Investors wonder if rally on markets can withstand economic headwinds

By The Canadian Press - Sunday, March 10, 2013 at 7:54 AM - 0 Comments

TORONTO – Stock markets could be looking for some direction this week following a muted response to blowout employment numbers on Friday, capping a week that saw New York’s Dow Jones industrials register a string of record high closes.

The TSX ended the week with slight pop, up 0.48 per cent, weighed down by gold stocks but New York registered strong gains, with the Dow gaining 2.18 per cent.

This means the Dow has more than made up the losses stemming from the 2008 financial collapse, rising over 115 per cent from the lows of March 2009 that resulted from the financial collapse and subsequent recession.

However, the TSX is still a good 2,300 points away from the all-time high of 15,073 from the summer of 2008.

Several items added up to improve sentiment, including strong trade data from China, positive news on U.S. home prices, a U.S. services sector expanding stronger than thought and then a jobs report showing the creation of 236,000 jobs last month. Also, the U.S. jobless rate edged down 0.2 of a point to 7.7 per cent, the lowest level in four years.

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Dollar could see further declines in wake of Bank of Canada rate announcement

By Malcolm Morrison - Sunday, March 3, 2013 at 6:52 AM - 0 Comments

TORONTO – The Canadian dollar could be under further pressure this week as traders look to see what the Bank of Canada signals about interest rates hikes and how job creation held up during February.

Currency and stock markets will also be looking to see how an automated series of steep U.S. government spending cuts is being implemented and what progress Italy is making in forming a new government following inconclusive results from an election last week.

The central bank makes its next announcement on interest rates on Wednesday.

No one expects the bank to change its key rate from one per cent but it could make subtle changes in the language of its statement about its interest rate intentions.

At its last meeting in late January, the bank indicated that interest rate hikes are likely further off than previously thought and lowered its economic estimates.

That was enough to push the loonie below parity with the greenback, where it has stayed ever since, falling to an eight-month low. And economists don’t expect it to rise above parity any time soon.

“We continue to look for the currency to work its way back toward parity eventually but I have no problems seeing it drop as low as 95 cents US in the next short while,” said Doug Porter, chief economist at BMO Capital Markets.

“There are a lot of negatives suddenly stacked up against the currency short term, which could persist for awhile yet.”

The central bank shaved three-tenths of a point off its projections for growth for both 2012 and 2013, to 1.9 per cent and 2.0 per cent respectively.

But that could be revised lower, given data released Friday showing fourth quarter growth came in at an annualized rate of 0.6 per cent, with growth actually contracting during December.

“I’m not pointing fingers here, it’s just the reality that they have been consistently optimistic and the economy has underperformed steadily and that’s been also true on the inflation front,” added Porter.

“I think there is certainly a reasonable argument to be made that they will change the language.”

The loonie has fallen by about three US cents since that last meeting, down 0.6 of a cent over the past week.

Continued low rates are one reason but the loonie has also fallen amid worries about the strength of the housing sector and the price differential between benchmark Brent crude and Western Canadian Select from the oilsands.

Traders have also been concerned about U.S. economic strength in view of automated, across the board U.S. government spending cuts of more than US$85 billion that were triggered Mar. 1.

The loonie has also been hit by weak December retail figures, tame inflation data for the end of the year, signs that the current account trade deficit remains at close to record levels and the latest indication of weak economic growth.

The other major piece of Canadian economic data comes out Friday, when the February jobs report is released.

“And of course the story there is that the Canadian jobs picture ended last year surprisingly strongly, and I think reality caught up with the job market a bit in January when we saw employment drop,” said Porter.

“I think there’s a chance we could see another weak report but I think the main story here is that the economy is going to struggle to turn out reasonable job gains through the first half of this year.”

Economists anticipate job creation for February to come in at 8,000 after a plunge of 22,000 positions during January, with the jobless rate edging up 0.1 of a point to 7.1 per cent.

The U.S. government’s employment report for February also comes out Friday. It is expected that the economy cranked out 155,000 jobs, roughly the same amount as January.

Meanwhile, North American stock markets ended last week with minor gains in the wake of better than expected U.S. readings on the manufacturing sector and consumer confidence.

The effects from the imposition of the so-called sequester will likely weigh on markets this coming week.

It’s a strange situation since the cuts date from an agreement to raise the U.S. government debt limit in the summer of 2011. The program was not meant to be activated. Rather, lawmakers were supposed to come together before the March 1 deadline to agree on a more considered method of cutting government spending.

“The impact on sentiment and like consumer confidence and business confidence is going to be greater than the actually financial impact or impact on GDP,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“It has a far greater bearing on sentiment because what it’s going to lead to is people getting laid off for a month, or a couple of weeks, or something. Like government employees not getting a paycheque. There’s a ripple effect.”

