Are the industrial provinces gaining the loss of the West ?

Schwaben small S                Schwaben Blog

 

May 22, 2015

 

Weekly Statistics:

Today

Week Ago Year Ago
22-May-15 15-May-15 22-May-14
(Midday)
S&P TSX

15,200

15,108

14,702

S&P 500

2,126

2,122

 1,892

DJIA

18,232

18,272

16,543

OIL

$59.93

$59.45

 $93.14

USD vs CAD

0.8165

0.8318

0.9072

Gold

$1,205

$1,225

 $1,297

 

According to Statistics Canada, the number of people receiving employment insurance (EI) benefits rose to 517,900 in March 2015 compared with 515,300 in March 2014. This is the first year-over-year increase since 2010. In March EI benefits rose by 8.9 percent to 38,800 while in February, the second straight month of more than 20 percent increase and the biggest rise since recession, surging to 29.4 percent. This was the fifth consecutive monthly increase for Alberta. Saskatchewan, Nova Scotia, Newfoundland and Labrador, which benefitted from the surge in crude oil prices, also saw larger increases in EI beneficiaries while British Columbia, Ontario and Prince Edward Island had smaller increases and benefits declined in Quebec by 1.5 percent from February. Alberta and Saskatchewan were major job creators during the last few years primarily because of the surge in crude oil prices however during the last year the crude prices have fallen by about 40% from their peak in June 2014 and therefore the rising fortunes of Alberta and Saskatchewan were expected to have a correction. The newly elected NDP government has promised to work with employers in the province but economists and financial commentators are still not confident of the government and are forecasting more troubles for the province in the near future.

Across the border, in the US, the number of EI beneficiaries fell in March and is pointing towards a strengthening labor market. While the US labor market is strengthening, Canadians are still feeling the pain because of last year’s collapse in oil prices.  Last year’s drop in the loonie should have strengthened manufacturing in Ontario and Quebec but no substantial gains in labor market have been recorded yet. Yesterday S&P 500 closed at a record high of 2,130.82 beating its previous high of 2,129.2 from Monday. This shows the increased confidence and optimism of investors but the low volumes in US indices paint a different picture. The low volumes could mean that people are being cautious and skeptical of further growth in equity markets. It could also mean that investors are waiting for the quarterly earnings season to see if the companies are really growing or it was the growth fueled by the availability of cheap money.

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch, Trading Economics

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US economy stronger than expected but what does this mean for inflation and interest rates ?

Schwaben small S                            Schwaben Blog

 

May 15, 2015

 

Weekly Statistics:

Today

Week Ago Year Ago

15-May-15

08-May-15

16-May-14

S&P TSX

15,108

15,170

14,534

S&P 500

2,122

2,116

 1,885

DJIA

18,272

18,191

16,511

OIL

$59.45

$59.45

 $92.78

USD vs CAD

0.8318

0.8265

0.9072

Gold

$1,225

$1,188

 $1,296

The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing towards a strengthening US job market. Initial claims for unemployment benefits dropped 1,000 to 264,000 (seasonally adjusted) for the week ended May 9. Initial jobless claims have importance in financial markets because unlike continued claims data which measures the number of persons claiming unemployment benefits, initial jobless claims measures new and emerging unemployment. Economists polled by Reuters had forecasted claims rising to 275,000 last week. As it is evident from the image below, the data could be volatile but the latest numbers are still near historic lows. A number below 300,00 is usually considered a threshold associated with strengthening labor market. The four-week moving average of claims, considered a better measure of labor market trends as it churns out the week-to-week volatility , fell 7,750 last week to 271,750. This was the lowest level since April 2000. Persistently low firings and greater employment gains should help a gain in wages and support consumer spending. The Federal reserve is still assessing the health of US economy before deciding when to raise the interest rates and unemployment numbers and jobless claims play a key role in that. Now that it’s almost certain that the Fed is not raising rates in June, majority of financial commentators are placing their bets on a rate hike in September. While US economy has overall shown signs of strength, flat retails sales and very low inflation rate could still make Fed to wait a little longer before finally raising interest rates.

