The recent run of Canadian strong economic figures was hard to ignore, as the Bank of Canada's policy decisions are also a data-dependent, especially with the economy outperforming the Bank's base case since October 2017. The BoC raised rates to 1.25% from 1.00% last week, as solid employment growth and more solid inflation dampened the pressure of NAFTA unclarities.
Latest reports on the Canadian labour market outperformed expectations by the end of the year. The country's unemployment rate was at its lowest level in more than four decades, becoming the reason for the BoC to consider further rate increases more willingly.
Bank of Canada thinks now is a good time to research their own digital currency. Although the name remains unknown, they are not the first financial institution to contemplate such an approach. Central bank digital currencies are a very unusual development in the financial sector. So far, no major bank has made any significant progress in developing such a currency. Bank of Canada may be the first to achieve some breakthrough in this regard. A paper has been circulating which focuses on creating a native digital currency.
Alphabet's Sidewalk Labs will develop a futuristic, billion-dollar community along a sizable swathe of Toronto's waterfront. On Wednesday, the City of Toronto and Sidewalk Labs — which is the urban innovation arm of Google's parent company Alphabet — announced a partnership to radically re-imagine 800 acres of the city's largely vacant, post-industrial Eastern Waterfront, and turn it into a tech-integrated neighborhood called Quayside.
Latest reports revealed that the Consumer Price Index for July remained at about the same level it was seen back in June, when it was reported to have increased 1.2% y/y/. Is it reasonable to expect a higher inflation in the next quarter? Yes, we do see inflation in Canada grinding higher in the next 3-6 months, though it is going to be a slow track up to the bank's 2% target. Some of the weaknesses has occurred due to temporary factors that are likely going to reverse to some extent in the nearest future. At this point, we continue to believe that the economy is operating at a relatively high level and that the growth will create modest inflation pressure.
Warren Buffett’s company is lending $1.5 billion to Home Capital and spending roughly $300 million to purchase nearly 40 percent of the troubled Canadian lender’s stock. Berkshire said Thursday that the credit line will carry a relatively hefty 9 percent interest rate once Berkshire completes its initial stock investment later this month. The rate is similar to what Berkshire charged on loans it made during the financial crisis to companies including Goldman Sachs and General Electric.
The Swedish and New Zealand housing markets are the most at risk of a correction among the so-called G-10 economies, according to Goldman Sachs. In a report on house prices in G-10 nations - those with the 10 most-traded currencies in the world - Goldman finds they are most elevated in small, open economies such as Sweden and New Zealand. A graph in the report shows that New Zealand’s probability of a housing bust is just above 40 per cent, while Sweden’s is just above 35 per cent. The risk of a bust in Canada is about 30 per cent, while in Norway, Australia and Switzerland the probability is assessed at 20-25 per cent.
Latest reports on the Canadian economy showed strong job creation and lingering housing market overheating. These were early signs for a rate hike. In your opinion, should we expect the BoC to raise interest rates? Why? No, I do expect the BoC to raise rates anytime soon, as there still are some downside risks that the Bank of Canada wants to make sure do not materialise, especially in the US trade policy. Another issue is that inflation is still below the Central Bank's target. There is still time for the excess capacity to be reduced before a rate hike becomes appropriate.
On Wednesday, April 5th the Horizons Medical Marijuana Life Sciences ETF began trading on the TSX. HMMJ is the first ever ETF offing investors direct exposure to a basket of cannabis related companies in Canada and the United States. According to its website, its stake didn't exceed 10 percent in any individual company. The Horizons Medical Marijuana Life Sciences ETF seeks to track the Solactive North American Medical Marijuana Index and it offers a way to invest without taking on individual company risk. However, the ETF only holds a total of 14 stocks, and while billed as a global fund, 10 holdings are Canadian-based. The medical marijuana industry is more developed in Canada than in other nations, and cannabis could soon become legal for all Canadian adults.
Canada's government is aiming to pass legislation that will legalise the recreational use of marijuana: the federal government is scheduled to table in Parliament legislation that will legalize the recreational sale of marijuana in the country. Prime Minister Justin Trudeau has acknowledged that will require selling cannabis at a price that is equal to or cheaper than its going rates on the black market and he has already endorsed one of its key recommendations: that marijuana should be legal for people who are of legal drinking age – 18 or 19 years old, depending on the province they live in.
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