Ia01 TSX Focus
Transcript of Ia01 TSX Focus
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FEATURE ARTICLE, PAGE 5
Are Stocks Cheap?
Congress Passes Bailout BillAfter Global Equity Markets First Hammeredby Bailout Uncertainty, Credit Market Strains
U.S. Economic Downturn Deepens Canadian Growth Unsustainably Strong in July Commodities Tumble on Global Growth Fears ECB Softens ToneRate Cut Coming Wachovia Bought by Wells Fargo, not Citigroup
OCTOBER 3, 200
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PAGE 2 FOCUS OCTOBER 3, 2008
After the latest bout of intense volatility and clear signs the U.S. econom
is on the ropes, markets are now fully priced for a 50 basis point rate cu
from the Federal Reserve this month, with many looking at an imminen
move. This prospect was priced in even before the fate of the massiv
rescue package in the second try in the House was known. Th
macroeconomic case for renewed rate relief is mounting rapidly, amidstring of weak U.S. results for September: (1) the ISM for manufacturing posted i
biggest monthly drop in almost 25 years, falling to a recession-like 43.5 last month, (
auto sales plunged 27% y/y, with plenty of remarks about tight credit crimpin
activity, and (3) payrolls fell 159,000, their largest drop this cycle, and the survey wa
taken even before the worst of the financial storm hit.
There is some concern that a rate cut could be washed aside by the relentless ris
in credit spreads. Arguably the most unsettling development in recent weeks has bee
the steep back-up in Libor, with 3-month US$ rates rising another 57 bps this week t
4.33%. Its fair to ask how much good a 50-bp cut from the Fed would do when marke
rates are rising by more than that amount in the space of a week. Still, the combinatioof the rescue package, a Fed rate cut, and the flood of liquidity measures by all centr
banks may help stem the rising tide in interbank rates. The fact that two banks (We
Fargo and Citigroup) were competing to buy Wachovia could be viewed in a positiv
light. Meantime, the Fed has cranked up the size of its balance sheet massively in recen
weeks, as it sometimes seems to be the lender of only resort these days. In the past wee
alone, the Fed increased various credit lines by $284 billion, and other central banks ar
also opening the taps wider. In addition, the Bank of England appears poised to cut rate
next week, and the ECB revealed that a rate cut was discussed at this weeks polic
meeting, a clear prelude.
The case for a cut in Canada is also building (see Bens piece) and the centrbank is ramping up its liquidity measures. The extraordinary hit to the TSX this wee
made the case that much louder. After outperforming almost all other marke
through the first half of the year, the rising tide of the global credit crisis fully washe
over the TSX, with the index sliding more than 13% in the space of just five session
dating back to last Friday. The TSX was pounded in two separate 7% down days, wit
the first hit delivered to all global markets by the Houses nay vote and the deepenin
credit strains, and the second was a serious sideswiping from commoditie
Commodity price measures are not just back to levels of a year ago, but all the wa
back to levels prevailing in late 2005, and the sell-off is taking no prisoners.
darkening global growth outlook and a rejuvenated U.S. dollarwhich had its beweek in yearshave both pounded on resource prices.
In case you are looking for a shred of optimism: No fewer than three bea
markets have been halted in their tracks in the second week of October in the past tw
decades alone. In 1990, 1998, and 2002, the S&P 500 hit bottom in that period. Is th
fourth time a charm? Of course, a real optimist would hope that the bottom wa
reached in the first week of October in this episode. A pessimist would note this late
bear actually began in the second week of October last year, and that the third wee
of October has a bit of history itself.
Our Thoughts
DOUGLAS PORTER
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PAGE 3 FOCUS OCTOBER 3, 2008
It looks like the Bank of Canada may follow in the Feds footsteps. In the pa
two weeks, weve seen July GDP surge 0.7% and August inflation accelera
in Canada. Usually, that combination would not be conducive to rate cut
but the GDP gain is simply unsustainable, as the big increases were in oil
gas output and manufacturing. And, inflation is likely to retreat wit
commodity prices falling and the economy slowing.Given the recent dramatic turn of events in global financial markets and th
intensifying credit market strains, we now expect the Bank of Canada to cut rates at th
October 21 meeting, if not sooner. The two downside risks cited by the Bankthe U.
economy and credit conditionshave worsened markedly over the past three week
The U.S. economy is in recession and the economic data stateside have deteriorate
further. Canada will feel the knock-on effects of the U.S. downturn. In addition, th
global slowdown is undercutting commodity prices, which will in turn weigh o
domestic demand in Canada. Meantime, credit conditions have tightened globall
While Canada has fared better than most, we have been impacted as well. In respons
the Bank of Canada initiated at least $20 bln in PRAs in an attempt to calm monemarkets. With these key risks intensifying, the Banks forecasts for Canadian growth an
inflation have likely been revised down, opening the door for easing at, or perhap
before, the next scheduled meeting.
