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Investors haven't been able to make up their minds recently on whether the all-clear has been sounded for the recession or some nasty surprise lingers over the horizon. It's unlikely that they will get much information this week to clarify the picture.
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" h* g% |: m+ |2 X. ~1 k: y; ?There are some big economic events this week, in the form of the U.S. Federal Reserve's latest decision on short-term interest rates, as well as pricing reports that will give the latest read on inflationary trends. But widespread consensus on the news in advance means the data are unlikely to shake the markets.
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. ]: H! j' m r! @( O/ \5 }, EFor the moment, there appears to be an equilibrium between bulls and bears, says Roland Chalupka, chief investment officer and portfolio manager with Fiduciary Trust Co. of Canada, a subsidiary of Franklin Templeton Investments Corp. that manages portfolios of high-net-worth investors.
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. \" r1 }- Z/ }1 ]2 cFor days the U.S. and Canadian markets have been struggling to break psychological barriers. In New York, the S&P 500 index has traded just short of 1,200 and in Toronto the S&P/TSX has hovered a hair below 12,000.
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Investors are just not confident enough to give the market more momentum right now, largely because sovereign debt concerns have reminded everyone that there is still a lot of bad debt on the balance sheet of banks outside of the United States, Mr. Chalupka says., U7 _8 G5 O8 n& V# x8 r
0 s0 D+ ~3 n _$ ~+ jThere won't be much in the way of corporate reports to digest this week, with fourth-quarter earnings season officially over in the U.S. and drawing to a close in Canada.
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$ U, p0 B5 F' |/ b$ bAmong the economic data, tomorrow morningwe hear the latest on U.S. housing starts, which are never an upbeat event these days with builder confidence in the basement. Consensus is for new builds to have slipped to 571,000 from 590,000 in the previous month.
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In the afternoon, the policy-making arm of the U.S. central bank announces its federal funds rate. The market expects the rate to remain in the target range of 0 to 0.25 per cent and most watchers will focus on the language of the accompanying statement. On this matter, economists generally anticipate the Fed will again acknowledge that the recovery is under way, albeit weakly, and that high unemployment remains a concern - enough of a signal to investors that rate hikes continue to remain distant.
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Consumer price index reports from the U.S. and Canada come Thursday and Friday, respectively. Neither is expected to show any signs of inflation.
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"With excess capacity limiting the ascent in prices, the year-on-year core inflation rate is set to remain close to or under the Bank of Canada's 2-per-cent target over the next several months, giving the BoC ample justification to honour its pledge to keep rates unchanged until [July]," notes Krishen Rangasamy, an economist with CIBC World Markets. |
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