Investors bracing for more volatility
TORONTO — Investors should prepare themselves for more volatility as markets look to a number of important economic releases in hopes of greater clarity on how North American and European economies are faring.
In Canada, the key data for the week will come on Tuesday, when the monthly GDP report for July is released. Economists are expecting gross domestic product to remain unchanged at 0.3 per cent, an indication that the Canadian economy has slowed somewhat since the first half of the year.
“We lost some of the momentum we saw in the late spring,” said Peter Buchanan, a senior economist with CIBC World Markets.
Analysts expect the gains to come from strong car sales that have boosted manufacturing and increased export demand, while wholesale volumes and retail spending will prove a weight.
If predictions on GDP are correct, the numbers are expected to have a negative effect on the loonie, which has been brought down to the 90- cent range in recent weeks.
Meanwhile, traders are expecting Canada’s merchandise trade surplus for August to narrow to $ 1.8 billion from $ 2.6 billion in July, when Statistics Canada reports on Friday. Strength is expected in crude oil exports and domestic car sales.
In the United States, markets will look for reassurances from the latest payrolls figures, also out on Friday. Analysts expect to see a gain in September, believing that the disappointingly low August figure was just an anomaly. Expectations are that there was a gain of 213,000 jobs in September, compared to 142,000 in August.
“Most of the advance indicators we look at are pretty positive,” said Derek Holt, vice- president of Scotiabank Economics.
“The initial jobless claims have been quite low and the job vacancies remain very elevated so that’s a sign of business confidence when it comes to hiring — the fact they have so many jobs they’ve been unable to fill so far.”
If the figures meet expectations, it will quell some concerns that the U. S. Federal Reserve may have about the state of the overall labour market, which it has cited as a key factor in its rate decisions.
Since the Great Recession of 200809, the Fed has pumped trillions of dollars of stimulus into the economy through its bond- buying program, which has kept short- term interest rates low.
That, in turn, has helped buoyed stock markets and allowed businesses to refinance their debt at lower rates and increase spending.