Canada’s main stock index ended lower on Friday as a decision by Canada to allow upstart Globalive to offer wireless service opened up competition in the telecoms sector and dragged down shares of existing mobile carriers as the industry will now need to deal with more competition in the sector. Shares of Rogers Communications Canada’s biggest wireless firm fell 6.95%.
The S&P/TSX composite index ended down 0.35% and for the week, it ended down 0.75%. There has been some profit-taking in recent weeks in the commodities and gold sectors. The gold-mining sector was another big drag on the stock market. The price of gold hit a 4-week low as the price of bullion has dropped by about $66 for the week in response to upbeat U.S. economic data and a strengthen U.S. dollar which is diminished gold’s appeal as an inflation hedge.
In the United States the Dow and S&P 500 closed up for a 3rd straight day on Friday after several solid consumer-related reports reinforced investors’ confidence in a steady recovery by the economy. Government reports showing stronger-than-expected November retail sales and an unexpected rise in business inventories in October pointed to a recovery in consumer spending.
The Dow Jones industrial average was up 0.63%, the Standard & Poor’s 500 Index was up 0.37% and the Nasdaq Composite Index was down 0.55%. For the week, the Dow was up 0.8%, the S&P was near flat and the Nasdaq dropped 0.2%.
The House of Representatives approved the biggest changes in financial regulation since the Great Depression on Friday, marking a win for the Obama administration and top Democrats in Congress. The bill, which will have to be reconciled with any measure the slower-moving Senate might eventually approve, aims to safeguard the financial system and ward off future crises of the type that punished the nation in the past year with its deepest recession since the 1930s.
The House voted 223-202 to pass the 1,279-page bill, which was hammered out in the months since last year’s crisis convinced Democrats of an urgent need for reform. All of the House of Representatives Republicans and 27 Democrats voted against bill. “This legislation brings us another important step closer to necessary, comprehensive financial reform that will create clear rules of the road, consistent and systematic enforcement of those rules, and a stronger, more stable financial system,” President Barack Obama said.
The bill would create an inter-agency council to police systemic risk in the economy, crack down on hedge funds and credit rating agencies, set up a financial consumer watchdog agency, and expose Federal Reserve monetary policy to unprecedented congressional scrutiny, among other reforms. Faced with a recession and multi-billion-dollar taxpayer bailouts of firms such as AIG and Citigroup, started by the Bush administration, Obama and fellow Democrats have vigorously pushed for fundamental regulatory change.
As mentioned, consumers stepped up their spending in November and grew more optimistic this month, unexpectedly strong data showed on Friday, raising hopes a self-sustaining economic recovery was starting to unfold. Data last week has suggested the recovery is gaining momentum, pulling further away from the devastating recession that pushed unemployment to 26 year high and raising hopes the economy can return to normal growth as massive government support starts to fade.
The U.S. economy snapped 4 straight quarters of decline by growing at a 2.8% annual rate in the 3rd quarter. Economists said the latest data suggested growth in the 4th quarter could come in at 4% or higher. We are not out of the woods yet but there is definitive improvement and a brighter outlook for the consumer than there was a couple of months ago. The Reuters/University of Michigan Surveys of Consumers’ preliminary index of sentiment for December rose to 73.4, just a touch below the year’s high set in September, from 67.4 in November. Economists had expected a reading of 68.5. In short, consumers are spending some money which is lifting shares of consumer or retail companies.
Sales in November were boosted by strong receipts from gasoline stations, increased purchases of cars and car parts, building materials and electronic goods, among others.
The Federal Reserve, meeting next week to set monetary policy, faces the tricky task of acknowledging a pick up in economic activity without spooking fragile markets into believing interest rate hikes are imminent. The upbeat data increased speculation that the Federal Reserve could be forced to start thinking about raising interest rates sooner than had been expected. The U.S. central bank has committed to keep borrowing costs near zero for an “extended period,” policymakers will assess the strength of the recovery, which has been built on low rates and government spending, at a meeting on Tuesday and Wednesday of this week.
This morning world stock markets mostly rose after Dubai said it had received $10 billion in emergency funds from its oil-rich neighbor Abu Dhabi, helping to ease investor fears that the emirate will default on its debt. European shares advanced more than 1%. The news cheered investors, who had feared the consequences of Dubai World defaulting. Since the state-owned company announced its intention last month to delay payment on its $60 billion in debts, investors have braced for more financial turmoil and been forced to reevaluate their assumptions about government promises to make good on debts.
The Dubai news is a big surprise to the market and should help support current stock market levels heading into next weeks Christmas break and into the end of the year. North American futures are expected to rise 0.40% to 0.50%, gold prices are up slightly while oil prices are down slightly.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
