Good Morning!

It’s that time again when financial prognosticators start looking to the year ahead. While concerns about a pending recession have eased since the yield curve inverted earlier this year, investors remain nervous.

Oxford Economics in its forecast says odds of a recession in Canada remain high. “While we don’t foresee an imminent recession in Canada, our models continue to send worrying signals. The on-going US-China trade war, decelerating growth in the U.S. and globally, and a plethora of underlying domestic concerns are all weighing on the outlook, and they keep odds of a Canada recession over the next 12 months high at 40%,” wrote director of Canada economics Tony Stillo.

South of the border, a recent Reuters poll of economists finds that while recession concerns have eased, a rebound is not expected any time soon. S&P Global Ratings puts the chance of a U.S. recession over the next 12 months at 25-30 per cent, compared with 30-35 per cent in August.

Here are Oxford’s other top calls for Canada:

  • Economic growth will slow from 1.5% this year to 1.3% in 2020
  • Bank of Canada will cut rates twice during the first two quarters of 2020
  • Business investment will rise by 0.8% in 2020, while export growth will slow to 1%
  • Housing market improve modestly with 2.4% gain

Here’s what you need to know this morning:

  • Canadian Parliament reconvenes
  • OPEC meets in Vienna
  • Bank of Canada Deputy Governor Timothy Lane delivers speech “Economic Progress Report” in Ottawa
  • The Ontario Securities Commission holds a hearing to consider an application by Catalyst Capital Group Inc. regarding the privatization bid for Hudson’s Bay Co
  • Hydro-Quebec CEO Eric Martel outlines 2020-24 strategic plan at Canadian Club of Montreal.
  • Notable earnings: Toronto-Dominion Bank, CIBC, Canadian Western Bank, Tiffany & Co.
  • Today’s data: Canadian trade balance, U.S. trade balance and factory orders

The Bank of Canada confirmed what everybody was expecting yesterday and held its benchmark interest rate at 1.75%. Of course, the real question all along was what’s next? The statement’s more upbeat tone on the Canadian and global economy had some economists rethinking calls for a cut in early 2020 and others giving next year a miss altogether. “Barring a negative shock hitting the economy, it looks like the BoC could be on hold for some time yet,” said BMO’s Benjamin Reitzes. Capital Economics’ Stephen Brown argues rising housing inflation will keep the Bank’s finger off the trigger for the long term. “The resurgence of the housing market – with the sales-to-new listing ratio now pointing to house price inflation accelerating to over 10% – suggests that the Bank will keep policy unchanged throughout 2020 and probably longer.”



— Please send your news, comments and stories to [email protected]. — Pamela Heaven @pamheaven

With files from The Canadian Press, Thomson Reuters and Bloomberg


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