Financial Update (Tuesday, March 24th)
Financial UpdateStock markets jump on Suncor-PetroCan merger, U.S. bank-aid plan
Dollar hits 6-week high
· TSX +452.16 to 8,958.51(Reuters) New life was breathed into the 3 week March rally on stock markets by a all-stock C$18.43 billion merger of Canadian oil companies Suncor Energy and Petro-Canada and another effort to revive American banks, leaving the TSX just 29 points below where it started 2009
· DOW +497.48 The U.S. Treasury Department rolled out detailed plans to persuade private investors to help it take up as much as $1 trillion in bad assets now choking bank balance sheets. The news lifted optimism on global equity markets
· Dollar +1.12c to 81.80USD as risk appetite sharpened on news of a U.S. plan to help rid banks of toxic assets and the price of oil climbed.
· Oil +$1.73 to $53.80US per barrel.
· Gold -$3.70 to $952.50USD per ounce
· Canadian 5 yr bond yields +.04bps to 1.76 Four weeks ago it was at 2.00
· http://www.financialpost.com/markets/market_data/money-yields-can_us.html
Good News!
TORONTO (Reuters) - Consumer confidence picked up in March as more Canadians said now was a good time to make a major purchase, while the majority saw their financial situations unchanged over the coming six months, the Conference Board of Canada said on Monday. The board’s Index of Consumer Confidence rose to 71.5 in March, up 2.7 points from February.
There was also a bit of good news from the American housing sector. The National Association of Realtors said sales of existing homes grew 5.1% in February compared with January. It was the largest sales jump since July 2003, against expectations of a decline.
Upbeat in a downturn
Bert Hill, The Ottawa Citizen
Builders are offering price incentives to sweeten the pot for jittery buyers, but it seems to be a tough sell in these uncertain days
Before New Year’s, a banner outside one of Holitzner’s model townhomes in Kanata advertised a $10,000 signing bonus. But a layer of fresh snow showed there had been no visitors, though a year earlier many took advantage of the Christmas lull to visit model homes and buy.
“It’s going to take time for people to come back into the market,” says Brian Card, president of CRG Consulting, a market research company that tracks new house sales.
“Many have seen 25 per cent or 35 per cent of their wealth disappear. I’ve never seen a market turn so quickly as it did in October and November,” says the veteran trends tracker.
Some confident souls are still thinking about buying, regardless of the global economic mess and what the stock market collapse is doing to their savings.
A combination of the strong economic fundamentals of the national capital region and a stimulus in a new federal budget this month could help, predicts Card.
Builders are also responding with price and buying incentives. There are bargains, but be prepared to act quickly because there is not a huge supply of empty houses ready for the taking.
On the surface, Ottawa has little to worry about. Job growth and household incomes are healthy. Even with a severely depressed technology sector, unemployment of 4.7 per cent is near record lows.
The missing ingredient is consumer confidence.
With no signs of the bursting house price bubbles in Toronto, Vancouver and Calgary, prices in Ottawa will likely flatten rather than plunge.
But if efforts by central bankers to prevent a deep recession fail, all bets could be off and the sudden slowdown in new house buying of the last few months could stretch into the future.
It will likely take several more months at least to start talking about recovery.
“The only certain thing is more uncertainty,” says Robert Merkley, president of Merkley Supply and a vice-chairman of the Greater Ottawa Home Builders’ Association.
He should know. He led the organization during the worst days of the mid-90s when major federal government layoffs put the industry into a deep freeze. There were only 1,355 new home sales in 1995, down 52 per cent from a year earlier.
Today developments are busy as crews work to build homes that already have buyers. Even if another house isn’t started after July, the Ottawa new house industry will do much better than it did in 1995.
Still, the downturn was breath-taking.
Ottawa new house sales plunged 65.9 per cent in November to 156. It was the worst sales month in a decade — and it capped four months of rapid decline.
The market started to slide in July, then picked up momentum through the fall with declines of 37 per cent in September and 55 per cent in October.
Total sales of 4,177 units through the first 11 months of the year were 23 per cent below the same period a year earlier. The industry had been expecting a slowdown after two years of very strong growth. But when it finally came, it was sharper and faster than anyone anticipated.
