Canadian Dollar Climbs to Three-Week High
The Canadian currency strengthened for the Christmas- shortened week against all 16 of its most-traded counterparts as the nation’s economy gained for a second straight quarter and retail sales increased. U.S. reports this week showed sales of existing American homes and orders for durable goods rose. The Canadian unemployment rate remained at 8.5 percent in December, a report may show on Jan. 8. The Canadian dollar has spun into life,” said Andrew Wilkinson, senior market analyst at Greenwich, Connecticut-based Interactive Brokers Group Inc. “Being America’s largest trading partner, Canada benefits from the U.S. recovery.
The beauty of this is that Canada is a resource-rich country, so investors are more willing to own the Canadian dollar than the U.S. currency. It’s a perfect storm.”The loonie, which was poised to outperform its major counterparts for the month, gained more than 2 percent this week versus the currencies of New Zealand and Australia, which like Canada export commodities.
Crude oil for February delivery climbed to $78.25 a barrel on the New York Mercantile Exchange yesterday, the highest level since Dec. 2. It increased 11 percent over the past two weeks. Copper for March delivery rose 2.8 percent this week, touching a 15-month-high of $3.3040 a pound on the New York Mercantile Exchange’s Comex unit. A Canadian commodity price index compiled by the Bank of Canada advanced more than 20 percent this year.
Raw materials generate half of Canada’s export revenue. The MSCI World Index, a measure of stocks in 23 developed markets, advanced 2.5 percent this week. The Standard & Poor’s 500 Index rose for each of the past five trading days, touching an almost 15-month high. U.S. orders for durable goods excluding transportation gained 2 percent in November, a Commerce Department report showed yesterday, almost twice as much as economists forecast. Sales of existing U.S. homes increased last month to the highest level in almost three years, the National Association of Realtors said on Dec. 22.
Credit Suisse downgrades integrated oil sector
Credit Suisse downgraded the integrated oil sector to “20 per cent underweight” on its relative outperformance and said oil prices were likely to stay lower for longer. Separately, the brokerage cut its price targets on eight oil and gas stocks, including majors BP Plc and Royal Dutch Shell Plc, and said it remained cautious on the integrated oil group.
Credit Suisse trimmed its price target on the group by an average of 11 per cent and said it expects the group’s earnings to fall by 61 per cent year-over-year in 2009. “Although the dividend and buyback support has been a positive relative attribute in a tough equity market, the sector’s payout is unsustainable in a sub $70 oil world,” the brokerage said in a note to clients.
Credit Suisse, which said the sector is “deeply underwater on its cash cycle”, added that it expects the sector to generate negative free cash of $56 billion in 2009, and a further negative $25 billion in 2010. Credit Suisse also lowered its West Texas Intermediate price forecast for 2009 to $50 a barrel (bbl) from $60/bbl and cut its 2010 estimate to $60/bbl from $80/bbl.
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