(November 26 – 17:15 ET) – The U.S. economy continues to show strength, say economists at CIBC World Markets. They expect next week’s U.S. payroll report to highlight tightening labour markets and are predicting two rounds of rate hikes in the first half of the year.
They’re calling for third quarter GDP to come in above 5%, on broad-based demand gains. Exports should spur a current account surplus for the first time since 1996.
GDP growth has economists at RBC Dominion Securities Inc. hawkish on rates too. As a result they “expect that the Bank [of Canada] will match the Fed in raising interest rates by 50 basis points in the first half of 2000”. These rate rises are expected to bend but not break the economic expansions in the U.S. and Canada.
Over at Nesbitt Burns Inc. analysts are lauding the TSE for finally taking the lead this week while the Americans feasted on Thanksgiving turkey. JDS Uniphase became the big mover on the tech front. Golds helped drive the market up an aggregate 2% on the week, with golds up 7% themselves. Financials added 2% as well. By contrast the Dow and S&P were rather flat this week, although Nasdaq continues to boom, up 56% on the year. The bond market and inflation worry seems to be weighing on stocks.
Nesbitt says it was surprised by the decline in long-term Canada bond yields this week, when U.S. rates were on the rise. Despite the outperformance of our stock and bond markets the Canadian dollar continued to struggle.
Most analysts expect to see some support emerging for the dollar on positive economics, but its hard to say whether the value will be recognized in the currency markets.
Overseas, Nesbitt notes, European central bankers seem to be moving to a more dovish stance on interest rates. Japan’s recovery appears to be intact.
-IE Staff
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