Gold prices surged to their highest in nearly eight years on Wednesday, while global shares cooled as signs of an acceleration in coronavirus cases kept investors on edge.
Fueling concerns about sustained weakness in the pace of the economic recovery was data showing several U.S. states seeing record infections and the death toll in Latin America passing 100,000, according to a Reuters tally.
The European Union is even prepared to bar U.S. travelers because of the surge of cases in the country, putting it in the same category as Brazil and Russia, the New York Times reported.
All that and softness in the dollar, along with endless cheap liquidity from central banks, helped spot gold gain 0.2% to $1,770.92 per ounce after touching $1,773, its highest level since October 2012 in early Asian trade.
Global stocks were 0.3% lower and have been moving sideways in recent weeks after rising more than 40% from March lows on hopes the worst of the pandemic was over.
European shares were 1% lower.
There was some good news in markets, with emerging market stocks climbing to a 3-1/2 month high. They were up 0.5% on the day, while MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.5% to reach its highest since pandemic lockdowns first cratered markets in early March.
E-Mini futures for the S&P 500 reversed early losses to gain 0.1%.
“Global equity market futures are struggling to make gains today, likely for no other reason than with rising daily Covid-19 cases in the US remaining front-page news, the headlines are proving to be a weighty burden to bear this morning,” said Stephen Innes, chief global market strategist at AxiCorp. “The trough in global growth is indeed behind us, but the recovery trajectory in H2 remains uncertain.”
Against a backdrop of concerns over a weaker U.S. dollar and that a jump in infections will lead to more stimulus measures, gold should remain on a reasonably constructive path, he said.
The euro, headed for its best month against the dollar since October, inched higher to $1.1303.
The dollar was just a touch negative against a basket of currencies, just above a one-week low hit Tuesday.
“The dollar and risk sentiment are likely to remain broadly negatively correlated, barring the U.S. displaying clear and enduring leadership in the global economic recovery, something hard to square with the grim U.S. news on COVID,” said Ray Attrill, head of FX strategy at NAB.
The New Zealand dollar eased after the country’s central bank said it might have to do yet more to stimulate the economy, including cutting rates further, expanding bond purchases or even buying foreign assets.
Euro zone bond yields were broadly steady, with a focus on Austria which is expected to sell a new 100-year bond that will raise 2 billion euros, one of the longest-dated bond sales since the coronavirus crisis.
Germany will also visit the primary market with the first reopening of a 15-year bond which is expected to raise 2.5 billion euros.
Oil futures were mixed as worries about oversupply in the market, stoked by a rise in U.S. crude inventories, were offset by a drop in gasoline stocks.
Brent crude was up 0.3% at $42.75 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 1 cents to $40.34 a barrel, paring some earlier losses.
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'A long climb back': Macklem stresses recovery as BoC holds – BNN
Bank of Canada Governor Tiff Macklem sent a clear message with Wednesday’s Monetary Policy Report: Economic recovery from the COVID-19 pandemic is the central bank’s top priority.
“The recovery has started, and we’re seeing some good numbers, but it’s going to be a long climb back,” Macklem told BNN Bloomberg in an interview Wednesday, just hours after the Bank of Canada held its benchmark interest rate at 0.25 per cent and made it clear it’s in no rush to move off that level.
“Considerable policy support is going to be required. Fiscal policy is taking a lead, but monetary policy has an important complementary role to play, and we wanted to be clear to Canadians that the Bank of Canada is going to be there through the full length of the long climb back.”
He also said that the central bank is prepared to add more stimulus, if required, a policy he says was made clear in the Bank of Canada’s central scenario issued with Wednesday’s MPR.
“The purpose of putting out a central scenario is that — even though there is considerable uncertainty around it — it is the scenario that guided us in our policy deliberation,” he said.
“As data comes in we’ll be evaluating that relative to that central scenario. If we need more monetary stimulus, we’ll do that.”
Macklem highlighted Canadians’ high level of household indebtedness as a longstanding concern for the Bank of Canada, but expressed confidence that economic recovery could prove to be a rising tide.
“The best predictor of whether somebody is going to pay their mortgage is whether they have a job,” Macklem said. “Yes, high household indebtedness is a vulnerability, but supporting the recovery and reducing that vulnerability are entirely aligned.”
“By holding interest rates low across the yield curve, that will reduce debt burdens for Canadians.”
While Macklem said the central bank “didn’t put [its] forward guidance on a calendar,” its central scenario indicates that the key interest rate will remain where it is for at least two years.
“There’s a lot of uncertainty around that scenario, but I think the message is pretty clear,” he said. “Interest rates are going to be very low for a long time.”
'Interest rates will be low for a long time': Canadian home sales jumped in June – Yahoo Canada Finance
Canada’s real estate markets continue to snap back after COVID-19 lockdowns put a damper on the typically busy spring market.
The Canadian Real Estate Association (CREA) says national home sales jumped 63 per cent month-over-month in June. Sales are up 150 per cent from April.
“While June’s housing numbers were mostly back at normal levels, we are obviously not back to normal at this point,” said Shaun Cathcart, CREA’s Senior Economist, in a release.
“I guess the bigger picture is one of cautious optimism. The market has recovered much faster than many would have thought, but what happens later this year remains a big question mark.”
The Fraser Valley led the way with a 99.7 per cent increase, followed by the Greater Toronto Area (83.8 per cent), Montreal (75.1 per cent), and Greater Vancouver (60.3 per cent).
The MLS Home Price Index (HPI) rose 0.5 per cent month-over-month and 5.4 per cent year-over-year.
“Frankly, that’s a much earlier turn than we had expected in this key measure, let alone what the housing bears anticipated,” said Douglas Porter, BMO chief economist, in a note.