He says the outcome is likely that it means the economic recovery will continue to be weak.

It doesn’t mean the outlook is dire, it just means things will keep muddling along, grinding out those few yards.

Markets up after Bernanke plays down risks

By The Associated Press - Wednesday, February 27, 2013 at 4:44 AM - 0 Comments

SEOUL, South Korea – World stock markets mostly rose Wednesday after the Federal Reserve chief played down risks from low interest rate policies, offsetting worries that Italy’s indecisive election result will rekindle Europe’s debt crisis.

The Asian heavyweight, Tokyo’s Nikkei 225 index was the rare loser as the yen strengthened against the U.S. dollar following several months of weakness that boosted exporters. The Nikkei fell 1.3 per cent to 11,253.97.

Other Asian markets gained ground. Hong Kong’s Hang Seng advanced 0.3 per cent to 22,577.01 and South Korea’s Kospi added 0.2 per cent to 2,004.04. Australia’s S&P/ASX 200 gained 0.7 per cent to 5,036.60. Shares in mainland China, Taiwan and Indonesia also rose.

European markets stabilized after diving the day before on Italy’s indecisive election result. The FTSE 100 index of leading British companies was up 0.3 per cent to 6,292.06 and Germany’s DAX was up 0.1 per cent to 7,607.16. France’s CAC 40 rose 0.3 per cent to 3,634.03.

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Traders look to progress on avoiding huge U.S. spending cuts

By The Canadian Press - Sunday, February 17, 2013 at 7:28 AM - 0 Comments

TORONTO – Gains could be hard to find on stock markets this week as traders wonder if the current rally on markets has run out of steam and look to a looming deadline for massive, automated government spending cuts to take place in the U.S. at the end of the month.

Traders will also take in reports from several of the top miners in the TSX resource sector.

The Toronto stock market finished lower last week, in large part because of earnings disappointments from the mining and oil groups.

Gold miners have been struggling with higher labour and material costs and oil companies have been dealing with a higher price differential between benchmark West Texas Intermediate crude and the Western Canadian select that comes from the oilsands.

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Stock markets could be in for more gains following solid U.S. economic data

By The Canadian Press - Sunday, February 3, 2013 at 7:01 AM - 0 Comments

TORONTO – The rally on stock markets that propelled North American indexes higher during January could find further momentum this month in the wake of solid economic data from the U.S. at the end of last week.

And the Canadian dollar could find some lift if the employment report for January comes in better than expected.

The S&P/TSX composite was up a shade over two per cent in January while the Dow industrials jumped about 5.75 per cent as corporations delivered some better than expected earnings reports and U.S. politicians avoided the so-called “fiscal cliff” with a compromise on taxation and an extension of the debt limit. There were also signs that China’s economy is reviving.

Sentiment was further improved on Friday as the U.S. non-farm payrolls report said the American economy created 157,000 jobs in January. The number of jobs created in November and December was also significantly revised upward, with a total of 127,000 more jobs created than initially thought.

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S&P 500 index closes above 1,500 for first time since start of Great Recession

By The Associated Press - Friday, January 25, 2013 at 8:46 PM - 0 Comments

NEW YORK, N.Y. – Passing another milestone on the nation’s long journey back from the Great Recession, the Standard and Poor’s 500 index closed above 1,500 for the first time in more than five years Friday after a wave of good earnings reports.

It took scores of incremental gains, several stalled rallies and a few sickening falls, but the widely watched S&P, one of the broadest measures of the American stock market, finished at 1,502.96, up 8.14 points. The index had not closed above 1,500 since December 2007, the start of the worst economic downturn since the 1930s.

The news came on top of other hopeful signs that the economy is slowly recovering. Housing is rebounding. Companies are hiring again, albeit slowly, and their earnings, a big driver of stock prices, are at record levels.

“The bottom line is that corporate America is doing exceptionally well,” said Joe Tanious, a global market strategist at JPMorgan.

The breakthrough happened on an eighth straight daily gain for stocks, itself a remarkable performance. That is the longest winning streak since November 2004.

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Canadian dollar slips amid higher commodities, slowing foreign investment

By The Canadian Press - Thursday, January 17, 2013 at 8:53 AM - 0 Comments

TORONTO – The Canadian dollar was slightly lower Thursday amid rising prices for oil and metals and data indicating a slower pace of foreign investment.

The loonie dipped 0.05 of a cent to 101.36 cents US.

Oil prices headed higher, building on Wednesday’s gain of almost $1 after the U.S. Energy Information Administration said crude supplies declined by one million barrels last week. Analysts polled by Platts expected a 2.5-million-barrel climb.

Prices were also supported by an attack on a natural gas plant deep in the Sahara desert in Algeria. Islamist militants are holding dozens of hostages.

