
The deteriorating fiscal positions leaves many governments vulnerable to future economic shocks, in that they are left with fewer resources.
The bank adds that the ability of governments to address current account imbalances - one of the believed root causes of the global downturn - would be hindered by the debt overload.
Although Canada remains in a fiscally strong position in relation to many other economies, with a debt-to-gross domestic product ratio projected to peak at about 35 per cent, it too would be impacted by the problems of others.
"Our financial system would be affected indirectly," the bank says, "since higher borrowing costs facing those countries with large financing needs would mute the global recovery."
"In addition, disorderly fluctuations in exchange rates could cause financial stress for Canadian businesses, financial institutions, and households."
The central bank says the outlook for the global economy has improved since June, but cautions that growth "is nonetheless likely to remain subdued for some time."
This makes global economies more vulnerable to any new shock that may emerge, the bank states.
Thursday, December 10, 2009
Financial Update For Dec. 10, 2009
• TSX +10.29rallied late in the day as financial shares pared losses after initially dropping on debt concerns, while a weaker U.S. dollar spurred mining shares higher.
• DOW +51.08
• Dollar +.84c to 94.83cUS
• Oil -$1.95c to $70.67US per barrel.
• Gold -$22.50 to $1,120.50USD per ounce
Ontario passes bill to create HST
The Canadian Press
Legislation to create a single 13 per cent sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition.
Finance Minister Dwight Duncan told the legislature that blending the five per cent GST with the provincial tax will lower costs for businesses, allowing them to lower prices for consumers and hire more staff.
“Doing nothing is not an option (and) the status quo is just absolutely the wrong thing,” Duncan said in third reading debate.
“This package will create jobs.”
The government estimates the HST will help create almost 600,000 jobs in Ontario over the next decade.
In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.
“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said Mr. McGuinty.
“There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”
The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax.
The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.
The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling Mr. McGuinty a liar.
“When the Liberals walked out of committee hearings, they hammered home their contempt of those in this chamber, and in the public, who dared to get in the way of their rush to whatever is left in our wallets,” Opposition critic Lisa MacLeod told the legislature.
“Some may talk about antics, they may disparage stunts and they may even dismiss this fight against the HST, for them I feel regret.”
The legislation also includes cuts to corporate and income taxes that take effect Jan. 1, and one-time rebates of up to $1,000 for some families to offset the impact of the HST, which takes effect July 1.
The Tories call the HST a greedy tax grab and complain it will apply to many items exempt from the PST, including gasoline, home heating fuel and cable TV bills.
British Columbia is also set to merge its provincial sales tax with the GST on July 1, something Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already done.
British bankers' pain may be Canada's gain
John Greenwood, Financial Post with files from Reuters
A tax on banker bonuses introduced by the U.K. government has been sharply criticized by financial industry officials, but observers say it could help bolster Canada's position as a global financial services centre.
"Tax is a very blunt instrument to use," said Rick Waugh, chief executive of the Bank of Nova Scotia and a senior official with the Institute of International Finance, a leading lobby group for global banks.
Speaking to reporters in Washington, Mr. Waugh said the tax could have the unintended consequence of making banks in less regulated jurisdictions more competitive.
Under the U.K. rule, any bank that pays a 2009 bonus of more than 25,000 pounds will pay a 50% tax on the money.
Because companies will pay the tax rather than employees, it will have a direct impact on corporate profitability.
Business leaders in Britain worry that it will further weaken U.K. banks, which received more than a trillion pounds of bailout money, much of which has yet to be paid back.
"They are killing the golden goose that is the financial system," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. told Bloomberg. "This is unprecedented. We expect to see a further exodus of financial institutions abroad to more tax-friendly environments."
Nearly all the major Canadian banks have operations in London but observers say Royal Bank of Canada will likely be most affected due to its substantial presence.
A spokesman for RBC declined to comment.
Meanwhile, some observers speculate the new tax could strengthen Canadian firms by making them more competitive compared with their U.K. peers.
"Absolutely, it will help," said Don Drummond, chief economist at TD Bank Financial Group. According to Mr. Drummond, the tax is another in a series of measures being taken by major economies around the world in the wake of the financial crisis.
They are partly aimed at putting limits on the way banks operate, but with public debt growing explosively in so many countries, such levies are increasingly seen as a way for governments to bail themselves out of their financial troubles -- which is why observers such as Mr. Drummond predict we will see more of them.
The United States and Britain "have much more serious fiscal problems than Canada does and they don't have an awful lot of options and those seem to be the areas that they are going to lean towards."
