Latest news with #DougPorter
Globe and Mail
2 days ago
- Business
- Globe and Mail
Market Factors: 11 ways the market's acting weird
In this edition of Market Factors we'll list the ways markets are acting contrary to history, and then detail 'growth at a reasonable price' stock buying opportunities benefitting from AI. The diversion is a reminder there's really smart people doing good things and we'll look ahead to the important data releases for the week. BMO chief economist Doug Porter identified more than 10 instances of aberrant market behaviour in recent months. A reversion to the mean of normal market trends may be painful. Mr. Porter's style was tongue in cheek in his recent weekly report, listing new lessons the market has taught us, 'all of which pretty much defied every textbook ever written.' The first lesson is that military actions in the Middle East would be followed by lower oil prices and a falling greenback. The reverse has been true in all of modern market history. Lesson two is markets rally on severe levels of political uncertainty. On again/off again tariffs, attacks on Iran that could spread into a wider conflict, and the threatened replacement of the Fed chairman are just three examples of uncertainty the markets have ignored. Lesson three is that uncertainty-driven equity rallies extend to the TSX, where a series of new highs has been hit despite low growth expectations for the Canadian economy. The benchmark's limitations as a reflection of the domestic economy are well known but the size of this disparity is notable according to Mr. Porter. Mr. Porter's fourth sarcastic lesson is that huge U.S. deficits would lead to lower bond yields. Fixed income investors are not demanding any premium for the added risk. Mr. Porter is particularly surprised that bond yields are falling despite the threats to Federal Reserve independence. Thus, lesson five is that central bank political risk contributes to lower bond yields. Number six is that rate cuts cause currency appreciation. This lesson comes from Europe, where the European Central Bank has cut its policy rate by a full percentage point and the euro is up 13 per cent year to date against the U.S. dollar. Lesson seven is that tariffs cause lower inflation. Every textbook says the reverse. Lesson eight is that Dr. Copper needs its credentials revoked. The copper price, usually a reliable indicator of global economic growth, has been climbing at the same time economists are continually shaving their growth expectations for 2025. Lesson nine is U.S.-specific and self-explanatory: lumber prices improve as the housing market sinks. Lesson ten is that gold prices rise as inflation cools. Bullion has been known as a hedge against inflation, rising along with consumer prices, but it's up 25 per cent this year as inflation pressure has eased. Lesson 11 is that the Mexican peso will rise the longer the country stays in the crossfire of U.S. tariff threats. The peso is up almost as much as the euro, even though 30 per cent of its GDP is exported to the U.S. and the economy is dependent to a significant degree on remittances from the U.S. Some of these market abnormalities – the peso and the U.S. housing market, for example – are of only peripheral interest to most Canadian investors. If, on the other hand, North American equities start reacting to uncertainty (after a Trumpian straw that broke the camel's back maybe, or gold prices drop precipitously) that will be more painful for domestic portfolios. AI remains among Citi's top growth investing themes, with attractive PEG ratios relative to the global market and attainable expectations implied by current stock prices. Citi strategist Drew Pettit helpfully provided a list of growth at a reasonable price (GARP) AI stocks in a report last week. The universe of AI and AI-adjacent stocks were limited to those with market caps of US$5-billion and above, and with historical free cash flow and profit growth above the profitability implied by current stock prices. The list is too long to recount in full here. The names most likely to interest domestic investors (according to me) include Comcast (CCZ-N), Automatic Data Processing (ADP-Q), Advanced Micro Devices (AMD-Q), Mastercard (MA-N), QUALCOMM (QCOM-Q), Dell Technologies (DELL-N), Arista Networks (ANET-N), Northrop Grumman (NOC-N), Corning (GLW-N), Ciena (CIEN-N), Docusign (DOCU-Q), NetApp (NTAP-Q), Visa (V-N), (AMZN-Q), Adobe (ADBE-Q), Alphabet (GOOG-T) and Seagate Technology Holdings (STX-Q). When I get irritated by the state of the world, I like to remind myself that there are really smart people doing really smart, positive things in laboratories across the planet. One example is a European research project called Nanospresso that gives hope to people with rare diseases. Drug companies don't work on rare disease treatments because they're rare – there's not a large enough patient base to make the costs of research recoverable with sales. Nanospresso provides the potential for bespoke genetic treatments that are built at the local level. If perfected, pharmacists could manufacture specific mRNA combined with lipid nanoparticles (protective shells to precisely deliver the treatment built with fats like cholesterol) to treat rare conditions anywhere. Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page. Ian McGugan looks at the many ways the market is shrugging off some very big risks. And David Berman shares his thoughts on the return of U.S. exceptionalism Norman Rothery updates his Smaller Stable Dividend portfolio, which has trounced the TSX Composite over the past 25 years Eric Reguly details how oil traders did a surprisingly accurate job predicting where the Israel-Iran dispute would go Jeff Sommer of the New York Times provides the recipe for doubling your stock returns, again and again The domestic economic calendar for the next week is just the S&P Global Canada manufacturing PMI for June (no forecasts posted yet) on Wednesday and the international merchandise trade report for May (a $6.05-billion deficit is expected) on Thursday. There are no corporate earnings reports of wider interest in the coming week. In the U.S., the ISM manufacturing survey results are out on Tuesday and economists expect a contractionary 48.8 result. Even in a services-oriented economy, the manufacturing survey is important because it is sensitive to changes in the economic cycle. The always-hyped change in non-farm payrolls data for June (120,000 new jobs expected) will be released Thursday morning. ISM services (50.8) results are also out Thursday along with durable goods orders for May (no estimates available yet). U.S. corporate earnings include Constellation Brands ($3.308 per share expected) on Tuesday and MarketAxess Holdings Inc. ($1.944) on Friday. See the full earnings and economic calendar here
Reuters
5 days ago
- Business
- Reuters
Canadian dollar pares weekly gain as economy shrinks
TORONTO, June 27 (Reuters) - The Canadian dollar edged lower against its U.S. counterpart on Friday as domestic data showed a contraction in the economy, but the currency was still headed for a weekly gain. The loonie was trading 0.2% lower at 1.3662 per U.S. dollar, or 73.20 U.S. cents, after trading in a range of 1.3628 to 1.3664. For the week, the currency was on track to advance 0.5%. Canada's gross domestic product fell 0.1% in April from March, led by a 0.6% decline in goods-producing industries as U.S. tariff uncertainty spurred some motor vehicle manufacturers to scale back production. A preliminary estimate showed a further decline of 0.1% in May. "We suspect that the underlying softness in growth and employment will eventually pave the way for additional (interest) rate relief," Doug Porter, chief economist at BMO Capital Markets, said in a note. "However, the stickiness of core inflation remains a big hurdle for near-term rate cuts; we still have exactly one month of data before the next decision." Data on Wednesday showed underlying inflation easing in May but not by enough to bolster expectations for additional interest rate cuts from the Bank of Canada. Investors see a 62% chance the BoC leaves its benchmark interest rate on hold at 2.75% at a policy decision on July 30 but are leaning toward a cut in September. The U.S. dollar (.DXY), opens new tab clawed back some recent declines against a basket of major currencies and the price of oil, one of Canada's major exports, was trading 0.2% lower at $65.12 a barrel. Oil was adding to a steep weekly decline as the absence of significant supply disruption from the Iran-Israel conflict has seen any risk premium evaporate. Canadian government bond yields moved lower across a flatter curve. The 10-year was down 2.3 basis points at 3.317%, pulling back from an earlier one-week high at 3.377%.