The February crude contract on the New York Mercantile Exchange gained 55 cents to US$94.79 a barrel.

March copper in New York rose two cents to US$3.63 a pound while February bullion declined $6.90 to US$1,676.30 an ounce.

On the economic front, Statistics Canada reported that foreign investment in Canadian securities came in at $5.6 billion in November, which was the lowest amount since July. Foreign investment in the Canadian money market was $3.8 billion, led by federal Treasury bills.

The data was important as “foreign investment flows into Canada have been an important support for the Canadian dollar over the last year and are expected to continue,” said Scotia Capital chief currency strategist Camilla Sutton.

In the U.S., the Commerce Department said housing starts came in at a seasonally adjusted annual rate of 954,000 during December. It was the fastest pace since the summer of 2008. Last year finished as the best year for residential construction since the start of the housing crisis.

And the Labour Department reported that the number of Americans seeking unemployment aid fell to a five-year low last week.

Weekly unemployment benefit applications fell 37,000 to a seasonally adjusted 335,000. The four-week average, a less volatile measure, fell to 359,250.

Stock markets look to U.S. earnings, Canadian business survey for direction

By The Canadian Press - Sunday, January 13, 2013 at 7:10 AM - 0 Comments

TORONTO – Investors will have plenty to chew on this week as U.S. companies deliver their quarterly earnings reports alongside a business survey from Canada’s central bank that will reveal sentiment on the economy.

Those two factors will be in focus in the coming trading sessions, while a handful of other economic data will also provide direction.

The U.S. banking sector will take much of the attention as several big name financial institutions report their results, including U.S. Bancorp, Bank of America and American Express.

Also on the schedule are Intel, General Electric and Lennar Corp.

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U.S. corporate earnings to take centre stage on stock markets this week

By Malcolm Morrison, The Canadian Press - Sunday, January 6, 2013 at 8:16 AM - 0 Comments

TORONTO – The Toronto stock market could be in for further gains next week as investors shift their focus from political wrangling in Washington to the start of a slew of fourth-quarter earnings reports.

The Toronto market ended last week 1.82 per cent higher while New York’s Dow industrials plowed ahead 3.84 per cent after U.S. lawmakers reached an 11th hour deal to avert big tax hikes and spending cuts that were due to kick in at the start of the year.

However, traders worry that U.S. budget talks could pose a threat to risk appetite for months.

The reporting season kicks off after the close Tuesday when resource giant Alcoa Inc. hands in results that are expected to be an improvement from a year ago.

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With hours to go before fiscal cliff is breached, markets relatively calm

By The Associated Press - Monday, December 31, 2012 at 8:22 AM - 0 Comments

LONDON – Markets appeared Monday to be taking in stride the prospect that U.S. politicians will fail to agree a budget deal in time to avoid automatic tax increases and spending cuts that many economists think could tilt the world’s largest economy back into recession.

With just hours to go before the U.S. falls off the so-called “fiscal cliff,” Republicans and Democrats remained divided over tax and spend, raising the prospect that markets will start 2013 without a clear idea of America’s budget policy. The main sticking point appears to be what level of taxes are imposed on higher incomes.

Discussions in the Senate broke off Sunday night without an agreement. The Senators will return to their offices Monday to try and hammer out a deal before the deadline.

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U.S. fiscal cliff worries will weigh on stock markets as 2012 trading winds down

By The Canadian Press - Sunday, December 30, 2012 at 8:36 AM - 0 Comments

TORONTO – A steady drip of losses is expected on the Toronto stock market as a new trading year is about to open amid growing uncertainty about how U.S. political leaders will deal with a deep partisan divide over budget deficits.

Traders have been reluctant to make big commitments on the markets as the end of December approached and with that, the fiscal cliff — the automatic imposition of big spending cuts and significant tax increases set to take effect Jan. 1.

The worry is that with the U.S. economy already weak, the double-whammy of those measures could easily tip the country back into recession, taking other economies along with it.

Investors will also take in data showing that the U.S. economy continued to improve in December despite the uncertainty surrounding the potential fiscal crisis.

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Canadian dollar lower, traders avoid risk on growing fiscal cliff worries

By The Canadian Press - Friday, December 28, 2012 at 9:03 AM - 0 Comments

TORONTO – The Canadian dollar was lower Friday amid doubts about whether the U.S. can avoid going over the so-called fiscal cliff in a matter of days, a development that could put the United States on course for another recession.

The loonie was down 0.06 of a cent to a one-month low of 100.45 cents US.

The fiscal cliff scenario involves the automatic imposition of huge spending cuts and significant tax increases due to take effect at the beginning of the year. With the U.S. recovery already weak, economists worry that the American and other economies could be dragged down if the measures are allowed to persist.

