BMO Harris Private Banking Market Outlook: Global Markets Rattled by Cyprus
Bailout but Canada and U.S. Economies Remain Strong
- The Eurozone continues to face challenges with the Cyprus bailout
and unemployment numbers high
- U.S. market rallies in all sectors, housing market improves with
existing and new home sales up and interest rates to remain low for
- The Canadian government's goal of balancing the budget by 2015 is
still within reach
TORONTO, ONTARIO -- (Marketwired) -- 04/18/13 -- BMO Harris Private
Banking's April Market Outlook Commentary Report notes that the
recent bank crisis in Cyprus shows the Eurozone has not yet resolved
its rooted structural problems.
The report states that, while Cyprus originally thrived after being
inducted into the European Union, much of that economic prosperity
declined at the peak of the debt crisis in 2010 - largely as a result
of non-performing loans and bank mismanagement. This forced the Bank
of Cyprus to request rescue bailout packages from the European
Central Bank, European Commission, International Monetary Fund and
Russia - each with stipulations and conditions.
"Despite a Cypriot bailout being inevitable, the handling of the
bailout illustrates that European policy makers are still struggling
to keep Europe's challenges under control," said Daniel Theriault,
Chief Investment Strategist, BMO Harris Private Banking. "In a number
of countries, most notably Spain and Greece, unemployment numbers
remain stubbornly high and many Eurozone economies are still in
recession. Even at the end of the quarter, Italy was still struggling
with political deadlock which has resulted in delays addressing key
issues such as debt and how to stimulate economic growth."
Additional highlights from the report include:
The United States Brings More Good News
In the U.S., the market and the economy continue to move on an
upwards trajectory. Key indicators include:
-- The stock markets continued their upward climb with the S&P 500
finishing the quarter up by 10.61 per cent.
-- All sectors in the market performed well with healthcare, consumer
staples, utilities and consumer discretionary leading the way, and
economic fundamentals showing consistent improvement.
While the 88,000 new jobs added in March were below analyst
expectations, the overall results for the quarter were encouraging
because they directly relate to consumer spending.
-- The U.S. housing market is improving with existing and new home sales
up, prices up and inventory levels of distressed properties down.
-- Corporate earnings are steadily improving with attractive dividends and
balance sheets being shored up substantially for many publicly listed
"The U.S. Federal Reserve has also indicated that they will be
keeping interest rates low until the national unemployment rate is
below 6.5 per cent," said Mr. Theriault. "All of these factors signal
that the U.S. economy and domestic markets will continue to improve
over the course of 2013."
Canada's Federal Budget
The report notes that much of Canada's financial news was driven by
the introduction of the 2013-2014 federal budget. This year's budget,
while not as direct in addressing the areas of fiscal stimulus and
tax revenue as last year's budget, tackled different areas of the
economy and spending, including:
-- The construction industry, which will receive $47 billion in new
infrastructure spending, while the manufacturing sector will collect a
combination of tax-break extensions and new spending.
-- Over the next five years, $1 billion will be allocated to southern
Ontario's auto sector, while a similar amount will be directed to
Canada's aerospace industry.
-- $500 million per year will be set aside for skills training matched to
employer needs for Canadians who are unemployed or underemployed.
-- Import tariffs on baby clothes and sports gear will be removed to help
make certain goods more affordable.
-- More tax breaks will be available for generating clean energy.
-- New tax reforms will be introduced, including closing a number of tax
loopholes and rewarding whisteblowers who report tax evaders.
"Canada's economy is in a good position right now, and the goal of
balancing the budget by 2015 still seems within reach if the economy
cooperates," said Mr. Theriault.
To view the full report, please visit:
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Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver
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