Canada Market Cheat Sheet (February 14, 2011)

TSX and Subgroups - Week Ending February 11, 2011

TSX and Subgroups - YTD to February 11, 2011

TSX and Subgroups - 1 Year Ending February 11, 2011

Strengths

• Canada Has Trade Surplus; Exports Jump Most Since '82. Canada unexpectedly posted its first trade surplus in 10 months in December as energy and metals powered the biggest jump in exports in almost three decades.
• Canada returns to trade surplus in December. OTTAWA (Reuters) - Soaring exports of crude oil and other energy products unexpectedly tipped Canada's trade balance into surplus in December after nine months of deficits, fueling hopes the much-coveted export recovery is gaining traction.[Reuters]
• Improved leasing market boosts Brookfield. Brookfield Office Properties (BPO-T17.28-0.18-1.03%) says the companies who fill its office towers in key markets such as New York and Washington are acting more decisively when it comes to leasing office space, as it reported fourth-quarter results that were just above analysts' expectations. The company, which has offices in most large Canadian and U.S. cities, said funds from operations in the quarter were 40 cents a share, the same as last year. Analysts had expected 39 cents. Brookfield cited an improving leasing market for the gains. [Globe and Mail]
• SNC-Lavalin Will Buy Rest of AltaLink From Macquarie for C$213 Million. SNC-Lavalin Group Inc. said it will buy the part of AltaLink LP that it doesn't own from Macquarie Essential Assets Partnership for C$213 million. SNC-Lavalin now holds an indirect 76.92 percent ownership interest in the Calgary-based transmission company. [Bloomberg]
• Canaccord boosts dividend as profit more than doubles. Canaccord Financial Inc. (CF-T15.92-0.08-0.50%) is raising its dividend after profit more than doubled in the third quarter on an improvement in the economy. The financial services firm said Thursday that it would pay a 7.5-cent-per-share dividend on March 15, an increase from the previous payout of 5 cents a share.[Bloomberg]

Weaknesses

• Fed's illusion of prosperity bound to vanish. U.S. Federal Reserve Board chairman Ben Bernanke recently congratulated himself on CNBC for helping boost the Russell 2000 stock index by 30 per cent. The San Francisco Federal Reserve Bank just published a report that claims the second round of quantitative easing – so-called QE2 – is a success because the U.S. inflation rate is a percentage point higher than it would have been absent the Fed intervention. [Globe and Mail]
• Home prices could dive if rates rise, analyst says. Higher interest rates could "easily" cause Canadian home prices to collapse, Capital Economics warned in a bleak report that suggests the housing market is likely to suffer the same sort of crash that has plagued countries such as the United States. [Globe and Mail]
• Housing market will be stable next two years: RBC. A stronger economy will offset the effects of higher mortgage rates and keep Canadian house prices stable over the next two years, according to the Royal Bank of Canada. In a market update that has the bank forecasting price gains of 0.5 per cent in 2011 and 1.3 per cent in 2012, economist Robert Hogue said that after two years of "gyrating wildly," the Canadian housing market is likely to be a much less interesting place for the next several years. [Globe and Mail]