Congressional leaders and President Barack Obama are expected to meet later Friday at the White House for last-minute talks. Obama and congressional Democrats want a deal that would let tax rates rise for the wealthiest taxpayers, a measure opposed by Republicans.

Commodities were mixed with February crude on the New York Mercantile Exchange up four cents to US$90.91 a barrel.

March copper dipped a penny to US$3.59 a pound while February gold declined $3.60 to US$1,660.10 an ounce.

TSX closes flat on pessimism surrounding talks aimed at averting fiscal cliff

By Malcolm Morrison, The Canadian Press - Thursday, December 27, 2012 at 4:51 PM - 0 Comments

TORONTO – The Toronto stock market closed little changed Thursday as traders continued to assess the chances of the United States going over the so-called “fiscal cliff.”

A double-whammy of tax increases and spending cuts, which threaten to erode the already weak U.S. economy, is set to click in on Jan. 1.

The S&P/TSX composite index added 2.97 points to 12,373.77 while the TSX Venture Exchange gained 11.15 points to 1,196.75.

The Canadian dollar was off 0.37 of a cent to 100.51 cents U.S.

Markets hit their worst levels of the session after Senate Majority Leader Harry Reid said the U.S. government appears headed over the fiscal cliff because of a lack of progress in negotiations between Republicans who control the House of Representatives and Democrats who control the Senate and White House.

But indexes recovered most of the losses late in the day on word that the House will be back in session Sunday evening. It is unclear what legislation the House might consider Sunday, since Speaker John Boehner is publicly insisting that the Senate must make the next move to avert the cliff.

“At the end of the day, this prevailing will-they-or-won’t they in Washington is causing a dip,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.

“But it’s tough to read too much into anything given that volumes are exceptionally low. All the players aren’t in the game so to speak.”

The Dow Jones industrials lost 18.28 points to 13,096.31, as data showed fiscal cliff worries are spreading to consumers.

The U.S. Conference Board said that its consumer confidence index fell this month to 65.1, down from 71.5 in November, the second straight decline and the lowest level since August.

The survey showed consumers were slightly more optimistic about current business conditions and hiring, but their outlook for the next six months deteriorated to its lowest level since 2011

The Nasdaq composite index fell 4.25 points to 2,985.91 and the S&P 500 index declined 1.74 points to 1,418.09.

Other data showed that the average number of Americans seeking unemployment benefits over the past month fell last week to the lowest level since March 2008.

The U.S. Labour Department said Thursday that weekly applications dropped 12,000 to a seasonally adjusted 350,000 in the week ended Dec. 22. The four-week average, a less volatile measure, fell to a nearly five-year low of 356,750.

On the Toronto market, losses were led by a 0.5 per cent decline in the financials subgroup as Sun Life Financial (TSX:SLF) moved down 26 cents to $26.35. TD Bank (TSX:TD) declined 72 cents to $83.27.

Commodities were mixed with February bullion up $3 to US$1,663.70 an ounce. The gold sector led advancers, up about 1.8 per cent with Barrick Gold Corp. (TSX:ABX) ahead 73 cents to C$34.24 while Goldcorp Inc. (TSX:G) advanced 46 cents to $35.98.

Support also came from the base metals sector, which rose 0.75 per cent while March copper was unchanged at US$3.60 a pound after rising five cents Wednesday. The gain, the largest in four weeks, came after workers rejected a wage proposal at BHP Billiton’s Escondida mine in Chile. Turquoise Hill Resources (TSX:TRQ) gained 21 cents to C$7.26.

The February crude oil contract on the New York Mercantile Exchange edged down 11 cents to US$90.87 a barrel. The energy sector was slightly higher while Canadian Natural Resources (TSX:CNQ) fell 40 cents to C$28.49 and Niko Resources (TSX:NKO) jumped $1.05 to $10.50.

A major TSX loser was Poseidon Concepts Corp. (TSX:PSN), which plunged more than 50 per cent after the oilfield service company suspended its dividend, replaced its CEO and initiated a board review of the management and business processes. Poseidon shares were down $1.83 at $1.48 after the company said it has established a special committee of the board to review the recent writeoff of certain accounts owing to it.

The tech sector also provided lift with Research In Motion Ltd. (TSX:RIM) up $1.20 or 11.43 per cent to $11.70, mirroring an 11 per cent gain on U.S. markets on Wednesday. RIM stock plunged about 25 per cent last week as analysts raised concerns about less revenue from the lucrative service fees charged by the company to use its secure network. The stock had been on a roll earlier in December on rising optimism about the new BlackBerry 10 lineup, which is being launched at the end of January.

Elsewhere on the corporate front, Bombardier Aerospace has received a new order for six Learjet 75 business jets. Bombardier shares added a penny to $3.76.

