The Canadian Press
NEWARK, N.J. — Ty Smith set up two first-period goals to become the sixth NHL rookie defenceman to get points in his first five games, leading the New Jersey Devils to an 2-0 victory over the New York Islanders on Sunday night. Scott Wedgewood, who spent last season in the AHL, made 28 saves for his first NHL shutout since blanking the Devils in December 2017 for Arizona. The win was his first in an NHL game since February 2018. Jack Hughes and Pavel Zajac scored two minutes apart late in the opening period as the Devils split their home-and-home series with the Islanders. Wedgewood, who signed with the Devils as a free agent in the off-season, has started the last two games for New Jersey. No. 1 goalie Mackenzie Blackwood was placed on the COVID-19 list on Thursday, hours before the Islanders posted a 4-1 win over the Devils. Wedgewood was at his best in the first period when he made six saves on the Islanders first power play. Rookie Ilya Sorokin made 22 saves in his second career game. He started against the Rangers and the Islanders also were shut out. Hughes, who had seven goals last season after being picked first overall in the 2019 draft, got his third of the season with a power-play goal from the left circle at 17:00. Smith had the primary assist on a play Islanders penalty-killer Cal Clutterbuck broke his stick. Zacha doubled the margin two minutes later, putting in the rebound of a Nikita Gusev shot past Sorokin. Smith had the second assist. The last rookie defenceman to score in five straight games to start his career was Cale Makar of Colorado in 2019. SPECIAL TEAMS The Devils came into the game struggling on the power play and penalty kill. They were 1 of 11 with the extra man in their first four games and were 1 of 2 against the Islanders. After giving up six goals in 16 short-handed situations, New Jersey was perfect on two kills. MOVES: Islanders left wing Michael Dal Colle played after missing the first four games with an injury. The Devils recalled forward Nick Merkley from the taxi squad and loaned forward Jesper Boqvist to the taxi squad. Merkley played on a line with Gusev and Zacha. He was on the ice for the Zacha goal. INJURY Islanders forward Anthony Beauvillier left the ice in the second period and played only 7:16. UP NEXT Islanders: Visit the Washington Capitals on Tuesday night. Devils: Host the Philadelphia Flyers on Tuesday night. ___ More AP NHL: https://apnews.com/NHL and https://twitter.com/AP_Sports The Associated Press
Economy on track for 'very strong' bounce in late 2021 | RENX – Real Estate News EXchange
“We are not out of the woods yet.” However, the end of the pandemic appears to be in sight, the commercial real estate industry has more data about potential lingering fallouts and when the recovery begins, it is likely to be strong and fast.
Those were key takeaways from Tuesday’s opening presentations at the virtual RealCapital conference, where CBRE’s Paul Morassutti and CIBC World Markets’ deputy chief economist Benjamin Tal provided overviews of the industry and economy.
Tal broke his analysis down into three time periods: The immediate economic impact, the second half of 2021 and the potential for longer-term economic “scarring.” The first two he summed up in short order.
“I believe we are already in the midst of a double-dip recession. The economy as we talk is basically shrinking by one or two per cent in Canada. This is the short term. It’s not great,” he said.
However, “I believe the recovery will be very strong. The second quarter, the spring, will be a transition period and then I am talking about a very strong second half.”
Tal predicted GDP growth of up to six or seven per cent in the second half of 2021. Because relatively few economic sectors have been affected by the pandemic — although those impacted have been hit deeply — he said a recovery can happen very quickly.
Pandemic’s economic impact deep but narrow
The hardest-hit sectors are mainly service-oriented. On the jobs front, those affected have largely been the lowest wage earners, meaning people with higher disposable incomes are banking money for better times ahead.
“The good news is the service industry is very quick to recover,” Tal noted, laying out the basis for his optimism long-term economic “scarring” will be minimal. “This is all about cash.
“For every dollar decline in wages, the Canadian government injected seven dollars into the economy. This is very important. This is the first recession ever where income actually went up. And it went up in a very significant way.”
That bubble of excess savings is about $90 billion and growing, he said.
“You increase your savings. You don’t want to do that, but you are forced to because you cannot spend. So your money is there, your income is there, but you are not spending,” he continued. “(People) are dying to go to a restaurant, but they are not willing to die to do so. So, they are waiting.”
One significant concern is a huge injection of spending into the economy could trigger inflation and higher interest rates.
“Inflation expectations are starting to rise,” he said. “I cannot talk about the economy rebounding by four, five or six per cent without saying that some inflationary pressures will be there.”
Tal called inflation “the No. 1 issue that will impact your business over the next three to four years” but said both the U.S. Fed and the Bank of Canada view it as a short-term issue.
“They are telling you ‘We are going to tolerate that inflation. We are going to allow that inflation to overshoot because we view it as a blip, we view it as a very short-term story’,” Tal said. He believes both central banks will employ strategies to control potential inflation on a longer-term basis.