The credit crisis is taking big bites out of economic activity around th
world, and even the strongest Canadian provinces are not immune. Th
challenge facing Central Canada is well-documenteda manufacturin
sector burdened by competitiveness issues and a deepening U.
downturn. While Ontario managed to skirt technical recession in Q2, re
GDP was up only 0.2% y/y, the slowest pace in four years. Exporcontinued to weigh on growthfinal domestic demand was up a solid 4.2% y/y. Th
outlook is even weaker as the credit crunch continues to take its toll on U.S. growth.
Meantime, the outlook for the once-resilient western provinces is now als
deteriorating. A global economic slowdown has dragged oil prices down more tha
$50 in the space of just three months, to levels close to those that represent brea
even prices for marginal oil sands projectsmost reports peg this in the $80-$9
range. At the same time, tighter credit conditions threaten to hit the resource an
agriculture sectors. While large oil companies have built up plenty of cash during th
commodity boom, the junior energy and farm sectors tend to be more financing
dependent. Finally, tighter lending standards and declining confidence threaten tweigh further on western housing markets that have led the country for the past fou
yearsaverage prices are down in B.C. for the first time since 2001, and residenti
construction in Alberta is running at half the pace of last year. This is not a deat
sentence for the economy of Western Canadajob growth and consumer spendin
are still solid, and near-$100 oil will keep cash from existing projects flowing. Rathe
its meant to point out that no region of the country is fully sheltered from the howlin
credit crisis, and a period of modest economic growth is in the cards out west after
four-year boom.
Our Thoughts
ROBERT KAVCIC
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PAGE 4 FOCUS OCTOBER 3, 2008
GOOD NEWS BAD NEWS
CANADADespite decent economic
data this week, equities
pummelled, led bycommodities
CAD weakens markedly
Real GDP at Basic Prices +0.7% (July)
Conference Boards Consumer Confidence Index
+2.6 pts to 85.7 (Sep.)
Industrial Product Prices -0.2% (Aug.)
Raw Material Prices -7.7% (Aug.)
Auto Sales +1.7% y/y (Sep.)
CANADA
UNITED STATESCongress passes packageEconomic downturn sped
up in September
Latest merger news: WellsFargo and Wachovia. Whatabout Citigroup?
Conference Boards Consumer Confidence Index
+1.3 pts to 59.8 (Sep.)
Personal Income +0.5% (Aug.)
Average Hourly Earnings +0.2% (Sep.)
Nonmanufacturing ISM -0.4 pts to 50.2 but still
expandingChicago PMI -1.2 pts to 56.7 (Sep.)
but still expanding
U.S.
Nonfarm Payrolls -159,000 (Sep.)
Unemployment Rate unch at 6.1% (Sep.)5-yr high
Manufacturing ISM -6.4 pts to 43.5 (Sep.)
Factory Orders -4.0% (Aug.)
Construction Spending unch (Aug.)
Real Personal Spending unch (Aug.)
Redbook -1.3% (Sep. 27 wk)
AutoSales -27% y/y (Sep.)
S&P Case-Shiller House Prices -16.3% y/y (July)
Challenger reports announced layoffs rise
33% y/y (Sep.)
Initial Claims +1k to 497k (Sep. 27 wk)
EUROPEECB stays on hold but rate
cut discussed as Trichet
acknowledges downside
risk to economy
European governmentsswoop in to nationalize
banks
Ireland and Greeceguarantee deposits
EurozoneConsumer Prices slowedto+3.6% y/y (Sep. P)
EurozoneProducer Prices -0.5% (Aug.)
EurozoneRetail Sales +0.3% (Aug.)
EurozoneServices PMI revised up to 48.4 (Sep. F)
GermanyUnemployment-29,000 (Sep.)
GermanyRetail Sales +3.1% (Aug.)
U.K.GfK Consumer Confidence +4 pts to -32 (Sep.)
