Les Whittington Ottawa Bureau found at http://www.thestar.com/article/857993–bank-hikes-interest-rates-but-sees-sluggish-economic-recovery

OTTAWA—The Bank of Canada today raised its trend-setting interest rate for the third consecutive time—to 1 per cent—but signaled this may be the last increase until the central bank sees signs of a durable recovery.

“Any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook,” bank governor Mark Carney wrote in a brief explanation of the decision.

The move means higher interest costs for some mortgage holders and consumer and business borrowers.

The bank said “economic activity in Canada was slightly softer in the second quarter” than it had expected and the economic recovery in Canada will be “slightly more gradual” than expected a few months ago. This largely reflects “a weaker profile for U.S. activity,” Carney said.

The Canadian economy expanded at a robust 5.8 per cent pace (on an annualized basis) in the January-through-March period but slipped to 2 per cent from April to June.

“The global economic recovery is proceeding but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies,” the bank observed.

“In the United States, the recovery in private demand is being held back by high unemployment and recent indicators suggest a more muted recovery in the near term.”

Still, looking ahead in Canada, the bank said “consumption growth is expected to remain solid and business investment to rise strongly” as a result of accommodative borrowing conditions.

In early 2009, Carney took the unusual step of announcing that he would hold the bank’s key overnight rate at 0.25 per cent for a year to help combat the recession. But, with the Canadian economy on the mend, he has been gradually raising the rate in recent months.

However, many analysts expect this to be the last upward move in interest rates by the bank for some time, perhaps until next year, unless business conditions rapidly improve.

In fact, economists were sharply divided over whether the bank, faced with a sputtering recovery in the vital United States market, would hike rates again today or take a breather to assess the economic trends.

But Carney pointed out today that, although monetary policy in Canada has tightened since April, financial conditions remain “exceptionally stimulative.”

“Since the start of this year, the (central) bank’s outlook for economic growth in 2011 has been too rosy,” TD Bank economist Craig Alexander responded.

Based on today’s decision, “the odds favour the Bank of Canada pausing for some time” before raising its key rate again, Alexander said. “TD Economics does not anticipate another tightening before March of next year.”

The next scheduled date for announcing the overnight rate target is Oct.19.

Article found at http://www.winnipegfreepress.com/business/breakingnews/economists-say-interest-rates-will-rise-but-many-also-question-wisdom-of-move-102355064.html

OTTAWA – Interest rates are expected to rise for the third time in as many months on Wednesday.

A consensus of economists believe Bank of Canada governor Mark Carney will overlook recent disappointing economic data and continued U.S. weakness and hike the trendsetting rate a quarter point to one per cent.

But the answer is somewhat different when economists are asked if Carney should move.

The reasoning for hiking rates is that while Canada’s economy has noticeably slowed, there is still plenty of evidence suggesting the country no longer needs emergency rates.

But many economists also question how much further Carney can go in his current tightening phase considering that the U.S. is heading in the opposite direction.

And some believe Carney has already moved too quickly, blaming the sharp slowdown in economic activity during the spring and summer to the anticipation of higher interest rates.

Last week, Statistics Canada reported that the country’s gross domestic product rose two per cent in the second quarter, a far cry from the previous quarter’s 5.8 per cent advance.

The slowdown was most acute in the two areas that are most sensitive to interest rates, home and car sales, notes economist Carl Weinberg of High Frequency Economics.

Great article found at http://www.thestar.com/business/markets/article/856383–tsx-closes-up-amid-encouraging-jobs-data

Stock Markets have been on a steady clime as of late. Hopefully it keeps going!!

The Toronto stock market closed modestly higher Friday with the TSX failing to get much traction from an American jobs report which blew past expectations.

The S&P/TSX composite index closed 33.83 points higher at 12,144.92 as buying sentiment was tempered by a weaker than expected reading on the U.S. non-manufacturing sector and falling gold stocks.

At the same time, investors also took in some major deal making in the precious metals group.

The TSX Venture Exchange rose 34.71 points to 1,565.96.

The Canadian dollar was ahead 1.3 cents at 96.22 cents (U.S.).

The TSX had been up almost 100 points but gains were pared in the wake of a report from the Institute for Supply Management that its service sector index for August came in at 51.5, down from 54.3 July and lower than the 53.2 reading economists had expected.

“Still expanding, mind you, but at the slowest pace since October,” observed BMO Capital Markets senior economist Jennifer Lee.

“It was worrying to see the employment component (of the index) fall below 50 again,” which signals contraction.

