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Oil, bank and raw-materials are the biggest laggards in Canada for the first time since at least 1988, fueling concern the nation’s economy is fading just as the U.S. is taking off.
The three industries, which collectively account for two-thirds of the Standard & Poor’s/TSX Composite Index, are the worst performers among 10 groups this year, according to data compiled by Bloomberg. The nation’s largest banks joined oil and materials in a rout that erased 4.1 percent from the benchmark index in three days, including the biggest one-day retreat since June 2013.
The selloff in the biggest pillars of the Canadian equity market comes as data showing a weaker jobs market coupled with slowing exports suggest a tentative economic recovery. Banks have slumped as earnings last week collectively missed estimates amid declining trading revenue and sluggish consumer borrowing. Meanwhile, the S&P 500 Index has reached all-time highs on signs of accelerating growth.
“It is fair to assume that the recent slide does send a much more muted message for Canada’s economy than the generally brighter U.S. picture,” Doug Porter, chief economist at BMO Capital Markets in Toronto, wrote in a research note dated today. Porter said last month that Canada’s expansion in the next few quarters may be curbed by the drop in prices for crude oil.
With a slump in commodities prices and lowered prospects for the banks weighing on its three largest industries, the S&P/TSX will struggle to keep pace with its peers in 2015. The Canadian market is lagging the S&P 500 for a fourth straight year.
‘Never Pleasant’
The S&P/TSX tumbled 329.53 points, or 2.3 percent, to 14,144.17 yesterday as the selloff in oil accelerated, with energy companies plunging the most since August 2011 as crude dropped to a five-year low. The index was down 52.87 points at 14,093.58, or 0.4 percent at 9:50 a.m. today.
“I’ve seen it before, more than once,” said John Kinsey, fund manager at Caldwell Securities Ltd. in Toronto. His firm manages about C$1 billion ($870 million). “It’s never pleasant, there’s a lot of stress. You’ve got all of this stuff where people are starting to panic.”
The Canadian benchmark equity gauge has plunged 9.7 percent since reaching a record on Sept. 3, wiping out more than C$270 billion in market value and reducing its gain for the year to 3.8 percent. The S&P/TSX, which was the second-best performing market among developed nations through the first half of the year, now ranks 16th.
Three Groups
Energy companies have slumped 14 percent this year and materials stocks have dropped 4.5 percent, leading declines among 10 major groups. While financials are still up 8.1 percent for all of 2014, they have plunged 4.7 percent from an all-time high in November.
“The three groups are feeding off each other,” said Shailesh Kshatriya, senior investment analyst at Russell Investments Group in Toronto. His firm manages about C$307 billion globally.
That combination is stirring concern as recent data suggests the nation’s economy is vulnerable. Gross domestic product rose at a 2.8 percent annualized pace in the third quarter, Statistics Canada said last month. That’s slower than the second quarter’s 3.6 percent expansion.
A report last week showed employment fell by 10,700 in November, while the unemployment rate rose to 6.6 percent. The country’s trade surplus narrowed for a third straight month in October as export growth slowed.
The U.S., by contrast, added the most to payrolls in three years during November, while the economy grew 3.9 percent in the third quarter, capping the strongest six months in a decade.
“If we had a more diversified economy with a broader base, the drop in energy would be a positive for the economy as a whole because consumers have all this money,” said Bruce Campbell, fund manager at StoneCastle Investment Management Inc. in Kelowna, British Columbia. His firm manages about C$100 million. “We’re so focused on energy and the money that’s derived from that, that’s going to hit our GDP and there’s a trickle-down to where money is spent and not spent.”
The economic picture is further clouded by the latest round of bank profits. The nation’s largest lenders slumped the most in three years last week on weaker-than-forecast earnings for the fiscal fourth quarter. Royal Bank of Canada (RY) was the only one of the six biggest banks to meet expectations.
Toronto-Dominion Bank, the nation’s largest lender by assets, sank 2.8 percent to C$52.72 yesterday, the lowest since Oct. 16. Bank of Nova Scotia, the third-largest, fell 1.8 percent to C$65.07.