Unlike most other major countries, Canada did not have to bail out its banks and insurance companies, because they mostly didn't get caught up in subprime investments. Canadian banking regulations are among the toughest in the world, and many analysts believe financial institutions in this country will only be modestly affected by the introduction of new global regulation.
Canada's major banks and insurers recently joined forces to work toward building Toronto as a major global financial centre, as a way to take advantage of the strong position of the country's financial system.
Mr. Drummond said the U.K. bonus tax and other measures like it will make Canada "more attractive to high priced talent."
• DOW +51.08
• Dollar +.84c to 94.83cUS
• Oil -$1.95c to $70.67US per barrel.
• Gold -$22.50 to $1,120.50USD per ounce
Ontario passes bill to create HST
The Canadian Press
Legislation to create a single 13 per cent sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition.
Finance Minister Dwight Duncan told the legislature that blending the five per cent GST with the provincial tax will lower costs for businesses, allowing them to lower prices for consumers and hire more staff.
“Doing nothing is not an option (and) the status quo is just absolutely the wrong thing,” Duncan said in third reading debate.
“This package will create jobs.”
The government estimates the HST will help create almost 600,000 jobs in Ontario over the next decade.
In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.
“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said Mr. McGuinty.
“There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”
The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax.
The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.
The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling Mr. McGuinty a liar.
“When the Liberals walked out of committee hearings, they hammered home their contempt of those in this chamber, and in the public, who dared to get in the way of their rush to whatever is left in our wallets,” Opposition critic Lisa MacLeod told the legislature.
“Some may talk about antics, they may disparage stunts and they may even dismiss this fight against the HST, for them I feel regret.”
The legislation also includes cuts to corporate and income taxes that take effect Jan. 1, and one-time rebates of up to $1,000 for some families to offset the impact of the HST, which takes effect July 1.
The Tories call the HST a greedy tax grab and complain it will apply to many items exempt from the PST, including gasoline, home heating fuel and cable TV bills.
British Columbia is also set to merge its provincial sales tax with the GST on July 1, something Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already done.
British bankers' pain may be Canada's gain
John Greenwood, Financial Post with files from Reuters
A tax on banker bonuses introduced by the U.K. government has been sharply criticized by financial industry officials, but observers say it could help bolster Canada's position as a global financial services centre.
"Tax is a very blunt instrument to use," said Rick Waugh, chief executive of the Bank of Nova Scotia and a senior official with the Institute of International Finance, a leading lobby group for global banks.
Speaking to reporters in Washington, Mr. Waugh said the tax could have the unintended consequence of making banks in less regulated jurisdictions more competitive.
Under the U.K. rule, any bank that pays a 2009 bonus of more than 25,000 pounds will pay a 50% tax on the money.
Because companies will pay the tax rather than employees, it will have a direct impact on corporate profitability.
Business leaders in Britain worry that it will further weaken U.K. banks, which received more than a trillion pounds of bailout money, much of which has yet to be paid back.
"They are killing the golden goose that is the financial system," Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. told Bloomberg. "This is unprecedented. We expect to see a further exodus of financial institutions abroad to more tax-friendly environments."
Nearly all the major Canadian banks have operations in London but observers say Royal Bank of Canada will likely be most affected due to its substantial presence.
A spokesman for RBC declined to comment.
Meanwhile, some observers speculate the new tax could strengthen Canadian firms by making them more competitive compared with their U.K. peers.
"Absolutely, it will help," said Don Drummond, chief economist at TD Bank Financial Group. According to Mr. Drummond, the tax is another in a series of measures being taken by major economies around the world in the wake of the financial crisis.
They are partly aimed at putting limits on the way banks operate, but with public debt growing explosively in so many countries, such levies are increasingly seen as a way for governments to bail themselves out of their financial troubles -- which is why observers such as Mr. Drummond predict we will see more of them.
The United States and Britain "have much more serious fiscal problems than Canada does and they don't have an awful lot of options and those seem to be the areas that they are going to lean towards."
Unlike most other major countries, Canada did not have to bail out its banks and insurance companies, because they mostly didn't get caught up in subprime investments. Canadian banking regulations are among the toughest in the world, and many analysts believe financial institutions in this country will only be modestly affected by the introduction of new global regulation.
Canada's major banks and insurers recently joined forces to work toward building Toronto as a major global financial centre, as a way to take advantage of the strong position of the country's financial system.
Mr. Drummond said the U.K. bonus tax and other measures like it will make Canada "more attractive to high priced talent."
Subscribe to:
Posts (Atom)
