Good morning from a rainy London, where the votes are still rolling in, but one thing is clear: David Cameron will remain prime minister. Markets have just opened in London, but the FTSE 100 is already up by two per cent this morning, with the pound also up by nearly two per cent.
Our detour into politics will be brief, below, because today is going to be a busy day in North America: it’s the first Friday of the month, so it must be jobs day!! We’ve got earnings and unemployment today for both Canada and the U.S. for April, as well as housing starts for Canada and wholesale inventories for the U.S. In previous jobs reports for Canada, we’ve seen signs of some fairly big shifts – one I would call an issue of quantities of jobs, over quality.
Yesterday saw the TSX get a little bit of its bounce back after two straight days of three-digit losses, but energy stocks were still feeling the crunch and were falling again. While the blame was placed at the feet of the new Alberta NDP, oil has actually fallen back to $58.50 this morning, and there were some broad concerns about Iran’s oil-pumping ability after sanctions against the country are lifted. The loonie closed down half a cent yesterday, at 82.51. In other news yesterday, Alibaba’s earnings yesterday were much better than expected, with quarterly sales up 45 per cent from this quarter a year ago. Maybe Chinese consumption isn’t slowing down so much after all?
While the big news today in the U.K. is the election, there will also be a monetary policy meeting from the Bank of England and the latest numbers for the trade deficit. In Germany, there’s industrial production and the trade surplus, which show the strength of German manufacturing and exporting for the eurozone’s blockbuster economy.
In earnings, we have AOL, Cineplex, Yellow Pages and Crocs reporting today.
David Cameron looks set to head back to Downing Street. Yesterday it looked too close to call, but today the results – although they’re still coming in – look startlingly clear: the winners of this election are the Conservatives, and to the north, the Scottish National Party. It looks like Cameron will get just enough seats for the majority in Westminster, while SNP swept Scotland – and delivered Labour’s worst defeat since the late 1980s and sidelining Ed Miliband, who just yesterday seemed to be a genuine contender for Downing Street. The Liberal Democrats, the Tories previous coalition partner, were absolutely crushed. Despite holding 12.3 per cent of the vote earlier this morning – the biggest gain for a single party – the anti-immigrant UKIP party only has one seat in the next parliament (so far), belonging to a former Tory who defected. It’s still unclear whether Nigel Farage will win a seat. The SNP’s surge in Scotland was perhaps the most remarkable to watch: previously a Labour stronghold, the party has been reduced to a single Scottish seat, and one of the better-known MPs was roundly trounced by a new SNP candidate, a 20-year-old politics student named Mhairi Black. You can see Maclean’s live watch of the vote counting, here.
Jobs, jobs, jobs. Last month brought a better than expected job gain for Canada, with 29,000 new jobs – but again, the issue was one of quantity over quality: with the gains largely coming from a big surge in part-time work, even with a loss in full-time work. As the oil rout has continued and amid repeated warnings about expecting a weak first quarter, it’s worth watching not only jobs numbers for April, but how the nature of those jobs changed.
Jobs numbers in the U.S. will be especially closely watched today. The economic data has been cloudy: while job numbers were strong, last month’s job growth of around 120,000 was seen as disappointing, and there’s another factor to watch, too: whether wage growth, which has been lagging job growth, is actually catching up. A series of missed expectations for other numbers suggest that the U.S. might not be seeing the big year that was expected in January. This has shown itself in the obsessive tracking of the Fed, with expectations for a bump in the interest rate pushed back to June. As analysts have struggled to gain a clear picture from the data, some have turned to unexpected indicators, as the Financial Post writes: tracking entrants at dog shows, new gun permits and weddings, all figures various analysts say can be signs of overall spending. Unconventional, maybe, but I bet it’s more fun than watching Janet Yellen’s every move.
Canadians wants cars. They just aren’t building them anymore. Jason Kirby’s column in Maclean’s this week looks at one of the great riddles of the Canadian auto industry: auto manufacturing is still on a seemingly unstoppable slide, as companies up sticks and take their factories elsewhere, despite big handouts from the government to stay. Meanwhile, every month brings nearly another record: this April was the biggest April on record for vehicle sales in Canada, and many of the cars are on the pricey end. But then again, maybe it’s not such a riddle after all: think of debt, spread over long amortization periods, even for people with bad credit. Sound familiar?
Return of the Croc. If, after seeing that Crocs – the brand behind the foam clog – was reporting today, you wondered how the company had managed to sustain itself (we hit “peak Croc” in 2007), look no further. This piece by Bloomberg breaks down how the company is still kicking, and after expanding the name into all kinds of shoes that didn’t look like a weird, oversized block of Play-Doh, they’re heading back to their roots in a bid to boost revenue, two years after they hit $1 billion in sales. The Crocs may have slipped in popularity in recent years in North America, but they’re still selling elsewhere in the world, and the reason has to do with what you will understand deeply if you’ve ever worn a pair of Crocs: a triumph of comfort over style. The clogs never lost their popularity with nurses and cooks, and there’s something to be said for the comfort trend: in central London and Copenhagen I barely see women in heels of any height anymore, when a pair of black sneakers will do.
Need to know:
TSX: 15,088.82 (+64.93), Thursday
Loonie: 82.51 (-0.55), Thursday
Oil (WTI): $56.89, Friday (4 a.m.)