Briefing highlights
- Bull market 9 years old today
- Markets at a glance
- Bombardier buoyed by U.K. financing
- Canada creates 15,000 jobs last month
- Unemployment now down to 5.8 per cent
- U.S. creates 313,000 jobs
The big question on everyone's mind as the bull market turns nine years old today is this: How long can it run?
It still has at least a while to go, some analysts say, though uncertainties loom, notably in Canada, where the outcome of the North American free-trade talks could ripple through stock and currency markets.
For Michael Hewson, it's an eyebrow-raising moment.
"It's a very strange world, indeed, when the long-anticipated confirmation of a 25-per-cent tariff on steel and 10 per cent on aluminium prompts stock markets to close higher, but that is precisely what transpired [Thursday] when U.S. President Trump finally signed the order, confirming what we knew was probably inevitable with the departure of Gary Cohn earlier this week," Mr. Hewson said today, referring to Mr. Trump's key trade adviser.
"There were a number of caveats, and this is probably where markets are taking their cues, with Mexico and Canada exempted so that progress could be made on NAFTA," he added.
"Furthermore, the tariffs will only come into effect in 15 days' time, which does allow time for further exemptions for countries who have a close security relationship with the U.S. This would suggest some scope for further dilution, which may explain why markets are reacting in the fairly calm manner that they are."
Here's how markets fared today.
And the Canadian dollar popped above 78-cent mark.
Stocks are, of course, gaining some support from Mr. Trump's decision to meet North Korean leader Kim Jong-Un, Mr. Hewson said, while on the tariff side, "rather than shock and awe, the President appears to be playing a slightly longer game in the hope that we'll get to an outcome that prevents a final denouement."
The U.S. jobs report also helped things along.
Throughout the turmoil since early February, Brian Belski, chief investment strategist at BMO Capital Markets has held to his outlook, a target of 2,950 for the S&P 500 and of 17,600 for the S&P/TSX Composite Index.
JPMorgan Chase, for one, recommends investors stay overweight in equities.
"Imminent concerns about inflation, rates, trade wars, and a growth downshift are overblown, in our view," its analysts said in a report Thursday.
"Although we recognize long-term risks stemming from market illiquidity and volatility, we believe that the equity [overweight] should be underpinned near term by strong corporate and macro fundamentals, stabilizations of long-dated [U.S. treasuries] yields, and increased inflows into equities," they added.
"Positioning and valuation also look more attractive following the equities technical selloff in early February."
David Rosenberg isn't so enarmored, though he noted that you'd have just under $US500,000 today with a US$100,000 investment at the market low nine years ago.
"As we celebrate year #9, what we actually see isn't so special," said the chief economist at Gluskin Sheff + Associates.
"The S&P 500 rose at a 17-per-cent annual rate, which is spot on the average of prior bull markets. But what is special is that this 17-per-cent annualized pace occurred with real GDP growth coming in at a mere 2.1-per-cent rate of growth and nominal at 3.6 per cent."
And here are two key points, based on four metrics that, collectively, stand in the 92nd percentile:
1. "The big issue that was not resolved during the corrective phase in late January and early February is excessive valuation."
2. "The U.S. stock market has only been this expensive 8 per cent of the time in the past."
As for NAFTA, BMO's Mr. Belski believes, like other observers, that there will be a deal in the end.
"We believe common sense will ultimately revail and NAFTA will be renegotiated, with the result generating a relatively minor impact on Canadian equities when all is said and done," Mr. Belski said.
"Granted, recent volatility surrounding steel tariffs is hijacking the lead story and clearly affecting investor emotions," he added.
"However, despite this volatility, we believe Canadian relative legislative direction, not NAFTA and trade war concerns, has been the primary driver of Canada's recent underperformance."
His reference to legislative direction referred to carbon pricing, infrastructure spending, housing and mortgage rules and the difference in tax rates between Canada and the U.S.
Read more
- Adrian Morrow, Greg Keenan, Niall McGee: Pending NAFTA result, Trump exempts Canada and Mexico from tariffs
- A ‘softer Trump’ buoys the Canadian dollar (but that mercy means holding Ottawa hostage)
- Ian McGugan: Trump’s tariff agenda does not make economic sense
- Lawrence Martin: Canada gets relief on tariffs – but Trump’s olive branch comes with thorns
Bombardier buoyed by financing
The British government is providing financing to help Bombardier Inc. sell C Series aircraft to a key Asian airline, just weeks after a U.S. trade agency rejected allegations the Canadian company was receiving unfair state subsidies, The Globe and Mail's Paul Waldie reports.
UK Export Finance, a government agency that assists British exporters, is providing financing to Korean Air Lines Co. Ltd. to support the sale of two CS300 aircraft. Bombardier signed a deal in 2011 with Korean Air for the purchase of ten CS300s with an option for another 10 and purchase rights for 10 more. One plane was delivered last December and another one is expected to be in service this year.
Montreal-based Bombardier is a significant employer in Northern Ireland with about 4,000 workers at plants in Belfast, including a major operation that makes wings for the C Series.
Read more
Jobless rate dips
Canada created 15,000 jobs in February, but it was today's U.S. employment report that was the real eye-popper.
At home, Statistics Canada said today, job gains were widespread across industries. Having said that, employment rose in New Brunswick and Nova Scotia, fell in Saskatchewan and was relatively flat elsewhere.
Not only that, break it down and you see a loss of more than 39,000 jobs and a rise of almost 55,000 part-timers.
Employment is now up by 1.5 per cent, or 283,000 positions, from a year ago, and all because of full-time jobs.
The unemployment rate edged down to 5.8 per cent.
In the United States, the economy churned out 313,000 jobs, far more than expected, with unemployment holding at 4.1 per cent.
Read more
- Canadian economy adds 15,400 jobs in February
- U.S. adds 313,000 jobs in February, but wage gains cool