Corporate Canada remains in good health. According to just-released data by Statistics Canada, non-financial corporations saw their operating earnings rise 3.1% in Q3 on the back of higher sales and a boost in profit margins. As today’s Hot Chart shows, the level of profitability remains high by historical standards with margins in excess of 6.5%. Also, we note that the debt-to-equity ratio fell to the lowest level in at least 23 years in Q3. Two key determinants of the return on equity are thus doing very well despite the strong Canadian dollar and the relatively weak U.S. recovery. The very low debt-to-equity ratio provides leeway for our firms to face the current global headwinds.
Economic Commentary
Economic Commentary
- Angela Merkel and Nicolas Sarkozy both rejected the idea of issuing debt on behalf of the Earn zone instead of country by country, and yesterday's meeting once again wrapped up without a solution. Portugal and Hungary also joined the club of nations that have had their credit ratings downgraded. Yields on Italy's bond issue this morning are the highest since the Euro zone was created. It looks more and more like the single currency is falling apart before our eyes.
- An IMF report also cautioned Japan about the size of its debt, whirls exceeds 200% of GDP and increases its citizens tax borders. However, 90% of Japanese debt is held domestically, which safeguards the country against hostile market forces to some extent
- Given the bearish climate, the greenback continues to climb. The EUR/USD rate is approaching its lose from September (at the height of the Greek crisis) and the USD/CAD rate broke through another technical level overnight. A continued downturn on U.S. stock markets after yesterday's holiday could lend even more strength to the movement today and especially Alonday. Caution should be the watchword for USD buyers.