ECB May Cut Interest Rates, Jobs In Canada Down

This morning we will see lighter volume in North America as the entire Eastern seaboard is getting pummeled by this storm.  NYC is to get pounded and based on that many traders will stay home today.  The same will hold true for Toronto.

With that said, Europe is still operating and is up about a half a point at midday.  The region, after a couple of weeks of selling, rebounded today after the head of the ECB suggested that interest rate cuts are possible to continue to stimulate the economy.  Also, China continues to stabilize and grow which is positive for the world economies but the risk of inflation is apparent again as growth accelerates.  Also, EU leaders agreed yesterday that they will seek a more accommodative trade deal with the US and have drafted a joint statement that has been sent to the Whitehouse for discussion.

In North America, futures are just slightly higher this morning.  Canadian Employment numbers came out this morning and the news was not good.  In January, 22000 jobs were lost vs. estimates of an additional 5000.  Also, December’s big plus 40000 jobs was revised down to 31000.  The actual unemployment rate fell to 7.00% but due to people coming out of the workforce altogether not from job creation.  We also got January Housing Starts for January and once again we saw a fall off from the previous month to 160000 units.  That is down from 197000 in December and 201000 in November.  While the US is stabilizing and seeing growth in housing and employment, Canada is stalling with the housing market as the main driver in my opinion.

Commodities are mixed this morning with Gold off a couple of bucks and oil up about a quarter point.

Courtesy of:

Kenneth A. Dick, BA, CIM, CFP, FCSI

www.canaccord.com

January 29th, 2013 Market Update

Today we are seeing some weakness in Europe and in the US futures markets primarily as due to profit taking.  Overnight in Asia however markets were higher primarily on news that the Indian government had cut the benchmark lending rate to 7.75% from 8.00%. Indices were higher by about a point across the board on further increased liquidity to the region.

Europe is off about a quarter point even with news that Italy’s borrowing costs have fallen to new three year lows at the latest auction yesterday.

In the US futures are down about a quarter point currently.

The Case Shiller Housing Index was released for November and once again year over year the index has advanced, this time by 5.52% vs. estimates of 5.55%.  While the number was slightly under estimates it virtually hit the mark and also rose for the 11th straight month.  The housing recovery in the US continues to plod along and provide positive confidence numbers.

Earnings on mandate positions were released this morning on CP, Pfizer and Metro.  CP came in adjusted at estimates or $1.28 per share.  The company exceeded revenue forecasts and the all important Operating Ration fell to 74.8 from 78.5 (lower is better in the rails).  The company also guided to a very strong second half of 2013 with record revenues and earnings.  Pfizer, came in at $0.47 per share vs. $0.44 estimated.  The company also beat on the top line.  They did however caution on the balance of 2013 with lower guidance.  Metro, the big Canadian food chain had not released earnings as of yet today but did increase its dividend this morning by 16%.  The estimates on earnings are at $1.15 per share.

Both gold and oil are higher this morning rebounding against the profit taking on the Euro and North American markets.

Moody’s yesterday downgraded all of the big Canadian banks except the Royal (which was downgraded in June) citing concerns in the housing sector and the increasing consumer debt load that Canadians continue to pile on.  Canadian consumer debt as a percentage of household income hit the record 165% level in Q3 of last year and while the Q4 numbers have not been released as of yet estimates would suggest it will still be hovering around levels that the US consumer was dealing with back in 2008 just prior to the crisis down there.  I continue to reiterate to all if you can reduce debt do it, regardless of how low interest rates are as they will not stay at these levels for ever.

In Canada, Consumer Confidence was up 5.1% in December which despite the debt concerns shows that Canadians, much like our friends to the south, are continuing to see positive economic signs.

Courtesy of:

Kenneth A. Dick, BA, CIM, CFP, FCSI

www.canaccord.com

Germany’s Economy Down, December Retail Sales in The USA Up

Some economic news to report this morning with the Germany economy surprisingly contracting in the fourth quarter on the continuing woes of the region. The German economy is the strongest of in the region and most are predicting it will be the first to bounce back later in the year. Euro markets are off about a point on the news.

The news out of the US however is stronger as Retail Sales advanced in December greater than expected increasing 0.5% vs. 0.2% estimated. November was also revised higher. The good news however is not moving futures higher as they are trading down currently by about a half a point on continued concern over the debt ceiling and appropriations bills that are required to be passed in the next couple of months.

Gold is trading higher on the news by about 1% while oil is off about a quarter point.

In Canada, more news on the real estate market as existing home sales fell 0.5% in December. While the number is negative, December is usually a quiet month in the industry with the holiday season. More importantly, Average Home Prices in Canada, year over year were down 1.1% and for December down 1.6%. The trend continues.

In earnings news, Corus Entertainment beat estimates, but reported lower revenues for Q4.

EnCana Corp the big Natural Gas company has come out and stated that it is not for sale on the heals of the retirement of the CEO this week.

As I mentioned yesterday the Nortel criminal ruling was to be released and it was exonerating the three former executives charged with financial misrepresentation. The decision was met with very different views but for the most part surprise was the dominant reaction. We shall see how the money is distributed at the end of the week.

Lastly, it would seem that the communications sector is heating up again as Shaw and Rogers are swapping some properties in various markets which may suggest that possible deal could be in the works down the road. The BCE Astral deal which is still in committee discussion is causing the entire media group in Canada to look at consolidation.

Kenneth A. Dick, BA, CIM, CFP, FCSI
www.canaccord.com

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Inflation in China Increases, Europe Flat, US Deficits Up

This morning we find inflation in China has crept back up to 2.5% which caused the Asian markets to sell off overnight.  On the positive side, markets in Japan were up 1.5% as the government approved a $116B(USD) stimulus package to continue to try and ignite the stagnant economy.

In Europe markets are flat this morning with no real news out of the region other than the UK Manufacturing Output numbers for December were slightly lower down 0.3%.

In North America, the Trade numbers in both Canada and US were released for December and both countries saw deficits widening.  In earnings news, Wells Fargo’s profit was up 24% from last year, however the net interest margin on loans did fall.

Ford, after increasing their dividend yesterday announced today that they are adding more than 2200 white collar jobs in the US this year to continue to improve the auto line-up.  Engineering, manufacturing and technology are the main areas that will be added to.

US futures are mixed this morning trading virtually flat currently.

Gold is off about a third of a point and oil is trading lower by about 0.75%.

Lastly, BMO released a report this morning suggesting the Canadian real estate market is in for a soft landing as we go deeper into 2013.  As I have been suggesting of late it would seem that in 2013 we will see declines across the country in real estate values.

Courtesy of:

Kenneth A. Dick, BA, CIM, CFP, FCSI

www.canaccord.com