Briefing highlights
- How global markets are ending the month
- Canada's economy: Stronger quarter, weak finish
- Scotiabank profit slips in second quarter
- Europe stuck with deflation, high unemployment
- A Mean Girls scene I'd love to see
- Video: Why rudeness at work is contagious
About that old adage
Global markets are set to end the month of May on an up note, despite that old adage.
“Sell in May,” Bank of Nova Scotia said today. “Pffft. Give us another gimmicky rule of thumb. At least this year that is, and at least when currency effects are isolated, which is the proper way of looking at the phenomenon given that the sell advice is usually expressed in local currency terms.”
So depending on what happens by the time the markets close today, Scotiabank’s Derek Holt and Dov Zigler point out that the S&P 500 has by this point climbed 1.6 per cent since the beginning of the year.
Toronto’s benchmark S&P/TSX composite has slipped 3 per cent, but that’s in U.S.-dollar terms. In loonie terms, it’s up 1 per cent, with “weakness in the Canadian dollar explaining the difference,“ they said.
“In euro terms, European bourses were up by between 0.9 per cent (Spain) and 3.3 per cent (London), as only Italy moved lower (-1.9 per cent),“ said Mr. Holt and Mr. Zigler.
“As for Asian exchanges, the only ones to post gains even after [U.S. dollar] conversion were India’s Sensex and Taipei.,“ they added.
“In yen terms, Tokyo was up by about 3 per cent, Seoul was down by 0.5 per cent in won terms, and mainland China was down a touch while the Hang Seng sank by 1.2 per cent in local [Hong Kong dollar] terms.“
A Mean Girls scene I'd love to see ...
“Ewww. Gag, right?”
Stronger start, weak finish
Canada’s economy ended a stronger quarter on a weaker note, according to the latest numbers.
The economy expanded at an annual pace of 2.4 per cent in the first quarter, Statistics Canada said today.
Having said that, a stronger January gave way to a weak February and even weaker March, when the economy contracted by 0.2 per cent.
The hit to the last month came largely from resources.
“On the face of it, the Canadian economy appeared to be off to the races in the first quarter, posting its strongest result in five quarters,” said Toronto-Dominion Bank senior economist Leslie Preston.
“Looking through the details, however, the quarter ran out of steam by March, and the worry is the start-of-year performance may prove a one-trick pony.”
The second quarter as a whole is also expected to show a contraction, hit by the wildfires that have ravaged Fort McMurray and hobbled the oil sands.
A rebound is expected, though, in the second half of the year.
“The underlying fragility of Canada’s economy beneath this see-saw growth pattern will necessitate monetary policy to remain stimulative for quite some time,” Ms. Preston said.
“We don’t expect the Bank of Canada to raise interest rates until 2018 at the earliest, with any further stimulus for the economy to come from fiscal policy.”
Scotiabank profit dips
Bank of Nova Scotia posted a lower second-quarter profit today, citing a restructuring charge and a hit from the embattled oil sector.
The Canadian bank’s profit slipped to $1.6-billion, or $1.23 a share, from $1.8-billion or $1.42 a year earlier. The latest results included a pretax charge of $378-million, which meant profit was otherwise up.
“Partly offsetting our earnings growth were elevated loan loan losses in the energy sector, which are expected to decline beginning next quarter,” chief executive officer Brian Porter said in unveiling the results.
Europe's woes
Europe is stuck in deflation, with unemployment at elevated, though lower, levels.
Annual inflation in the euro zone is expected to be 0.1 per cent this month, up a tick from April’s 0.2 per cent, the Eurostat agency said today.
“Euro zone inflation remains within the doldrums, with today’s 0.1-per-cent reading representing the fourth consecutive negative reading despite continued gains in energy prices,” said IG market analyst Joshua Mahony.
“Despite the [European Central Bank] embarking on a substantial round of easing, the fact that the euro zone remains within deflation is a clear heads up that monetary policy alone cannot fix the problem of stagnant price growth.”
A separate Eurostat report today showed unemployment in the monetary union stuck at an elevated 10.2 per cent. While high, it’s the lowest level since August, 2011, the agency said.
On a stronger note, the jobless level across the wider European Union dipped to 8.7 per cent, the lowest since the harsh days of April, 2009.
More than 21 million people can’t find work in the EU, almost 16.5 million of them in the euro zone.