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Huge state aid is dragging Canada out of worst-ever contraction – BNN

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Canada’s households are emerging from an historic downturn flush with cash from government aid, boding well for the nascent recovery.

Gross domestic product plunged by an annualized 38.7 per cent in the three months through June, adding to an 8.2 per cent drop in the first quarter, Statistics Canada said Friday in Ottawa. But household disposable income surged on the back of state transfers, much of which has yet to be spent.

The data suggest Prime Minister Justin Trudeau’s aggressive spending has more than offset the impact of the recession on family finances, making the biggest contribution to a quick recovery and limiting potential long-term damage. Whether it’s enough to bring the economy back to normal remains an open question.

The second quarter will go down as by far the worst ever. But the collapse mostly reflects losses during one month — April — the nadir of the pandemic. Monthly GDP data supports the view that a sharp recovery is underway, with growth of 6.5 per cent in June, a record, and 3 per cent in July.

“The speed of the rebound seems out of sync with the confidence exuded by policy makers that it couldn’t happen this fast,” Derek Holt, an economist at Bank of Nova Scotia, said in a report to investors. “It is, but stay tuned.”

Government transfers rose 88 per cent non-annualized in the quarter, the largest jump on record. Almost a third of household income, an unprecedented share, was from government transfers. That, along with a sharp pullback in household spending, pushed the savings rate to 28 per cent, the highest ever. That mirrors data from the U.S., where incomes surged early in the pandemic because of federal relief checks.

The improvement in household balance sheets contributed to strong GDP showings beginning in May, and should support consumer spending going into the second half, Jocelyn Paquet and Kyle Dahms, economists at National Bank Financial, said in a report to investors.

“Monthly figures published up to now are hinting at a +41.1 per cent annualized rebound” in the third quarter, they wrote. “But the pace of this recovery remains highly uncertain and dependent on the evolution of the pandemic both at home and abroad.”

But for now, the outlook is better. Oil prices have recovered, the country’s housing market is booming again amid historically low interest rates, and the federal government has pledged to keep the fiscal taps open into the recovery period — keeping disposable income elevated.

What Bloomberg’s Economists Say

“Our tracking of high-frequency and alternative data signals the easy gains after the re-opening of the economy have largely been realized. We don’t expect to see a complete recovery in activity until at least late 2021, and anticipate an even longer road ahead for the labor market.”
–Andrew Husby

Another reason for optimism: Canada has also avoided a new wave of cases like the one that continues to hamper the expansion south of the border.

With July’s estimate of a 3 per cent increase, Canada’s economy is now at 94 per cent of February’s levels, or put another way, has recouped around two-thirds of lost output from the height of the pandemic

Still, Canada’s economy isn’t expected to fully make up the losses until 2022. Labor data next week will show to what extent workers are transitioning away from government support and back into paid employment.

“The concern has long been that still exceptional softness in labor markets (the unemployment rate was still in double-digits at 10.9 per cent in July) would outlast exceptional policy supports,” Nathan Janzen, an economist at RBC Capital Markets, said in a report to investors.

The Canadian dollar pared gains on the report, and was trading 0.2 per cent higher at C$1.3105 against its U.S. counterpart at 11:06 a.m. Toronto time.

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The second quarter was truly bad, with historic declines across the board. Household consumption plunged by an annualized 43 per cent, housing investment was down 48 per cent, and non-residential business capital spending was down 57 per cent.

Exports and imports plummeted by more than half. The drop in imports was larger than the collapse in exports, which means the trade sector actually contributed positively to growth in the second quarter.

The second quarter contraction is worse than the U.S. and Germany, but better than other parts of Europe like the U.K., Italy and Spain.

Friday’s data show that Canadians are eating, drinking and smoking more than they did pre-pandemic, but largely spending less on other things. Transportation services are down 81 per cent from the end of last year, while expenditures outside the country fell 90 per cent. Purchases on clothing, accommodation and restaurants have also seen big hits.

Despite the grim numbers in the rear-view mirror, economists are starting to raise 2020 Canadian forecasts. Bank of Montreal Chief Economist Doug Porter said his team will be revising upward its full-year GDP forecast for the first time in four months on the better-than-expected rebound.

–With assistance from Erik Hertzberg.

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Canada signs deal with VBI Vaccines to develop coronavirus candidate by 2022 – Global News

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VBI Vaccines Inc said on Monday it had entered into an agreement with Canada to develop a potential vaccine for COVID-19 by 2022 through mid-stage trials conducted exclusively in the country.

Canada will contribute around 75% of the U.S.-based company’s development costs and C$55.9 million ($42.2 million) for the project.

VBI Vaccines said last month that together with the National Research Council Canada it was investigating the vaccine candidate, VBI-2900, in preclinical trials.

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As per the agreement, signed last week, the company’s Ottawa-based unit is obligated to complete the vaccine development in or before the first quarter of 2022.






3:06
Ottawa signs 2 new COVID-19 vaccine deals for Canada


Ottawa signs 2 new COVID-19 vaccine deals for Canada

There are currently no approved vaccines for COVID-19, but around 38 vaccines are being tested in humans around the world.

