All eyes to the eurozone

Financial and economic news for December 4


Yesterday saw a surge in North American markets and a predictably unchanged Bank of Canada interest rate. For this morning’s drama, turn to the European Central Bank, for more news on how badly the EU’s economy is really doing.

The Day Ahead

The TSX had big gains yesterday, closing 133.99 points up after gains in commodities, including oil, on news of lower-than-expected U.S. reserves. The surge came after five straight days of losses. Exchanges in Tokyo, Hong Kong and Sydney all edged up today, after a record-setting day in New York. European markets opened slightly higher this morning over hope for economic stimulus from the European Central Bank today.

The loonie also inched higher from Wednesday, to 87.98, on fairly optimistic words by the Bank of Canada on the state of the economy. The Bank left the interest rate unchanged at one per cent – where it has been for four years – which was widely expected.

TD reports today as the banks’ earning reporting season continues. Yesterday RBC reported record earnings, with an eight per cent increase in profits this fiscal year, despite lowered trading revenue.

The European Central Bank will announce their interest rate target today in Frankfurt. Speculation hasn’t focused on a possible change in interest rates – at a record low of half a percent, it can’t really get lower, and with the European economy flagging, it can hardly go higher. Instead, analysts are watching to see whether ECB president Mario Draghi, who has been urging governments to stoke inflation, introduces more stimulus measures. This could include quantitative easing, otherwise known as when a government buys massive amounts of bonds.

The Bank of England will also announce its interest rate target today – though nothing is expected to change. In September, former Bank of Canada governor Mark Carney said the rate could start to climb in early 2015, but British wages have so far failed to rise. The bigger news is the ongoing analysis of the U.K. autumn statement, announced yesterday.

Labour numbers for November will be released tomorrow in both Canada and the U.S. In Canada, look out for whether this could mean the third straight month of gains in employment – numbers from October pushed the unemployment rate down to its lowest since the financial crash.

What you missed

The S&P 500 had another record day yesterday – the year’s 48th – which caused the Financial Times to provide a link to Curtis Mayfield’s Move On Up. They also noted this year’s number of record setting days were on par with 1929.

After the U.K.’s autumn statement, analysis of the British economy is in full force this morning. Seeking to take the U.K. into a surplus by 2019-20, George Osborne revealed cuts that would cut British spending to 1930s levels, in an attempt to bring down a deficit one BBC reporter called a “cavernous financial hole” this morning. The statement also included the high-profile “Google tax”, intended to stop multinationals from shifting their profits out of the UK. to avoid paying taxes.

Petronas deferred their decision on a proposed B.C. LNG terminal over concern about sinking oil prices, the Malaysian state-owned oil company says. The $36-billion deal would ship liquefied natural gas from the west coast to meet demand in Asia.


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