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Canadian dollar gains as stimulus hopes boost Wall Street

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar rose against the greenback on Tuesday, as the prospect of U.S. stimulus bolstered risk appetite and Prime Minister Justin Trudeau said Canada was pressing the incoming U.S. administration not to scuttle a major pipeline project.

The loonie was trading 0.2% higher at 1.2729 to the greenback, or 78.56 U.S. cents, having traded in a range of 1.2714 to 1.2763.

“Relatively firm oil prices, along with a risk-on backdrop, this morning supported the CAD,” Ronald Simpson, managing director, global currency analysis, at Action Economics, said in a note.

Wall Street’s main indexes rose as U.S. Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package to help the world’s largest economy ride out a pandemic-driven slump.

Canada sends about 75% of its exports to the United States, including oil. U.S. crude oil futures settled 1.2% higher at $52.98 a barrel.

Canada is pressing people at the highest levels of U.S. President-elect Joe Biden’s incoming administration to reconsider canceling the Keystone XL pipeline, Prime Minister Justin Trudeau said.

Canadian factory sales decreased by 0.6% in November from December, the first drop in three months, Statistics Canada said. Separate data for the same month showed wholesale trade rising 0.7%.

Canada‘s inflation report for December and a Bank of Canada interest rate decision are due on Wednesday.

Analysts see a small chance of a ‘micro rate cut,” with the central bank moving its benchmark rate by less than 25 basis points, avoiding negative rates. The policy rate was last cut in March to a record low of 0.25%.

Canadian government bond yields were mixed across the curve, with the 10-year down half a basis point at 0.805%.

 

(Reporting by Fergal Smith; editing by Jonathan Oatis and Sonya Hepinstall)

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Canadian dollar hits a three-year high, playing catch-up with oil

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar strengthened to its highest level in three years against its U.S. counterpart on Wednesday, as oil prices rose and Canadian bond yields climbed at a faster pace than their U.S. counterparts.

The loonie was trading 0.5% higher at 1.2523 to the greenback, or 79.85 U.S. cents, having touched its strongest intraday level since February 2018 at 1.2521.

“The medium term direction for CAD is pretty clear,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “Unless oil corrects lower, we should see further CAD strength as it slowly catches up to the oil move that has already happened.”

Oil, one of Canada‘s major exports, has rallied more than 30% since the beginning of the year, while the Canadian dollar is up 1.7%.

U.S. crude oil futures settled 2.5% higher at $63.22 a barrel on Wednesday after U.S. government data showed a drop in crude output after a deep freeze disrupted production last week.

Canada‘s economy will see a solid and sustained rebound this year as COVID-19 inoculations ramp up, Bank of Canada governor Tiff Macklem said on Tuesday, while warning that Canada‘s red-hot housing market is starting to show signs of “excess exuberance”.

Canadian government bond yields were higher across a steeper curve on Wednesday. The 10-year yield touched its highest since February last year at 1.360% before pulling back to 1.316%, up 7.1 basis points on the day.

The gap between Canadian and U.S. 10-year yields narrowed by 5.5 basis points to 6.4 basis points in favour of the U.S. bond.

 

(Reporting by Fergal Smith; editing by Emelia Sithole-Matarise and Chizu Nomiyama)

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Forecasts for Canada’s TSX hiked as analysts eye global recovery: Reuters poll

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TSX rises

TORONTO (Reuters) – Canada‘s main stock index is expected to extend its record-setting rally this year as a global economic recovery boosts the outlook for the index’s heavily weighted financial and resource stocks, a Reuters poll found.

The median forecast in a survey of 24 portfolio managers and strategists was for the S&P/TSX Composite index to rise to 19,650 by the end of 2021, up 7.2% from Tuesday’s close of 18,330.09. November’s forecast was 18,400.

It was then expected to rise further to 20,125 by the middle of 2022.

“The TSX Composite with its heavy makeup of financials, energy and material stocks should be a perfect proxy and beneficiary of a global economic reopening,” said Matt Skipp, president of SW8 Asset Management.

Investors expected the rollout of COVID-19 vaccines, historically low interest rates and fiscal stimulus to support an economic recovery. In January, the International Monetary Fund projected the global economy would grow 5.5% in 2021 after an estimated 3.5% contraction in 2020.