Opportunities

• Drilling technology sparks new oil boom. Gary Williams recalls the last time the oil industry showed up in his tiny town of Waskada, Man. Crews punched holes in the prairie ground, then disappeared as suddenly as they arrived when those holes came up empty. But that was 30 years ago. This time, it's different. Armed with new drilling technology and eager to reap the rewards of oil's high prices, companies are tapping complex geological formations, and the crude is flowing, adding Manitoba to Canada's list of significant oil-producing provinces.
• PetroChina pays $5.4 billion for Canadian gas assets. PetroChina is purchasing half of a prolific shale gas project from Canada's Encana Corp for C$5.4 billion ($5.4 billion), marking the largest Chinese investment yet in a foreign natural gas asset.
• Global stock exchange consolidation may just be starting. As the heads of the TMX Group Inc. (X-T42.150.020.05%)and London Stock Exchange Group Inc. sat together in Toronto to unveil their $7-billion merger plan, Deutsche Boerse AG and NYSE Euronext Inc. (NYX-N38.310.511.35%)confirmed that they too are in talks to create a vast new exchange company that would combine the New York Stock Exchange with Germany's main market. The Deutsche Boerse-NYSE plan would create what would be the world's biggest market operator by revenue. The deals mark the resumption of a wave of mergers that in the past decade has seen exchanges unveil more than 600 purchases worth $94-billion (U.S.), according to Thomson Reuters. More than half that activity has been via cross-border deals as the industry has gone from one where each country had one or two major exchanges to one where transnational conglomerates dominate. [Globe and Mail]
• China pays $5.4-billion for B.C. gas play. PetroChina International Investment Co. Ltd. (PTR-N133.760.150.11%) has agreed to pay $5.4-billion in a natural gas investment with Encana Corp. (ECA-T31.03-0.99-3.09%) that promises to be the largest Chinese investment in Canadian energy assets. The deal underscores the voracious appetite Asian firms have for North America's vast deposits of oil and gas – and speaks to the growing attraction of Canadian energy assets to overseas companies, which are increasingly looking at ways to buy western reserves that can some day be delivered to consumers in China and South Korea.[Globe and Mail]
• Canadian developers go shopping in Brazil. Real estate companies are sinking billions into the South American country's property market, saying it is ripe for consolidation. When the more than one million residents of Campinas, Brazil go shopping, they wander open-air markets and visit a smattering of outdoor strip malls. Despite a swelling middle class, the bustling industrial region about an hour outside of capital Sao Paulo has very little indoor retail space. The lack of a proper shopping mall is the kind of thing that Pierre Lalonde dreams about when trying to decide where to invest Ivanhoe Cambridge's money. [Globe and Mail]

Threats

• Canadian Currency Strengthens as Trade Surplus Buoys Interest-Rate Outlook.The Canadian dollar rose against most of its major counterparts as an unexpected trade surplus in December encouraged speculation the Bank of Canada will raise borrowing costs sooner than other central banks.
• Canada to say next week if review of LSE bid needed. Canada hopes to announce next week whether it will review the London Stock Exchange's bid to merge with Canadian exchange operator TMX Group, Industry Minister Tony Clement said on Thursday.[Reuters]
• Mortgage rates on the upswing. Canadian banks are once again ratcheting up mortgage rates, as government bond yields rise because of worries about inflation and growing confidence in the global economic recovery. Toronto-Dominion Bank and Canadian Imperial Bank of Commerce were the first two banks out of the gate with mortgage hikes Monday. Both banks raised the rate on their standard five-year fixed mortgages to 5.44 per cent, an increase of one-quarter of a percentage point, or 25 basis points. Economists predict the other major banks will soon follow suit, perhaps as early as Tuesday. The yield on five-year Canadian government bond yields has gone up sharply of late, jumping 24 basis points last week alone, and mortgage prices closely track these bonds. [Globe and Mail]
• Pharmacies face upheaval with private-label drug ruling. An obscure line of generic prescription drugs launched by Shoppers Drug Mart Corp. (SC-T39.380.842.18%) has the potential to help ease its regulatory-reform pain but at the same time shake up the pharmacy sector. The company began to roll out its private-label line last year in most provinces to counter new laws meant to reduce the cost of government drug plans. Ontario, for one, had prohibited generic drug companies from paying rebates to drugstores – rebates that had been worth an estimated $750-million a year to the pharmacies. On Thursday, Shoppers released its year-end results, showing profits had been dragged down by the regulatory changes. [Globe and Mail]
• Strong loonie shifting Canadian production offshore: EDC. Canadian firms are increasingly shifting their production offshore in response to the pressures of globalization and the strong loonie, Export Development Canada says. A new study from the Crown corporation shows sales from foreign affiliates of Canadian firms grew by more than twice the rate of exports from firms inside Canada between the years 2000 and 2008.[Bloomberg]