The data took some of the shine from the U.S. Labor Department report that the U.S. private sector created 67,000 jobs last month, much higher than the 40,000 or so that analysts expected.

“However, longer term, we think that the jobs market remains challenged,” said Philip Petursson, director of institutional equities at MFC Global Investment Management, who added that the U.S. economy needs to generate at least 200,000 jobs a month.

The U.S. jobless rate edged up 0.1 of a percentage point to 9.6 per cent.

The Canadian jobs report for August comes out next Friday.

Goldcorp Inc. and Andean Resources announced a friendly agreement Friday under which Goldcorp is to acquire Andean for about $3.6 billion. The deal appeared to trump a rival $3.4-billion bid by Eldorado Gold Corp. Andean’s main asset is the Cerro Negro gold project in Argentina, estimated to contain 2.1 million ounces of gold and 20.6 million ounces of silver.

Andean shares soared $2.17 or 45 per cent to $6.98 on very heavy volume of 73.9 million shares, while Goldcorp stock was down $1.69 at $44.49 and Eldorado was off 64 cents at $19.89.

Petursson noted the acquisition is another in a string in which companies have found it more efficient to pick up other miners and not just rely on developing new production.

“The exploration costs are increasing and the actual finds are decreasing so it is much easier for a company like Goldcorp, which wants to increase production, to go out and acquire,” he said.

Overall, the gold sector was the biggest sectoral drag on the TSX as bullion prices fell back following the U.S. jobs data.

The December gold contract faded $2.30 to $1,251.10 (U.S.) an ounce. Barrick Gold lost 52 cents to $47.09.

The base metal sector moved up 0.68 per cent even as early gains in copper prices disappeared with the December copper contract on the Nymex unchanged at $3.50 (U.S.) a pound. Teck Resources climbed 92 cents to $39.70 while Western Coal Corp. rose 12 cents to $4.44.

The energy sector lost much early lift as oil prices switched direction and the October crude contract on the New York Mercantile Exchange closed down 42 cents at $74.60 (U.S.) a barrel. Cenovus Energy shed 32 cents to $29.35 while Talisman Energy gained 24 cents to $17.45.

The financials sector was the strongest group, up 1.34 per cent with investors satisfied that Canada’s five biggest banks earned a combined $4.8 billion in third-quarter profit — nine per cent more than last year — as they cashed in on strong growth in mortgages, consumer and corporate loans and other retail operations.

TD Bank, which handed in earnings Thursday, gained $1.23 to $74.40, and Manulife Financial climbed 37 cents to $13.23 on heavy volume of 10 million shares. Its shares have been hammered since early August when the insurer handed in a $2.4 billion quarterly loss.

Markets in Toronto and New York racked up strong gains this week with the TSX rising 2.23 per cent to a three-and-a-half month high after a run of strong economic data from around the world earlier in the week, particularly manufacturing data out of the U.S. and China.

The Dow Jones industrial average jumped 127.83 points Friday to at 10,447.93 for a gain of 2.89 per cent this week.

The Nasdaq composite index rose 33.74 points to 2,233.75 while the S&P 500 index gained 14.41 points to 1,104.51.

In other corporate news, remarks by Dubai’s police chief suggest a tough line in talks with BlackBerry maker Research In Motion Ltd. Lt.-Gen. Dahi Khalfan Tamim says that worries about spying by the U.S. and Israel spurred plans to sharply limit BlackBerry services in the United Arab Emirates.

The UAE plans to block BlackBerry email, messaging and Web services Oct. 11 unless authorities can gain access to the encrypted data traffic — a warning that echoed similar threats by a number of other countries, including India. Nevertheless, RIM shares edged up a penny to $46.51.

Pacific Rubiales Energy Corp. has struck an agreement to give a further interest in the Buganviles oil and gas block in Colombia to a South American subsidiary of Petrodorado Energy Ltd.

The farm-out agreement allows Petrodorado to earn a larger participating interest in the Visure and Tuqueque prospects by covering all of Pacific Rubiales’ related costs. Pacific Rubiales shares lost 17 cents to $24.40, while Petrodorado shares were up half a cent at 36.5 cents.

Air Transat, the airline operated by Transat A.T. Inc. has reached a tentative 48-month labour contract with its pilots. Transat shares gained 10 cents to $12.60.

Packaged ice company Arctic Glacier Income Fund announced Friday that a subsidiary has reached an agreement with authorities in Michigan to resolve allegations that it violated the state’s antitrust laws. Its units were up 15 cents at $1.80.