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Market Watch: ‘Tailwinds are turning into headwinds’


 

TORONTO – Stock markets will be under pressure this week as traders focus on upcoming moves from the U.S. Federal Reserve and troubles brewing in the retail sector.

Toronto’s S&P/TSX composite index was higher last week as commodity prices elevated amid uncertainty about what the U.S. economic future holds. The trend will likely continue this week, if the TSX can overcome negative sentiment stateside.

“A lot of people are pausing,” said John O’Connell, chairman and CEO of Davis Rea.

“You’re at one of those points in time where people begin to reassess positions and probably do a little bit of trimming.”

Bonds yields have recently been soaring, with the 10-year U.S. Treasury note touching multi-year highs near 2.8 per cent.

And key commodity prices are rising, with oil getting a boost partly on supply concerns from the unrest in Egypt. Though not an oil exporter, the country controls the Suez canal that links the Mediterranean Sea and Red Sea, giving it a crucial role in maintaining global energy supplies.

Gold prices have also been up as traders moved to the perceived safe-haven of the precious metal. And copper is on a tear, rising six per cent since the start of August.

“All of the things that were tailwinds before are sort of turning into headwinds,” O’Connell said.

On Wednesday, minutes of the July meeting of the Federal Open Market Committee will be released, possibly providing clues as to when the Federal Reserve plans to begin winding down its massive bond-buying program.

It’s widely expected that asset purchases from the Fed will slow next month, though nothing has been made official yet.

Adding pressure to the economic outlook for the rest of the year are U.S. retailers, who last week delivered a dismal earnings results and reduced expectations.

Nordstrom Inc. was the latest to cut its full-year sales outlook, matching similar moves earlier by both Wal-Mart Stores and Macy’s Inc. This week, more U.S. retailers will deliver their latest results and expectations, including J.C. Penney, Target, the Gap, Home Depot, Best Buy, Staples and Sears.

The retail sector is a closely-watched part of the U.S. economy as consumer spending makes up roughly 70 per cent of economic activity.

In Canada, retail sales will likely show a drop of 0.4 per cent in June when statistics are released on Thursday, according to consensus expectations compiled by the Bank of Montreal (TSX:BMO). The decline is expected to be entirely from the floods in southern Alberta.

The consumer price index for July, scheduled for release on Friday, is expected to show inflation rose 0.2 per cent, which would be the third straight monthly increase.

In the U.S., existing home sales on Wednesday will likely show a modest uptick of 0.4 per cent, according to census expectations from BMO, partly as a result of improved credit conditions.


 
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Market Watch: ‘Tailwinds are turning into headwinds’

  1. We’ve had a ‘window of opportunity’…..and done nothing with it.

    But hey, Harp’s up north doing photo-ops.

    • And EmilyOne is still writing the same old comments day in, day out.

      Hey everyone: EmilyOne doesn’t like Harper!

      • And golly, FV, HI and Barb R are still playing the same ol’ game. You’d think they were using the same ol’ handbook. Heh.

        As are Wayne, Dave and ….why yes,….Chet/Biff

        Not to mention the ‘hate-everyone-but-this-week-it’s women’ crowd.

        Or the ‘Libertarian-Ayn Rand’ crowd….which is actually hilarious considering Ayn Rand held Libertarians in contempt..

        It’s the Madeleine de Verchères gambit.

        At least the ‘fundie religious crowd’ seems to be on holidays, thank God. LOL

        But generally speaking, it’s kinda like looking through the Magic Mirror on Romper Room.

        Predictable….and boring.

        • Silly me: I thought I saw your comments pop up on every page on Macleans, day in , day out. But I could be wrong: haven’t been here for a while.

          Have fun, EmilyOne. Say hi to Wherry for me.

          • Yes, you’re very silly.

            We both agreed on that somewhere around last Xmas.

    • Actually Harper is doing an outstanding job reducing our reliance on the USA. If you do some research you’ll see he has spent most of his time in office opening trade routes and setting up trade agreements directly with Mexico , Brazil , China , Japan , Southern Korea and a bunch of other countries. When the states goes bankrupt and descends into Anarchy ( which it will , detroit is the very tiny tip of the iceberg ) , Canada will be able to tighten it’s borders and survive without out our southern neighbors .

      Of course alot of people want to know why he isnt interfering with the price of gas , increasing their benefits on welfare and generally micromanaging his Utopia .

      Some people need to be nannied and given everything to them on a silver plate , the sense of entitlement is sometime stifling .

      I count myself fortunate to have travelled to other places in the world besides NewYork to buy duty free products , if only canadians would travel to other countries and realise they have very little to complain about here , you live in Paradise and don’t even know it .

      If you can’t make it in Canada you might just as well sign up for the one way ticket to Mars , because life is very hard in almost every other place on this planet …

      • Actually Harper has accomplished nothing in office. He’s merely talked about it.

        We have no trade agreements with those countries. After 4 years of negotiations we don’t even have one with Europe. Our reliance on the US continues.

        Nobody is asking about him interfering with the price of gas. He can’t even manage to give away Alberta oil.

        He HAS given us a ninny state. It would help if you weren’t one of the ninnies.

        A paradise….really? And Harp did all that by himself in just a couple of years? Or was it all the people who came before him? Who, in fact, left him a huge surplus he promptly blew……….

        I had no idea life was so hard in the UK, Sweden, Norway, Germany, etc

        And it’s all Harp’s [what recession?] doing eh?

      • When the states goes bankrupt and descends into Anarchy ( which it will, detroit is the very tiny tip of the iceberg ) , Canada will be able to tighten it’s borders and survive without out our southern neighbors .

        Ha-ha – that’s hilarious! Have you missed all the stories about the “harmonized border security” arrangements that have already taken place? Or the fevered pitch for approval of Keystone and the thousands of jobs it will create south of the border?

        Harper would love to see Canada become the 51st state and he is doing his level best to make that happen. If the US goes down, Canada is going with it.

        Stealth snowmobiles just ain’t gonna cut it.

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