Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Briefing highlights

  • Housing ‘health check’
  • Stocks, Canadian dollar, oil at a glance
  • Canada’s trade deficit narrows
  • Housing, stocks: What analysts are saying today
  • Required Reading
  • RBC scores part of Aramco IPO

Housing ‘health check’

Affordability issues are dogging Canadian housing markets but the “risk profile” is getting better.

Indeed, here’s how Royal Bank of Canada senior economist Robert Hogue summed things up in his latest “health check” on residential real estate:

“Generally stronger market activity reduced already low odds of a steep and widespread housing downturn over the next 12 months in Canada. There’s a greater likelihood that the market will heat up.”

Story continues below advertisement

This comes, as The Globe and Mail’s Rachelle Younglai writes, home sales in Vancouver and Toronto scored hefty sales increases in October.

As always in Canada, there can be widespread differences among the regions. Here’s how the four biggest markets look to Mr. Hogue:

Within historical norms or not posing any immediate threat

Modestly outside historical norms and posing moderately higher risk than usual

Significantly outside historical norms and posing much higher risk than usual

Canada Vancouver Calgary Toronto Montreal
Affordability
Resale market balance
Rental market balance
Interest rates
Labour market
Demographics
New home inventory - singles
New home inventory - multiples
New home under construction - singles
New home under construction - multiples

“Most local markets are seeing positive developments: Demand-supply conditions are improving in previously soft markets, including Vancouver, Calgary and Toronto,” Mr. Hogue said in his report.

“Downward price pressure is now easing (Vancouver, Calgary) or has recently reversed (Toronto). Stronger markets like Montreal and Ottawa maintain solid momentum.”

“Weak spots” on the Prairies are firming up, though that’s happening gradually and “still tenuously.” And the uncertainty surrounding the oil industry is hurting confidence among buyers, Mr. Hogue said.

Notable is that Mr. Hogue doesn’t see all the condos going up as an issue of overbuilding.

“Elevated levels of apartment construction in Vancouver, Toronto and Montreal raise some potential longer-term absorption issues,” he sad.

Story continues below advertisement

“There’s little risk near term, however, as unsold inventories are currently low.”

Notable, too, of course, is the focus on affordability, given that the Vancouver and Toronto markets are out of reach for everyday buyers.

“The high cost of homeownership in Vancouver, Toronto and, to a (much) lesser extent, Montreal are a top vulnerability for Canada’s major markets,” Mr. Hogue said.

Read more

Markets at a glance

If you are of a risk-bearish disposition, you may need honey in your coffee this morning.

— Kit Juckes, global fixed income strategist, Société Générale
Read more

Trade deficit narrows

Canada’s merchandise trade deficit narrowed in September, easing to $978-million from August’s $1.2-billion.

Imports declined 1.7 per cent, eclipsing the 1.3-per-cent drop in exports, Statistics Canada said.

If you look at just volumes, exports tumbled 2.1 per cent, the federal agency said, while imports declined 1.6 per cent.

Story continues below advertisement

Lower gold and crude oil were among the culprits in the drop in exports.

But “despite the monthly decrease, total exports since the beginning of 2019 were up 1.9 per cent compared with the same period in 2018,” Statistics Canada said.

“As suspected, two-way trade was down, although the declines were fairly broad-based and not just driven by the auto sector as we had anticipated,” said CIBC World Markets senior economist Andrew Grantham.

“The soft end to the quarter meant that export volumes were down slightly in Q3 as a whole, following a healthy second quarter,” he added.

“Over all, while this looks like a soft report, the declines in two-way trade were anticipated and not any worse than we had feared.”

The U.S. trade deficit, in turn, narrowed to US$52.5-billion.

Story continues below advertisement

Read more

Ticker

Interac acquires 2Keys

Interac Corp. has acquired Ottawa-based 2Keys, a specialist in digital identity, to help the payments processor build new technology for securing and verifying who is involved in financial transactions, James Bradshaw reports.

Barkin cites conflicting signals

From Reuters: Conflicting signals make it difficult to get a handle on the true health of the U.S. economy and reducing uncertainty for businesses would provide a shot in the arm to growth, Richmond Fed Reserve Bank President Thomas Barkin said on Tuesday.

Airline industry to fight back

From Reuters: The aviation industry is to launch a campaign it hopes will counter a ‘flight shaming’ movement that has weakened demand for air travel in Europe where some travellers are increasingly concerned about their environmental impact.