Loonie moves higher ahead of Christmas, deadline for U.S. to avoid fiscal cliff

By The Canadian Press - Monday, December 24, 2012 at 12:59 PM - 0 Comments

TORONTO – The Canadian dollar moved higher on Monday as financial markets prepared for the Christmas holiday and weighed the U.S. federal budget negotiations that have stalled.

The loonie closed at 100.88 cents U.S., up 0.22 of a cent in a shortened trading session that ended at noon ET.

Key U.S. lawmakers were predicting that much of their holiday season will be spent in Washington, D.C., as they seek to bridge a gap between the Republican-dominated House of Representatives and the White House.

A deal must be reached if the United States is to avoid going over the so-called fiscal cliff, which would involve the automatic imposition of hundreds of billions of dollars in spending cuts and tax increases that could plunge the world’s largest economy back into recession.

President Barack Obama said Friday that he is “ready and willing” to get a big package done to deal with the fiscal cliff, adding there’s no reason not to protect middle-class Americans from tax increases.

In commodities, the January crude oil contract on the New York Mercantile Exchange slid nine cents to US$88.57 a barrel.

March copper was down 1.8 cents at US$3.55 a pound. February gold bullion dropped 40 cents to US$1,659.70 an ounce.

Markets flat in holiday-thinned trading though concerns over U.S. budget remain

By The Canadian Press - Monday, December 24, 2012 at 7:11 AM - 0 Comments

LONDON – Financial markets were largely steady in holiday-thinned trading Monday though concerns remain over the progress of U.S. budget discussions and the future of the economic reform program in Italy.

For weeks, the discussions between the White House and Congress over a budget deal have been the main driver in markets. If a deal isn’t agreed to by the start of 2013, automatic spending cuts and tax increases worth hundreds of billions of dollars will be imposed — which many economists think could push the U.S. economy back into recession.

The prevailing view has been that a deal would be agreed to in time but as the deadline nears there are growing doubts over whether the U.S. will be able to avoid the so-called “fiscal cliff.”

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Traders face uncertainty over fiscal cliff in holiday trading week

By The Canadian Press - Sunday, December 23, 2012 at 4:34 PM - 0 Comments

TORONTO – Holiday cheer will be swapped with a dose of fear after traders return from a holiday break this week as developments over the “fiscal cliff” negotiations keep the attention of investors, and will likely lead to erratic movements in stock markets.

The shortened trading week, and traditionally low volume levels around the Christmas holiday, will likely accentuate any market shifts related to developments in the stalled U.S. federal budget talks. Congress will reconvene on Thursday.

But before then, trading will likely remain calm in the shortened session leading up to Christmas Eve.

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Asian stock markets rise after EU, IMF agree on a deal to help Greece deal with its debt

By The Associated Press - Monday, November 26, 2012 at 10:14 PM - 0 Comments

BANGKOK – Asian stock markets rose Tuesday after talks over Greece’s financial crisis ended with an agreement on how to reduce its debt load, paving the way for the cash-strapped country to receive the next installment of a bailout loan.

Finance ministers of the 17 countries that use the euro and representatives of the International Monetary Fund reached an agreement late Monday that will enable Athens to receive €34.4 billion ($40.8 billion) immediately and three additional payments in early 2013.

Greece has endured five years of recession and a 25 per cent unemployment rate. It has been locked out of the international long-term debt market by exceptionally high interest rates demanded for its bonds since 2010, and has been relying on funds from rescue loans by other euro countries and the IMF.

Japan’s Nikkei 225 index rose 0.4 per cent to 9,424.91. South Korea’s Kospi rose 1 per cent to 1,927.59. Hong Kong’s Hang Seng added 0.3 per cent to 21,935.92. Australia’s S&P/ASX 200 gained 0.7 per cent to 4,454.40.

Wall Street stocks were mixed on the first full day of trading after the Thanksgiving holiday, with no resolution on the immediate horizon to the “fiscal cliff” of automatic tax increases and steep spending cuts that take effect in January unless President Barack Obama and Congress reach a budget agreement.

The Dow Jones industrial average fell 0.3 per cent to close at 12,967.37. The Standard & Poor’s 500 index fell 0.2 per cent to 1,406.29. The Nasdaq composite rose 0.3 per cent to 2,976.78.

Benchmark oil for January delivery was up 25 cents to $87.99 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 54 cents to close at $87.74 on the Nymex on Monday.

In currencies, the euro rose to $1.2985 from $1.2963 late Monday in New York. The dollar fell to 81.97 yen from 82.18 yen.

