Top of the Morning

Here’s a story that will shock Canadians (and, well, everyone): former Federal Reserve chairman Ben Bernanke is having trouble refinancing his mortgage. From Bloomberg:

The former Federal Reserve chairman, speaking at a conference in Chicago yesterday, told moderator Mark Zandi of Moody’s Analytics Inc.—“just between the two of us”—that “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”

When the audience laughed, Bernanke said, “I’m not making that up.”

“I think it’s entirely possible” that lenders “may have gone a little bit too far on mortgage credit conditions,” he said.

On the Homefront

TSX 60 futures are moving to the upside ahead of the open after the composite index gave back ground on Thursday.

 

The loonie is sinking this morning, trading around 0.894 against the greenback.

 

The yield on the five-year Government of Canada bond is holding steady around 1.59 per cent.

 

Trade data on deck. At 8:30 a.m. (EDT), Statistics Canada will release August’s trade balance. Economists are looking for a surplus of about $1.5 billion, which would be the fourth monthly trade surplus in a row. In July, the nation recorded its largest trade surplus since October 2008 despite a notable drop-off in energy exports. With the decline in energy prices, this reading might see shipments of crude oil (real exports) rebound while the nominal dollar figure remains underwhelming. Going forward, a firming U.S. economy and, to a lesser extent, a softer loonie, are expected to provide support for Canadian exports. From a monetary policy standpoint, traders should keep a close eye on the performance of the nation’s non-commodity exports, as Poloz & Co. have stressed the need for a broad-based export recovery.

UPDATE: Canada booked an unexpected trade deficit of $610 million in August.

 

Iamgold sells non-core mine. Iamgold (IMG) is set to sell its Niobec mine and related rare earth element (REE) deposit in Quebec for $500 million, an additional $30 million when the REE deposit comes online, and a two per cent gross royalty on REE production. In the press release, Iamgold president and CEO Steve Letwin noted that this sale lets the company live up to its name. “This sale unlocks the value of Niobec for our shareholders, positions IAMGOLD as a pure gold play and significantly improves our liquidity, which provides us with the opportunity to further improve the grade and cost structure of our portfolio of gold assets,” he said. Gold miners have come under pressure as the price of the shiny metal has drifted lower over the summer, giving back nearly all of its year-to-date gains. Shares of this miner, however, are moving higher in the pre-market trade.

 

Smaller deficits as far as the eye can see. On Thursday, Prime Minister Stephen Harper announced that the federal government deficit for fiscal year 2013-14, the 12-month period ending March, 31, 2014, would be “significantly lower” than previously indicated. At an event in Brampton, Ont., Harper said that the fiscal 2013 budget would come in at around $5.2 billion, less than one-third of the estimated provided in the latest budget of $16.6 billion. For fiscal year 2014, the cumulative federal budget deficit is just $800 million as of July, less than 80 per cent of what it was running at in the previous fiscal year. However, don’t expect an early return to black ink in Ottawa: the Prime Minister said the federal government would still run a small deficit in the current fiscal year before returning to a surplus position in fiscal year 2015-16. That isn’t the last major announcement Harper will make this week, as he is set to deliver a statement in the House of Commons today that provides an overview of his plans to use Canadian military forces in the fight against Islamic State.

 

Billionaire value investor not a fan of Canadian stocks. At a CFA Society dinner in Toronto this week, Charles Brandes of Brandes Investment Partners explained that relatively stretched price-to-earnings ratios and elevated levels of household debt to income don’t bode particularly well for Canadian equities. But we shouldn’t feel too slighted: Brandes isn’t that optimistic about the outlook for equities south of the border, either. He prefers Europe and emerging markets on a three-year time frame, writes The Globe and Mail’s Darcy Keith.

Daily Dispatches

The big market-moving release of the day is likely to be the U.S. non-farm payrolls report, slated to be released at 8:30 a.m. (EDT). August’s report came in far below what economists were looking for, snapping a streak in which more than 200,000 jobs were added for six consecutive readings. The consensus estimate is for net job growth of 215,000 in September, with the unemployment rate holding steady at 6.1 per cent. However, bond trader Ed Bradford points out the metric that’s more important than the headline number for those looking to get a sense of how these figures might change the conversation inside the Federal Reserve. “Broadly speaking, short term interest rates follow wages so on Friday ignore the headline number and concentrate on average hourly earnings,” he wrote. That number is expected to rise 2.2 per cent year-over-year.

 

Some rare good news out of Europe: retail sales rose 1.2 per cent month-over-month in the euro area, far more than economists had anticipated. This brings the annual growth in sales up to 1.9 per cent, which as Bank of Montreal senior economist Robert Kavcic notes, is “hardly a blistering pace, but still the strongest clip since 2007.”