Yahoo
24-06-2025
- Business
- Yahoo
Bank of Canada gets 'step in the right direction' for July rate cut from 'so-so' inflation data: economists
Canada's annual inflation rate remained flat at 1.7 per cent in May, according to the latest data from Statistics Canada released Tuesday. Economists say Bank of Canada (BoC) policymakers will likely need to see more convincing data to justify a rate cut on July 30. "The quick take on this overall result would be: Not bad, but should do better to convince the Bank to trim rates further," BMO chief economist Doug Porter wrote to clients on Tuesday morning. "The data over the next five weeks will ultimately drive the decision, but the odds of a July cut are lower now on the so-so CPI." Statistics Canada says a smaller price increase for rent and a decline in travel tours put downward pressure on prices, while smaller price dips for gasoline and cell phone service blunted the overall decline. On a monthly basis, the Consumer Price Index (CPI) rose 0.6 per cent last month. On a seasonally adjusted monthly basis, CPI was up 0.2 per cent. StatCan says shelter costs rose three per cent year-over-year in May, following a 3.4 per cent increase in April. Rent rose 4.5 per cent on an annualized basis last month, a slowdown from a 5.2 per cent gain in April. The slowdown in rising rents was most significant in Ontario, where prices rose three per cent in May, after a 5.4 per cent jump in April. "The increased availability of rental units, coupled with slower population growth compared with spring of the previous year, contributed to the slowdown in rent price growth in May," StatCan wrote on Tuesday. "Given the large weight of Ontario nationally, these effects alone were enough to offset faster price growth in seven other provinces." TD Bank senior economist Andrew Hencic wrote in a research note on Tuesday that ongoing challenges in Canada's housing market, particularly in Ontario, should help limit further rent price gains in the coming months. For homeowners, the mortgage interest cost index fell for the 21st consecutive month in May, dropping from 6.8 per cent in April to 6.2 per cent in May. Meanwhile, price breaks at the gas pumps led consumer energy prices lower for another month, falling 15.5 per cent year-over-year in May, versus a 18.1 per cent drop in April. StatCan says May gasoline prices are down year-over-year due in large part to the removal of the federal government's consumer carbon tax, and corresponding provincial levies. StatCan's core measures inflation, a key gauge for the Bank of Canada, edged down slightly in May. CPI-median and CPI-trim each slowed to 3.0 per cent year-over-year, from 3.1 per cent in April. "Overall, the moderation in core measures is a step in the right direction for the Bank of Canada," CIBC economist Katherine Judge wrote in a note to clients on Tuesday morning. "They will want that progress to be maintained in the next report in order to feel comfortable cutting in July." Analysts had expected the annualized rate of inflation to hold steady. Consensus estimates published by CIBC Economics last week called for a 1.7 per cent annualized reading for May. Last month, CPI for April pulled back to 1.7 per cent, from 2.3 per cent in March. StatCan says this was largely due to lower energy costs, as the federal government removed its consumer-facing carbon tax, and benchmark oil prices fell. Karl Schamotta, chief market strategist at the payments firm Corpay, says a cut in October now seems most probable. "July remains on the table," he wrote in his morning email newsletter. "Although recent data releases have pointed to a surprising degree of resilience in the Canadian economy, a deterioration isn't difficult to see, inflation is clearly continuing to moderate, and new evidence in the weeks ahead could clinch an earlier move." However, Schamotta notes several Canada-U.S. tariff deadlines are set to pass early next month. There is also a retail sales report, two jobs numbers, and a set of quarterly consumer and business surveys due before the central bank's next rate announcement. Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist. Download the Yahoo Finance app, available for Apple and Android. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
24-06-2025
- Business
- Yahoo
Canada's annual inflation rate flattens in May, may not be enough to convince BoC to cut rates in July
Canada's annual inflation rate remained flat at 1.7 per cent in May, according to the latest data from Statistics Canada released Tuesday. Economists say Bank of Canada (BoC) policymakers will likely need to see more convincing data to justify a rate cut on July 30. "The quick take on this overall result would be: Not bad, but should do better to convince the Bank to trim rates further," BMO chief economist Doug Porter wrote to clients on Tuesday morning. "The data over the next five weeks will ultimately drive the decision, but the odds of a July cut are lower now on the so-so CPI." Statistics Canada says a smaller price increase for rent and a decline in travel tours put downward pressure on prices, while smaller price dips for gasoline and cell phone service blunted the overall decline. On a monthly basis, the Consumer Price Index (CPI) rose 0.6 per cent last month. On a seasonally adjusted monthly basis, CPI was up 0.2 per cent. StatCan says shelter costs rose three per cent year-over-year in May, following a 3.4 per cent increase in April. Rent rose 4.5 per cent on an annualized basis last month, a slowdown from a 5.2 per cent gain in April. The slowdown in rising rents was most significant in Ontario, where prices rose three per cent in May, after a 5.4 per cent jump in April. "The increased availability of rental units, coupled with slower population growth compared with spring of the previous year, contributed to the slowdown in rent price growth in May," StatCan wrote on Tuesday. "Given the large weight of Ontario nationally, these effects alone were enough to offset faster price growth in seven other provinces." TD Bank senior economist Andrew Hencic