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Briefing highlights

  • Watch Ontario home prices
  • Catalyst in rival HBC bid
  • U.S. third-quarter growth revised up
  • Chinese industrial profits slump
  • What to watch for today
  • What analysts are saying today
  • Required Reading

Watch Ontario home prices

We should keep a keen eye on rising Ontario home prices as markets rebound from the measures taken to cool them down.

In a broader look at Canada’s housing markets, Re/Max cited the “higher-than-normal gains” in parts of the province, including London, where prices are up 10.7 per cent from a year ago, Windsor at 11 per cent, Ottawa at 11.7 per cent and Niagara at 12.9 per cent.

Looking ahead, again broadly, the real estate firm projected average Canadian prices will rise 3.7 per cent next year.

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But Ontario, which, along with British Columbia, was home to the bubble that sparked tax and other measures in those provinces, and new mortgage-qualification stress tests at the national level, certainly bears watching, based on those Re/Max numbers.

“Southern Ontario is witnessing some incredibly strong price appreciation, with many regions still seeing double-digit gains,” Christopher Alexander, executive vice-president and regional director for Re/Max of Ontario-Atlantic Region, said in a statement.

“Thanks to the region’s resilient economy, staggering population growth and relentless development, the 2020 market looks very optimistic.”

And unaffordable, too, when you’re talking about Toronto, an issue that continues to plague policy makers.

While Toronto prices rose 5.4 per cent this year, Re/Max projected in its report this week that gains will speed up to 6 per cent in 2020.

Certainly at this point, the Re/Max numbers aren’t suggesting anything bubble-like, just worth watching.

Aside from Toronto, here are Re/Max projections for growth in average prices in other areas of the province in 2020:

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  • Windsor, 9 per cent
  • Kitchener-Waterloo and Niagara, 7 per cent
  • Kingston and Ottawa, 6 per cent
  • London, Barrie, Oakville, Mississauga and Brampton, 5 per cent
  • Cornwall, 4 per cent
  • Hamilton-Burlington, 3.8 per cent
  • North Bay and Durham, 3 per cent
  • Sudbury and Thunder Bay, 2 per cent

In a separate study this week, CIBC World Markets deputy chief economist Benjamin Tal said Ontario has now “fully recovered” from the correction, and “we view that market to be in equilibrium.”

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Catalyst in rival HBC bid

The Capital Catalyst Group Inc. is going up against Hudson’s Bay Co. executive chairman Richard Baker in a bid for the iconic Canadian retailer.

The investment company is also going to the Ontario Securities Commission in an aggressive move against the group led by Mr. Baker.

Catalyst is offering $11 a share, compared to Mr. Baker’s $10.30.

“Unlike the insider issuer bid, the Catalyst offer is a bona fide, independently financed all-cash off that can be completed in a timely manner,” it said.

“Catalyst is deeply concerned with the financial terms and structure of the company-sponsored share buyback … outlined in the Oct. 20, 2019, arrangement agreement … between insiders … and the company,” added Catalyst, which holds almost 17.5 per cent of the common stock.

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Ticker

U.S. growth revised up

From Reuters: U.S. economic growth picked up slightly in the third quarter, rather than slowing as initially reported, amid a stronger pace of inventory accumulation and a less steep decline in business investment. Gross domestic product increased at a 2.1-per-cent annualized rate, the Commerce Department said in its second estimate of third-quarter GDP. That was up from the 1.9 per cent pace estimated last month.

Chinese industrial profits slump

From Reuters: Profits at China’s industrial firms declined in annual terms for the third consecutive month in October, tracking sustained drops in producer prices and exports and underscoring slowing momentum in the world’s second-largest economy. Industrial profit fell 9.9 per cent in October, year-on-year, to the equivalent of US$60.74-billion, data released by the National Bureau of Statistics showed, marking the biggest drop since the January-February period and compared with a 5.3 per cent decline in September.

Merkel seeks common approach

From Reuters: German Chancellor Angela Merkel called on European countries to agree to a common approach towards China and the rollout of the next generation 5G mobile network. Some German lawmakers want to exclude China’s Huawei from 5G contracts, following warnings by the United States that this could lead to spying for Beijing. Huawei denies the allegations made by Washington. Merkel prefers security standards to be the yardstick rather than singling out individual firms. “One of the biggest dangers ... is that individual countries in Europe will have their own policies towards China and then mixed signals will be sent out,” she told lawmakers in a budget debate in the Bundestag lower house.

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What to watch for today

Amid a few economic readings today, markets will be watching for the Federal Reserve’s Beige Book of regional conditions this afternoon.

“The Fed’s regional briefing will likely confirm that the economy is expanding at a ‘slight-to-modest’ pace and businesses remain nervous about the trade war” said Bank of Montreal senior economist Sal Guatieri.

“However, the report should indicate still decent consumer spending and improved housing markets,” he added.

“Wage and price pressures likely remained moderate, even if some companies are trying to pass tariff costs to customers. Barring a bleaker economic landscape, the report is unlikely to support a December rate cut.”

What analysts are saying today

The sudden daily obsession with the trade war probably has a lot to do with the fact that there’s very little else to talk about at the moment, which doesn’t bode well for the rest of the year. Of course, that may change if a deal gets over the line but, let’s face it, we’ve been ‘close’ to that for much of the year.

— Craig Erlam, senior market analyst, Oanda

“Enduring optimism the U.S. can reach an interim trade deal with China has helped investors overlook disappointing Chinese economic data. The steepest fall in Chinese industrial profits in eight months suggest China is still feeling the heat from the trade war on top of a more widespread growth slowdown. Inventors can stomach a slowdown in China if they see an endpoint via the phase one trade deal. If the deal doesn’t materialize and the data out of China continues to weaken, then things could go south quickly.” Jasper Lawler, head of research, London Capital Group

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“Yesterday, President Trump claimed the talks are in the ‘final throes,’ hence why traders are bullish. The back and forth of the trade discussions has been at the forefront of traders’ minds recently. Equity markets are posting gains, but the upside moves aren’t massive as dealers are mindful that things still could fall apart. The breakdown in trade talks in June hasn’t been forgotten by traders.” David Madden, analyst, CMC Markets

“Global sentiment isn’t exactly soaring, with developments on the U.S.-China relationship providing little tangible evidence that we are on the cusp of a phase one deal. There is optimism that such a deal can be agreed, yet the length of time taken, and lack of progress tempers some of the bullishness evident throughout global markets. The impact on this ongoing breakdown in trade was evident from overnight data out of China, showing a 9.9-per-cent decline in factory profits.” Joshua Mahony, senior market analyst, IG

“A large Tory majority is the most bullish scenario for [the British pound], a Labour majority the most negative, albeit downside for [the pound] on Labour’s domestic policies needs to be set against the likelihood of a softer Brexit and potentially no Brexit on a second referendum. A hung parliament is modestly positive on no Brexit hopes. Our central scenario is that the current withdrawal agreement (WA) will be approved by parliament and the U.K. will belatedly exit the EU in January 2020. The forecast assumes a further relief rally in [the pound], albeit a bounded one.” Paul Meggyesi, head of foreign exchange research, JPMorgan Chase

Required Reading

Freeland to negotiate USMCA addendum

Deputy Prime Minister Chrystia Freeland is expected to be in Washington to negotiate an addendum to the U.S.-Mexico-Canada Agreement that will help the Trump administration get Congress to ratify the trade deal, Mexican government sources say. Adrian Morrow and Robert Fife report.

No financial penalties

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A small B.C. company involved in a scandal that saw the personal information of millions of voters illicitly collected for the purpose of shaping political events around the world will not face financial penalties in Canada for its misuse of data, Justine Hunter writes.

Little-known company a contender

A little-known private company has emerged as a contender to acquire $3.7-billion in crude-by-rail contracts that the Alberta government aims to transfer to the private sector. Jeffrey Jones and Emma Graney report.

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