EUROPE
EurozoneEconomic Confidence -0.8 pts to87.7 (Sep.)
EurozoneManufacturing PMI revised down to
45.0 (Sep. F)
EurozoneJobless Rate +0.1 ppts to 7.5% (Aug.)
U.K.Manufacturing PMI -4.3 pts to 41.0 (Sep.)
U.K.Services PMI -3.2 pts to 46.0 (Sep.)
U.K.Credit Conditions tighten (Q3)
ItalyJobless Rate +0.2 ppts to 6.8% (Q2)
JAPANRecession already here?
RetailSales +0.7% (Aug.)
JAPANTankan Survey -8 pts to -3 (Q3)
Jobless Rate +0.2 ppts to 4.2% (Aug.)
Household Spending -4.0% y/y (Aug.)
Industrial Production -3.5% (Aug. P)
Indications of stronger growth and a move toward price stability are good news for the economy.
Jennifer Lee, Economist
Recap
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Are Stocks Cheap?Robert Kavcic, Economic Analyst
Stock markets are in the grip of the worst downturn sinc
the bursting of the technology bubble. With prices no
deep in bear market territory, and record-breaking poinmoves almost a daily phenomenon, it begs the questio
Are stocks cheap yet? While valuation metrics give mixe
results, stocks generally look to be on the cheap side, bu
the earnings numbers on which those valuations are base
remain subject to downside risk.
The equity bear market is now a year old, with the S&P 50
down 29% from its October-07 peak. This puts the curren
selloff in-line with the average post-war recessio
experience (Table 1
). The current episode is outdone onby the tech-wrecka bear market exaggerated by hig
technology valuationsand two cases in the 1970s. St
at almost 12 months old, the bear market lags th
historical norm of about 16 months in duration.
The widely used Fed valuation model compares t
earnings yield offered by stocks (essentially the inverse
the p/e ratio) to the yield on government bonds, suggestin
that stocks are cheap when their earnings yield more tha
Treasuries. With earnings yields still relatively high and bon
yields probing multi-decade lows, this simple modsuggests that the S&P 500 is 44% undervalued at curre
levels. But, the model contains some major flaws that nee
to be addressed in the current environment. First, with 1
year Treasury yields near the lowest level since the 1950
the basic Fed model is losing reliability. That is, as intere
rates fall toward zero, the implied fair value of stoc
approaches infinitycase in point is the Japanese Nikke
which is unrealistically 75% undervalued by this measur
Also, the basic model discounts future earnings at a risk-fre
rate. It seems unreasonable to discount volatile corporaearnings at a risk-free rate in the current environmen
which has seen corporate yield spreads surge (Chart 1) an
earnings consistently miss expectations. To account for th
risk, we add the spread between corporate BAA rates an
10-year Treasuries to the basic model. This risk-adjuste
version suggests that, while less attractive than under th
basic model, the S&P 500 is still 13% undervalued at curre
levels (Chart 2).
Feature
* calculations based on month-end
RANKING THE RECESSIONS
Decline*
(percent)-46%
-40%
-33%
-29%
-24%
-19%
-16%
-12%
-12%
Duration
(months)21
23
19
12
20
17
5
8
15
Year1974
2001
1970
2008
1982
1957
1990
1953
1960
TABLE 1
S&P 500 Peak to Trough Decline
CORPORATE RISK SURGESCHART 1
United States (ppts)
BAA Long-Term Treasuries
04 05 06 07 081.0
1.52.0
2.5
3.0
3.5
4.0
STANDARD VALUATION MODEL IGNORES RISKCHART 2
S&P 500 (percent)
82 87 92 97 02 07-60
-40
-20
0
20
40
60
80
Risk-Adjusted
Model
FedModel
Overvalued
Undervalued
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As with any valuation model, the quality of the inputs is
critical consideration. In this case, the only flimsy variable
the forward-year earnings estimate, which faces considerab
downside riskanalysts are currently projecting a sharp 42
rebound in S&P 500 operating earnings over the next yea
While financial earnings are expected to bounce back fro
negative levels, cyclical sectors including consum
discretionary, technology, energy and materials are all pricin
in double-digit growth even as credit conditions deteriorat
global economic activity continues to weaken and pro
margins contract (Chart 3). As such, these sectors will like
face downward revisions in the coming quarters.