Financial and resource stocks account for more than 50% of the Toronto market’s valuation. The energy sector has surged about 75% since the end of October, helped by a rally in crude oil prices.

“Toronto is usually a latecomer in a bull market,” said Ron Meisels, president of Phases & Cycles, an investment research firm. “The energy stocks are just now starting to participate.”

With energy prices moving up, so have expectations for inflation, contributing to a jump in global long-term bond yields since the start of the year.

Higher long-term rates could help the profit margins of banks, all the more so because short-term rates, which are more sensitive to central bank policy, are currently stuck near zero. Banks often fund their lending with short-term borrowing or deposits.

Another potential upside for banks would be the lifting by Canada‘s main financial regulator of a suspension on share buybacks and dividend increases, said irwin, a portfolio manager at ABC Funds.

The Office of the Superintendent of Financial Institutions imposed the suspension last March to help gird against the economic impact of the pandemic.

“I see pent-up dividend increases over the next six to 12 months,” Michael said.

Consumer spending is also waiting to be unleashed, strategists said, after an historic level of economic support from Canada‘s government helped swell Canadian savings to record levels.

That could support corporate earnings, which most of the poll’s respondents forecast would return to pre-COVID-19 levels within a year or earlier.

“Once we get past COVID … I expect a massive acceleration of economic growth as the pent-up demand and excess savings are released,” said Philip Petursson, chief investment strategist at Manulife Investment Management.

(Other stories from the Reuters Q1 global stock markets poll package:)

 

(Reporting by Fergal Smith; additional polling by Manjul Paul and Richa Rebello; editing by Larry King)

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PACE Releases Guidance for Circular Economy Transition in Five Sectors | News | SDG Knowledge Hub | IISD – IISD Reporting Services

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The Platform for Accelerating the Circular Economy (PACE) Secretariat has released five publications that outline how the electronics, textiles, food, plastics, and capital equipment sectors can increase their circularity. Comprising the ‘Circular Economy Action Agenda,’ the reports serve as a rallying call for businesses, governments, researchers, consumers, and civil society to work together.

Each publication outlines the objective for a circular economy and what circularity in that particular sector looks like, the impact on people and the planet if those objectives were to be achieved, the barriers that stand to hinder implementation, and actions that can optimize the sector’s transition towards a more circular economy.

The report, ‘Circular Economy Action Agenda: Electronics,’ authored in partnership with Accenture, notes that less than 20% of electronics are collected and recycled, despite the raw materials within e-waste being valued at approximately USD 57 billion per year. A circular economy for electronics, the report explains, would see products use more recycled and recyclable content, designed for longevity and collected for recycling when they are no longer suitable for use. However, barriers include, inter alia, production systems that depend on virgin materials, lack of industry-wide standards for circular design and inconsistent regulatory regimes, and lack of knowledge on the hazards wrought by e-waste.

The report’s ten calls to action to accelerate the transition to a circular economy for electronics include, inter alia, incentives for designing circular products, enabling easier sourcing of recycled content, increasing market demand for circular products and services, setting up effective collection systems, and encouraging customers to take back their electronics once they are no longer useable. For each call to action, as also done in the other four publications, the report outlines where governments, financial services institutions, consumers, and civil society actors can start.

Of note is a cross-cutting call to action to enable efficiency and transparency in compliance and responsible transboundary movement. It cites the relevance of the Basel Convention, which prohibits illegal trade and dumping of hazardous waste as end-of-life electronics are often classified. PACE recommends that competent authorities to the Basel Convention team up with trade ministries, private sector actors, and standard-setting institutions to develop certifications and “green lanes” for environmentally sound management of e-waste.

Used textiles trade should be managed with targeted efforts to ensure environmental benefits.

The report, ‘Circular Economy Action Agenda for Textiles,’ also produced with Accenture, flags that people throw away apparel worth an estimated USD 460 billion each year, and that the textiles industry consumes roughly 215 trillion liters of water annually. Recycling textile waste, the report notes, can unlock up to USD 100 billion per year, as well as natural resource and chemical use reductions.

