The Canadian dollar was strengthened today amid speculation that Rio Tinto?s $38 billion bid for Alcan will increase demand for the Canadian currency. Additionally, a better than expected trade surplus and a higher new housing price index drove the Loonie higher.
The Canadian housing market steered clear of a housing slump as the Canadian Real Estate Association announced that the average house price reached $335,180 - a 10.4 percent increase from June of last year.
Mining giant Rio Tinto offers $38 billion for Alcan, trumping rival Alcoa?s bid by 38.2 percent. Surpassing recent buyout bids for Canadian Bell Inc., Alcan could be tagged as Canada?s biggest buyout in history.
http://www.canada.com/nationalpost/financialpost/story.html?id=a3bf8be0-6afe-4b1a-936a-5e15fb86f1e4&k=88783[I]Source: Financial Post[/I]
A mild decline in imports and exports narrowed the Canadian trade surplus. Falling exports can be attributed to a strong Canadian dollar daunting US business.
[B]Currency Markets: USD/CAD[/B]
The Canadian dollar was strengthened today amid speculation that Rio Tinto?s $38 billion bid for Alcan will increase demand for the Canadian currency. Additionally, a better than expected trade surplus and a higher new housing price index drove the Loonie higher. Today?s rebound followed a two day decline in the Canadian dollar after the Bank of Canada policy statement dampened hawkish sentiment. The Canadian dollar was most recently quoted at 1.0470.
[B]Equity Markets: S&P/TSX Index
[/B]The S&P/TSX plowed forward today, harvesting over 100 points. Index leaders included Alcan Inc. whose shares jumped $8.27 to $102.67 amid Rio Tinto?s $38 billion dollar merger bid, the largest in Canadian history. With oil prices raging above $73 a barrel, Canadian energy companies Suncor, Canadian Natural, and Petro-Canada all moved higher. The S&P/TSX was most recently quoted up 125.04 points at 14,291.13.
[B]Fixed Income: Canadian 10-Year Government Bond
[/B]The Canadian 10-year bond tumbled as investors moved their money into the equities market looking to take profits from the swelling S&P/TSX index. Investors regained their confidence after risk aversion reigned on news that the S&P and Moody?s cut the ratings on billions of dollars worth of debt backed by sub-prime mortgages. As the Canadian dollar began to climb again, hawkish speculations returned, driving the yields higher. Interest rate futures are still pricing in another rate hike by year-end. The Canadian government 10-year bond was most recently quoted at 95.350, yielding 4.46 percent.