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© 2020 Reuters

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Wall Street falls, S&P 500 down 1.2% as global markets swoon – CP24 Toronto's Breaking News

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Stan Choe, Damian J. Troise And Alex Veiga, The Associated Press


Published Monday, September 21, 2020 3:03PM EDT


Last Updated Monday, September 21, 2020 11:23PM EDT

NEW YORK – Wall Street slumped Monday as markets tumbled worldwide on worries about the pandemic’s economic pain, though the S&P 500 had pared its losses by the end of the day.

The drops began in Asia as soon as trading opened for the week, and they accelerated in Europe on worries about the possibility of tougher restrictions there to stem rising coronavirus counts. In the U.S., stocks and Treasury yields weakened, while prices sank for oil and other commodities that a healthy economy would demand.

The S&P 500 fell 38.41 points, or 1.2%, to 3,281.06. It extends the index’s losing streak to four days, its longest since stocks were selling off in February on recession worries. But a last-hour recovery helped the index more than halve its loss of 2.7% from earlier in the day.

The Dow Jones Industrial Average fell 509.72, or 1.8%, to 27,147.70 after coming back from an earlier 942 point slide. The Nasdaq composite slipped 14.48, or 0.1%, to 10,778.80 after recovering from a 2.5% drop.

Wall Street has been shaky this month, and the S&P 500 has dropped 8.4% since hitting a record Sept. 2 amid a long list of worries for investors. Chief among them is fear that stocks got too expensive when coronavirus counts are still worsening, Congress is unable to deliver more aid for the economy, U.S.-China tensions are rising and a contentious U.S. election is approaching.

Investors should expect the stock market to stay volatile, perhaps through the November elections, as they wait for these questions to shake out, said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management.

Monday’s selling was exacerbated by worries about the possibility of more business restrictions in Europe, particularly as the United States heads into flu season, Draho said, and “some investors may be stepping aside.”

David Joy, chief market strategist at Ameriprise Financial, noted how Monday’s sharpest drops were concentrated in areas of the market most closely tied to the economy’s strength, such as energy companies and raw-material producers.

“It seems to be a broader expression of worry about the economy,” he said.

Bank stocks took sharp losses after a report alleged that several continue to profit from illicit dealings with criminal networks despite U.S. crackdowns on money laundering.

Shares of electric and hydrogen-powered truck startup Nikola plunged 19.3% after its founder resigned as executive chairman and left its board amid allegations of fraud. The company has called the allegations false and misleading.

General Motors, which recently signed a partnership deal where it would take an ownership stake in Nikola, fell 4.8%.

Investors are also worried about the diminishing prospects that Congress may soon deliver more aid to the economy. Many investors call such support crucial after extra weekly unemployment benefits and other stimulus expired. But partisan disagreements have held up any renewal of what’s known as the CARES Act.

“The stimulus money from the CARES Act, the impact of that, is running off and there doesn’t seem to be any urgency in Washington to get another package together,” said Joy of Ameriprise Financial..

Partisan rancour is only continuing to rise, deflating hopes further. The sudden vacancy on the Supreme Court following the death of Justice Ruth Bader Ginsburg is the latest flashpoint dividing the country.

Tensions between the world’s two largest economies are also weighing on markets. President Donald Trump has targeted Chinese tech companies in particular, and the Department of Commerce on Friday announced a list of prohibitions that could eventually cripple U.S. operations of Chinese-owned apps TikTok and WeChat. The government cited national security and data privacy concerns.

That raises the threat of Chinese retaliation against U.S. companies.

A U.S. judge over the weekend ordered a delay to the restrictions on WeChat, a communications app popular with Chinese-speaking Americans, on First Amendment grounds.

Trump also said on Saturday he gave his blessing to a proposed deal between TikTok, Oracle and Walmart to create a new company that would likely be based in Texas.

Layered on top of all those concerns for the market is the continuing coronavirus pandemic and its effect on the global economy.

On Sunday, the British government reported 4,422 new coronavirus infections, its biggest daily rise since early May. An official estimate shows new cases and hospital admissions are doubling every week.

Prime Minister Boris Johnson later this week is expected to announce a slate of short-term restrictions that will act as a “circuit breaker” to slow the spread of the disease. The number of cases has been rising quickly in many European countries and while authorities don’t seem ready to return to the tough restrictions on public life that they imposed in the spring, the new wave of the pandemic threatens the economic outlook.

The FTSE 100 in London dropped 3.4%. Other European markets were similarly weak. The German DAX lost 4.4%, and the French CAC 40 fell 3.7%.

In Asia, Hong Kong’s Hang Seng dropped 2.1%, South Korea’s Kospi fell 1% and stocks in Shanghai lost 0.6%.

The yield on the 10-year Treasury fell to 0.66% from 0.69% late Friday.

September’s losses for markets are reversing months of remarkable gains. Beginning in late March, when the Federal Reserve and Congress pledged massive amounts of support for the economy, the S&P 500 erased its nearly 34% in losses caused by the pandemic. Signs of budding economic improvements accelerated the gains, but growth has slowed recently.