When consumers do start spending that excess cash, Tal and Morassutti see changes coming to some current trends which affect CRE.
Housing: Sales to stay strong, rents to stabilize
On the housing front, where sales have remained strong despite the pandemic, they both expect rents to also quickly firm up.
“It is true that multifamily fundamentals in Toronto have weakened,” said Morassutti, the vice-chairman of valuation and advisory at CBRE.
“Rents are down and vacancy is up, mainly due to a glut of small condos being added to the long-term rental supply and the disruption to immigration and foreign students. For the most part, we view this as temporary.”
Tal said Canada is underestimating population growth because it is not counting residents repatriating from countries such as Hong Kong, nor is it tracking foreign students whose visas expired but have been allowed to stay under revised government regulations.
“I expect the supply factor in the multiresidential sector will ease and therefore I see some improvement and stabilization in rent,” Tal said. “We are starting to see it right now, also in vacancies.”
Home sales have benefited from the stratified economic impact. A significant group is “not touched financially by this crisis,” mainly in demographics which can afford to purchase homes.
“They are in position to take advantage of low interest rates and that is exactly what they are doing. And that is why the housing market is doing so strongly.”
Higher office vacancy “not cataclysmic”
While the work-from-home situation will continue to some degree, Morassutti said once things return to normal many employees will return to offices, creating shifts in both housing and office trends.
“The future is not binary, it is not one or the other, it is both. It is flexibility,” he said. “The issue is what would, say, a 10 per cent reduction in demand have on long-term vacancy? After all, the retail sector has been completely upended by the movement of just 10 to 15 per cent of sales to online platforms.”
In all of its office projections, Morassutti said CBRE sees vacancy rising. A 10 per cent reduction in office space demand could translate to a vacancy increase of up to 400 basis points, he said.
“Is the office sector becoming the retail sector? The answer is no. Here In Toronto, the real issue over the next few years is new supply. And this shouldn’t come as a surprise since too much new supply coming at the wrong time has always been the office sector’s Achilles heel,” he explained.
“I would also note that we added almost five million square feet of supply in Toronto in 2008 in the midst of the global financial crisis and another six million square feet beginning in 2013 and quite frankly, the market outperformed virtually all vacancy forecasts both times.
“Is it concerning? Yes, of course it’s concerning, but it is not cataclysmic.”
Vancouver and Toronto still have North America’s lowest office vacancy rates, with Ottawa and Montreal also in the top five.
Retail, industrial outlooks
The outlook is similar for hard-hit sectors of retail.
“We would reiterate the view we have held for some time,” Morassutti said.
“The sector is heavily bifurcated with secondary assets bearing a disproportionate share of the operational pain. Some retail assets have fared quite well, notably grocery-anchored centres where you have a strong concentration of essential retailers.”
Retail, particularly hospitality and entertainment, will be a key benefactor once the pandemic eases.
“Many Canadians are sitting on tons of cash and there is a lot of pent-up demand. There are good-news stories in the retail sector.”
Industrial remains a good-news story and Morassutti said the growth potential is wider than just e-commerce, distribution and warehousing.
“For anything logistics- or warehouse-related, we think there is ample runway,” he noted. “But the entirety of the industrial investible universe is not just logistics or distribution centres. A lot of it is manufacturing, a lot of it is small-bay, multi-tenant. A lot of it has nothing to do with the e-comm tailwind that everyone points to.”
This dovetails with an expected expansion of the life sciences sector, which is increasingly seeking office, R&D and manufacturing space.
“We fully expect this sector to follow a similar trajectory that we have witnessed in the U.S., albeit on a smaller scale,” he said.
Challenges remain, but outlook “looks good”
Over the mid- to long-term, Morassutti said challenges remain, but CBRE remains bullish on real estate.
“In a world where there is $18 trillion of negative-yielding debt, the yield provided by real estate looks good,” he said.
“In our opinion, geopolitical stability will be rewarded, transparency will be rewarded, stable banking systems, thoughtful immigration policies and economic growth will be rewarded, resiliency will be rewarded.
“The fastest-growing city in North America is Toronto and many other Canadian cities are on that list. Canadian employment growth is expect to double the G7 average over the next few years.
“So taking all of that into account, we think Canada stacks up very well.”
Material stocks drag TSX lower
* The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.3% as gold futures fell 0.3% to $1,799 an ounce.
* Miners Dundee Precious Metals Inc and Centerra Gold fell 3.9% and 3.8%, respectively, and were the top drag on the TSX.
* At 09:37 a.m. ET (14:37 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 77.04 points, or 0.42%, at 18,253.05.
* The financials sector gained 0.1% as Royal Bank of Canada and National Bank of Canada topped analysts’ estimates for first-quarter profit.
