Market jitters short term - TSX rally to resume, according to a new CIBC World Markets report
Global economic outlook has seldom been brighter TORONTO, July 5 /CNW/ - CIBC (CM: TSX; NYSE) - While recent market jitters saw investors jump in and out of the equity market in June, CIBC World Markets forecasts the underlying strength in the global energy and commodity sectors will see the TSX hit its target of 15,000 by year end. CIBC World Markets' latest Canadian Portfolio Strategy Outlook report attributes market instability in June to investor concerns over rising inflation, central bank rate tightening and anxieties about the U.S. subprime loan market. But the bank believes that strong market fundamentals will outweigh these concerns. "While banks and other interest-sensitive stocks have taken it on the chin, most of the adjustment in bond yields should be behind us," says Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets. "A summer hike from the Bank of Canada is unlikely to mark the beginning of a full fledged tightening cycle, in view of the moderating impact of a rising Canadian dollar on both domestic growth and import prices. "While a final verdict on the subprime market won't be known for several quarters, the global economic outlook has seldom been brighter, bringing strong support to energy and most commodity markets." The report notes that soaring demand for oil in the developing world - where carbon emissions don't yet matter - has helped push crude prices above US$70 a barrel and will drive prices to record highs this year. Mr. Rubin also believes that rising crude prices are likely to be the catalyst for renewed mergers and acquisition activity in Canada's energy patch, particularly among those with extensive oil sands exposure. The bank remains 3 1/2 percentage points overweight in the energy sector of its strategy portfolio. Soaring energy prices and concerns over carbon emissions have also benefited key segments in the industrial sector, such as railways and transit and rail equipment manufacturers. Rail is nine times more fuel efficient than its main freight competitor, trucking, and hence is a source of much less greenhouse gas emissions. In addition, manufacturers of rail and transit equipment are benefiting from the recent plans to ramp up mass transit as cities around the world attempt to reduce vehicle emissions. As a result, CIBC World Markets has added a percentage point of weighting to the industrial sector. The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/psjul07.pdf. CIBC World Markets is the wholesale and corporate banking arm of CIBC, providing a range of integrated credit and capital markets products, investment banking, and merchant banking to clients in key financial markets in North America and around the world. We provide innovative capital solutions and advisory expertise across a wide range of industries as well as top-ranked research for our corporate, government and institutional clients.
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For further information: Jeff Rubin, Chief Economist and Chief Strategist, Managing Director, CIBC World Markets at (416) 594-7357, firstname.lastname@example.org or Kevin Dove, Communications and Public Affairs at (416) 980-8835, email@example.com; Archived images on this organization are searchable through CNW Photo Archive website at http://photos.newswire.ca. Images are free to accredited members of the media.