Canada Market Cheat Sheet (February 7, 2011)

Canada Market Cheat Sheet (February 7, 2011)

The TSX ended last week up 1.77%, and the TSX60 ended the week up 1.65%. Looking at the subgroups you can see the small- and mid-cap subgroups fared well, and there was a surge in the Global Gold (See "Gold Stocks Reverse Downtrend") and Financials subgroups, both up over 3%. On the weak side, the lone Energy subgroup suffered a net loss on the week, down -1.05%.

YTD

One Year (YOY)

Strengths

  • Scotia Capital sees big year for IPOs. The Canadian IPO market is poised for a strong year, and a handful of deals could top the C$1 billion mark, and in sectors that haven't shown strength for years, according to the deputy head of investment banking at Bank of Nova Scotia [Reuters]
  • M&A in the Periphery: Profit boom puts pressure on miners to hand back cash. Top global miners are set to report a doubling in profits for the December half, thanks to booming iron ore and copper sales, sparking calls for fat cash returns to shareholders as the major miners run out of takeover opportunities. BHP Billiton (BHP.AX: Quote) (BLT.L: Quote), Rio Tinto (RIO.AX: Quote) (RIO.L: Quote), Anglo American (AAL.L: Quote) and Xstrata (XTA.L: Quote) are due to report their December-half results over the next two weeks. [Reuters]
  • Mining Mergers Fuel Second-Best Start for Canadian Takeovers in 12 Years. Cliffs Natural Resources Inc. and Inmet Mining Corp. pushed Canada to its second-best start for takeovers in at least a dozen years. [Bloomberg]
  • Canada May Have C$9 Billion More Revenue for Budget, Economist Survey Says. The Canadian government may have as much as C$9 billion ($9 billion) more in revenue over the next five years than Finance Minister Jim Flaherty budgeted, according to economist forecasts his department published today. [Bloomberg]
  • Canadian Dollar Reaches Highest Level Since May 2008 on Economic Growth. Canada’s dollar reached the strongest level since May 2008 as the nation’s economy and employment grew more than forecast, boosting confidence in the recovery. [Bloomberg]
  • Canada Job Creation Four Times as Much as Forecast; Unemployment Increases. Canada’s job creation in January was more than four times the median forecast, pushing the Canadian dollar to its strongest level since May 2008 and adding to evidence the country’s economic recovery may be accelerating. [Bloomberg]

Weaknesses

  • Bank of Canada Governor Mark Carney ’s plea for households to cut debt, which surpassed the U.S. for the first time in 12 years, is starting to get through to homeowners like Gary Taitt. That may crimp earnings at the country’s biggest banks. [Bloomberg]
  • Canada Ivey PMI below forecast in January. Purchasing activity in the Canadian economy unexpectedly turned lower in January, the Ivey Purchasing Managers Index showed on Friday, in sharp contrast to other data suggesting economic recovery remains intact. [Reuters]
  • Canada Unemployment Rose to 7.8% in January [Bloomberg]

Opportunities

  • All the signs say oil’s rise has ended – except the most important, demand. Crude oil prices have recovered much of the ground they lost during the financial crisis and global recession, but can investors hope for more gains ahead? The rebound has certainly been impressive. Oil – specifically, the benchmark West Texas intermediate – has surged 160 per cent from its low in 2009, and recently hit its highest level in 2½ years. Already, observers have begun to fret about the usual impact of high energy costs, including their potential to drive up inflation and drive down economic growth. [Globe and Mail]
  • Gold Drops as Economic Recovery Curbs Metal’s Investment Demand. Gold declined on speculation that an economic recovery will curb demand for the metal as an alternative investment. The dollar gained against the euro after a Labor Department report showed the U.S. jobless rate in January unexpectedly fell to 9 percent, the lowest in 21 months. Earlier, gold reached a two-week high of $1,361 an ounce as the mounting conflict in the Middle East boosted demand for a haven. [Bloomberg]
  • Spring IPO for Glencore could launch flurry of deals. Mick Davis, boss of global mining giant Xstrata, used the notion of a commodities supercycle to justify the fat premium paid for Canadian nickel miner Falconbridge in 2006. Two years later, when commodities crashed, his “stronger-for-longer” theory looked bogus. Not any more. Commodities are back with a bang and the conventional wisdom is that the supercycle is intact, as growth in emerging economies powers forward. Now torrents of cash are flowing into the commodities industry. And where there is ample money and rising valuations, there are deals. [Globe and Mail]
  • Kinder Morgan plans pipeline expansion to B.C. Kinder Morgan Canada is accelerating plans to boost deliveries of Alberta crude to the West Coast, pressing ahead with new pipeline capacity that raises the stakes in a high-profile race to export Canadian energy to Asia. [Globe and Mail]

Threats

  • ‘Debt Fear’ Means Slower Lending for Canadian Banks [Bloomberg]
  • Bank of Canada's Macklem Says Businesses Shouldn't Count on Weaker Dollar. Bank of Canada Senior Deputy Governor Tiff Macklem said businesses should invest more to boost their ability to compete and that sustained strength in the country’s dollar is a risk to the economic recovery. [Bloomberg]
  • Canada Banks Urged by Regulator to Limit Early Redemptions on Hybrid Bonds. Canada’s banking regulator urged the country’s lenders to avoid early redemptions of so-called hybrid bonds, which have plunged in the last six months on concern the lenders may buy the notes back at below current prices. [Bloomberg]
  • Legislative Threat to Competitiveness: Rogers, BCE Gain After Canadian Court Rejects Globalive Wireless Ruling. Rogers Communications Inc. and BCE Inc., Canada’s largest phone companies, climbed after a Canadian court overruled the government’s 2009 decision to grant rival Globalive Communications Corp. a wireless license. [Bloomberg]

Economic Reporting This Week

Table Source: Richardson GMP

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