* The energy sector dropped 0.7%, even though U.S. crude prices were up 1% a barrel, while Brent crude added 1.1%.
* On the TSX, 62 issues were higher, while 150 issues declined for a 2.42-to-1 ratio to the downside, with 24.02 million shares traded.
* The largest percentage gainers on the TSX were printing company Transcontinental Inc <TCLa.TO>, which jumped 2.3%, and National Bank of Canada <NA.TO>, which rose 2.3%.
* The most heavily traded shares by volume were Manulife Financial Corp <MFC.TO>, Suncor Energy Inc <SU.TO>, and Great-West Lifeco Inc <GWO.TO>.
* The TSX posted 12 new 52-week highs and no new lows.
* Across all Canadian issues there were 44 new 52-week highs and six new lows, with total volume of 43.98 million shares.
(Reporting by Amal S in Bengaluru; Editing by Aditya Soni)
Fed to keep policy easy, stay patient as U.S. economy revives – Reuters
WASHINGTON (Reuters) – Amid market expectations the Fed may be forced to tighten monetary policy sooner than expected, top U.S. central bankers delivered a simple message to investors fixated on rising U.S. bond yields and price risks: Do not expect any changes until the economy is clearly improving.
Testifying on Wednesday before the House of Representatives Financial Services Committee, Fed Chair Jerome Powell emphasized the U.S. central bank’s promise to get the economy back to full employment, with little worry about inflation unless prices begin rising in a persistent and troubling way.
“We are just being honest about the challenge,” Powell told lawmakers when asked about Fed projections that inflation will remain at or below the central bank’s 2% target through 2023.
The Fed has said it will not raise interest rates until inflation has exceeded 2% and “we believe we can do it, we believe we will do it. It may take more than three years,” Powell said. The current inflation rate by the Fed’s preferred measure is about 1.3%.
An expected jump in prices this spring, he said, may reflect post-pandemic supply bottlenecks, or a jump in demand as the economy reopens, but nothing to warrant a policy response.
Powell’s remarks led a broad central bank effort to convince the public and particularly bond market investors that it is not going to tighten monetary policy until it is clear people are getting back to work.
Yields on U.S. Treasury bonds have risen recently, with the risk of a potential spike in inflation in focus as the United States expands its coronavirus vaccination program, plans further fiscal spending and moves toward a post-pandemic reopening of the economy.
Financial markets are pricing in a better outlook for the U.S. economy, and “that’s appropriate,” Fed Vice Chair Richard Clarida told the American Chamber of Commerce in Australia, adding he had become more bullish himself in recent months.
What that does not mean, he said, is any imminent change to the Fed’s near-zero setting for short-term interest rates, or its bond-buying program.
“We to a person are going to be patient, we are going to be very careful, and we are going to be very, very transparent of our intentions well in advance of any decision we might make in the future,” Clarida said.
Clarida said he sees inflation rising above 2% in the spring but coming back down to about that level by year’s end.
Talk about a possible market “taper tantrum” in response to a change in the Fed’s bond-buying program is “premature,” Clarida said. A taper tantrum refers to a rapid run-up in bond yields based on changes in market expectations for Fed policy.
“We have a deep hole, there’s still a ways to go, and I think that settings of monetary policy are entirely appropriate not only now but, given my outlook for the economy, for the rest of the year,” he said.
‘FRONT-RUNNING THE FED’
While some observers believe the Fed may need to remove crisis-era policies sooner than expected, that argument ignores the Fed’s new jobs-first framework, said Tim Duy, chief U.S. economist with SGH Macro Advisors.
“If we try to force the Fed into the old framework, we will be front-running the Fed. The Fed will not validate such front-running,” Duy wrote of Powell’s appearances this week before House and Senate committees. “The Fed intends to maintain easy policy until the data pushes it in another direction and the Fed does not expect that to happen for a long, long time.”
The Fed has said it plans to keep buying $120 billion a month in U.S. government and government-backed securities “until substantial further progress has been made” toward the Fed’s maximum employment and inflation goals.
With the inflation target a long way off, Fed officials have focused on what they see as a major gap in the labor market as well – a scar that goes well beyond the 6.3% headline unemployment rate to include concerns about disproportionate joblessness among minorities and the exodus of women from the labor force.
In recent weeks, Powell, Clarida and others have used an alternate measure of around 10% that includes, for example, those who have left the labor force in recent months, and even that may fall short of the damage to workers the Fed hopes to repair.
Powell, who testified in Congress as part of his mandated twice-a-year appearances on Capitol Hill to provide updates on the economy, said the Fed needed to see tangible progress before shifting gears, not just anticipated improvement, and not premature bets from the bond market.
“We are not acting on forecasts,” Powell said. The policy “is what it sounds like – incoming actual data that sees us moving closer to our goals.”
Reporting by Howard Schneider and Ann Saphir; Editing by Peter Cooney
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