That said, how far do earnings still have to fall? U
corporate profits have been firmly in a cyclical downtren
since 2006Q3, but remain about 20% above normalizelevels (Chart 4). We calculate normalized earnings b
taking the historical average share of profits from nomin
GDPa proxy for profit margins. While down from i
cyclical high, the current 10.9% profit margin has about
ppts further to fall before reaching postwar-average leve
a reversion that would offset much of the undervaluatio
seen in most earnings-based measures.
Given the clear and present earnings risk, its wort
considering some non-earnings based valuation measure
The equity q-ratio compares the market value nonfinancial corporate equity to the replacement value
corporate assets. When the ratio is less than 1, as it
currently, it implies that the cost of buying the equit
market is cheaper than the cost of building the underlyin
businesses from scratch. By this measure, stocks look th
most attractive theyve been since 1992 (Chart 5). A relate
measure that includes the financial sector is the S&P 50
price-to-book value, and its down sharply from the 199
peak and also at a 16-year low. These asset-base
valuation measures appear supportive of stock priceparticularly outside the financial sector.
The Bottom Line: A range of metrics suggests that valuation
have indeed moved into attractive territory and at least don
pose a headwind to stock prices. However, the market w
continue to grapple with the possibility of a long earning
recession, and a turnaround in corporate profits will need
be on the horizon to drive stocks higher on a sustained basis.
Feature
* Financials excluded (not meaningful)
EARNINGS ESTIMATES STILL HIGHCHART 3
S&P 500* (percent)
Forward-Year Consensus Earnings Growth
Consumer Disc.
Telecom
Technology
Energy
Health Care
Consumer Staples
Utilities
Materials
Industrials
0 10 20 30 40 50
* Nominal GDP Average Profit Share
PROFIT RECESSION IN FULL SWINGCHART 4
United States ($blns)
80 85 90 95 00 050
500
1,000
1,500
2,000
Normalized*
CorporateProfits 20%
Gap
* (market value of equity / current value of corporate net worth, non farm nonfinancial sector)
CHART 5
NON-EARNINGS MEASURES LEND SUPPORTS&P 500 Price-to-Book Value
56 66 76 86 96 060
1
2
3
4
5
6
Equity Q-Ratio*
56 66 76 86 96 060.0
0.5
1.0
1.5
2.0
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PAGE 7 FOCUS OCTOBER 3, 2008
CANADA I II III IV I II III IV 2007 2008 2009
Real GDP (q/q % chng : a.r.) -0.8 0.3 1.7 -0.4 0.6 1.4 2.0 2.4 2.7 0.7 1.0
Consumer Price Index (y/y % chng) 1.8 2.3 3.5 3.4 3.4 2.5 1.9 2.1 2.1 2.7 2.5Unemployment Rate (%) 5.9 6.1 6.1 6.4 6.6 6.7 6.6 6.6 6.0 6.1 6.6
Housing Starts (000s : a.r.) 234 220 197 190 188 185 184 183 228 210 185
Current Account Balance ($blns : a.r.) 17.8 27.0 10.1 5.2 0.4 -2.5 -4.4 -5.5 13.6 15.0 -3.0
Interest Rates
(average for the quarter : %)
Overnight Rate 3.83 3.00 3.00 2.67 2.50 2.50 2.58 3.17 4.35 3.13 2.69
3-month Treasury Bill 2.99 2.54 2.31 2.04 2.00 2.34 2.85 3.36 4.14 2.47 2.64
10-year Bond 3.73 3.67 3.63 3.38 3.40 3.57 3.76 3.94 4.27 3.60 3.67
Canada/U.S. Interest Rat e Spreads(average for the quarter : bps)
90-day 90 89 79 78 57 60 74 88 -34 84 70
10-year 7 -22 -23 -12 -13 -17 -21 -24 -36 -12 -19
UNITED STATES
Real GDP (q/q % chng : a.r.) 0.9 2.8 -0.6 -0.6 0.5 1.4 2.2 2.5 2.0 1.5 0.8
Consumer Price Index (y/y % chng) 4.2 4.3 5.3 4.3 3.6 2.7 1.5 1.6 2.9 4.5 2.3
Unemployment Rate (%) 4.9 5.3 6.0 6.4 6.6 6.8 6.8 7.0 4.6 5.6 6.8
Housing Starts (mlns : a.r.) 1.05 1.03 0.91 0.83 0.80 0.83 0.89 0.95 1.34 0.96 0.87
Current Account Balance ($blns : a.r.) -703 -733 -702 -643 -609 -577 -553 -539 -731 -695 -570
Interest Rates
(average for the quarter : %)
Fed Funds Target Rate 2.75 2.00 2.00 1.50 1.50 1.50 1.58 2.08 5.00 2.06 1.67
3-month Treasury Bill 2.09 1.66 1.52 1.26 1.43 1.74 2.11 2.48 4.47 1.63 1.94
