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Dollar gains, equity rally stalls as caution returns

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World stock markets stalled at two-week highs and oil prices fell on Thursday as increased restrictions in parts of the world to contain the spread of the Omicron COVID-19 variant tempered investor optimism about the economic recovery.

European shares closed lower after opening higher, while stocks on Wall Street were mostly in the red and Japan’s blue-chip Nikkei stock index slipped almost half a percent.

That left MSCI’s world stock index hovering near two-week highs but struggling to make much headway after three days of solid gains. It has risen more than 3% this week and is set for its biggest weekly rise since early February.

U.S. Treasury yields retreated following three straight days of gains for the benchmark 10-year note after data again showed a tight U.S. labor market ahead of a key inflation reading on Friday that could influence Federal Reserve policy-making.

Even if the year-over-year consumer price index gain comes in less than the expected 6.8%, the Fed will not back off plans to quicken the tapering of its bond-buying program, said Marc Chandler, chief market strategist at Bannockburn Global Forex.

“The Fed has made its pivot,” he said. “The labor market is strong enough and has enough momentum to take care of itself and now it’s got to turn our attention back to inflation.”

The number of Americans filing new claims for unemployment benefits dropped to the lowest level in more than 52 years last week as labor market conditions tightened further amid an acute shortage of workers, the Labor Department said.

The yield on 10-year Treasury note fell below 1.5%, down 1.8 basis points to 1.491%.

The dollar edged higher against a basket of currencies as a warning from the International Monetary Fund‘s chief economist added to concerns about Omicron and tempered the appetite for currencies and other assets considered “risky.”

The pandemic could turn out far more costly than estimated, but central banks do not have the space to keep monetary policy loose and interest rates low as inflationary pressures build, the IMF’s Gita Gopinath https://www.reuters.com/business/imf-chief-economist-sees-inflationary-pressures-2021-12-09 said in Geneva.

Deputy Governor Toni Gravelle of the Bank of Canada said there is a risk Omicron could hold back services consumption and exacerbate supply constraint issues.

Britain announced tougher COVID-19 restrictions on Wednesday.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.27% to 96.214. The euro fell 0.42% to $1.1294 and the yen slid 0.21% to $113.42.

On Wall Street, the Dow Industrials tried rebound for much of the session but closed essentially flat. The S&P 500 fell 0.72% and the Nasdaq Composite lost 1.71%.

Healthcare and consumer staples were the only two of the 11 S&P sectors to gain.

MSCI’s all-country world index closed down 0.60% and the broad STOXX Europe 600 index fell 0.08%, but emerging markets stocks rose 0.54%.

Oil prices fell after measures by some governments to slow the spread of Omicron, while a ratings downgrade for two Chineseproperty developers stoked fears over the economic health of the world’s biggest oil importer.

Developers China Evergrande and Kaisa https://www.reuters.com/business/chinas-kaisa-kicks-off-12-bln-debt-restructuring-after-missing-pay-date-source-2021-12-09 were downgraded to “restricted default” by rating agency Fitch due to non-payment of offshore bonds. A source said Kaisa had started work on restructuring its $12 billion offshore debt.

Hopes for monetary easing in China after a cut to banks’ reserves ratio this week and fairly benign inflation figures on Thursday lifted Chinese shares and Asian shares outside Japan, which rose 0.6% to a two-week peak.

China’s blue chip CSI300 index rose 1.7% and has gained 3.6% for the week so far. [.SS]

Brent crude futures settled down $1.40 at $74.42 a barrel, while U.S. crude also fell $1.42 to settle at $70.94 a barrel.

Gold slipped as the dollar firmed. U.S. gold futures settled down 0.5% at $1,776.70 an ounce.

Bitcoin fell 5.70% to $47,645.13.

 

(Reporting by Herbert Lash; Additional reporting by Dhara Ranasinghe in London and Tom Westbrook in Sydney; Editing by Dan Grebler, Cynthia Osterman and Lisa Shumaker)

Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

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

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