US Jobless Claims May 15, 2015

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch, Trading Economics

Markets stronger than expected before weekend

   Schwaben very small S                                         Schwaben Blog

 

May 8, 2015

 

 

Weekly Statistics:

Today

Week Ago Year Ago
08-May-15 01-May-15

09-May-14

S&P TSX

15,170

15,339

14,534

S&P 500

2,116

2,108

 1,878

DJIA

18,191

18,024

16,583

OIL

$59.45

$59.26

 $91.07

USD vs CAD

0.8265

0.8222

0.9072

Gold

$1,188

$1,177

 $1,304

On Friday morning European markets surged about 2.5% on the conservative victory in England starting markets on a good note that continued in North America after the job market in US has rebounded on employment gains for the month of March. The employers added 223,000 new positions in April compared to a gain of 85,000 in March (initially reported as 126,000). Economists were expecting a gain for 224,000. The majority  of gains came from professional and business services (added 62,000 jobs), health care (added 45,000 jobs) and construction (added 45,000). The average hourly earnings for employees rose by 0.1% and have now grown by 2.2% in the last twelve months. This was below the economist’s estimate of 0.2%. The unemployment rate moved down to 5.4% and is closer to Fed’s expectation of “full employment”, which it pegs around 5.2%. This is the lowest unemployment rate since 2008. Michael Dolega, senior economist at TD Economics, said “The report was more or less a Goldilocks one, healthy enough to assuage fears that an abrupt slowdown in the US economy is upon us, but not strong enough to bring forward the Fed hike meaningfully”. The labor participation rate remained virtually unchanged at 62.8%, up 0.1% from participation rate. Over the last twelve months, it has stayed within a range of 62.7% and 62.9%, still near the lowest level since the late 1970s. Many economists now think that the first-quarter woes were temporary and the economy will rebound this spring, as it did last year from a first-quarter contraction. While the increasing gains in job numbers point towards the strengthening US economy but the slow growth in hourly wages paints a different picture. This absence of wage pressure will keep the Fed from raising the rates in June and it led to a rally in equity markets with all the major indices up more than 1%. While the Fed may not hike interest rates in June, a September rate hike is still on the table and this will be the first rate hike since 2006.

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch

Is the US slowing or is it just a strong dollar ?

Schwaben S

Schwaben Blog

 

May 1, 2015

 

Weekly Statistics:

Today Week Ago Year Ago
01-May-15 24-Apr-15

02-May-14

S&P TSX

15,339

15,408

14,765

S&P 500

2,108

2,118

 1,881

DJIA

18,024

18,080

16,512

OIL

$59.26

$57.40

 $90.86

USD vs CAD

0.8222

0.8207

0.9072

Gold

$1,177

$1,180

 $1,304

 

The US economy stalled in the first quarter with Gross Domestic Product (GDP) increasing at an annual rate of only 0.2%. That was a big drop from last quarter’s 2.2% growth and the weakest growth in last one year. A survey of 86 economists by Bloomberg had a median forecast of economic growth of 1%.   While harsh weather dampened the consumer spending, it was a stronger dollar that further weakened the economic growth. The dollar’s more than 4.5% gain against US’s main trade partners in the first quarter led to in an increase in trade deficit from $471.4 Billion to $522.1 Billion. This subtracted 1.25% points from the first quarter growth. What many economists and analysts have not considered though is that a rise in U$ against other currencies will suppress reported earnings of foreign subsidiaries and hence understate the “real” operating earnings that companies have earned. In other words lower corporate earnings are a result of currency losses rather than lower corporate earnings. Diane Swonk, chief economist at Mesirow Financial in Chicago said, “ The US economy has yet to demonstrate the self-sustaining resilience that the Fed wants to see before raising the interest rates”.  The Fed officials met on Wednesday and noted for the fist time that non-energy imports were keeping inflation below its target of 2%, which indirectly implies the impact of a stronger dollar. The Fed clearly stated its intention to be data-driven while deciding for hiking the interest rates. This will be the first time since 2006, if the Fed decides to raise the interest rates. It means that from now on rates could be hiked in any of the Fed’s meeting. During previous meetings of the Fed, financial commentators and economists interpreted that interest rates could be increased in June or September but with the recent announcement, Fed has cleared the rumours regarding rate hike.

Meanwhile the US job markets showed signs of improvement as the wages for private sector employees increased by 0.7% in the first quarter and were up 2.8% in the last twelve months. This is the biggest gain in more than six years. The Labor department also reported that the number of claims for job less benefits fell to the lowest level since 2000. The number was 262,000 versus a consensus estimate of 290,000, well below the 300,000 mark that economists have been using as a benchmark. While this shows that the US economy is improving well but the slow growth in GDP tells a different story. This confused sentiment has led to an increased volatility in equity markets and fear amongst investors.

Source- Bloomberg, Globe Investor Gold, Financial Post, Market Watch