10-year Note 3.66 3.88 3.86 3.49 3.53 3.74 3.96 4.18 4.63 3.73 3.85
EXCHANGE RATES
(average for the quarter)
US/C$ 99.6 99.0 96.0 93.0 92.0 91.2 90.4 89.6 93.5 96.9 90.8
C$/US$ 1.004 1.010 1.042 1.075 1.087 1.097 1.107 1.117 1.074 1.033 1.102
/US$ 105 105 108 108 110 114 113 111 118 106 112
US$/Euro 1.50 1.56 1.50 1.39 1.38 1.35 1.33 1.31 1.37 1.49 1.34
US$/ 1.98 1.97 1.89 1.77 1.74 1.73 1.72 1.70 2.00 1.90 1.72
Note: Blocked areas represent BMO Capital Markets forecasts
Up and down arrows indicate changes to the forecast
2008 2009 ANNUAL
Economic Forecast
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CANADA Douglas Porter, CFA, Deputy Chief EconomiThere will be a string of housing-related data next week, including building permits f
August on Monday, housing starts for September on Wednesday, and new hom
prices for August on Friday. They are all expected to point in the same direction
slowdown. Only the starts data will have been in any way affected by the latest seveflare-up in financial turmoil, although its too soon to see a major impact. We look for
drop in starts to the 205,000 area, which masks a much more serious slowdown
single-family activity. Those starts have dropped back to their lowest level since th
start of the decade in recent months, as only buoyant condo activity has held up th
broader figures. That support is expected to give way over the next year.
Coming just days before the federal election, and during the midst of the financi
hurricane, the September employment report will carry some outsized attentio
However, since the survey was conducted in the middle of the month (i.e. before th
worst of the turmoil), the results may lack fireworks. Looking through the recent bswings in employment, there has been no net new job creation over the past s
months, and we expect a similar no-growth story for September, with the risks tilted t
the downside. That may compare favourably with the 9-month string of job losses
the U.S., but its a long way from last years average monthly gain of 30,000. Th
subdued performance is expected to bump up the unemployment rate a tick to 6.2%
matching the highest level since late 2006, and up from the 5.8% secular low at th
start of the year. Average wages are likely to moderate a bit further to a 3.7% y/y pac
well down from the scorching 4.9% peak also seen at the start of the year.
Exports likely weakened in August amid a pullback in commodity prices and slowin
U.S. spending. That should cut the trade surplus to $4.2 billion from Julys $4.9 billio
taking it to a six-month low. But we likely aint seen nothing yet on the trade fron
with resource prices in retreat and the U.S. consumer battening down the hatches. A
recently as late last year, the surplus dipped to $2 billion, and it could easily go lowe
still if the U.S. economy takes a serious step back. Net exports look to remain th
biggest drag on the Canadian economy for quite some time yet.
In an already crowded economic calendar on Friday, the Bank of Canada will for th
first time release the results of its Senior Loan Officer Survey. This will provide som
clear evidence if lending standards have been significantly changed in Canada
recent months. (The only caveat would be that the survey may already be a tad dated
since it was likely conducted prior to the most intense financial turmoil.) Perhap
providing an early read, Governor Carney said in last weeks speech that there is n
evidence at this point that our corporations are facing unusual credit restrictions.
addition, the Bank will also release its usual Business Outlook Survey, and its expecte
to show some ratcheting back in expectations for sales, employment and capit
spending, as well as less serious price pressures.
Key for Next Week
Housing StartsWednesday, 8:15 am
Sep. (e) 205,000 a.r.Consensus 209,000 a.r.
Aug. 211,000 a.r.