The report envisions a future where inputs for textiles are safe, recycled, or renewable; where textiles are kept in use for longer; and where textiles are recycled at the end of their use, rather than incinerated or landfilled. Barriers to achieving this vision include high price sensitivity in the fibers market, short trend cycles (e.g. fast fashion), undeveloped collection and sorting infrastructure, and blended fibers and chemical additives that compromise the quality and safety of textile recycling.

The ten calls to action to accelerate the transition to a circular textile economy include incentivizing and supporting textiles’ design for longevity and recyclability, encouraging behavioral shifts, guiding new business models, increasing efficiency and quality in textiles sorting, and making the recycled fibers market more competitive. The authors note that (re)used textiles sent overseas can deliver environmental benefits, but it remains unclear how much imported textiles are actually reused, rather than downcycled or disposed of. Accordingly, a call to action emphasizes that the used textiles trade should be managed with targeted efforts to ensure environmental benefits and help preserve local industries, in part through matching countries’ desired levels of import and export.

The report, ‘Circular Economy Action Agenda for Plastics,’ also by PACE and Accenture, projects plastic packaging volumes to more than quadruple by 2050, to over 318 million tons per year. A circular economy for plastics, the report notes, starts with eliminating unnecessary plastics and shifting from virgin materials to recycled or renewable ones. Highlighting that just 14% of plastic packaging today is collected for recycling (and that an even lower percentage is actually recycled), several of the report’s ten calls to action point to a need for incentivizing reusing—and eventually recycling—plastics, in part through better-functioning collection systems and strategically-planned sorting and recycling facilities.

Fragmentation of the plastic waste trade globally can contribute to uncertainty around investments in reverse logistics and recycling infrastructure.

The report calls out fragmentation of the plastic waste trade globally as a barrier to a circular economy for plastics, which, beyond disincentivizing plastics’ collection and transport, can also contribute to uncertainty around investments in reverse logistics and recycling infrastructure. One of the calls to action outlines how actors can strategically plan sorting and recycling facilities in compliance with trade regulations. The call to action references the Basel Convention’s Plastics Waste Amendments, which came into effect in January 2021, to enhance control of transboundary movements of plastic waste.

The report, ‘Circular Economy Action Agenda: Food,’ developed by the PACE Secretariat and Resonance, notes that a third of all food is currently lost or wasted, despite the fact that 800 million people do not have enough to eat. The report highlights the value of a regenerative food system that goes far beyond the current production regime where 75% of food is derived from just 12 plant and animal species. Rather, a circular food economy would recycle the nutrients in food byproducts to make textiles and animal feed or drive innovations. Less than 2% of nutrients are recycled today.

The report calls for a transition to healthy diets based on regenerative practices that avert food loss and waste hotspots. Additional calls to action include reframing wasted food and byproducts as valuable resources, rather than trash, and facilitating secondary market development for these inputs. Nineteen barriers identified include perverse incentives such as ecologically harmful agricultural subsidies and lack of finance or assistance to more sustainable production methods, as well as poor coherence and logistics such as cold chains and proper storage.

The report, ‘Circular Economy Action Agenda: Capital Equipment,’ by PACE, Accenture, and Circle Economy, covers long-lived buildings, machines, and infrastructure, which consume 7.2 million tons of raw materials annually. A circular economy for capital equipment, the report notes, would primarily see products designed with reuse rather than recycling in mind, and delivered though “product-as-a-service” models that go beyond one-off sales. Calls to action, similar to other sectors, include incentives for circular product design, servitization, increasing end-of-use product return, and responsible reverse logistics systems, among other recommendations. One barrier of note is that some public organizations are not allowed to trade with private parties, which prevents capital equipment from being returned for refurbishing or reuse.

PACE notes that over 200 experts from more than 100 businesses, governments, and civil society organizations have contributed to the development of the Action Agenda. PACE was created in 2018 by the World Economic Forum (WEF). It is now hosted by the World Resources Institute (WRI). [Publication: Circular Economy Action Agenda: Electronics] [Publication: Circular Economy Action Agenda: Textiles] [Publication: Circular Economy Action Agenda: Plastics] [Publication: Circular Economy Action Agenda: Food] [Publication: Circular Economy Action Agenda: Capital Equipment] [PACE Circular Economy Action Agenda Landing Page]

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