AP Business Writer Joe McDonald contributed.

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S&P 500 sinks more than 2% as markets tumble worldwide – CP24 Toronto's Breaking News

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Stan Choe, Damian J. Troise And Alex Veiga, The Associated Press


Published Monday, September 21, 2020 3:03PM EDT


Last Updated Monday, September 21, 2020 11:23PM EDT

NEW YORK – Wall Street slumped Monday as markets tumbled worldwide on worries about the pandemic’s economic pain, though the S&P 500 had pared its losses by the end of the day.

The drops began in Asia as soon as trading opened for the week, and they accelerated in Europe on worries about the possibility of tougher restrictions there to stem rising coronavirus counts. In the U.S., stocks and Treasury yields weakened, while prices sank for oil and other commodities that a healthy economy would demand.

The S&P 500 fell 38.41 points, or 1.2%, to 3,281.06. It extends the index’s losing streak to four days, its longest since stocks were selling off in February on recession worries. But a last-hour recovery helped the index more than halve its loss of 2.7% from earlier in the day.

The Dow Jones Industrial Average fell 509.72, or 1.8%, to 27,147.70 after coming back from an earlier 942 point slide. The Nasdaq composite slipped 14.48, or 0.1%, to 10,778.80 after recovering from a 2.5% drop.

Wall Street has been shaky this month, and the S&P 500 has dropped 8.4% since hitting a record Sept. 2 amid a long list of worries for investors. Chief among them is fear that stocks got too expensive when coronavirus counts are still worsening, Congress is unable to deliver more aid for the economy, U.S.-China tensions are rising and a contentious U.S. election is approaching.

Investors should expect the stock market to stay volatile, perhaps through the November elections, as they wait for these questions to shake out, said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management.

Monday’s selling was exacerbated by worries about the possibility of more business restrictions in Europe, particularly as the United States heads into flu season, Draho said, and “some investors may be stepping aside.”

David Joy, chief market strategist at Ameriprise Financial, noted how Monday’s sharpest drops were concentrated in areas of the market most closely tied to the economy’s strength, such as energy companies and raw-material producers.

“It seems to be a broader expression of worry about the economy,” he said.

Bank stocks took sharp losses after a report alleged that several continue to profit from illicit dealings with criminal networks despite U.S. crackdowns on money laundering.

Shares of electric and hydrogen-powered truck startup Nikola plunged 19.3% after its founder resigned as executive chairman and left its board amid allegations of fraud. The company has called the allegations false and misleading.

General Motors, which recently signed a partnership deal where it would take an ownership stake in Nikola, fell 4.8%.

Investors are also worried about the diminishing prospects that Congress may soon deliver more aid to the economy. Many investors call such support crucial after extra weekly unemployment benefits and other stimulus expired. But partisan disagreements have held up any renewal of what’s known as the CARES Act.

“The stimulus money from the CARES Act, the impact of that, is running off and there doesn’t seem to be any urgency in Washington to get another package together,” said Joy of Ameriprise Financial..

Partisan rancour is only continuing to rise, deflating hopes further. The sudden vacancy on the Supreme Court following the death of Justice Ruth Bader Ginsburg is the latest flashpoint dividing the country.

Tensions between the world’s two largest economies are also weighing on markets. President Donald Trump has targeted Chinese tech companies in particular, and the Department of Commerce on Friday announced a list of prohibitions that could eventually cripple U.S. operations of Chinese-owned apps TikTok and WeChat. The government cited national security and data privacy concerns.

That raises the threat of Chinese retaliation against U.S. companies.

A U.S. judge over the weekend ordered a delay to the restrictions on WeChat, a communications app popular with Chinese-speaking Americans, on First Amendment grounds.

Trump also said on Saturday he gave his blessing to a proposed deal between TikTok, Oracle and Walmart to create a new company that would likely be based in Texas.

Layered on top of all those concerns for the market is the continuing coronavirus pandemic and its effect on the global economy.

On Sunday, the British government reported 4,422 new coronavirus infections, its biggest daily rise since early May. An official estimate shows new cases and hospital admissions are doubling every week.

Prime Minister Boris Johnson later this week is expected to announce a slate of short-term restrictions that will act as a “circuit breaker” to slow the spread of the disease. The number of cases has been rising quickly in many European countries and while authorities don’t seem ready to return to the tough restrictions on public life that they imposed in the spring, the new wave of the pandemic threatens the economic outlook.

The FTSE 100 in London dropped 3.4%. Other European markets were similarly weak. The German DAX lost 4.4%, and the French CAC 40 fell 3.7%.

In Asia, Hong Kong’s Hang Seng dropped 2.1%, South Korea’s Kospi fell 1% and stocks in Shanghai lost 0.6%.

The yield on the 10-year Treasury fell to 0.66% from 0.69% late Friday.

September’s losses for markets are reversing months of remarkable gains. Beginning in late March, when the Federal Reserve and Congress pledged massive amounts of support for the economy, the S&P 500 erased its nearly 34% in losses caused by the pandemic. Signs of budding economic improvements accelerated the gains, but growth has slowed recently.

AP Business Writer Joe McDonald contributed.

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