wrote in a research note on Tuesday that ongoing challenges in Canada's housing market, particularly in Ontario, should help limit further rent price gains in the coming months. For homeowners, the mortgage interest cost index fell for the 21st consecutive month in May, dropping from 6.8 per cent in April to 6.2 per cent in May. Meanwhile, price breaks at the gas pumps led consumer energy prices lower for another month, falling 15.5 per cent year-over-year in May, versus a 18.1 per cent drop in April. StatCan says May gasoline prices are down year-over-year due in large part to the removal of the federal government's consumer carbon tax, and corresponding provincial levies. StatCan's core measures inflation, a key gauge for the Bank of Canada, edged down slightly in May. CPI-median and CPI-trim each slowed to 3.0 per cent year-over-year, from 3.1 per cent in April. "Overall, the moderation in core measures is a step in the right direction for the Bank of Canada," CIBC economist Katherine Judge wrote in a note to clients on Tuesday morning. "They will want that progress to be maintained in the next report in order to feel comfortable cutting in July." Analysts had expected the annualized rate of inflation to hold steady. Consensus estimates published by CIBC Economics last week called for a 1.7 per cent annualized reading for May. Last month, CPI for April pulled back to 1.7 per cent, from 2.3 per cent in March. StatCan says this was largely due to lower energy costs, as the federal government removed its consumer-facing carbon tax, and benchmark oil prices fell. Karl Schamotta, chief market strategist at the payments firm Corpay, says a cut in October now seems most probable. "July remains on the table," he wrote in his morning email newsletter. "Although recent data releases have pointed to a surprising degree of resilience in the Canadian economy, a deterioration isn't difficult to see, inflation is clearly continuing to moderate, and new evidence in the weeks ahead could clinch an earlier move." However, Schamotta notes several Canada-U.S. tariff deadlines are set to pass early next month. There is also a retail sales report, two jobs numbers, and a set of quarterly consumer and business surveys due before the central bank's next rate announcement. Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist. Download the Yahoo Finance app, available for Apple and Android. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
National Observer
09-05-2025
- Business
- National Observer
Unemployment rate rises to 6.9% in April as trade war hits factory jobs
The national unemployment rate ticked up to 6.9 per cent in April as the manufacturing sector started to strain under the weight of tariffs from the United States, Statistics Canada said Friday. The Canadian economy added 7,400 jobs last month, the agency said, slightly outpacing economist expectations for a gain of 2,500 positions. But the unemployment rate also rose two tenths of a percentage point in April, topping economists' call for a jobless rate of 6.8 per cent. At 6.9 per cent, the unemployment rate is back at its recent high seen in November. Before then, the jobless rate had not hit that level since January 2017, outside the pandemic years. While the economy did add jobs in April, the rising unemployment rate suggests employers were not hiring as quickly as Canada's population was growing. Statistics Canada noted that's a reversal of earlier this year, when strong employment gains coincided with slowing population growth. Canada's manufacturing industry led job losses in April, shedding 31,000 positions, with the bulk of the impact in Ontario. Canada's manufacturing industry contracted in April as the sector grappled with tariffs from the United States. The hit came after the United States imposed tariffs starting in March on non-CUSMA compliant imports from Canada as well as sector-specific levies on steel and aluminum and automobiles. Manufacturing-heavy Windsor, Ont., saw its unemployment rate jump 1.4 percentage points to 10.7 per cent last month. Statistics Canada said the April figures showed the first significant decline in manufacturing jobs since November, though employment levels for the industry remain steady year-over-year. The wholesale and retail trade sector also lost some 27,000 jobs in April. Offsetting the declines last month was a gain of 37,000 jobs in the public administration sector, which Statistics Canada said was largely temporary work tied to the federal election in April. Average hourly wages rose 3.4 per cent in April, down slightly from 3.6 per cent in March. BMO chief economist Doug Porter said in a note to clients Friday that the details of the April jobs report are worthy of a failing grade for the labour market, with the trade war serving as a clear source of weakness. "This is the first major data reading for April, and it shows that tariffs are already taking a material bite out of the economy," he said. The April job figures mark the last reading the Bank of Canada will get on the health of the labour market before its next interest rate decision set for June 4. The central bank held its benchmark rate steady at 2.75 per cent at its decision last month, breaking a streak of seven consecutive cuts as it waited for more clarity on how Canada's trade dispute with the United States would unfold. Ali Jaffery, senior economist at CIBC, said in a note that the latest jobs report supports the case for a return to cuts in June. "Overall, we are seeing a job market that was weak heading into the trade war, now looking like it could soon buckle," Jaffery said. Porter echoed that call, arguing the odds are now higher for a quarter-point cut for June. Despite economic uncertainty tied to the U.S. trade dispute, most workers were telling Statistics Canada they felt secure in their jobs. Some 73.9 per cent of workers aged 15-69 disagreed when asked if they thought they'd lose their job in the next six months, though the proportion of those who felt otherwise was highest in industries reliant on exports to the United States.