Story continues below advertisement

China to battle financial risks

From Reuters: China aims to improve the financial system and capital markets to fend off financial risks, the ruling Communist Party said, following a meeting of its top leadership. China will “strengthen the construction of the basic system of the capital market, improve the modern financial system with high adaptability, competitiveness and inclusiveness, and effectively prevent and resolve financial risks,” Xinhua news agency quoted a decision endorsed by the leadership last week.

OPEC’s Barkindo on oil market

From Reuters: OPEC Secretary-General Mohammad Barkindo said the oil market outlook for 2020 may have upside potential, appearing to downplay any need for deeper cuts to production. The Organization of the Petroleum Exporting Countries and its allies led by Russia meet in December to review output policy. The so-called OPEC+ alliance has since January implemented a deal to cut oil output by 1.2 million barrels per day to support the market. The pact runs to March 2020. “Based on the preliminary numbers, 2020 looks like it will have upside potential,” Mr. Barkindo told a briefing.

Also ...

What analysts are saying today

“Bottom line here is that the [housing] market continues to tighten up in Toronto. The sales-to-new listings jumped again as sales are up 14 per cent from a year ago, but new listings continue to fall. The market balance looks as tight as it was during 2014 and 2015, when the market was very firm, but before it boiled over and prompted policy action. This is probably just as we were expecting given still-strong demographic demand and the plunge in longer-term mortgage rates over the past year. Prices are rising across all segments of the market.” Robert Kavcic, senior economist, Bank of Montreal

Story continues below advertisement

Markets remain confident we won’t see a repeat of what happened in May when [U.S.-China trade] talks completely fell apart. The Trump administration is in election mode and they will likely take a phase-one deal in any form. Any major demands on structural issues could be saved for the next phase of talks. All the rhetoric continues to point that a deal will get done soon and the bullish outlook for stocks remains firmly in place.” Edward Moya, senior market analyst, Oanda

“Yesterday’s record high for the Dow comes off the back of a similar move for the S&P 500 last week. While many will point towards the reintroduction of monetary easing from the Fed as having provided a key boost to stocks, we are also seeing gains from a positive earnings season that has largely been driven by low estimates despite weakening underlying numbers. European indices have seen a similar trend of outperformance despite initial signals pointing towards an ‘earnings recession’ of two consecutive quarters of earnings declines.” Joshua Mahony, senior market analyst, IG

“The other overnight news is that the [Reserve Bank of Australia] is on hold for the foreseeable future, and while there is still an easing bias in place, the data will have to deteriorate to justify the next cut. I’d still rather be long [the Canadian dollar] than either [the Australian or New Zealand dollars], but [the Australian versus the U.S. dollar] is still 20 per cent below its [post-great financial crisis] average, and it’s only there because of the Chinese economy’s woes and the yuan’s weakness. Take those away temporarily and [the Australian versus the U.S. dollar] can rally further.” Kit Juckes, global fixed income strategist, Société Générale

“The luxury sector has seen its fair share of winners and losers over the course of the past few weeks, with M&A a key component in this particular sector. The recent bid by LVMH for Tiffany is a case in point, as the big brands look to diversify their product mix. This morning’s profits warning by Danish jewellery maker Pandora is the latest in a long line of warnings this past year as sales remain sluggish, sending the shares sharply lower. When new CEO Alexander Lacik took over in April he embarked on a turnaround plan, which included cutting costs and simplifying its product range, however it looks like his plan to reshape the business may well take longer than expected as management downgraded expectations for next year.” Michael Hewson, chief analyst, CMC Markets

Required Reading

Crude discount widens

The discount on Canadian crude widened to its highest level in nearly a year after a major oil spill forced the shutdown of the Keystone pipeline, a key conduit for energy exports to U.S. markets. Tim Shufelt reports.

RBC part of Aramco IPO

Royal Bank of Canada has won a role in Saudi Aramco’s massive initial public offering, providing another signal that oil is largely unaffected by the breakdown in diplomatic relations between Canada and Saudi Arabia. Jeffrey Jones and Tim Kiladze report.

Behind the Aramco IPO

Saudi Aramco’s share sale is finally in motion, but, columnist Eric Reguly writes, its long-term potential remains an open question.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies