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Uncertainty weighs on loonie The "uncertainty" surrounding Canada's federal election, and the surge of the New Democratic Party in public opinion polls, is weighing on the Canadian dollar , keeping the loonie in check as other major currencies gain against the greenback.
The impact is muted, but it illustrates market fears of an NDP-led coalition, Scotia Capital currency strategist Camilla Sutton said today.
She noted that most of the drivers of the strong loonie, such as oil prices and speculation over interest rate hikes, haven't been factors of late, and the only thing really supporting Canada's currency has been the broad-based weakness in the U.S. greenback.
Still, Ms. Sutton noted that the loonie is little changed from Friday's close while other major currencies have rallied.
At least part of this, she said, can be attributed to this week's polls, which indicate that Jack Layton's NDP is on a tear.
"The most recent polls showing the NDP climbing and the potential of an NDP-led coalition is somewhat concerning, but the impact is limited," Ms. Sutton said.
"Now, the flip side could be that the chance of a Conservative majority would be positive."
To put this in perspective, the loonie is still about 5 cents over parity, so it's not like the Tories can warn of the threat of socialist-led hordes and the impact in financial markets.
The Canadian dollar has been strong, and is expected to be even stronger yet, buoyed by the country's economic and fiscal outlook, strong commodity prices and the soft greenback.
David Watt, senior currency strategist at RBC Dominion Securities, said the polls are beginning to become an issue, but, at this point, the impact on the dollar is probably more related to volatility, rather than the level of the loonie. And for now, it's not an issue that would change the trend.
"I'd say there are more questions from the global community," he said, adding that the turn in the opinion polls raises questions about the currency that haven't yet been seen in the election campaign.
West drives consumer confidence Consumer confidence is edging higher in Canada, buoyed by the happier folks in the West, but is still well below where it stood before the recession, the Conference Board of Canada says.
The group's consumer confidence index rose 4 points this month, with Quebec alone among the five regions tracked as showing a "marginal" impact. British Columbia holds the top spot, while Ontario is at the lowest level.
"Attitudes toward current finances remain stubbornly weak," the agency said in a statement.
"Despite evidence that the recovery in Canada is well under way, just 17.5 per cent of respondents said their finances had improved over the past six months, a decline of 0.3 percentage points from March. However, there was a 0.8 percentage-point drop in the number of respondents who said that their finances had worsened over the same period."
House prices rise Canadian house prices rose again in February, up by 0.1 per cent from January, and now sit about 3.8 per cent above the reading of a year earlier, according to the Teranet-National Bank house price index.
For months now, the pace of annual increases has trended down, though the monthly reading still marks the third gain in a row.
Prices for resale homes dipped in Toronto and Calgary, and climbed in Vancouver, Ottawa and Montreal.
"In March, market conditions were balanced at the national level," said National Bank's Marc Pinsonneault.
"True, they were rather tight in Vancouver and Toronto, but in these areas where houses are the most expensive, a front-loading of activity might have occurred given the announcement in January of a reduction in the maximum amortization period for insured mortgages from 35 to 30 years."
Added economist Diana Petramala of Toronto-Dominion Bank: "Going forward, the combination of rising interest rates, new mortgage insurance rules, and over-indebted households will likely put a damper on housing demand and home price growth through the second half of this year. Overall, as the economic backdrop begins to normalize, we expect the housing market to remain in a balanced position with more muted home price increases in the coming years."
Barrick shines Barrick Gold Corp. had a $1-billion (U.S.) first quarter.
The gold giant said today its first-quarter profit climbed 22 per cent to $1-billion, or $1 a share, reflecting better prices for both gold and copper .
"First-quarter operating results exceeded our expectations and combined with strong metal prices and good cost control, resulted in significant growth in earnings and operating cash flow," said chief executive officer Aaron Regent.
Barrick added that its exploration budget has been boosted by more than 50 per cent this year, to up to $340-million, and cited "early indications of positive results in North and South America."
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Nexen profit climbs Nexen Inc. profit climbed in the first quarter to $202-million or 38 cents a share, from $141-million or 27 cents a year earlier. Revenue rose to $1.63-billion from $1.5-billion.
Nexen also noted in a statement that its board has approved development of its Golden Eagle project in the North Sea, and that it has entered Poland by taking a stake in Marathon Oil Corp. shale holdings, The Globe and Mail's Carrie Tait reports today.
"Nexen has numerous opportunities available with several projects in development, others to appraise and a large resource base that is expected to sustain growth well into the future," the company added. "This growth strategy includes plans to add approximately 70,000 barrels of oil equivalent per day of new production over the next 18 to 24 months."
Chief executive officer Marvin Romanow said Golden Eagle is the biggest discovery in the North Sea since Buzzard, and Nexen's share of the $3.3-billion (U.S.) cost is $1.2-billion.
"While I believe the government's decision to increase taxes will discourage new investment, our near term plans for the U.K. North Sea remain robust due to the size and quality of our discoveries," Mr. Romanow said, referring to tax plans by the British that have angered the industry.
"We also have a competitive advantage because of the extensive infrastructure and resources that we have in the region. We have successfully developed other large projects in the North Sea and this experience gives us confidence the project can be completed on schedule and on budget."
Cenovus profit slips Cenovus Energy Inc. today posted a slump in first-quarter profit to $47-million or 6 cents a share from $525-million or 70 cents a year earlier, hit by hedging losses of more than $200-million, among other factors such as lower natural gas prices.
Revenue, though, climbed to $3.5-billion from $3.2-billion.
"We've posted another strong quarter with production exceeding our expectations and operating expenses
coming in better than anticipated," said chief executive officer Brian Ferguson.
"Cash flow is also doing better than we expected so far this year. We're on track with our capital spending plan, including the investment in our expansion project at the Wood River Refinery, which is expected to be completed later this year."
UBS keen on CN UBS Securities Canada has boosted its 12-month price target on shares of Canadian National Railway Co. after the company's earnings report late yesterday.
As Globe and Mail transportation writer Brent Jang reports, Canada's biggest railway raised its outlook for adjusted earnings per share this year, forecasting "double-digit diluted EPS growth of up to 15 per cent."
UBS analyst Tasneem Azim raised her target to $81.50 from $80, and maintained her "buy" rating.
"Despite a challenging operating environment, CN was able to deliver 12-per-cent year-over-year EPS growth and a $0.02 beat relative to consensus in [the first quarter]," she said.
What to expect from the Fed Federal Reserve chief Ben Bernanke marks a new chapter in the evolution of the central bank this afternoon by holding his first post-decision news conference.
The rate-setting panel, the Federal Open Market Committee, releases its decision at 12:30 p.m. ET, followed by Mr. Bernanke's meeting with reporters at 2:15 p.m.
Here's what to expect, according to three observers:
"In terms of the contents of the statement to be released at 12:30, the characterization of the economy is expected to be upgraded slightly from the comment last meeting that the 'economic recovery is on firmer footing' possibly indicating more broad-based strength, reflecting the recent improvement in labour market conditions. However, an upgrade to the outlook is not expected to be significant enough to warrant any material change in policy ... As well, we are assuming that the planned $600-billion in asset purchases through the end of the second quarter of 2011 will be confirmed. Attention will be placed on any suggestion that maturing assets will be allowed to roll off the Fed's balance sheet over the second half of this year which is expected to be one of the initial steps in an eventual tightening monetary conditions." George Davis, Elsa Lignos, Paul Borean, RBC Dominion Securities.
"One thing to also expect is for Bernanke to defend the Fed against calls it has debased the [U.S. dollar], and rightfully so. On this count, it is vital to separate the implications of conventional monetary policy from unconventional monetary policy in the U.S. versus elsewhere. Conventional monetary policy - mostly measured by overnight rates - has indeed been one of the factors inducing [U.S. dollar] weakness as short-term hot money spreads have favoured other crosses like [the Canadian dollar] and the euro. With US growth and the Fed's dual mandate both remaining under pressure." Karen Cordes Woods, Derek Holt, Scotia Capital
"While Bernanke will likely play it super cautious for fear of rattling markets, investors will assess how comfortable (or nervous) he is about either the economic outlook (given ongoing and new headwinds) or the inflation outlook (given rising commodity prices). Importantly, the chairman will reveal the Fed's revised economic outlook, which will likely show an upward revision to inflation, compared with January's projection, and a near-term downward revision to growth. However, the Fed's medium-term outlook - which carries more weight in its policy deliberations - probably hasn't changed meaningfully." Sal Guatieri, BMO Nesbitt Burns
In Economy Lab today
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