TORONTO – The Bank of Canada’s latest rate announcement, along with a number of other key economic indicators, will be front and centre this week for the Toronto and U.S. markets.
Bank governor Mark Carney is widely expected to keep the central bank’s trend-setting rate at one per cent, but Danielle Park, president and portfolio manager with Venable Park Investment Counsel, said investors will look for hints on when a rate cut or hike may come.
“I think he’s going to acknowledge that the Canadian data continues to disappoint. I think he’s going to want to sort of back out of expectations that they may be hiking in the not too distance future,” Park said.
“I think they’re definitely on hold mode at this point and, if anything, they may signal that there might be a willingness to cut rates at some stage if the global trend continues this way.”
It will be Carney’s last rate announcement before he leaves the Bank of Canada for the top job at the Bank of England. He will be replaced by outgoing Export Development head Stephen Poloz.
There will also be an abundance of data slated for release from Statistics Canada this week.
The agency is set to release payroll employment figures, industrial product and raw materials indexes and, of particular interest, the first-quarter read on gross domestic product.
Analysts expect that the GDP data will show growth in the first part of 2013, supported by gains in the retail, wholesale and factory sectors.
In corporate news, the last of Canada’s big banks are expected to report second-quarter results.
Scotiabank (TSX:BNS) reports Tuesday, Bank of Montreal (TSX:BMO) on Wednesday and Royal Bank (TSX:RY) and CIBC (TSX:CM) on Thursday.
Last week, National Bank (TSX:NA) hiked its dividend and reported its adjusted earnings hit a record $369 million — up six per cent from the same time last year. TD Bank (TSX:TD) reported that its profits were up two per cent from a year ago.
In the U.S., markets will be closed Monday for the Memorial Day long weekend.
On Thursday, the U.S. Commerce Department will also release its first-quarter gross domestic product figures, while the U.S. Labor Department will have weekly jobless claims numbers, as hopes grow that declines seen last week will continue.
The latest data showed that applications for unemployment aid dropped to a seasonally adjusted 340,000 in the week ended May 18. That’s down from 363,000 the previous week and a level consistent with solid job gains.
Park said U.S. markets will continue to be sensitive to any economic news, as investors are nervous about the strong run equities have had in the last few weeks.
“It’s a weaker economy than people acknowledge. As we go along, I think the second quarter could be quite weaker than people have anticipated,” she said.
“At some point here, the stock market is going to have to acknowledge that it’s way overpriced… it’s just beyond ridiculous in terms of its valuation at present.”