THREE CHARTS TO START YOUR WEEK
STOCKS
Businesses upgrade their technology.
Business spending is helping to fuel the economic recovery, despite the modest decline in durable goods orders reported for January.
"The U.S. durable goods orders data are often too volatile to examine on a month-to-month basis, so it is best to smooth out volatility," said Jennifer Lee, a senior economist with BMO Nesbitt Burns. "And after doing so in the latest month, a clearer picture of the overall trend in core capital goods orders is revealed."
The three-month moving average shows orders are up at an annual rate of 19 per cent, the second-highest reading in nearly four years, she said.
Businesses are still spending on machinery, computers, electronic products and software, economists say.
A better gauge of business investment in the short term is the shipping data, which were up an annualized 2.6 per cent in January, compared with the fourth quarter of 2009, said Marc Pinsonneault, a senior economist with National Bank Financial Inc. "In fact, the indication for business investment in machinery and equipment is even better when one takes into account the increase in machinery and equipment imports," he said.
COMMODITIES
Steel industry heats up
Iron ore markets are not signalling the global recovery is stalling and the outlook is projected to be quite robust well into 2011, BMO Nesbitt Burns Inc. analysts say in a report to clients.
The spot price for iron ore has increased to $130 (U.S.) a tonne, and expectations are the 2010 benchmark price settlement could be significantly higher, although some Chinese resistance to higher prices is expected, the analysts said.
"A sharp recovery in global industrial and steel-making activity and the need for re-stocking in the Western world are tightening supply and driving iron ore prices to high levels," they said.
Restarting of Western world steel smelting capacity, poor-quality iron ore in Asia, strong Chinese demand and low freight costs, suggest resource conglomerates Vale SA and BHP Billiton Ltd. "are progressively more able to impose, the more favourable to producers, spot pricing regime in Asia," they said.
BMO Nesbitt Burns has "outperform" ratings on New York Stock Exchange-listed Cliff Natural Resources Inc. and Toronto Stock Exchange-listed Consolidated Thomson Iron Mines Ltd.
CURRENCIES
Bank of Canada holds cards close to vest
The clock is ticking, although the Bank of Canada tomorrow is expected to reaffirm its policy of holding the target overnight bank rate steady at one-quarter of a percentage point until the second quarter of 2010.
Although the domestic economy has been growing at a healthy rate and inflation has picked up, economists expect no increase in regulated rates until the second half of 2010 or early 2011.
"The Bank of Canada may eventually wish to provide a bit more guidance [about its rate-decision policy] for markets, but it would be premature to do this before the April or June decisions," said Eric Lascelles, chief economics and rates strategist with TD Securities Inc.
TD Securities continues to anticipate a first rate hike around the fourth quarter.
"At this early stage, there is little to be gained by signalling what the post-June policy path might look like and, potentially, a lot to lose by way of a stronger Canadian dollar and higher-term interest rates," said Michael Gregory, a senior economist with BMO Nesbitt Burns Inc.
