December 2nd, 2013 Business & Market Update

Some good news out of China overnight as November Manufacturing outpaced estimates, however markets there were off about a half a point.  Japan was flat.

In Europe, at midday markets are mixed with the EuroStoxx Index down about a fifth of a point contrary to positive news out of the UK as manufacturing there was also stronger for November.

US markets are back at full speed today after the extended long weekend and it would seem that while the shopping spree down there was strong sales numbers were lower due to deeper discounts.  Futures however are marginally stronger this morning.  Canada is following suit up slightly over Fridays close.

Gold is off 14.00 to 1237 on the continual strengthening of the US Dollar, oil is up 0.38 to 93.10 and the loonie continues to fall off about 0.14 cents to 94.08 the lowest level in two years.  Bonds are trading lower this morning with the US and Canadian 10 year notes yielding 2.77% and 2.58% respectively.

Tomorrow marks the start of the big Canadian banking oligopoly announcing earnings as BMO is first to report.  National will report Wednesday, CIBC, RBC and TD on Thursday and BNS on Friday.  Generally estimates are suggesting slight beats across the board with the possibility of dividend increases from TD and RBC.

I have added some further insight from the Pimco Due Diligence Conference that I attended recently in regard to the US Housing market which Pimco has done exhaustive research on in regard to their investment in non-agency mortgage backed securities.  While there has been a solid recovery, there is a great deal of room left in many regions of the country for continued growth.  A key takeaway was the fact the residential real estate is a market of houses not a housing market.  The difference is the fact that not all markets are the same (Manhattan vs. south Florida as an example).  A national number indicating housing starts, pricing and permits does not provide a realistic picture regionally of where value lies.  Not surprisingly, when asked about the Canadian market, for the most part the response was that it is overvalued.  Of course the same analysis applies in regard to regions.  I am sure you will find it very interesting.

Lastly, while on the road Thursday and Friday last week I was unpleasantly surprised at the traffic in the town of Peterborough, ON (population 135,000) due to the Canadian version of Black Friday.  I had meetings most of the day in town and it was like driving around in downtown Toronto.  I saw accidents on the road and in parking lots, line-ups at banks, gas stations and malls that were insane.  All to get a deal on something that is probably not needed at the end of the day.  While I understand it is good for the economy that the consumer is out there spending, I wonder at what cost from a debt perspective?  This is one US tradition that I would be happy to export back to them!!

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

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

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