Today is budget day in Canada and the federal budget promises more political intrigue in the ‘soap opera’ unfolding in Ottawa. Harper has promised a six point economic action plan which will include job training, infrastructure spending and (likely) some assurance that Canadian banks will remain competitive with their global counterparts (who have been subsidized by their respective governments).
Yesterday we saw European shares jump by more than 3%, ending a five day losing streak, as a 73% surge in British bank Barclays boosted lagging financials, while oil shares also tracked higher (oil prices are higher again this morning).
The Dow Jones Stoxx (Europe) banks index rose 7%. Financial stocks spiked, with Lloyds jumping 32%, ING jumping 27.8%, Royal Bank of Scotland jumping 19.8%, BNP Paribas jumping 16.9% and Societe Generale jumping 11% (all these banks led the 58% decline in the banking index in the last 6 months).
Stocks rose in “yo-yo” or “choppy” trade lifted by optimism over a $68 billion takeover in the drug industry that offset a grim warning about the year ahead, from Caterpillar to worries over the state of the financial sector (financial shares in the U.S. ending the day down). Caterpillar announced 20,000 job cuts, Home Depot 7,000, and when you include other firms the total job cuts announced yesterday exceeded 70,000.
A very rare piece of good news helped sentiment, as sales of existing U.S. homes unexpectedly jumped 6.5% in December. Pfizer, the world’s biggest drug maker, said it would buy rival Wyeth, suggesting that some companies are attractively valued after a dismal 2008 (although, I would have expected some smaller M&A activity to start things rolling and it is an indication that there is potential for some deals to get done).
In Canada, the two biggest groups within the index, Financial and Energy led the way. The index posted a modest gain of 0.33%. The stock market “clawed” back from a 1.2% mid afternoon fall but remained well off its early 2.2% mid morning gain.
The Dow Jones industrial average jumped 0.48%, the Standard & Poor’s 500 Index jumped 0.56% and the Nasdaq Composite Index jumped 0.82%. The broad based S&P 500 index is down more than 7% for the year so far (not the start to 2009 that we were looking for) but it is up about 11% from the 11-year lows hit on November 20th.
There is a little bit of optimism and confidence back in the market today after a hard week – likely attributable to bargain hunting. Today will be interesting with budget day in Canada (although, this will likely not influence Canadian stock market significantly) and we should hear more about the U.S. stimulus package within a week or so.
This morning we continue to see oil prices gaining on OPEC cuts and cold weather. European shares have given up a little of yesterday’s gains but bank stocks continue to advance while U.S. futures are pointing higher.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
