Jan. 16, 2015

IMPACT OF SWISS FRANC ‘DEPEGGING’

  • Historically, the Switzerland has been a safe haven, both in their currency and financial institutions.
  • This week, in a surprise move, the Swiss National Bank (SNB) abandoned its 3 year ‘peg’ of 1.20 Swiss francs per Euro. This ‘peg’ was to prevent the Swiss franc from rising too high against the Euro.
  • At the same time, the SNB reduced interest rates to -0.75% from -0.25% to discourage a run-up in their currency.
  • Since removing the ‘peg’ the Swiss franc has soared 30%.
  • The #1 industry in Switzerland, banking, has been protected.
  • Analysts believe the SNB acted this week to be ahead of the downward pressure on the euro from the ECB meeting next week, as well as the Greek elections.

CANADIAN REAL ESTATE

  • Canadian December home prices fell 0.2% M/M. Declined in Halifax (-1.1%), Calgary (-1.1%), Quebec City (-1%) and increased in Edmonton (0.2%), Toronto (0.3%).
  • Y/Y home prices were up 4.9% nationally.
  • Number of homes sold through the MLS system in December dropped 25% M/M in Calgary (largest decline since 2008) and 26% in Edmonton (worst monthly decline ever). Rest of Canada declined 3.1%.
  • Number of sales from December to December, outside Alberta were up 6.1%, while they declined 4.3% in Calgary and 6% in Edmonton.
  • David Wolf, co-manager of Fidelity Canadian Asset Allocation Fund and a former Bank of Canada advisor, says the next move in interest rates may be down.

UNITED STATES

  • US December CPI declined 0.4% M/M, up 0.8% Y/Y. Core unchanged M/M and up 1.6% Y/Y.
  • US December import prices fell 2.5% M/M (largest decline in 6 years) and down 5.5% Y/Y.
  • State and local governments added 108,000 jobs in 2014, the most since 2008, largely in education.
  • November job openings rose by 142,000 to 4.97 million, the highest level in 14 years. There are now 1.8 unemployed for each job opening.

OIL

  • To date Canadian oil and gas companies have cut $5.18 billion from their 2015 budgets, down 24%.
  • CanOils predicts with US$50 WTI oil, less than 20% of Canada’s 50 top companies would be able to sustain their business long-term. Over the short-term 95% of these will be cash flow positive.
  • Iran lowered the oil price for its budget to $40.
  • Iraq is doubling crude shipments from its Kirkuk fields to 300,000 boe/day.
  • US crude production increased 60,000 boe/day to 9.19 million, the most since 1983.
  • China’s December crude imports surged to a record 7.19 million boe/day up from previous high of 6.81 million boe/day in April.
  • International Energy Agency expects non-OPEC supply to decline 350,000 boe/day while production from OPEC is expected to decline 100,000 boe/day to 29.8 million.
  • OPEC produced 30.48 million boe/day in December.