Fears of U.S. driving over fiscal cliff to set the pace on markets

By The Canadian Press - Sunday, November 18, 2012 at 8:44 AM - 0 Comments

TORONTO – The looming U.S. fiscal cliff will weigh on markets again this week amid uncertainty that politicians can come together to defuse a potential crisis that threatens to send the U.S. into recession and derail a fragile global economic recovery.

“If there is no indication that a compromise is going to be reached, and that some type of resolution is going to be reached, equity markets as we are witnessing, will pass verdict,” said Andrew Pyle, investment adviser at ScotiaMcLeod in Peterborough, Ont.

Investors will also be anxious to see if shoppers’ confidence has been shaken as the American retail sector launches the start of the holiday shopping season with many stores opening their doors Thanksgiving night on Thursday.

The TSX has tumbled 3.9 per cent since the election Nov. 6 as worries about a sudden slowing of economic growth would be bad news for a resource heavy market like Toronto’s, since a lessening of demand for oil and metals would put pressure on mining and energy stocks.

The Dow industrial average has fallen five per cent as investors worry about higher dividend and capital gains taxes.

The election left the Washington status quo largely in effect — the Democrats control the White House and Senate while Republicans continue to control the House of Representatives.

The outcome left traders lacking confidence that lawmakers can agree on a budget deficit cutting compromise and defuse the expiration of Bush-era tax cuts and the automatic imposition of huge spending cuts. Many economists believe the combination would send the U.S. back into recession.

There was some comfort at the end of the week as congressional leaders expressed confidence a deal could be reached following a Friday meeting with president Barack Obama.

And while many think that American politicians will get a compromise together out of sheer self-survival instincts, it’s not surprising that investors aren’t waiting around until Dec. 31 to protect themselves, particularly in the U.S. where much higher dividend and capital gains tax hikes are a real possibility.

“While politicians in Washington may tend to act stupid at times, they will not be so insane to allow this fiscal cliff to materialize and will likely do something sooner than later so that doesn’t happen,” added Pyle.

“But that doesn’t mean that investors are not still sensitive to hints or indications that may not happen.”

And while investor confidence has been shaken by the looming deadline, traders will be anxious to see if consumers are feeling a sense of alarm at the start of the holiday retail season, which traditionally kicks into gear the day after Thanksgiving. It’s referred to as Black Friday as it, ideally, marks the start of a period when retailers begin to turn a profit, or move into the black.

Some analysts point out that a widely-watched gauge, the University of Michigan’s consumer sentiment index released Nov. 9, showed that Americans feel better about the state of the U.S. economy than at any point in the last five years.

But Pyle said it’s very possible the unease is affecting consumers who are facing big tax hikes in 2013 unless the fiscal cliff issue is dealt with.

“We have lost a key element of consumer confidence with this market decline,” he said.

“And so now retail business owners in the US are not only thinking about their own fiscal future under the fiscal cliff scenarios, now (they’re) thinking, I may not get many customers in the store on Black Friday because the market has fallen back so much and we could see it reflected in another somewhat dismal retail sales number for November.”

On the economic front, traders will look to the September reading on Canadian retail sales. Economists looked for Statistics Canada to report sales rose 0.5 per cent during the month following a 0.3 per cent rise in August.

In the U.S., traders hope to see continued signs of an improving housing sector amid lower levels of foreclosures and modest price increases.

Housing starts for October are reckoned to come in at an annualized rate of 840,000, down from 872,000 in September.

“Compounding the natural volatility of the figures, stormy weather towards the end of the month may have restricted starts along the populous east coast,” said CIBC economist Andrew Grantham.

Stocks in for losses on worries political gridlock will derail fiscal cliff deal

By The Canadian Press - Sunday, November 11, 2012 at 7:31 AM - 0 Comments

TORONTO – Stock markets look set for a steady drip of losses in the near future as traders worry that American lawmakers won’t be able to avoid a series of damaging spending cuts and tax increases coming into effect at the beginning of next year.

Worries about the impending fiscal cliff sent North American markets lower last week after traders immediately turned their attention from a fierce election campaign that essentially left the American political landscape unchanged to the looming deadline.

The TSX ended the week down 183.61 points or 1.48 per cent while the Dow fell 277.77 points or 2.12 per cent.

The fiscal cliff label refers to a string of tax increases and steep spending cuts aimed at cutting the deficit which are set to take effect at the first of the year. If they are allowed to take full effect, the cuts and tax increases will total about at least half a trillion dollars and take a big chunk out of GDP, in 2013. Failure to come up with a compromise would likely tip the U.S. back into recession and drag down other economies with it.

Bank of Canada governor Mark Carney says the fiscal cliff is the most imminent threat facing the Canadian economy.

Traders found little comfort from an announcement by President Barack Obama Friday that he is inviting congressional and business leaders to a meeting next for talks aimed at finding a compromise.

