Toronto Stock Exchange reversed course to inch lower on Tuesday, as a drop in energy shares on weaker oil prices offset gains in miners.
* The energy sector fell 3.2%, with Cenovus Energy Inc and Crescent Point Energy Corp leading the declines with a drop of 5.3% and 3.7%, respectively. [O/R]
* Oil prices fell more than a percent, having hit multi-year highs earlier in the session after OPEC+ producers clashed over plans to raise supply to meet rising global demand.
* At 9:39 a.m. ET (13:39 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 50 points, or 0.25%, at 20,231.46.
* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.5% as gold futures rose 1.4% to $1,808 an ounce. [GOL/]
* The largest percentage gainers on the TSX were gold miners Centerra Gold Inc and NovaGold Resources Inc, rising 4.2% and 3.9%, respectively.
* Official data from Toronto Regional Real Estate Board showed that home sales across Toronto inched down in June from the prior month as market activity continued to ease from the record levels reached in March.
* The financials sector slipped 0.4%. The industrials sector was unchanged.
* On the TSX, 80 issues were higher, while 143 issues declined for a 1.79-to-1 ratio to the downside, with 18.29 million shares traded.
* The most heavily traded shares by volume were Bank of Nova Scotia <BNS.TO>, Toronto-Dominion Bank <TD.TO>, and Bombardier Inc <BBDb.TO>.
* The TSX posted five new 52-week highs and no new lows.
* Across all Canadian issues there were 53 new 52-week highs and six new lows, with total volume of 36.57 million shares.
(Reporting by Amal S in Bengaluru; Editing by Aditya Soni)
The global economy is falling below expectations – The Economist
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IT IS WELL known that markets hate uncertainty. Bad news, then, that by one measure the world economy is throwing up more nasty surprises for investors. Citigroup’s global economic-surprise index (CESI), which measures the degree to which macroeconomic data announcements beat or miss forecasts compiled by Bloomberg, has fallen into negative territory for the first time since November (the indices for America and China have been negative since mid-May). Since the summer of 2020 economic indicators had tended until recently to surprise on the upside. But as inflation has surged and consumer confidence has flagged, they are now failing to meet forecasters’ expectations. (See chart.)
Measures of economic surprises appear to be a useful way to gauge market sentiment. When the economy is booming data releases will typically be better than analysts expected, boosting the CESI. During an economic downturn, economic statistics will fall below the consensus estimate, leading to negative surprises. From June 2020 to July 2021, when the CESI for America was positive thanks to upbeat employment, inflation and housing figures, the S&P 500 index of big American firms rose by 38%. Since then the CESI has bounced above and below zero, and shares have fallen by roughly 9%.
In a paper published in 2016 Chiara Scotti, an economist at the Federal Reserve, constructed her own surprise index based on five indicators: GDP, industrial production, employment, retail sales and manufacturing output. America’s index also measured personal income. Ms Scotti found that positive economic surprises in America were associated with appreciation of the dollar relative to the euro, pound sterling and yen. (In fact, Citi’s index was designed by the bank’s foreign-exchange unit for trading currencies, not stocks.)
But the surprise index can be hard to interpret. The CESI includes both backward- and forward-looking macroeconomic indicators, and is weighted in favour of newer releases and those that tend to have the biggest impact on markets. Because the index reflects economic performance relative to expectations, it can be negative during expansions if forecasters are too optimistic, and positive during contractions if they are too gloomy. But as Citi analysts wrote in a research note, “coincident rather than causal relationships are relied on even if they have no consistency whatsoever.” ■
Sri Lanka Economy Shrinks 1.6% Amid Political Chaos, Inflation – BNN
(Bloomberg) — Sri Lanka’s economy fell back into contraction last quarter as the country battled its worst economic problems since independence, with emergency aid to stabilize the island nation proving elusive.
Gross domestic product declined 1.6% in the quarter ended March from a year earlier, the Department of Census and Statistics said in a statement on Tuesday. That’s shallower than a 3.6% contraction seen by economists in a Bloomberg survey and compares with a revised 2% expansion in the previous quarter.
The contraction likely marks the beginning of a painful and long recession for the country, whose Prime Minister Ranil Wickremesinghe last week said the economy had “completely collapsed.” The crisis follows years of debt-fueled growth and populist fiscal policies, with the Covid-19 pandemic’s hit to the dollar-earning tourism industry serving as the last straw.
Absence of foreign exchange to pay for import of food to fuel led to red-hot inflation, the fastest in Asia, triggering protests against the government led by the Rajapaksa clan that eventually led to the resignation of Mahinda Rajapaksa as premier. While the months-long protests hurt business activity in parts of the country, the government on Monday imposed new curbs, which includes a call to residents to stay home until July 10 to conserve fuel.
That will depress activity further, while raising the risk of more unrest given lingering shortages of essential goods.
Sri Lanka is in talks with the International Monetary Fund for aid to tide over the crisis, with at least $6 billion needed in the coming months to prop up reserves, pay for ballooning import bills and stabilize the local currency. The central bank has raised interest rates by 800 basis points since the beginning of the year to combat price gains that touched 39%.
Other details from the GDP report include:
- For the first quarter, the services sector grew 0.7% from a year earlier
- Industrial production slipped 4.7% and agriculture output contracted 6.8%
©2022 Bloomberg L.P.
China's economy recovering but foundation not solid, premier says – Financial Post
BEIJING — China’s economy has recovered to some extent, but its foundation is not solid, state media on Tuesday quoted Premier Li Keqiang as saying.
China will strive to drive the economy back onto a normal track and bring down the jobless rate as soon as possible, Li was quoted as saying.
“Currently, the implementation of the policy package to stabilize the economy is accelerating and taking effect. The economy has recovered on the whole, but the foundation is not yet solid,” Li was quoted as saying.
“The task of stabilizing employment remains arduous.”
China’s economy showed signs of recovery in May after slumping the previous month as industrial production revived, but consumption remained weak and underlined the challenge for policymakers amid the persistent drag from strict COVID-19 curbs.
China’s nationwide survey-based jobless rate fell to 5.9% in May from 6.1% in April, still above the government’s 2022 target of below 5.5%.
In particular, the surveyed jobless rate in 31 major cities picked up to 6.9%, the highest on record. Some economists expect employment to worsen before it gets better, with a record number of graduates entering the workforce in summer.
Li vowed to achieve reasonable economic growth in the second quarter, although some private-sector economists expect the economy to shrink in the April-June quarter from a year earlier, compared with the first quarter’s 4.8% growth.
(Reporting by Kevin Yao and Beijing newsroom; Editing by Andrew Heavens, William Maclean)
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