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Canadian economy sputters into lower gear as rising interest rates bite – BNN Bloomberg

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Canadian economic activity came in a bit stronger than expected in July, but remained weak through the summer in a clear sign growth has begun to sharply slow down.

Gross domestic product increased in July by 0.1 per cent, beating estimates for a 0.1 per cent drop, Statistics Canada reported Thursday in Ottawa. Preliminary data show GDP was unchanged in August.

Even with the surprise upside in July, the data are consistent with an economy gearing down from a strong start to the year, as a reopening boom loses steam. Since April, growth has averaged just 0.1 per cent on a monthly basis.

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The weakness shows the extent to which Canada’s resource-heavy economy — which had benefitted from the recent boom in energy prices — remains vulnerable to global economic headwinds and higher borrowing costs that threaten to stall expansions in most major advanced economies.

While the slowdown won’t be enough to stop the Bank of Canada from delivering another interest rate hike next month, policymakers will be closely monitoring the extent of softness in the economy to see how high they need to go to rein in inflation to the 2 per cent target.

JOB VACANCIES FALL

Governor Tiff Macklem has already increased the Bank of Canada’s overnight interest rate by 3 percentage points since March, and is expected to continue hiking through the rest of this year. Markets are pricing another 50 basis-point increase at the central bank’s next policy decision on Oct. 26.

The Canadian economy grew 3.1 per cent in the first quarter and 3.3 per cent in the following three months. Economists anticipate Canada’s growth rate will fall to 1 per cent annualized in both the third and fourth quarters of this year.

In July, the manufacturing and construction sectors contracted, wholesale trade pulled back, retail activity shrank, and higher inflation and interest rates continued to slow real estate activities.

In a separate report on Thursday, Statistics Canada said job vacancies also declined in July by 56,400, or 5.5 per cent — another sign of a slowdown. Total vacancies, however, remain elevated at just under 1 million.

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Stock market news live updates: Stocks close higher, S&P 500 snaps 5-day losing streak – Yahoo Canada Finance

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U.S. stocks rose Thursday, stymieing this week’s rout across equities from stretching into another day after rate jitters and recession chatter hampered a seasonally bullish period for Wall Street.

The S&P 500 (^GSPC) climbed 0.8% after five straight days of losses, while the Dow Jones Industrial Average (^DJI) bounced 180 points, or also about 0.5%. The technology-focused Nasdaq Composite (^IXIC) advanced 1.1% after the index had its worst first week of December since 1975, per data from Bespoke Investment Group.

In other markets, U.S. Treasuries held steady after the 10-year yield slid below 3.5% to a nearly three-month low. Oil fell, with the commodity plunging more than 10% this week to trade near year-ago levels. West Texas Intermediate (WTI) crude futures closed around $72 per barrel.

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Meanwhile, filings for unemployment insurance rose slightly last week. Initial jobless claims, the most timely snapshot of the labor market, came in at 230,000 for the week ended Dec. 3, an increase of 4,000 from the previous week’s revised level, Labor Department figures showed Thursday.

On the corporate side, GameStop (GME) shares rose 11%, even as the meme stock favorite reported worse-than-expected quarterly earnings.

Shares of Rent the Runway (RENT) surged 74% after the company raised its full-year revenue forecast and reported results that beat Wall Street estimates. CEO Jennifer Hyman also said the company’s restructuring plan was “substantially complete” and will focus on “substantially improving cash burn” in the future.

Another round of earnings is on the docket for traders after the bell Tuesday, with headliners including Broadcom (AVGO), Costco (COST), Lululemon (LULU), and DocuSign (DOCU) on deck to report. Costco is Yahoo Finance’s Company of the Year.

Investors are nearing the Federal Reserve’s highly anticipated last rate-setting meeting of 2022 next week. U.S. central bank officials are scheduled to convene Dec. 13-14 and expected to lift their benchmark interest rate by 50 basis points.

While the Fed’s next policy move is largely priced in, uncertainty remains around how high the key policy rate will need to go, how long the U.S. economy will weather a higher interest rate environment, and whether it may trigger a recession. Wall Street’s big banks, along with traders, are pricing in a pause at around 5%, but some have warned rates can go higher if economic and labor market momentum keeps at the current pace.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022.  REUTERS/Brendan McDermidTraders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022.  REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

“We do not yet think the Federal Open Markets Committee is ready to signal the end of rate hikes is coming soon, but mathematically with the dot plot in hand, the December step toward ‘sufficiently restrictive’ will put them just 75 bps away from the Summary of Economic Projections’ (SEP) median terminal rate,” UBS economist Jonathan Pingle said in a recent note. “The Chair seems likely to remind everyone that the SEP is not a commitment, and depends on how the economy and data unfold.”

