Stocks could be in for sideways trading this week

TORONTO — The Toronto stock market could be in for some summer doldrums trading this week after a double-shot of poor U.S. economic data raised questions about how much strength the American consumer can provide to an economic recovery.

TORONTO — The Toronto stock market could be in for some summer doldrums trading this week after a double-shot of poor U.S. economic data raised questions about how much strength the American consumer can provide to an economic recovery.

The TSX snapped four straight weeks of gains last week, losing 37 points or 0.35 per cent after a report Thursday showed that U.S. retail sales unexpectedly dropped last month. Economists had expected a rise in sales of 0.7 per cent — instead they dropped by 0.1 per cent.

And on Friday, the University of Michigan’s consumer sentiment index for August came in at 63.2, worse than the 69 that economists expected and down from 66 posted in July.

“The U.S. we have to remember is still important globally (and) the U.S. consumer is still a big player in the global economy,” said John Johnston, chief strategist at The Harbour Group, RBC Dominion Securities.

Last week’s showing left the Toronto market up 43 per cent from the lows of early March, when investors fearful of a financial sector meltdown were pricing in a full-fledged depression.

The U.S. consumer accounts for around 70 per cent of the U.S. economy and 20 per cent of the global economy.

But some analysts aren’t all that sure if the strength of the U.S. consumer really matters that much in terms of keeping the rally on the Toronto market on the rails.

Doug Porter, deputy chief economist at BMO Capital Markets, makes the point that “the last thing we need in this recovery is for the U.S. consumer to be leading the way.”

“After all, it was really over consumption by the U.S. that really got us into a lot of these problems,” he observed.

“We should be looking for the rest of the world to boost its consumer spending and I think on that front there was some encouraging news.”

Porter said there has been a recent string of strong retail sales and auto sales reports out of China along with the news that France and Germany, Europe’s two biggest economies, surprisingly grew in the second quarter of the year as well.

He also noted that the recent retail sales and consumer sentiment reports don’t tell the whole story on consumer strength.

“Even with the pullback in consumer spending in the past year, consumer spending as a share of U.S. GDP was still at a high in the second quarter because the rest of the economy weakened even more than consumer spending,” he said, noting that U.S. consumer spending accounting for 70 per cent of the U.S. economy is way out of line with the rest of the world.

“Canada is in the mid-50s, China in the mid-30s and the only major economy that’s anywhere close to the U.S. is Britain, and they have issues of their own,” said Porter.

He also said that the healing in the global economy is “just a huge plus” for the Toronto market, which is heavily weighted in favour of energy and mining companies.

“Our core view is that Toronto will outperform New York on a sustained basis.” he said.

Just Posted

Fire investigators comb through industrial fire wreckage looking for answers

Industrial building in north Red Deer was completely gutted in Wednesday morning fire

Time for a central Albertan in cabinet, says chamber of commerce

Central Alberta had no cabinet ministers in last government

Trump Russia probe finally delivers some answers

WASHINGTON — After nearly two years of waiting, America is getting some… Continue reading

Trans Mountain Pipeline deadline extended

OTTAWA — The federal government is delaying a decision on the Trans… Continue reading

WATCH video of Innisfail resident creating the world’s biggest caricature

Watch as Innisfail resident Dean Foster creates the world’s biggest caricature of… Continue reading

CRA’s automatic benefit registrations give retirees reason to file on time

TORONTO — This is the time of year when procrastinators begin to… Continue reading

Study: Genetic test predicts middle-aged obesity risk

NEW YORK — Can a genetic test identify newborns at risk of… Continue reading

Downtown Red Deer Co-op Plaza Food store closing

Central Alberta Co-op is closing its downtown Red Deer Plaza food store… Continue reading

Earth, meet Polo: Ralph Lauren unveils plastic bottle shirt

NEW YORK — Earth, meet Polo. Polo Ralph Lauren on Thursday launched… Continue reading

Statistics Canada reports retail sales rose 0.8 per cent in February

OTTAWA — Statistics Canada says retail sales rose 0.8 per cent in… Continue reading

Inflation rises 1.9% on higher prices for fresh vegetables, mortgage costs

OTTAWA — Canada’s annual inflation was up last month as price pressures… Continue reading

Netflix adds 9.6M subscribers in 1Q as competition heats up

SAN FRANCISCO — Netflix kicked off the year with the biggest subscriber… Continue reading

Liberals find anti-Trudeau sentiment on campaign trail in Prince Edward Island

OTTAWA — When voters in Prince Edward Island go to the polls… Continue reading

Most Read