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Briefing highlights

  • Forecaster sees S&P 500 slumping
  • Stocks, loonie, oil at a glance
  • Toronto home sales, prices climb
  • Bombardier in talks to sell CRJ unit
  • Italy in breach of fiscal rules: EC
  • Required Reading

View of the S&P 500

Here’s how Capital Economics sees the S&P 500 playing out: “U.S. stock market still an accident waiting to happen.”

That’s the title of a recent report from John Higgins, the group’s chief markets economist, who projects the S&P 500 will tumble 17 per cent from this point before the end of 2019.

“This might appear to be incompatible with our end-2019 forecast of 2.25 per cent for the 10-year Treasury yield, which is slightly above its level now,” Mr. Higgins said.

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“But it is common for the S&P 500 to continue to rise while Treasuries rally – as they have done recently – in response to expectations of looser Fed policy,” he added, referring to market speculation that the U.S. Federal Reserve could cut its key interest rate.

“The S&P 500 typically falters when that expectation is vindicated by economic weakness, which is what we project.”

As Mr. Higgins put it, the bond market is “running ahead” of stocks, and the latter will catch up at some point.

Mr. Higgins said Capital Economics isn’t “explicitly forecasting” a recession, but it does project a marked slowdown.

“But our end-2019 forecast of 2,300 for the S&P 500 would only leave it 22 per cent or so below its recent peak,” he said.

“This would be a much smaller drop than the declines seen around the two recessions of the 2000s.”

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Markets at a glance

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Toronto home sales, prices rise

Toronto home prices climbed last month as sales volumes roared ahead by almost 19 per cent, but the gain came off an extremely low base of activity last spring, The Globe and Mail’s Janet McFarland reports.

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The Toronto Real Estate Board reported 9,989 homes were sold in the Greater Toronto Area in May, up 18.9 per cent compared with the same month last year.

TREB said average home prices climbed to $838,540 in May, up 3.6 per cent compared with a year ago, as buyer activity grew while the number of homes available did not keep pace.

Read more

Bombardier in talks to sell CRJ unit

Bombardier Inc. is in talks with Japan’s Mitsubishi Heavy Industries Ltd. on a sale or other options for its Canadair Regional Jet program as the Montreal plane maker looks to a future exit from commercial aviation, The Globe and Mail’s Nicolas Van Praet reports.

Canada’s biggest transportation manufacturer confirmed it is in discussions with Mitsubishi on its CRJ plane program, but declined to comment on the nature of the talks. Mitsubishi also confirmed that talks were under way.

Bombardier’s management still needs to complete additional review and analysis before sending the matter to the board for approval, and Mitsubishi also has to complete its due diligence review and approval process, Bombardier said. An agreement was not certain, the company said.

Read more

Ticker

U.S. sees small rise in private sector jobs

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From Reuters: U.S. private employers added 27,000 jobs in May, well below economists’ expectations and the smallest monthly gain in more than nine years, a report by payrolls processor ADP showed.

Italy breaches fiscal rules: EC

From Reuters: The European Commission concluded Italy is in breach of EU fiscal rules because of its growing debt, a situation that justifies the launch of a disciplinary procedure.

Sephora holds ‘inclusion workshops’

From The Associated Press: Sephora was closing its U.S. stores for an hour today to host “inclusion workshops” for its 16,000 employees, just over a month after R&B star SZA said she had security called on her while shopping at a store in California.

Required Reading

Trans Mountain bid planned

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A group of Alberta First Nations and Métis communities is planning to bid for a stake in the Trans Mountain oil pipeline, adding to a list of Indigenous would-be backers of contentious energy projects, mergers and acquisitions reporter Jeffrey Jones writes.

Low-brow

The CBC, argues columnist Konrad Yakabuski, has no business chasing ad dollars with low-brow game shows.

Travel tips

David Israelson offers smart travel tips to save you money.

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