Lost Cachet
Canadian banks had been considered a haven, showing resilience through the financial crisis, yet now face weaker demand for loans as consumers seek to reduce record household debt. One wonders if this was the result of the 11 billion dollar non-bailout they got a little while ago in the "Canada no we are not in recession era".
“They’ve been a great place to park your money, but they may have lost that cachet,” said David Cockfield, fund manager at Northland Wealth Management in a phone interview from Toronto. His firm manages about C$270 million. “I’d been expecting to be disappointed so many times in the past and they kept coming through, so I was neutral this time and they ended up getting hit.”
The drop in banks combines with a worse showing for commodity shares. Oil stocks have led the market lower this year, with producers from Crescent Point Energy Corp. to Encana Corp. plunging to multi-year lows.
Brent and West Texas Intermediate crudes have slumped into a bear market amid concerns of slowing global growth and a U.S. oil glut with production at the fastest pace in three decades.
Gold and Raw Material -Slump
Raw-materials stocks have retreated with gold prices touching a four-year low in November and demand for base metals such as copper slowing in China, the world’s largest commodities consumer. China is Canada’s second-largest trading partner after the U.S.
China’s economic growth will decelerate to a 26-year low of 6.7 percent in 2016, according to data compiled by Bloomberg.
Teck Resources Ltd., Canada’s largest diversified miner, has plunged 42 percent this year, the biggest decline since 2008. Barrick Gold Corp., the world’s largest gold producer by production, is down 29 percent in 2014 and touched a 1991 low on Nov. 5.
While energy producers are starting to curb capital spending to preserve their balance sheets, the sentiment in Canada’s oil patch in Calgary is not as negative as in 2008, said Martin Pelletier, managing director and portfolio manager at Calgary-based TriVest Wealth Counsel Ltd.
“It doesn’t feel like the financial crisis,” Pelletier said in a phone interview. “It doesn’t have the same fear factor, yet the share prices are trading close to those levels.”
‘Fire Sale’
TriVest, which has a 6 percent weighting in energy, owns names including Vermilion Energy Inc., Crescent Point, Tourmaline Oil Corp. and Whitecap Resources Inc. There will be opportunities for investors to buy energy stocks at “fire-sale prices,” Pelletier said.
In the meantime, the uncertainty and volatility surrounding benchmark oil prices make it difficult to predict a bottom for Canadian energy stocks, let alone broader resource companies, said Caldwell’s Kinsey.
“If the oils keep going, nobody knows where they’re going to go,” he said. “Commodities can be very brutal.”
I do hope Mr. Harper takes all the credit for this debacle..I am sure he is man enough to do this..DO YOU
VILLA PARK, Illinois – Thousands of low-wage workers from around the United States convened Friday in a Chicago suburb and kicked off the first-ever national fast food strikers’ convention. They were greeted by the president of one of America’s largest unions, who brought a message of unity to the burgeoning fast food workers’ movement.
“Tonight, I want you to know that 2 million SEIU workers have your back and are standing with you,” said Service Employees International Union president Mary Kay Henry. Her union, which claims to represent about 2.1 million workers, has long been a backer of the fast food strikes.
The convention’s itinerary for Friday night, including Henry’s speech, represented something of a victory lap for striking fast food workers. Since November 2012, the movement has ballooned from about 200 workers in one American city to thousands of workers across the country.
The most recent strike in mid-May affected fast food restaurants in 150 cities across the U.S. and was accompanied by solidarity rallies in 33 other countries. Friday was an opportunity for thousands of fast food workers from around the nation to meet one another and celebrate their successes thus far.
Henry’s speech fit very much into that theme; near the end, she even encouraged the audience to stand up and give themselves a bow.
“Because of your courage, this movement is getting stronger every day,” she told the audience. “It’s getting larger.”
The fast food movement has two key demands: An industry-wide minimum wage of $15 per hour, and the right to form a union. Discussing the first of those two demands, Henry argued that striking fast food workers have already had some success in raising the wage floor for the economy as a whole. By her estimate, 6.7 million workers have already had their wages go up as a direct consequence of fast food worker agitation. That includes low-wage workers in Seattle, where local officials recently struck a deal to raise the minimum wage to $15 per hour.
“One-hundred thousand workers sent me here to thank you,” said Henry, referring to the $15 deal.
A spokesperson for Berlin Rosen, the public relations firm that often works with organizations in the fast food workers movement, told msnbc over email that the 6.7 million figure was based on Bureau of Labor Statistics (BLS) estimates of how many people are affected by recent minimum wage increases. Seattle is just one of several states and municipalities that have recently hiked the minimum wage. Chicago and San Francisco are both contemplating their own increases to $15 per hour.
Henry’s speech framed the assembled workers as the front line of a much larger movement, which encompasses home health care workers, port truckers, adjunct professors, Walmart employees, and workers in various other industries which have seen recent labor unrest.
If the fast food movement is indeed bolstering wages across the country and giving juice to other attempts at worker organizing, it helps explain why SEIU has pumped millions of dollars into supporting workers who aren’t likely to be paying union dues any time soon.
Over the past few years, large unions like SEIU have made significant investments in so-called “alt-labor” groups of non-union workers, although it has not always been clear whether such an investment would return dividends. But minimum wage hikes tend to be unqualified coups for the labor movement, since they raise the median wage for union and non-union workers alike. Similarly, radicalized non-union workers can help provide mass and mobilization on behalf of other causes unions support.
That leaves open the question of what could happen if the fast food workers’ interests diverged from SEIU’s. At least for now, both the union and the non-union workers seem to be reaping benefits from the alliance. As Henry herself put it near the end of her speech, “We will win together.”
“Tonight, I want you to know that 2 million SEIU workers have your back and are standing with you,” said Service Employees International Union president Mary Kay Henry. Her union, which claims to represent about 2.1 million workers, has long been a backer of the fast food strikes.
The convention’s itinerary for Friday night, including Henry’s speech, represented something of a victory lap for striking fast food workers. Since November 2012, the movement has ballooned from about 200 workers in one American city to thousands of workers across the country.
The most recent strike in mid-May affected fast food restaurants in 150 cities across the U.S. and was accompanied by solidarity rallies in 33 other countries. Friday was an opportunity for thousands of fast food workers from around the nation to meet one another and celebrate their successes thus far.
Henry’s speech fit very much into that theme; near the end, she even encouraged the audience to stand up and give themselves a bow.
“Because of your courage, this movement is getting stronger every day,” she told the audience. “It’s getting larger.”
The fast food movement has two key demands: An industry-wide minimum wage of $15 per hour, and the right to form a union. Discussing the first of those two demands, Henry argued that striking fast food workers have already had some success in raising the wage floor for the economy as a whole. By her estimate, 6.7 million workers have already had their wages go up as a direct consequence of fast food worker agitation. That includes low-wage workers in Seattle, where local officials recently struck a deal to raise the minimum wage to $15 per hour.
“One-hundred thousand workers sent me here to thank you,” said Henry, referring to the $15 deal.
A spokesperson for Berlin Rosen, the public relations firm that often works with organizations in the fast food workers movement, told msnbc over email that the 6.7 million figure was based on Bureau of Labor Statistics (BLS) estimates of how many people are affected by recent minimum wage increases. Seattle is just one of several states and municipalities that have recently hiked the minimum wage. Chicago and San Francisco are both contemplating their own increases to $15 per hour.
Henry’s speech framed the assembled workers as the front line of a much larger movement, which encompasses home health care workers, port truckers, adjunct professors, Walmart employees, and workers in various other industries which have seen recent labor unrest.
If the fast food movement is indeed bolstering wages across the country and giving juice to other attempts at worker organizing, it helps explain why SEIU has pumped millions of dollars into supporting workers who aren’t likely to be paying union dues any time soon.
Over the past few years, large unions like SEIU have made significant investments in so-called “alt-labor” groups of non-union workers, although it has not always been clear whether such an investment would return dividends. But minimum wage hikes tend to be unqualified coups for the labor movement, since they raise the median wage for union and non-union workers alike. Similarly, radicalized non-union workers can help provide mass and mobilization on behalf of other causes unions support.
That leaves open the question of what could happen if the fast food workers’ interests diverged from SEIU’s. At least for now, both the union and the non-union workers seem to be reaping benefits from the alliance. As Henry herself put it near the end of her speech, “We will win together.”