The Toronto stock market fell slightly Thursday, as the Bank of Canada issued a warning over the country’s housing market and high levels of consumer debt.
The S&P/TSX composite index lost 23.49 points to 14,868.64. The Canadian dollar gained 0.21 of a cent to 92.23 cents (U.S.).
The Bank of Canada says in its latest semi-annual review that the housing market is showing signs of a soft landing, but it remains the biggest domestic risk facing Canada.
Although the probability of a sharp housing correction with prices is small, it says the consequences will be large for highly indebted households, some financial institutions and the economy in general.
Portfolio manager Kash Pashootan said traders expect Governor Stephen Poloz to signal that he is no rush to raise interest rates, given the level of consumer debt among Canadians and soaring housing prices. Two measures released Thursday showed no slowdown in home prices.
Statistics Canada reported that its new housing price index rose 0.2 per cent in April, following identical increases in both February and March. The Teranet-National Bank National Composite House Price Index says Canadian home prices were up in May, rising 0.8 per cent over the previous month.
“The sentiment is that the Canadian consumer is heavily indebted,” said Pashootan, vice-president at First Avenue Advisory in Ottawa, a Raymond James Company.
“The Canadian economy is going to continue to be fragile... so there is no immediate pressure for interest rates to rise.”
In the U.S., the Dow Jones industrials dropped 66.07 points to 16,777.81, the Nasdaq fell 22.75 points to 4,309.18, while the S&P 500 dipped 8.91 points to 1,934.98
Oil prices are rising as an Al Qaeda-inspired group captured two key cities in Iraq and vowed to also take over Baghdad. One of those two cities, Mosul, lies in an area that is a major gateway for Iraqi oil.
The July crude contract on the New York Mercantile Exchange up $1.59 to $105.99 (U.S.) a barrel. August bullion was up $12 to $1,273.20 an ounce, while July copper was down two cents to $3.02 a pound.
On the corporate front, Lululemon Athletica Inc. is reporting a lower first-quarter profit of $18.98-million, as the yoga wear company moves to boost its share price and get past its boardroom controversy. Lululemon said Thursday that its board of directors has approved a stock buy-back program up to $450-million of its common shares to create more shareholder value after its shares sunk over the past year. Stock in Lululemon fell nearly 15 per cent, or $6.28, to $38.25 in New York.
Meanwhile, there were more signs of economic improvement in the U.S., as the Commerce Department reported that retail sales rose for a fourth straight month in May, adding to evidence that consumer spending will contribute to stronger economic growth.
Consumer spending rose 0.3 per cent in May, helped by a surge in demand for autos. The result follows a 0.5 per cent climb in April and a 1.5 per cent surge in March, which was the biggest one-month gain in four years.
Also, the U.S. Labor Department says weekly applications for unemployment benefits rose 4,000 to a seasonally adjusted 317,000. The four-week average, a less volatile measure, increased to 315,250. These figures are close to the jobless claims levels before the outbreak of the Great Recession in December 2007.