Index Daily Change
S&P/TSX composite index 0.68% Decline
Dow Jones industrial average 0.48% Decline
Standard & Poor’s 500 Index 0.55% Decline
Nasdaq Composite Index 0.68% Decline

The Canadian stock market closed lower yesterday after 2 days of gains, slipping back below the 12,000 mark as the stock market came under pressure from a stronger U.S. dollar and falling commodity prices. Gold slid to a 6-week low as the U.S. greenback rose more than 1% versus the Euro, with a ratings downgrade of Portugal and persistent worries over debt-laden Greece weighing on the Euro ahead of a European Union summit on March 25th and 26th. Germany and France were still discussing whether to involve the International Monetary Fund (IMF) as a standby aid mechanism for Greece, and in what form any additional contribution by Euro zone states might take.

Investors are resistant to the IMF getting involved because their involvement would suggest that the Euro zone is dealing with two issues: 1) the Greek debt issue; and 2) the apparent inability of the Eurozone to function properly on their own without the help of outsiders.

Canada could see higher interest rates sooner than previously thought as a result of higher inflation and stronger economic growth, Bank of Canada Mark Carney said yesterday. Carney did not declare higher rates were on the way, but issued his clearest signal to date that his year-old commitment to keep the policy rate at the record 0.25% until July was “expressly conditional” on inflation remaining manageable.

In the United States stocks fell as Portugal’s credit rating downgrade stirred concerns about sovereign debt. Major indexes eased a day after hitting 18-month highs, with losses across most sectors. Worries centered on countries’ ability to pay their debt, bolstering the U.S. dollar and hurting commodity-related stocks. Portugal’s rating was lowered by one notch to AA-minus, compounding problems in the Euro zone, where diplomats have still not agreed on a safety net for heavily indebted Greece. Oil prices also declined after data showed U.S. crude inventories rose nearly 5 times more than expected last week, a bearish sign for demand.

Data released earlier in the day sent mixed signals about the economy, with new home sales unexpectedly falling to a record low in February, but new orders for durable manufactured goods rose for a 3rd straight month in February.

For the month so far, the S&P 500 is up about 6%.

This morning European stock markets edged up ahead of a key meeting of EU leaders in Brussels where the main topic once again will be what to do about the Greek debt crisis, which has increased pressure on the Euro currency in recent days. North American stock markets are poised to recoup around half of yesterday‘s losses. The main focus in the markets will be what, if anything, EU leaders decide regarding Greece and whether any financial support package that may emerge has any involvement from the International Monetary Fund.

Analysts are hoping that something will emerge after months of uncertainty, even though German Chancellor Angela Merkel has been reluctant to stump up German cash to support Greece, however, Merkel does not want to see the euro continue to drop.

Regards,

Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA

SVP & Partner