Canada’s largest banks approach record highs on the back of strong housing sector
The Canadian economy faces strong headwinds in 2013. Volatile commodity prices, waning demand in emerging markets and weak growth outlooks have placed considerable strain on Canada’s relative performance. In response, the Bank of Canada has been forced to cut growth forecasts, as the nation’s domestic economy slows amid global pressure. The one bright spot, however, has been the housing market, which earlier this week showed more signs of strength.
According to the Canadian Mortgage and Housing Corporation, housing starts for the year-ended in June topped 199,600, beating expectations by 12,600. Housing starts have been consistently strong for most of the year, defying expectations for a major slowdown.
Shares of Canadian banks are rising on the country’s upbeat housing sector. As data from the Canadian Real Estate Association show, the gains are not only attributable to new housing starts, but existing homes as well. Canadian existing home sales rose more than 3 percent in June, almost matching the previous month’s gain that was the fastest in more than two years.
Shares of Royal Bank, Canada’s largest bank by market capitalization, rose 1.3 percent to $64.60 in intraday trade, the highest intraday gain since February. RBC would later close at $64.78 a share. Canada’s second-largest bank, TD, advanced more than 1.5 percent, its biggest intraday gain in two years, to reach $87.42.
Canada’s four other banking lenders—CIBC, BMO, Scotiabank and National Bank—also advanced Thursday. CIBC advanced 1.3 percent, closing at $74.97 a share. BMO advanced 1.5 percent to close at $62.09 a share.
The banks were also supported by the latest testimony from US Fed Chairman Ben Bernanke, who said the status of economic recovery would determine the pace of stimulus cuts. The future of US monetary policy has been the centre of attention for months, as investors grapple with the prospect of higher lending rates.
Earlier in the day Canadian wholesale sales recorded the biggest gain in more than two years, advancing 2.3 percent in May, beating expectations of a 0.3 percent hike. On Friday Statistics Canada and the BoC release official data on the Consumer Price Index, a key indicator of inflation. The BoC has expressed concern that inflation isn’t growing fast enough, a sign of sluggish growth in the Canadian economy. Despite its struggles, the Canadian economy is still expected to grow by as much as 1.7 percent this year, according to the International Monetary Fund.
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