These are stories Report on Business is following Monday, Dec. 1, 2014.
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The good (pump prices), the bad (stocks), and the ugly (ruble)
It may be Cyber Monday, but investors have decided to sell rather than shop.
Stocks are sinking, oil prices are volatile, other commodities are also being hit, and the Canadian dollar remains below 88 cents U.S., albeit up.
As Bank of Montreal's chief economist Douglas Porter put it in a recent report, commodities have gone "from super cycle to spin cycle." And the oil price collapse, in particular, will eat away at Canada's economic growth if it's prolonged.
Oil prices slipped again today but then stabilized.
Gold initially slumped again, driven lower after Swiss voters rejected a proposal to pump up their central bank's gold reserve, but then perked up noticeably.
Copper also slipped again, and the Canadian dollar touched a low of 87.28 cents and a high of 87.67 cents, though it's now up from Friday's close.
Russia's ruble was also crushed, as were some other currencies. Again.
Not helping matters this morning are fresh readings of the manufacturing sectors in Europe and Asia, which were weak, and the soft showing from Black Friday sales.
Tokyo's Nikkei is just about the sole winner today, rising 0.8 per cent.
But Hong Kong's Hang Seng, hurt by violence amid protests for political reforms, tumbled 2.6 per cent.
London's FTSE 100, Germany's DAX and the Paris CAC 40 were down by between 0.3 per cent and 0.9 per cent.
New York markets are down, and Toronto's S&P/TSX composite is bouncing around.
"After a long weekend of shopping and turkey, America will do its best to get back up to speed today," said market analyst Alastair McCaig of IG.
"Considering the negative mindset that has hung over both Asian and European markets in its absence, it will be doing well to regain the bullish momentum it had before the festivities."
The Toronto market has been hurt by the plunge in oil.
"Note that energy makes up 22 per cent of the TSX even after the recent slide, precisely the weight of consumer discretionary and staples in the S&P 500, the sectors that arguably stand to benefit most," said senior economist Robert Kavcic of BMO Nesbitt Burns.
"Inversely, energy is just over 8 per cent of the S&P 500, or roughly in line with the share of consumer stocks in the TSX. This is not a new revelation by any means, but just serves to highlight that, in this oil price environment, the deck is stacked heavily in favour of U.S. equities and against those in Canada."
There is, of course, some good news in oil's plunge as energy costs slide, giving consumers across the globe more spending money.
"Let's not forget that there are many winners from what is effectively a positive supply shock," BMO's Mr. Kavcic said Friday.
"Fittingly the price collapse comes during Black Friday week, and consumers are the clear and immediate beneficiaries - average gasoline prices in the U.S. have cratered below $2.80/gallon, down almost 25 per cent since early July," he said.
"For someone filling up an average-sized tank once a week, that's roughly a $50/month tax cut - better than a sharp stick in the eye. Indeed, consumer stocks have been among the best performers in recent months, pushing to record highs."
- Oil hits five-year low, tumbles below $65
- 'Dinged' and 'pinched': A long oil rout would sideswipe Canada
- Jeffrey Jones, Jeff Lewis and Carrie Tait: As oil skids toward $65, companies forced to recalculate
- Eric Reguly: Why oil prices will bounce back ... eventually
- Wabush woes: Labrador mining town reels from a China slowdown
A busy week
Amid all this, it's going to be one busy week.
"Let me put it this way," said senior BMO economist Jennifer Lee. "What is not out this week?"
It started with the manufacturing purchasing managers indexes released today, which so far have investors in a sour mood.
From there, central bankers take centre stage, starting in Australia, then India, Brazil, Canada, Britain and the euro zone.
"So far, the fourth quarter hasn't started too well for Japan, China and the euro zone, and it is not likely that November will change that perspective," Ms. Lee said today.
"Even in the U.K., where there is actually growth and talk of tightening sometime in 2015, the quarter started on a weaker note. And that weakness will be the topic of discussion for the central banks that are holding policy meetings this week."
The Bank of Canada won't do anything, of course, but markets will be closely watching its statement after the collapse in oil.
"Lower oil prices are a negative development for the economic backdrop and CAD and will play into the tone of the BoC's statement," said senior currency strategist Camilla Sutton of Bank of Nova Scotia, referring to the Canadian dollar by its symbol and Wednesday's Bank of Canada decision.
And, as The Globe and Mail's Tim Kiladze reports, Canada's big banks begin reporting fourth-quarter results tomorrow, when Bank of Montreal kicks it off.
- Asia, Europe factory activity slackens despite price cuts
- Eric Reguly: Mario Draghi: Will the master of QE teasing finally make a move?
- Tim Kiladze: After a record run of profits, Canada's Big Six banks brace for shift
Moody's cuts Japan
Abenomics suffered another blow today as Moody's Investors Service cut Japan's debt rating by one notch.
The move comes just about two weeks before Prime Minister Shinzo Abe, whose economic program is named for him, heads into an election.
"This is a classic case of how appeasing rating agencies can at times result in misguided economic policy," said Derek Holt of Bank of Nova Scotia.
"Moody's is disturbed that the second sales tax hike from 8 per cent to 10 per cent just under a year from now has been postponed in the wake of the economy's harsh response this summer and Prime Minister Abe's election call," he said in a research note, referring to round two of a tax hike that ate into economic growth.
"It's not so clear to me how Moody's would have responded to a completely crippled economy and the negative feedback effects on government revenues (like 1997's hike, only perhaps worse) had Japan gone ahead and stuck to plans to hike the tax again," he added.
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