“Home sales, prices and starts have effectively regained all the ground lost during the shutdown. However, fair point that some of this outsized strength is simply pent-up demand for the lost sales from the key spring season, and it remains to be seen if the momentum can be maintained.”
Emergency COVID-19 measures, like mortgage deferrals and CERB, have helped keep Canadians afloat during the pandemic. But those programs are set to wind down, so the longer term outlook could be much different.
“For those who lost their job or are already stretching their salaries to continue to pay their mortgage, the ending of programs such as CERB could significantly impact the course of their existing and future housing purchase or selling plans. In the short term, until the end of 2020, there appears to be enough pent up demand to maintain a sellers’ market in major centres,” said John Lusink, president of Right at Home Realty,
“If people are unable to get back to work or government support programs are not renewed, we could see an impact on the real estate market, albeit very unlikely to the extent we saw in 2008-2009 or the early 90’s.”
Lusink says low inventory has brought about multiple offers, which has allowed sellers to put a higher prices on their properties.
Immigration rates are also set to decline, but Royal LePage President and CEO Phil Soper, says that won’t have a large effect.
“Research into the home purchase behaviour of new Canadians leads us to believe that the pandemic-driven drop in immigration will have only a muted impact on our housing market. We found that only 15 per cent of immigrants purchased a home in their first three years in Canada. Note that by ten years of residence, newcomers have a higher rate of homeownership than those born in the country – their desire to own is strong, but it takes time to realize that dream,” said Soper.
“There will be an indirect impact on housing, as these new arrivals would have driven demand for rental accommodation. Add to this the near shutdown of short-term, Airbnb-style rentals and we could see landlords selling underutilized properties. It appears that there is a line-up of first-time buyers, encouraged by historically low interest rates, to acquire these homes.”
Anyone currently in the market, or planning to get in can expect low mortgage rates for the foreseeable future. The Bank of Canada maintained its key overnight rate today. During a press conference, governor Tiff Macklem was clear in his messaging.
“The message to Canadians is that interest rates are very low and they’re going to be there for a long time. We recognize that Canadians and Canadian businesses are facing an unusual amount of uncertainty, so we have been unusually clear about the future path for interest rates,” said Macklem.
“If you’ve got a mortgage or if you’re considering to make a major purchase or you’re a business and you’re considering to make an investment, you can be confident that interest rates will be low for a long time.”
James Laird, Co-founder of Ratehub.ca, says buyers should get a pre-approval now to know how much house they can afford and to take advantage of low rates.
“As the real estate market continues to rebound competitive pressure between mortgage lenders is causing both fixed and variable rates to inch down on a continuous basis.”
“For Canadians that are currently shopping for a home they should get a pre-approval to lock in today’s rates for up to 120 days. Anyone with a mortgage coming up for renewal or who is considering a refinance should shop around to take advantage of the historically low rates.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.” data-reactid=”48″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
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Interest rates will stay low as Canada faces 'long climb' out of COVID-19 hole, central bank says – CBC.ca
Canada’s central bank opted to keep its benchmark interest rate right where it was on Wednesday, at 0.25 per cent.
It’s the first rate decision under the stewardship of Tiff Macklem, who took over as governor of the Bank of Canada last month after Stephen Poloz’s seven-year term as governor ended.
The final months of Poloz’s tenure featured a sudden and dramatic series of rate cuts as central banks around the world moved in unison to slash lending rates to near zero to encourage borrowing and investment to stimulate the economy walloped by the COVID-19 pandemic.
The bank’s rate decision suggests there are no short term plans to deviate from that strategy any time soon.
“It’s going to be a long climb out,” Macklem said at a press conference following the announcement on Wednesday. “We are being unusually clear that interest rates are going to be unusually low for a long time.”
Move was expected
The decision was in line with expectations of economists who monitor the central bank polled by Bloomberg. The bank’s next decision is scheduled for Sept. 9 and no change is expected at that meeting either.
In addition to the interest rate decision, the bank also released its quarterly Monetary Policy Report, which outlines the bank’s outlook for the economy.
The bank calculates that lockdowns and other physical distancing efforts across Canada in the April-to-June period shaved off about 15 per cent of Canada’s GDP.
That makes for the worst quarter for Canada’s economy since the Great Depression, but it’s actually better than the worst-case scenario the bank was tracking when the pandemic began.
“There are early signs that the reopening of businesses and pent-up demand are leading to an initial bounce-back in employment and output,” the bank said.
For 2020 as a whole, the central bank is now expecting Canada’s economy to shrink by 7.8 per cent but then rebound by 5.1 per cent in 2021 and 3.7 per cent in 2022.
While that’s better than it could have been, it does mean the central bank doesn’t think the economy will get anywhere close to back to normal for another two years.
And that outlook hinges on one rather uncertain development: It assumes Canada’s economy will be spared a second wave of COVID-19.
“We have assumed there is no widespread second wave and hence there’s no widespread second lockdown,” Macklem said. “But we do anticipate there will be localized flare ups and localized restrictions.”
Sherry Cooper, chief economist of Dominion Lending Centres, says that view may prove to be overly optimistic.
“The last few weeks have shown that numbers can bounce back even faster than the numbers went down and a second wave is a very real possibility in the fall,” Cooper said.
In addition to signaling it has no plans to change rates any time soon, the bank also said it plans to continue its bond buying programs, to support credit markets.
Economist Brian DePratto of TD Bank said there were “no surprises” in the bank’s decision.
“With uncertainty still extremely elevated, the Bank of Canada is not taking any chances, maintaining stimulus, and reminding us again that they can and will do more to support the economy if needed.”
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