Briefing highlights
- Canadians richer but deep in debt
- What to expect from house price report
- What to expect from the Fed today
- Stocks mixed ahead of Fed decision
- Loonie below 74.5 cents
- Quebecor swings to quarterly profit
- Yahoo attack indictments reportedly coming
- And then there's Trump, and his taxes
Pleasure and pain
A report from Statistics Canada later in the morning will be all about pleasure and pain.
Pleasure: It’s not a word you’d normally associate with something called the quarterly national balance sheet accounts, but this 8:30 a.m. ET report will tell us how rich we are.
Pain: This one’s more apt as the report will also tell us how much we owe.
We’re expected to learn that we’re wealthier, given the rise in stock values. But expect to see, too, that our debt burden is at a new high.
There will be several measures in the Statistics Canada report.
Paul Ferley, Royal Bank of Canada’s assistant chief economist, expects the report to show that household asset balances rose 2 per cent in the fourth quarter of last year to $12.4-trillion, pushed higher by a 3.8-per-cent rise in Canada’s benchmark stock index, the S&P/TSX composite.
On the other side of our ledger, household liabilities presumably rose in the final three months of 2016 amid a slower pace of mortgage growth but a pick-up in other consumer credit.
What that all should mean, Mr. Ferley said, is that household net worth climbed by $210-billion to $10.3-trillion.
Lucky us.
But as we’ve been hearing for years now, our borrowing is out of hand, so much so that the report is expected to show the key measure of household debt to disposable income at its highest level ever.
The last measure put that at 167 per cent, or $1.67 owed for every dollar of income. Mr. Ferley expects it’s now 168 per cent. Or, for those who clearly didn’t use a calculator when they were getting in way over their heads, $1.68 for every $1.
“Encouragingly, growth in assets and net worth are expected to have marginally outpaced that of debt,” Mr. Ferley said.
“Accordingly, the debt-to-asset and debt-to-net worth ratios will both likely edge lower to 16.4 per cent and 19.7 per cent, respectively, from 16.5 per cent and 19.8 per cent.”
The debt burden could be worse, actually, because it was the fourth quarter, which traditionally shows a slowdown, noted Bank of Montreal senior economist Benjamin Reitzes.
“Also, disposable income growth was solid in Q4, helping to restrain the increase in debt ratios,” Mr. Reitzes said.
“This release also includes details on household assets,” he added.
“After rising to a record high in Q3, net worth as a share of disposable income likely pushed higher still with home prices and the TSX moving up. Over all, Canadian balance sheets are in decent shape, as interest rates remain low even after the recent back-up.”
Thirty minutes after the Statistics Canada report, we’ll learn from the Canadian Real Estate Association why we’re in so much debt.
The CREA report will show Toronto home sales pushing higher in February, and prices at dramatically high levels. Vancouver will show a sales drop but still inflated prices.
Across Canada, Mr. Reitzes expects the CREA report to show sales down 2 per cent in February from a year earlier, with average prices up 2 per cent. The MLS home price index, a better measure, is expected to show a rise of 14.5 per cent.
What else to watch for today
Two U.S. economic indicators in the morning – retail sales and inflation – are just the warm-up act for the main event.
The Federal Reserve is widely expected to raise its benchmark rate by one-quarter of a percentage point. Markets take that as a given, and they’ll be watching to see new projections from the U.S. central bank and what chair Janet Yellen has to say at a news conference.
“After being viewed as a long shot up until just a couple of weeks ago, the market has come to price in the March Fed move we had thought was likely,” said Nick Exarhos of CIBC World Markets.
“But what does that mean for stocks, which have been roaring ahead post-Trump?” he added.
“Looking back at the most recent moves, equities may be due for a breather. Slightly less monetary accommodation may be part of the story, but the recent run in stocks has pushed several valuation metrics to levels that will need realized earnings to play catch-up.”
Stocks mixed
Global markets are mixed so far in the run-up to the Fed decision.
“The major focus is on whether it will be a hawkish or a dovish hike,” said London Capital Group senior market analyst Ipek Ozkardeskaya.
“At the beginning of the year, the Fed was expected to proceed with three rate hikes in 2017,” she added.
“A hawkish stance would shift the expectations toward four rate hikes instead.”
Tokyo’s Nikkei and Hong Kong’s Hang Seng each lost 0.2 per cent, while the Shanghai composite gained 0.1 per cent.
In Europe, London’s FTSE 100 and the Paris CAC 40 were up by between 0.1 and 0.2 per cent by about 8:05 a.m. ET, and Germany's DAX was little changed.
New York futures were up, and the Canadian dollar was just below the 74.5-cent (U.S.) mark.
How markets ended Tuesday
Watercooler
While some of us are fretting over our debts, and others over the Fed’s projections, you can bet the office chat will be about the spectacle that was Tuesday night’s leak of Donald Trump’s tax forms.
For Europe, there’s also the not-so-small matter of the Netherlands election.
First, what played out late Tuesday: Rachel Maddow unveiled on MSNBC that Trump was taxed $38-million (U.S.) on income of $150-million in 2005, which means a rate of 25 per cent, having written off $100-million in corporate losses.
Ms. Maddow had promised to release the details in the run-up to the show, prompting the White House to issue a statement beforehand maintaining that MSNBC, “desperate for ratings,” broke the law.
And as The Globe and Mail’s Barry Hertz writes, the show and its producers “teased, toyed and played their audience for a bunch of basic-cable rubes.”
We’ll see what more Mr. Trump has to say later in the morning.