But he made it clear that spending cuts must be combined with new revenue, adding he would not accept any approach that isn’t balanced and doesn’t include the wealthy paying more taxes.

Losses were deeper on U.S. markets as traders weighed the odds of much higher tax rates on dividends and capital gains.

“People woke up Wednesday morning and those who have meaningful investment positions said OK, nothing has really changed in the government so it looks like tax rates will be going up, one way or another,” said Norman Raschkowan, North American strategist at Mackenzie Financial Corp.

“And you have to consider that the tax rate on capital gains in the U.S. is 15 per cent (the same as the tax rate on dividends). And the Democrats are suggesting the tax rates should be closer to the rate that’s paid on regular income and interest income and so on.”

He pointed out that the U.S. market has come a long way since hitting bottom in March, 2009, leaving many investors with strong gains on their portfolios.

“And they’re going to say, maybe I’ll take those gains now at the 15 per cent tax rate rather than risk taking them next year at whatever the higher rate is. And people who bought these stocks for the dividends are suddenly saying, maybe they’re not quite as attractive,” he said.

A major reason for the lack of confidence in American lawmakers is that traders recall the fierce infighting that went on during the debate on raising the U.S. debt limit during the summer of 2011. The raucous debate pressured financial markets around the world.

It’s not just Americans who are more inclined to sell these days. Canadians are also finding that the U.S. isn’t as attractive as it was earlier this year.

“In our portfolios, I’ve been very bullish on the U.S. and up to now, and I still think longer-term, it will do well,” said Sadiq Adatia, chief investment officer at Sun Life Global Investment.

“But for the next three months now, I’m taking off a little bit of my bet on the U.S., hedging it by putting some (money) in Canada because I think if the fiscal cliff doesn’t get resolved, I don’t want to be significantly overweight. If it does, I can get back into my position right away.”

At the same time, market analysts make clear that they can’t believe there won’t be an agreement, even it comes at a minute before midnight.

“I have to believe that common sense is going to prevail and there will be, both sides will say, look, we do have to compromise here, let’s find a way and they’ll do something because they both realize how they’re holding the economy back,” said Jim Muir, director at Fraser Mackenzie.

“I can’t believe that these politicians would be that stupid.”

Busy week for traders amid interest rate decisions, U.S. growth data, earnings

By The Canadian Press - Sunday, October 21, 2012 at 7:32 AM - 0 Comments

TORONTO – Investors have plenty to sift through this week with traders looking to central bank intentions for interest rates, a raft of quarterly earnings reports from Canadian corporations and the first look at how the U.S. economy performed during the third quarter.

There isn’t any doubt about what the Canadian central bank will do about interest rates — it’s widely expected the bank will leave its key rate unchanged at one per cent.

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How to stop doing dumb things with your money

By Julia McKinnell - Tuesday, January 24, 2012 at 11:40 AM - 0 Comments

Getty Images; iStock; Photo Illustration by Lauren Cattermole

Selling stock when it’s going down and buying when it’s going up is irrational, writes Carl Richards, a ski fanatic from Park City, Utah, whose new book The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money is full of ironic advice like, “Don’t just do something, stand there!”

“When the market soars or hits a rough patch,” he writes, “there’s a natural tendency to do something. Fast. Our natural reaction is to sell after bad news (when the market is already down) and buy when news is good (after the market is already up), thus indulging our fear and our greed. It’s an impossible strategy.”

Richards, who is also a certified financial planner, uses the term “behaviour gap” to describe any situation where a person’s behaviour leads to subpar results. For example, if you are lonely, you may feel unsafe, and in an effort to belong, you may buy a new car or some clothes that allow you to blend in. “Meanwhile, you may sacrifice your real financial security in your half-conscious attempts to achieve emotional security.” He tells his clients, “Find out who you are and what you want. Then you can stop wasting your life energy and your money on stuff that doesn’t matter to you.”

Feeling certain that a stock is a great deal? “Overconfidence is a serious problem,” he writes. “If you don’t think it affects you, that’s probably because you’re overconfident. Fortunately, we can do something about it. We can recognize that we’re not as smart as we think we are. The next time you’re about to make an investment decision because you’re certain you’re right, take time to have the ‘overconfidence conversation.’ Find a spouse, friend, or anyone you trust, and walk them through your answers to: what impact will it have if I’m wrong? And, have I been wrong before?”

Speaking of advice, ignore it, writes Richards. “Let’s face it, most of the advice we give and get is useless or worse. People tend to give advice that’s based on their own fears, their own experiences, their own motivations.”

Following a tip you’ve read about is “just dumb.” If you read about it in The Economist, a magazine that sells more than a million copies a week, so did “a whole bunch of people who think they are being clever in exactly the same way at exactly the same time.”

