Market Commentary

June 29, 2011

Rates have moved much higher over the past 24 hours. The bond market sold off steadily on Tuesday as the continuing efforts in Europe to stave off a Greek default appear to be bearing fruit. Positive progress in debating a package combining spending cuts and tax increases yesterday will be voted on later today. As the Greek dilemma had been a primary cause of rates declining so much over the past month or so, it is not surprising that a positive near-term resolution should unwind some of that activity.


Adding fuel to the selloff this morning was a surprisingly strong May inflation report for Canada. The market had expected YoY inflation of 3.3% but got 3.7%. The Core inflation reading, which excludes volatile food and energy components (and is the one the Bank of Canada bases rate decisions on), was up 1.8% Year over Year (exp. +1.5%), and 0.5% Month over Month (exp. +0.2%). This 1.8% YoY reading for Core Inflation is below the 2.0% the Bank of Canada is targeting, so there is still a bit of room but obviously less so than the market thought yesterday.


Some important data out Thursday includes Canadian GDP growth for April, and the Chicago PMI.

by First National Financial LP 29. June 2011 04:39

February 15, 2011

The only hard data out in North America this morning was in the US. Retail Sales growth for January was softer than expected: +0.3% vs. 0.5% consensus, and there were some downward revisions to the December data as well.


The Empire Manufacturing Index was a touch higher than expected, while the Import Price Index surged: +1.5% MoM (exp. +0.8%) and +5.3% YoY (exp. +4.4%).


The retail numbers exert downward pressure on yields, while the rest of the data works to move yields higher.


Other notable headlines this morning include the accelerating rate of inflation in China (officially 4.9% YoY, with food prices up 10.3% YoY).


The rest of the week will be quite eventful, including the January CPI for both Canada and the US:


-          Canada: Manufacturing Shipments, Leading Indicators (Wed), Wholesale Trade (Thu), CPI (Fri)

-          US: Housing Starts, Building Permits, Industrial Production, Capacity Utilization, FOMC Meeting Minutes (Wed), CPI, Leading Indicators, Philadelphia Fed, Initial and Continuing Jobless Claims (Thu).


by First National Financial LP 15. February 2011 03:55

January 25, 2011

An early rally in the bond market has faded somewhat. The rally was largely set off by surprising data released overnight that showed the UK economy contracted 0.5% in the 4th quarter of 2010. The market had been expecting growth of +0.5% so the surprise was quite large.


In Canada, the December inflation numbers released this morning were a bit softer than expected. The CPI was flat vs. November, and up 2.4% year over year (in both cases, 0.1% less than expected by the market), while the Core CPI was -0.3% vs. November (-0.1% exp.) and +1.5% YoY (+1.6% exp.).


Finally, further south we saw evidence that the post-‘homebuyer tax credit’ price of residential real estate has continued trending downward since reaching post-crash highs in June. The November S&P/Case-Shiller Home Price Indices showed that home prices have once again fallen about 3% in the five months from June to November.


Key events for the rest of the week are US-only. New Home Sales, Fed Meeting (Wed); Pending Home Sales, Durable Goods Orders, Initial and Continuing Jobless Claims (Thu); Q4 GDP, Consumer Sentiment (Fri).


Also note that this week, the annual global economic conference in Davos, Switzerland is taking place, and there is likely to be lots of rhetoric and ideas for the market to digest.

by First National Financial LP 27. January 2011 10:59

December 21, 2010

There is no US data out this morning, but there is some Tier I Canadian information. Inflation numbers for November were more tame than the market expected: MoM CPI growth was +0.1% (+0.3% exp.), and YoY growth was 2.0% (2.2% exp.). The ‘Core’ CPI numbers similarly fell short of modest expectations. Weaker inflation expectations, all things equal, would help push bond yields lower.

Also, Canadian Retail Sales for October were released at +0.8%, which beat expectations of +0.5%. This sounds reasonably strong but it is noted that MoM Sales growth was negative after stripping out sales at Gasoline Stations [which were up 7.4%]. Also, the September numbers were revised lower.

There is still some material data to come out during the course of this week, including:

US: Existing Home Sales (Wed); Durable Goods Orders, Personal Income / Expenditures, Consumer Sentiment, New Home Sales, Initial and Continuing Jobless Claims (Thu).

Canada: Real GDP – October (Thu)

by First National Financial LP 21. December 2010 04:34