Every week we bring you the world’s biggest business, currency, and travel stories. This week: Toronto considers a foreign home owners tax, oil falls, gold rises, unemployment rises in Canada and falls in the US, American stocks are up but that could mean an interest rates hike, and the Bank of England takes decisive post-Brexit action.
West Coast, Best Coast (just not for foreign buyers)
Vancouver’s new 15% foreign home buyers tax came into effect this week. It is still too early to determine the results of the new tax, but some people are already concerned that the real losers could be Canadian sellers. Experts also worry that the new tax could force foreign buyers to Canada’s other red hot housing market: Toronto. Ontario is considering a similar tax to cool the market according to Ontario Finance Minister Charles Sousa, and Mayor John Tory echoed this sentiment but stressed the need to gauge its effectiveness in Vancouver first. House prices in Toronto are up 17% year on year, while they are up 11% in Vancouver.
Oil fell 20% from a high of US$51 per barrel in June to just below US$40 in the first week of August. It is the first time oil has closed below US$40 since April. Oil has bounced between US$40 and US$50 for some time without threatening to break either price. The TSX energy sector fell 1.7% at the news. Much of the fall can be attributed to the US Energy Information Administration recently released figures which show a 521.1 million barrel oil stockpile in the US. Gas prices in Canada are down around 17% from last year.
Gold prices could reach $1,500 an ounce by 2017 according to a report by RBC Capital Markets. This year prices are already up 25% since January due to economic and political turmoil. Following Brexit the price of gold shot up by $58.80 reaching $1,320 – its highest level in two years. Investors use gold as a safe haven in times of uncertainty.
Canada lost 31,300 jobs in July as unemployment rose to 6.9%, the largest 10 month drop in employment for 5 years causing the loonie to drop by 0.83 cents on Friday. 31,200 jobs were lost in total, with the number of full time workers dropping by 71,400 while 40,200 part time jobs were created. Alberta’s unemployment rate hit a 22 year high at 8.6% while BC added 12,100 jobs to claim the lowest unemployment rate in the country at 5.6%.
US Job Growth
Job growth south of the border was much more positive. The US economy added 255,000 jobs in July, below the 292,000 jobs created in June, but surpassing the expected 175,000-180,000 predicted by economists. Unemployment in the US remains far below that of Canada at 4.9%.
Buy high, sell higher
The S&P 500 jumped 0.86% to beat the all time high reached last month while the Nasdaq rose 1.06% and the Dow Jones rose 1.04%. Promising job figures fueled the growth. Banks were the big winners with shares in Goldman Sachs climbing 2.6% while JPMorgan Chase rose 2.7%. Alphabet, owners of Google, rose 1.2% while Apple surpassed that with an increase of 1.5%. Promising employment numbers combined with the rising stock market could convince the Fed to raise interest rates.
On Friday the pound sunk to its lowest point against the USD in 8 days, falling by 1.6% to US$1.3112. The fall is the result of an interest rates cut announced on August 4th by the Bank of England. Rates will fall from 0.5% to just 0.25% (a record low) and will also be accompanied by about £70bn in bond buybacks in order to create greater liquidity in the UK financial market. The Bank also said that banks that do not pass on the low rates to their customers will be punished. The Bank’s decisive action combined with strong employment numbers in the US boosted the FTSE 100 to its highest point since July of 2015.
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