Ben Bernanke will become the first chairman of the U.S. Federal Reserve to hold a press conference after one of the central bank’s twice-quarterly policy meetings.AFP / Getty Images
Prince William and Kate Middleton will have to share the global spotlight this week with a less dashing figure than themselves, but one who has shown he can throw around money faster than any royal family.
Ben Bernanke will become the first chairman of the U.S. Federal Reserve to hold a press conference after one of the central bank's twice-quarterly policy meetings. It's part of the Fed's efforts to meet lawmakers' demands that it become more transparent, and the event could add a bit of zest to the market.
Mr. Bernanke will use the press conference Wednesday to present the Fed's latest economic projections and to provide additional context for its policy decisions. Historically, the markets have had to wait about three weeks for this information to appear in the published minutes of the meeting, and investors have reacted in the interim to the nuanced language of a statement that accompanies the Fed's interest-rate policy.
"We suspect that the Fed's forecasts, particularly any changes to them, will begin to take on more significance for the markets," notes Paul Ashworth, chief U.S. economist at Capital Economics.
Thursday will bring the initial figures for U.S. first-quarter GDP (they will be revised at least twice in coming weeks). Economists expect that the combination of higher energy prices, lower exports and weaker consumer demand will have slowed growth considerably.
The consensus is for 1.8 per cent expansion, down from 3.1 per cent in the fourth quarter, and well short of the level of growth normally expected in this stage of an economic recovery. (For some context, China's first-quarter growth recently clocked in at about 9 per cent).
On Friday, February figures for Canadian GDP are due for release. Economists expect zero growth after four months of robust expansion, but CIBC World Markets Inc. doesn't expect that the pause will be enough yet to effect its forecast of 4 per cent growth for the entire first quarter.
Canada's earnings reports begin to flow at full speed this week. Among the bigger names, Canadian National Railway Co. posts on Tuesday, Barrick Gold Corp., Cenovus Energy Inc. and Shoppers Drug Mart Corp. report Wednesday, Potash Corp. of Saskatchewan Inc. and Fairfax Financial Holdings Ltd. deliver Thursday and TransCanada Corp. announces on Friday.
The current reporting season could mark a changing pattern between Canadian and U.S. businesses, according to Peter Buchanan, senior economist at CIBC World Markets. "While earnings momentum for the TSX has trailed the S&P 500 in recent quarters, that pattern should be reversed in [the first quarter] as recent resource price hikes and a stronger economy north of the border nurture the bottom line."
Companies in the S&P 500 index are on course to deliver profit growth of 12 per cent for the first quarter. Members of the TSX composite index are likely to boast of a rise of almost 20 per cent year-over-year, led by health care, staples and materials, he writes.
The forward price-to-earnings multiple for the TSX is a bit more than 15 times, compared with 13.7 times for the S&P 500. But Mr. Buchanan says the Toronto market is not materially overvalued in historical terms. The long-term average PE for the TSX is about 14.5, he says, which attaches only a modest premium to today's market, given the low rates of return on competing assets, such as government bonds.
"The current multiple should not be seen as signalling undue risk," he concludes.