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Economy

China reopening is wild card for Canada sticking economic soft landing, analysts say

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OTTAWA/TORONTO, Feb 6 (Reuters) – China’s rapid reopening is likely to fuel demand for commodities produced in abundance by Canada, potentially helping Canada’s economy avoid a recession as long as it does not also force up inflation and spur further interest-rate hikes.

The Bank of Canada last month hiked its key interest rate to 4.5%, the highest level in 15 years, and said the economy will stall in the first half of the year and could tip into recession. That prompted the central bank to pause its most aggressive tightening cycle for now, becoming the first major central bank to do so.

But analysts say a rebounding Chinese economy will likely fuel demand for Canada’s major exports, including oil, natural gas, grain, cereals and other goods, making a much-desired soft landing for the economy more likely than previously thought.

China, the world’s second-biggest economy, has lifted many of the most debilitating restrictions after abruptly jettisoning its strict “zero COVID” policy in December.

“We are really seeing China roaring back with expected growth, liquidity and fiscal spending accelerating from here, with the Canadian dollar and Canadian stocks being major beneficiaries,” said Joseph Abramson, co-chief investment officer at Northland Wealth Management.

Traders have already bid up Canadian stocks and the Canadian dollar , dubbed a ‘commodity currency’, since the news of China reopening surfaced in December. The benchmark stock market (.GSPTSE), which has a roughly 30% weighting in energy and mining stocks, is up nearly 8% while the loonie has gained 1.8% against the U.S. dollar.

Doug Porter, chief economist at BMO Capital Markets, said that for Canada, China’s reopening is more a “clear-cut positive” than it would be for other countries with fewer commodities exports.

Canada has the world’s third-largest reserves of oil , which climbed as much as 17.9% since China began relaxing its restrictions in December before giving back much of those gains.

But China’s reopening-driven oil price rise could stoke inflationary pressures, which Bank of Canada Governor Tiff Macklem highlighted as a concern for keeping rates paused in an interview with Reuters last week.

“The biggest near-term risk, the thing that could throw things off quickly, would be if the rapid reopening in the economy in China causes global commodity prices, oil prices, to go up,” Macklem said.

The U.S. Federal Reserve, the European Central Bank and the Bank of England have since laid the groundwork for a pause as well.

Most analysts forecast a more services-driven rebound in China and do not expect it will produce a dramatic oil shock.

“If it’s primarily services that are driving the rebound from the relaxation of restrictions, maybe you don’t get that explosive oil input-cost pressure across the world,” said Derek Holt, head of capital markets economics at Scotiabank.

Karl Schamotta, chief market strategist at Corpay said China’s reopening will help put a floor under global price levels, potentially offsetting demand destruction as economies slow.

“But we don’t think Western central banks will be forced to tighten more aggressively in response to a new and unexpected inflation shock,” he added.

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Economy

Mark Carney to lead Liberal economic task force ahead of next election

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.

Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.

The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.

“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.

Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.

Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.

Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.

All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.

Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.

Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.

Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.

Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.

Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.

But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.

The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.

While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”

Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.

“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.

“It’s the same failed Liberal policies causing the same hardships for Canadians.”

He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.

The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.

This report by The Canadian Press was first published Sept. 9, 2024.

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Here’s a quick glance at unemployment rates for August, by province

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OTTAWA – Canada’s national unemployment rate was 6.6 per cent in August. Here are the jobless rates last month by province (numbers from the previous month in brackets):

_ Newfoundland and Labrador 10.4 per cent (9.6)

_ Prince Edward Island 8.2 per cent (8.9)

_ Nova Scotia 6.7 per cent (7.0)

_ New Brunswick 6.5 per cent (7.2)

_ Quebec 5.7 per cent (5.7)

_ Ontario 7.1 per cent (6.7)

_ Manitoba 5.8 per cent (5.7)

_ Saskatchewan 5.4 per cent (5.4)

_ Alberta 7.7 per cent (7.1)

_ British Columbia 5.8 per cent (5.5)

This report by The Canadian Press was first published Sept. 6, 2024.

The Canadian Press. All rights reserved.

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