A busy week with plenty of central bank action, gets off to a slow start today with Canadian housing data and PMI. Stocks are down slightly and the dollar up as Federal Reserve Chairman Bernanke stated that the central bank may expand QE2 from the current amount of $600 billion.
The Canadian housing market has been under pressure lately with some weak reports though last month’s 15% increase month-on-month in permits have eased the fears that a significant downturn is nearby. We still expect the housing market to slow even further in the coming quarters.
Chairman Ben Bernanke has remarked that the Fed may choose to increase the amount of quantitative easing as the bank is of the opinion that growth may be too weak to make a serious dent in the unemployment rate, which rose by 0.2 points to 9.8% in November according to the employment report released last Friday. The report also showed that only 39,000 new jobs were created in November, much below our own and consensus estimate of 150,000. We maintain our position that expanding QE2 will do nothing except boost the banks’ balance sheets as there is simply not enough demand from borrowers for additional loans at the moment.
In addition to Canadian housing data we also get the Ivey Purchasing Managers’ Index at 15:00 GMT. The index has been very strong in most of 2010 though it did decline to 56.7 in the latest report. However, that still suggests solid growth in the fourth quarter.
The Canadian housing market has been under pressure lately with some weak reports though last month’s 15% increase month-on-month in permits have eased the fears that a significant downturn is nearby. We still expect the housing market to slow even further in the coming quarters.
Chairman Ben Bernanke has remarked that the Fed may choose to increase the amount of quantitative easing as the bank is of the opinion that growth may be too weak to make a serious dent in the unemployment rate, which rose by 0.2 points to 9.8% in November according to the employment report released last Friday. The report also showed that only 39,000 new jobs were created in November, much below our own and consensus estimate of 150,000. We maintain our position that expanding QE2 will do nothing except boost the banks’ balance sheets as there is simply not enough demand from borrowers for additional loans at the moment.
In addition to Canadian housing data we also get the Ivey Purchasing Managers’ Index at 15:00 GMT. The index has been very strong in most of 2010 though it did decline to 56.7 in the latest report. However, that still suggests solid growth in the fourth quarter.
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