Stocks rallied to their highest level in a month in the U.S. yesterday and Canada also posted some very strong gains yesterday.
Over the weekend, Obama outlined plans to create 2.5 million jobs by 2011 through programs repairing roads and bridges, modernizing schools and making public buildings more energy efficient, among other initiatives. Although the economy continues to weaken, investors hunted for bargains (since stocks are cheap) and put ‘faith’ in central banks and governments that the economic issues will resolve themselves with a little or a lot of intervention (auto and credit) and some significant “stimulus” (spending).
Oil prices were steady below $44 a barrel this morning in Asia as investors anticipated that OPEC will announce a big production cut next week to stabilize crude prices that have fallen about 70% since July.
Toronto stocks jumped more than 5.5% led by a rise in mining stocks as President elect Barack Obama’s economic plan will likely benefit those companies. U.S. stocks climbed with the Dow Jones Industrial Average “flirting” with the key milestone (psychological) 9,000 level. Additionally, the White House said a deal to help the automakers is near. Reports say a roughly $15 billion loan package could be announced later today.
In Canada, all eyes will be on the Bank of Canada at 9:00. The market is torn as to whether the Bank will cut 0.50% or 0.75%. The Bank is on record stating its concern about falling commodity prices, tight credit markets and slower US growth. All of which have deteriorated since the last meeting, so a 0.50% cut is easily justified. I never see the Bank of Canada as a fast moving entity so a 0.75% cut is a little uncharacteristic. The recent employment report that showed Canada lost 70,600 jobs last month will likely be a factor in the Bank’s decision and it is still a wild card as to how aggressive they want to be.
Stocks in Europe rallied this morning and U.S. index futures are swinging between gains and losses this morning.
Regards,
Wilfred Vos Bcs, CFP, FMA, FCSI, CIM, CFA, MBA, DMS, CBV
SVP & Partner
