It’s full throttle into spring after the Easter break, with this week bringing central-bank meetings around the world, and lots of economic news from Canada in the lead-up to the federal budget. After the U.S. employment report released on Friday, the essential question we’re weighing today is whether the strength of the U.S. economy is enough to outweigh the impact of the oil rout.
Markets were rising in North America yesterday on the underwhelming jobs report from the U.S.—suggesting it will take a little longer for a rate hike to come—and European indexes are feeling the push this morning. (In Europe, markets were closed both Friday and Monday for Easter.) The TSX/S&P Composite Index also got a 70-point bump yesterday, as the loonie closed up half a cent, at 80.14 cents to the dollar. This morning, Australia’s reserve bank held its rate steady, at 2.25 per cent, and India is also expected to announce its benchmark rate today. In other central-bank news, the Bank of Japan begins a two-day monetary-policy meeting today, the Bank of England will begin its meeting tomorrow, and we’ll also see more notes from the Fed on the latest monetary policy meeting, due out tomorrow.
There’s some big company news today, with Samsung reporting better-than-expected results from the first quarter; chips and display screens are helping to cut the impact of a slump in smartphone sales. Meanwhile, FedEx expanded its reach in Europe by buying the Dutch delivery company TNT.
The week ahead will be busy, and we have a whole look-ahead to the biggest business stories this week in Maclean’s. Today, Hudson’s Bay Co. will release its first-quarter earnings amid some high-profile reversals in the Canadian retail market from Target and Future Shop. Tomorrow, Finance Minister Joe Oliver is expected to give a speech that may provide insight into the federal budget—now scheduled for April 21—and, on Thursday, Nova Scotia’s budget and earnings from a major media company will be released. The week caps off with jobs data from Statistics Canada.
Selling off General Motors. In a bid to meet an election promise to balance the budget this year, the federal government sold off its remaining stock in General Motors, with an estimated worth of $3.3- to $3.4 billion. Oliver announced the sale to Goldman Sachs yesterday evening, after announcing on Thursday that the federal budget will be released on April 21. The financial-crises bailouts for GM and Chrysler totalled about $13.7 billion, of a combined U.S.-Canadian bailout of $80 billion, and the Conservatives had long pledged the stock would eventually be sold. With the government pledging not to run a deficit despite the drop in oil prices, there’s no more convenient time. For those of you who are eagerly awaiting the budget, Maclean’s Jennifer Robson has drawn up a history of past budgets, from branding efforts and catchphrases to hand-drawn economic charts during wartime.
Can the U.S. economy outweigh the oil slump? This is the ongoing question for Canada’s economy, according to the latest Bank of Canada business-outlook survey, which weighed the sentiment of businesses across the country. It indicates that optimism isn’t flourishing, noting signs of “spillover” from the drop in oil prices to other sectors, even as some businesses say they expect to benefit from a strengthening U.S. economy and a weaker loonie. You can see the full report here, with lots of fun charts! The picture for hiring is also weak, according to the report, with sentiment decreasing to its lowest level since 2009, which, as we all remember, was not the economy’s finest hour.
But how strong is the American economy? The latest jobs report, released on Friday when North American markets were closed, touched on this subject, as the rate of job creation suddenly dipped: 126,000 jobs to the year’s average of 269,000, while also revising down job gains for the first two months of the year. The sudden drop left many bemused after such strong job growth, while also giving markets a boost on opening in North America yesterday, based on the implication that the Fed will take longer to raise the benchmark interest rate. Janet Yellen has warned that the Fed would slowly raise rates, keeping a close eye on economic data as they arrive. Unemployment remained steady at 5.5 per cent, with an increase in wages being balanced out by fewer hours worked, and this spring could bring about a trend we saw last year, as the end of a harsh winter gave job growth a boost. But, even as the job market overall has improved, the gains have still not been even: Despite high-profile wage hikes from some major companies, wages have been slow to follow employment; long-term unemployment hasn’t budged; and rates of unemployment have remained disproportionately higher for black Americans and older people. Why does this all matter to Canada? See above: U.S. economic growth is essentially the economy’s ticket to smoothing out the effect of falling oil prices.
A battle for maple-syrup dominance. The maple-syrup producers of Quebec are feeling the heat from the Americans, with the competition chipping back their share of the global market for the sweet stuff from around 80 per cent to an average of 72 per cent, according to the Globe. Quebec produces the vast majority of Canada’s maple syrup, and the province has a few advantages that go beyond just its maple trees: Quebec’s syrup federation has a strategic reserve and member quotas, with the Globe reporting that some of the new competitors are Canadians who have decamped outside the group’s control, as demand for natural sweeteners has pushed up maple syrup’s popularity. In a report on the industry in 2013, Agriculture Canada said syrup exports were worth almost $280 million, with Quebec producing more than 95 per cent of that supply. Of course, you could also skip the report and just read this Canadiana classic from Businessweek, “The Great Canadian Maple Syrup Heist,” about an elaborate theft from the Global Strategic Maple Syrup Reserve. (I know I’m going to.)
Need to know:
TSX: 15,100.65 (+74.03), Monday
Loonie: 80.14 (+0.55), Monday
Oil (WTI): $51.73, Tuesday (6:30 a.m.)