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Fed grows cautious Printer Friendly Refer a Friend
Written by PAG   
Friday, 12 February 2016

Global equity markets resumed their downward trajectory this week as fears grew over the health of the world’s economy. The U.S. Federal Reserve helped fan those fears during two days of testimony by Chairwoman Yellen before House and Senate committees. In addition to highlighting risks to domestic growth and inflation due to external forces she said the Fed was looking at negative interest rates if the US economy needed a boost. A number of European central banks – including the ECB – have introduced negative short-term rates to try to stimulate growth and boost inflation. The admission that the Fed is considering a negative-rate strategy (it was on the table in 2010) rattled nerves and certainly points to a delay in the Fed’s plan to raise rates in regular increments this year. The next policy meeting is in March. Meantime, U.S. employment data continues to point to underlying strength in the jobs market. The latest indicator for unemployment benefits claims fell to 269,000 for the week ending February 6. That beat expectations as did last Friday’s government jobs report. It showed unemployment falling to an 8-year low with accelerating wage growth. In other news, it was reported late Thursday that the UAE’s energy minister was ready to cooperate on production cuts for oil. An oil glut has led to concerns about corporate bankruptcies and recessions in energy-based countries. That fear crept into the banking sector this week which led to sharp losses in many lenders’ share prices around the world. The prospect of negative interest rates added to the concern about the banking sector. Turning to Japan where the equity sell-off has been especially strong, there may be a meeting convened by the Bank of Japan to discuss further monetary stimulus.
Wild week for markets Printer Friendly Refer a Friend
Written by PAG   
Friday, 22 January 2016
It was a wild couple of days for markets again this week as percolating fears over slowing global growth and falling oil prices continued to send stocks up and down. Many believe it will remain volatile until oil prices find a floor. Falling oil prices are stirring concern on two fronts: rising bankruptcy potential in the energy sector and possible recessions in oil dependent countries – including Canada. Turning to China, the world’s second-largest economy put its official 2015 growth rate at 6.9% Tuesday. The figure, the lowest in 25 years, rattled nerves as China is a key engine of global economic growth. As if on cue, the IMF downgraded its forecast for global growth taking the figure down to 3.4% this year and 3.6% the next. That’s 0.2% less each year versus the Fund’s predictions in October last year. The IMF expects Canadian growth to come in at 1.7% in 2016 and 2.1% in 2017. In U.S. economic news, the consumer price index slipped 0.1% in December the Labor Department said Wednesday. Expectations were for CPI to come in flat. Housing starts also fell 2.5% in December from a month earlier pointing to a loss of momentum at the end of 2015. A measure of relief for markets came Thursday after the European Central Bank’s monthly policy meeting. The ECB did not trim interest or deposit rates keeping them at 0.05% and minus 0.3%, respectively, but central bank head Mario Draghi did say he was willing to provide more stimulus at the bank’s March meeting. Forcing his hand is the euro-zone’s annual rate of inflation which was just 0.2% in December – well below the ECB’s medium-term target of 2%. In related news, the Bank of Canada did not raise rates at its Wednesday meeting.
Volatility remains high Printer Friendly Refer a Friend
Written by PAG   
Friday, 02 October 2015

After a sharp drop in August, markets have remained volatile over the subsequent weeks and the most recent one was no different. Big, daily point swings are becoming routine as Chinese growth worries and US interest rate uncertainty persist. The latest concern for traders was Chinese industrial profits for August which suffered their biggest drop since October 2011.
News from the euro zone was similarly downbeat as consumer prices fell y-o-y in September for the first time since the ECB launched its stimulus program. The 0.1% drop from a year ago raises the spectre of deflation – a sustained and self-reinforcing fall in prices – and may force the hand of ECB President Mario Draghi to increase the current bond-buying program.
In the US, a solid US private sector employment report soothed nerves Wednesday but the more important employment report – non-farm payrolls for the month of September – arrives today (October 2).
In Canada, the economy posted its second straight month of growth as GDP rose 0.3% month-over-month in July building on the 0.4% in June. The two months of positive growth stand in contrast to the first five when the economy contracted each month. Budget talks have started again in the US with both sides hoping to avoid the brinkmanship of past years; a measure to keep the government running through to December 11 was approved Wednesday.
Finally, negotiators in Atlanta are trying to reach an agreement on the Trans-Pacific Partnership Trade Talks. The talks span the Pacific region and involve 12 countries including Canada and its largest trading partners, the US, Mexico and Japan.
Volatility Returns Printer Friendly Refer a Friend
Written by PAG   
Friday, 28 August 2015

Equity market volatility was the story of the week as major stock benchmarks see-sawed around the world. Dramatically, the world’s most recognized index – the Dow – fell and rose more than 1,000 pts. from the open Monday to the close Thursday ending the four-day period in positive territory. Drivers leading to the downside were worries about Chinese economic growth – and by de facto – global growth. The catalyst spurring the rebound came in the form of better-than-expected gross domestic product (GDP) data out of the US which eased fears about the strength of the global economy.
For the second quarter, US GDP – the broadest measure of goods and services produced across the country – came in at 3.7% solidly beating early expectations of 2.3%. Oil prices surged on the news jumping 10% Wednesday – their biggest gain in six years while other commodities also picked themselves off the floor. Moves in China over the past couple of days also helped sooth nerves as the PBOC cut interest rates and flooded the market with liquidity to prop up its weakening economy.
Eyes now turn to a meeting of central bankers in Jackson Hole, Wyoming which is hosted by the US Federal Reserve. Although Fed Chairwoman Yellen is not expected to attend the symposium that lasts into the weekend onlookers will be parsing communiques for any hints of when the Fed may start raising interest rates. The US central bank has pledged it would raise rates this year but it hasn’t said when; also unclear is whether the recent turmoil may complicate their plans. Greater clarity may come a week from now when US jobs numbers for August are released September 4.
All eyes on Fed Printer Friendly Refer a Friend
Written by PAG   
Friday, 07 August 2015
With the US Fed’s next policy meeting in September the focus of attention is turning to economic data releases as they may sway opinions as to when the Fed raises interest rates. The odds of an interest rate increase at the meeting next month are about 50-50 as of market close Thursday.
Perhaps the biggest news of the week that may tilt the scale one way or another are US jobs numbers out today (August 7) but keep in mind the FOMC will have one more jobs report to digest before they do or don’t act. Other reports released this week – US consumer spending and an ISM manufacturing report – sent mixed messages and were not helpful in discerning the Fed’s next move.
The Canadian jobs report is also out today and it will be parsed for further signs of decay in Canada’s economy after last week’s dismal GDP release. Growth is less of an issue across the Atlantic as the UK economy is expected to expand a robust 2.8% this year. That level of growth in combination with an expected 2% rate of inflation by Q3 2017 is allowing Bank of England Governor Mark Carney to build expectations for a rate rise next year.
Elsewhere, the leaders of France and Greece announced Thursday that they expect a final bailout package to be agreed upon before the month is out. And finally, the price of oil deserves mention as it hit multi-month lows this week with Brent crude settling below US$50 a barrel Thursday.

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