TSX lower on BoC housing concerns
The Bank of Canada’s governor issued a warning Thursday that the high house prices in markets such as Vancouver and Toronto are unsustainable.
Stephen Poloz’s concern was part of his statement on the state of the Canadian financial system, which is otherwise much the same as it was 6 months ago. Other key risks identified are a sharp increase in interest rates due to higher global risk premiums, stress emanating from China and other emerging-market economies, and a prolonged weakness in commodity prices.
His statement that “prospective homebuyers and their lenders should not extrapolate recent real estate performance into the future when contemplating a transaction” spooked investors in the banks, which would suffer the impact of a housing crash or other delinquent consumer loans.
The financial sector of the main TSX index declined, along with energy stocks which were pressured by lower oil prices.
Wall Street, Asia and Europe all closed mostly lower, on oil prices and global growth concerns.
The S&P/TSX Composite Index closed down 73.08 (0.51 per cent)
The Dow Jones closed down 19.86 (0.11 per cent)
Oil is trending lower (Brent $51.88, WTI $50.44 at 4.40pm)
Gold is trending higher (1271.90 at 4.40pm)
The loonie is valued at U$0.7867
Natural gas prices could be about to fall
Canadian natural gas prices could fall to an average of U$2.50 per million British thermal units as competition from the US intensifies. In 2015 the average price was $2.70.
The National Energy Board’s report shows that in 2014 prices were as high as $5 but the trend has been lower since. However, prices are expected to start increasing in the winter and should lead to a higher average for 2017.
Canadian industries more productive
Canada’s industries were operating at increased productivity in the first three months of 2016. Statistics Canada reported Thursday that industries operated at 81.4 per cent of their production capacity in the first quarter, up from 80.9 per cent in the previous quarter. The mining, quarrying, and oil and gas extraction industries were the main source of this increase.