Socio-Economics History Blog

Socio-Economics History Blog

Canadian Stocks in Bear Market, Loonie Swoons, Alberta’s Heavy Crude Crashes to $16, Consumer & Business Confidence Dives…

by mosesman

Oil_Plunge_killing_Canada

  • Canadian Stocks in Bear Market, Loonie Swoons, Crude Crashes to $16, Consumer & Business Confidence Dives… 
    by , http://wolfstreet.com/  
    “Investment and hiring intentions lowest since 2009”: Bank of Canada
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    Since Christmas Eve, the Toronto Stock Exchange index has dropped every single day, 10 trading days in a row, including so far today as I’m writing this, the longest losing streak since 2002. Now at 12,210, it’s down 21% from its 52-week high, set on April 17, and thus in bear market purgatory.
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    Beaten down energy producers, at about 20% of the index, have had a big impact. But the problems are broader. Among the standouts is the must-own, super-growth, TSX mega-cap Valeant, whose shares have plunged 65% from their 52-week high.
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    The Canadian dollar just dropped below US$0.70 for the first time since spring 2003, to US$0.6996. It now takes C$1.43 to buy a US dollar, up from about parity in 2011, 2012, and much of 2013. That year, Stephen Poloz became governor of the Bank of Canada. His solution was to demolish the currency. So he took it down 28% against the US dollar, with a big supporting hand from the collapsing prices of the commodities that Canada exports. Oil joined them in mid-2014.
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    The US benchmark WTI is trading just above $30 a barrel. Pundits at major investment banks have their eyes set on $20. Doom-and-gloomers see $10. 
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    Canadian producers aren’t so lucky. Alberta’s heavy crude blend, Western Canada Select, plunged 30% so far this year, and on Monday hit US$16.51 a barrel, according to PSAC. “Lowest close on record,” according to the Globe and Mail. 
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    Canadian producers are already experiencing what doom-and-gloomers are predicting for WTI. The swoon of the Canadian dollar is in part a reflection of this. Poloz is patting himself on the back. He sees benefits for big exporters outside the resource sector, such as auto manufacturing plants and component suppliers to the US auto industry that compete with Mexico.
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    This is a small consolation for Canadians who want to eat: At lot of food is imported; 81% of fruits and vegetables are imported. Canadians have to buy them with their plunging loonie.
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    In 2015, food prices rose 4.1%, according to the 2016 Food Price Report by the Food Institute at the University of Guelph. Meat prices rose 5%, fruits 9.1%, vegetables 10.1%. The average Canadian household spent C$325 more for food in 2015 than in 2014. Steeper increases are expected this year, with the average household likely to spend $345 more than last year. The report squarely blamed the loonie.
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    Well-to-do Canadians might brush off price increases. But they make a big difference for many middle-class Canadians who, just like their brethren in the US, are struggling on a monthly basis to make ends meet.

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