When planning for retirement, don’t get hung up on how much money you’ll need to buy your dream house, he urges. “Just make sure there’s enough in the budget to visit the kids, pay your golf club dues, and maybe see a marriage counsellor when things get bumpy.”

If you’re routinely buying or selling at the wrong time, Richards suggests one alternative is to swear off the stock market forever. “I’m not kidding. Whatever the experts may claim, steering clear of stocks isn’t stupid.”

Or if you’re constantly worrying and fiddling with stocks, try going on an information fast. “We can check the performance of our stock portfolio in the middle of the night, on vacation, at our daughter’s wedding. The trouble is it often makes us feel worse—and eventually we act on our fears.”

Richards, the founder of Prasada Capital Management, confesses that he doesn’t know when it is a good or bad time to buy, and this frustrates friends and family. “It’s bad enough that I don’t know where the market is going. People are still more confused when they find out I don’t even care. Believe it or not, the ability to build and protect wealth is often inversely related to knowing what’s going on in the market. I tell my clients: it’s a terrible idea to try to predict the market’s movements. Worse, it makes people anxious—and anxious people screw up.”

Focus on personal goals, he writes. If your financial goal is to send the kids to college, “tracking the performance of the Dow this week is not going to help you reach that goal.”

He tells the story of an older woman, worried how events in Lebanon might affect her portfolio. “I told her two things. ‘First, Lebanon isn’t going to play a major role in what happens to you. Second, there is not a thing you can do to influence events in Lebanon.’ Then I asked her, ‘Given those two facts, why are we talking about Lebanon?’ ”

What do financial markets have in store for 2012?

By Erica Alini - Thursday, January 19, 2012 at 9:10 AM - 0 Comments

Richard Drew/AP

When one of the world’s most experienced money managers talks of “paranormal” activity in today’s markets, you know these are treacherous times for average investors. “It’s as if the Earth now has two moons instead of one,” mused Bill Gross in his first investment letter of 2012. Gross, the head of a $244-billion bond fund at Pimco, one of the world’s biggest fund managers, lost $5 billion in redemptions last year, as clients pulled money out of his fund after a string of bad (but at the time seemingly rational) bets against U.S. Treasuries.

If not paranormal, 2011 was the year when volatility went viral. Bad luck played a part, with large swaths of the Japanese economy swept away by the tsunami. Mostly, though, the uncertainty that rattled investors was man-made, as bickering policy-makers in Brussels and Washington seemed to gamble with the fate of the global economic recovery. Stocks on the Standard and Poor’s 500 Index swung twice as much as they did, on average, in the last 50 years, only to close roughly where they had opened 12 months earlier, according to Bloomberg. The Dow Jones Industrial Average closed up by just six per cent, and the NASDAQ went down two per cent. Even more disappointing was the TSX, which closed the year down by 11 per cent.

Gross wasn’t the only pro who faltered in a year when, in addition to wild volatility, market activity slowed. U.S. broker-dealer MF Global Holdings Ltd. went belly up in November after betting $6.3 billion on European sovereign bonds. Last October, Goldman Sachs posted its first quarterly loss since 2008. Eager to protect profits and reputations, some financial firms are resorting to desperate measures—Dutch Bank ABN AMRO even introduced a tool called the Rationalizer, which measures emotional arousal levels through skin sensors and advises traders to take a break or wind down their transactions if they get too elated or frustrated. All this raises a troubling question: what chance does the average investor stand? Even those who played it safe by turning to things like guaranteed investment certificates and principal-guaranteeing investment vehicles were left languishing. With interest rates at near-zero levels, baby boomers are approaching retirement with unexpectedly undersized nest eggs. Mounting resentment against financial advisers, meanwhile, had Canadians choosing to try to go it alone. The number of accounts registered with online brokerages has increased by 36 per cent since 2008, according to Investor Economics, a Canadian financial services research company.

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Broker-in-Chief

By John Geddes - Tuesday, October 7, 2008 at 6:01 PM - 26 Comments

Stephen Harper was probably smart not to try feigning an emotional response today over the state of the economy. The Prime Minister would have looked phony.

But did he really need to talk in Toronto like a broker trying to coax a reluctant dentist into risking a few bucks on a hot tip in a bear market?

“I’m not the most emotionally expressive guy, but I understand, I understand in my own family, that people are pretty shocked by developments in the stock market,” he told reporters in Toronto.

“Look,” he went on, “the main thing the government has to do in a time like this is not panic. A lot of people out there are panicking. I think there are probably some great buying opportunities emerging on the stock market as a consequence of all this panic.”

But the market churn, though it’s pretty scary, isn’t really the root worry of most Canadians. What’s got people spooked is the notion that it’s their mutual funds now, but might be their jobs soon. The PM says he understands, but not if he really thinks its about the TSX. It’s about what comes next.