EmploymentFriday, 7:00 am
Sep. (e) unchConsensus +12,500 (+0.1%)
Aug. +15,200 (+0.1%)Unemployment Rate
Sep. (e) 6.2%Consensus 6.2%
Aug. 6.1%
Average Hourly WagesSep. (e) +3.7% y/yAug. +3.8% y/y
Merchandise Trade SurplusFriday, 8:30 am
Aug. (e) $4.2 blnConsensus $4.7 bln
July $4.9 bln
Bank of Canada SurveysFriday, 10:30 am
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PAGE 9 FOCUS OCTOBER 3, 2008
UNITED STATES Jennifer Lee, EconomiThe minutes to the Federal Reserves September 16th meeting (when the decision t
stay on hold was unanimous) will be mildly interesting, if to get a handle on ho
nervous policymakers were becoming. Remember, the meeting was just two day
after Lehman went belly-up and Bank of America bought Merrill Lynch. The amount odiscussion regarding inflation concerns will also be of interest, especially by Fishe
given that in the press release, the reference to elevated energy prices was removed
Look for pending home sales to drop for the second straight month in August. We a
calling for a 1% decline in this leading indicator of housing activity, adding to July
outsized 3.2% fall. This will leave sales just slightly below year-ago levels, as dramatical
reduced prices and foreclosures beckon to potential homebuyers with the ability t
obtain credit. Anecdotal reports also suggest that foreigners are taking advantage
these times as their opportunity to dip their toes into the U.S. housing market.
The August trade deficit is expected to narrow but only modestly. Crude oil pric
dropped, on average, by about $15/bbl in the month but it takes time to show up
the trade data. Meantime, after possibly hitting rock bottom in July, the Feds trade
weighted U.S. dollar surged in August, which will curb already-slowing export activit
Also, the exports component in the manufacturing ISM series leads the trade numbe
by a month or two and the component edged lower in June and July, suggesting th
exports grew at a slower pace in August. Finally, Chinas trade surplus continued t
widen in the month. Look for a trade shortfall of about $60 bln in the month.
FOMC MinutesTuesday, 2:00 pm
Pending Home SalesWednesday, 10:00 am
Aug. (e) -1.0%Consensus -1.1%
July -3.2%
Trade DeficitFriday, 8:30 am
Aug. (e) $59.5 blnConsensus $59.0 bln
July $62.2 bln
Key for Next Week
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PAGE 10 FOCUS OCTOBER 3, 2008
OCT 3* SEP 26 WEEK AGO 4 WEEKS AGO DEC. 31/07
Call Money 3.00 3.00 0 0 -125Prime Rate 4.75 4.75 0 0 -125
Fed Funds (effective) 2.00 2.00 0 0 -225Prime Rate 5.00 5.00 0 0 -225
Canada 1.35 1.83 -48 -100 -247United States 0.53 0.84 -32 -124 -271Japan 0.56 0.57 -1 -2 1Eurozone 5.34 5.14 20 38 66United Kingdom 6.27 6.26 1 53 28Australia 7.99 7.74 25 81 107
Canada 2.61 2.83 -22 -11 -114United States 1.74 2.10 -36 -57 -131
Canada 3.80 3.68 12 33 -19United States 3.69 3.85 -16 -1 -33Japan 1.45 1.47 -2 -2 -6Germany 3.91 4.16 -25 -9 -39United Kingdom 4.37 4.55 -18 -1 -14Australia 5.29 5.61 -33 -34 -104
US/C$ 92.46 96.75 -4.4 -1.8 -7.7
C$/US$ 1.082 1.034 /US$ 105.68 106.01 -0.3 -1.9 -5.4US$/Euro 1.3748 1.4614 -5.9 -3.6 -5.8US$/ 1.773 1.845 -3.9 0.4 -10.7US/A$ 77.47 83.10 -6.8 -5.0 -11.5
CRB Futures Index 326.79 364.57 -10.4 -11.1 -8.9Oil (generic contract) 94.58 106.89 -11.5 -11.0 -1.5Natural Gas (generic contract) 7.38 7.63 -3.3 -0.9 -1.4Gold (spot price) 829.35 878.75 -5.6 3.2 -0.5
S&P/TSX Composite 11242 12126 -7.3 -12.3 -18.7S&P 500 1139 1213 -6.1 -8.3 -22.4Nasdaq 2022 2183 -7.4 -10.4 -23.8Dow Jones Industrial 10645 11143 -4.5 -5.1 -19.7Nikkei 10938 11893 -8.0 -10.4 -28.5Frankfurt DAX 5725 6064 -5.6 -6.6 -29.0London FT100 4926 5088 -3.2 -6.0 -23.7France CAC40 4019 4163 -3.5 -4.2 -28.4S&P ASX 200 4695 4905 -4.3 -3.7 -25.9
* as of 10:30 am
2-year Bond
Currencies
Commodities
Equities
CHANGE FROM: (BASIS POINTS)
(% CHANGE)
Canadian Money Market
U.S. Money Market
3-Month Rates
Bond Markets
10-year Bond
Financial Markets Update
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MONDAY OCTOBER 6 TUESDAY OCTOBER 7 WEDNESDAY OCTOBER 8 THURSDAY OCTOBE
JAPAN Leading Index
Aug. P (e) 89.2July 91.4
Bank of Japan Monetary Policy
Meeting (October 6-7)
BoJ Monthly Report
Machine OrdersAug. (e) -2.7% -2July -3.9% -4
Machine Tool OrdersSep. PAug. -13.9% y/y
EUROZONE G E R M A N Y
Factory OrdersAug. (e) -0.5% -4.7% y/yJuly -1.7% -0.7% y/y
E U R O Z O N E
Real GDPQ2 F (e) -0.2% +1.4% y/yQ1 +0.7% +2.1% y/y
G E R M A N Y
Industrial ProductionAug. (e) -0.3% -2.8% y/yJuly -1.8% -0.6% y/y
F R A N C E
Trade DeficitAug. (e) 4.5 bln
July 4.8 bln
G E R M A N Y
Trade SurplusAug. (e) 12.0 blnJuly 13.9 bln
ECB Monthly Repo
U.K.
Industrial ProductionAug. (e) -0.2% -2.0% y/yJuly -0.4% -1.9% y/y
Manufacturing ProductionAug. (e) -0.2% -1.6% y/yJuly -0.2% -1.4% y/y
Nationwide Consumer ConfidenceSep. (e) 49Aug. 52
Trade Deficit NAug. (e) 7.6 bln 4July 7.7 bln 4
Bank of England Moneta
Meeting (October 8
OTH
ER
Reserve Bank of Australia Monetary
Policy Meeting
A U S T R A L I A
EmploymentSep. (e) unchAug. +14,600
Jobless RateSep. (e) 4.3%Aug. 4.1%
M E X I C O
CPI CoSep. (e) +0.7% +Aug. +0.6% +
OCTOBER 6 OCTOBER 10
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* date approximate Upcoming Policy Meetings Bank of Canada: October 21, December 9, January 20 FOMC: October 28-29, December 16, Ja
MONDAY OCTOBER 6 TUESDAY OCTOBER 7 WEDNESDAY OCTOBER 8 THURSDAY OCTOBE
CANADA8:30 am Building Permits
Aug. (e) -3.0%July +1.8%
10:00 am Ivey Purchasing ManagersIndex
Sep. (e) 49.0
Aug. 51.5
8:15 am Housing StartsSep. (e) 205,000 a.r.
Consensus 209,000 a.r.Aug. 211,000 a.r.
10:00 am Pending Home SalesAug. (e) -1.0%
Consensus -1.1%July -3.2%
10:35 am DoEs Petroleum Status
Report (Oct. 3 week)
UNITED
STATES
1:00 pm 3 & 6-month T-billauction $53.0 bln(New cash $8.0 bln)
8:55 am RedbookOct. 4Sep. 27 -1.3%
1:15 pm Fed Chairman Bernanke
speaks on the economyand markets in
Washington
2:00 pm FOMC Minutes from
September meeting
3:00 pm Consumer CreditAug. (e) +$5.0 bln
Consensus +$5.8 blnJuly +$4.6 bln
5:00 pm ABC News/WashingtonPost Consumer ComfortIndex
Oct. 5Sep. 28 -41
Presidential Debate
1:00 pm 10-year TIPS auction$9.0 bln(New cash -$7.0 bln)
8:30 am Initial ClaimsOct. 4 (e) 475,000 (-22,00Sep. 27 497,000 (+1,000)
10:00 am Wholesale InveAug. (e) +0.4%
Consensus +0.4%July +1.4%
10:00 am Conference BoaConfidence Inde
Q3Q2 39
10:35 am DoEs Natural GaReport (Oct. 3 w
Chain-Store SaleSep. (e) +1.4% y/yAug. +1.7% y/y
North AOCTOBER 6 OCTOBER 10
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PAGE 13 FOCUS OCTOBER 3, 2008
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