More price data is due out ahead of the meeting and will offer traders – and Fed officials – a snapshot of where inflation is trending. The Producer Price Index (PPI), a measure of inflation at the wholesale level, is set for release on Friday, while the all-important Consumer Price Index (CPI) is due out on Tuesday, day one of the Fed meeting.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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Key inflation measure shows price pressures cooled off in November, but remain high – CNN

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New York
CNN
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Another key inflation measure shows price pressures cooled off but remained stubbornly high in November, despite the Federal Reserve’s monthslong efforts to fight inflation through higher interest rates.

The Producer Price Index, which measures prices paid for goods and services by businesses before they reach consumers, rose 7.4% in November compared to a year earlier, the Bureau of Labor Statistics reported Friday. That’s down from the revised 8.1% gain reported for October.

US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. The higher-than-expected inflation readings raised concerns about whether the Fed will be able to slow the pace of rate hikes.

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But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.

The PPI report generally gets less attention that the corresponding Consumer Price Index, which measures prices paid by US consumers for goods and services. But this is a rare month in which the PPI report came out before the CPI report, which is due out Tuesday.

That and the Fed meeting scheduled for Tuesday and Wednesday next week is making this inflation report of particular importance to investors.

“Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

Overall prices rose a seasonally adjusted 0.3% compared to October — the same monthly increase as was reported in both September and October — but were slightly higher than the 0.2% rise forecast by economists.

Stripping out volatile food and energy prices, core PPI rose 6.2% for the year ending in November, down from the revised 6.8% increase the previous month. Economists had forecast only a 5.9% increase.

Core PPI posted a 0.4% increase from October, a far bigger rise than the revised 0.1% month-over-month rise in that previous month, and twice as big as the 0.2% rise forecast by economists.

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Keystone pipeline temporarily closed following Kansas oil spill

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The energy company in charge of the pipeline has not said what caused the spill or how much oil was released.

The Keystone pipeline has halted operations following an oil spill into a creek in the United States state of Kansas. The pipeline carries more than 600,000 barrels of oil from Canada to the Texas Gulf Coast each day.

Canada-based TC Energy said in a press release that it shut down the pipeline on Wednesday night in response to a drop in pipeline pressure. The company has yet to offer information on the scale and cause of the spill.

“The system remains shut down as our crews actively respond and work to contain and recover the oil,” the release said.

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The spill resulted in oil leaking into a creek in northeastern Kansas and the company has said they were using machinery to prevent the oil from moving further downstream. Pipelines have long spurred concerns about the destructive potential of oil spills.

Another pipeline previously proposed by TC, the Keystone XL pipeline, would have been 1,930 kilometres (1,200 miles) long and cut across US states such as Montana, South Dakota and Nebraska.

That proposal spurred strong opposition from advocates who said it would increase the chance of spills, undermine the rights of Indigenous communities and worsen climate change.

Former President Donald Trump approved a permit for the contentious project in 2017 but a court halted construction in 2018 before the permit was cancelled by President Joe Biden’s administration last year.

TC finally abandoned the effort in June 2021 but has since filed a claim seeking remuneration for losses it says it faced because of the cancellation.

The spill on Wednesday occurred several years after the Keystone pipeline leaked about 1.4m litres (383,000 gallons) of oil in eastern North Dakota in 2019.

As word of the shutdown spread on Wednesday, oil prices ticked upwards by about five percent.

“It’s something to keep an eye on, but not necessarily an immediate impact for now,” said Patrick De Haan, head of petroleum analysis at GasBuddy, which tracks gasoline prices, according to the Associated Press. “It could eventually impact oil supplies to refiners, which could be severe if it lasts more than a few days.”

In their statement, Keystone said their primary focus was the “health and safety of onsite staff and personnel, the surrounding community, and mitigating risk to the environment through the deployment of booms downstream as we work to contain and prevent further migration of the release”.

Previous Keystone spills have resulted in stoppages that lasted up to two weeks. However, analysts have noted that the current stoppage could possibly last longer because it involves a body of water.

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