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(December 27, 2006) The U.S. economy is on track to shake off the slumping housing market and avoid a recession in 2007 while Canada continues to work through a moderate, albeit short-lived, slowdown, according to Laurentian Bank Securities economists.

According to Carlos Leitao, Laurentian’s chief economist and strategist, the U.S. housing market will undergo only a mild correction, “slowing overall consumer spending enough to ease inflationary pressures but not hard enough to tip the economy over into recession.” Leitao believes the bottom U.S. housing market may have already been recorded. Once the market hits bottom in the fourth quarter of 2006, Leitao predicts it will remain relatively flat throughout 2007.

With housing and the auto sector the only main areas of weakness in the American economy, Leitao expects that economic growth in the U.S. will gradually accelerate in the New Year.

As for Canada, Laurentian has issued a moderate growth outlook for 2007. “The last quarter of 2006 is likely to be the bottom in terms of economic growth,” notes Laurentian economist Sebastien Lavoie. “As we move forward into the New Year, the pace of expansion of the economy is anticipated to regain gradually some steam in tandem with the anticipated U.S. economic rebound.”

Lavoie is forecasting Canada’s real GDP to grow close to its long-term trend of 2.9% by the last quarter of 2007 with the economy keeping this momentum thereafter.

Still, sub-par economic growth in the near term will translate into less job creation in 2007 and a modest increase in the jobless rate to 6.9%, says Lavoie. This, he believes, will put pressure on the Bank of Canada to lower its policy rate by 50 basis points during the second quarter, “just enough to ensure that the economic slowdown stays moderate and short-lived.” This would put the overnight rate at 3.75% by mid-year.

The U.S. Federal Reserve is expected to adopt a similar approach toward interest rates. Leitao says he doesn’t see a change in the Fed’s monetary policy stance before the second quarter of 2007 at the earliest. The Fed will then reduce interest rates by about 50 basis points. “However, this should not be interpreted as the start of a new easing cycle but rather as an “insurance” against a longer slowdown,” Leitao adds.

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Metals and minerals to outperform in 2007: Scotiabank

(December 27, 2006) While nickel was the top-performing commodity in 2006, uranium and zinc are expected to lead the metals and minerals sector in 2007, according to Scotiabank.

Nickel surged 159% over the past year and prices are expected to remain strong through 2008, thanks to increased stainless steel production, higher demand for oil drilling equipment and electric power expansion.

Uranium, the third-best-performing commodity in 2006, will likely be the top performer in 2007. Spot uranium prices are expected to average $80 US in 2007 and end the year close to $90 US, up from $48.10 US in 2006. The current upswing in uranium prices represents a shift in global energy production away from high-priced fossil fuels.

“Uranium and zinc are our top ‘picks’ for investors in 2007, with precious metals, especially silver, also expected to benefit from further weakness in the U.S. dollar,” says Patricia Mohr, vice-president and commodity market specialist at Scotia Economics.

Oil prices are expected to maintain their value, averaging somewhere about $60 US in 2007 compared to $66 US in 2006. At the same time, global oil consumption should expand at a slightly stronger pace of 1.7% in 2007, boosted by somewhat lower prices, with most of the growth coming from China and the Middle East.

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CIBC acquires majority stake in FirstCaribbean

(December 27, 2006) CIBC has acquired a 44% stake in FirstCaribbean International Bank, the largest regionally listed bank in the English-speaking Caribbean, for $989 million US.

CIBC acquired the majority stake in the bank in an all-cash deal from Barclays Bank. Now, CIBC said, it will move forward with a mandatory offer to all FirstCaribbean shareholders.

FirstCaribbean has over 3,500 staff, 100 branches and banking centres and offices in 17 countries including the Bahamas, Barbados, the British Virgin Islands, the Cayman Islands, Jamaica and Trinidad & Tobago. Currently, FirstCaribbean has assets of approximately $12.4 billion US and a market capitalization of $2.8 billion US.

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Global Financial adds to its advisory board

(December 27, 2006) Global Financial Group has named RBC’s vice-president for regional banking operations to its advisory board.

Jacki Challenger is an industry veteran who leads a team of 900 staff and commands a budget of $70 million as she oversees all of RBC’s personal banking business in Canada. Challenger will add her experience to GFG as it develops a global securities exchange system designed for the listing and trading of real estate securities through its subsidiary egX Markets Inc.

The company’s goal is to commoditize real estate and provide investors, who currently have limited access to revenue-producing commercial and industrial property investments, with a regulated, transparent and liquid marketplace for real estate securities.

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