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Tuesday, April 20, 2010

CIBC: "The Week Ahead" - April 19th-23rd

CIBC: "The Week Ahead" - April 19th-23rd

Key Highlights of this week’s article entitled: “The ABCs of the MPR”

The upcoming announcement from the Bank of Canada regarding the Monetary Policy Report has the markets all in a buzz. Avery Shenfeld breaks down what everyone will be looking for and what the near and long term consequences will be.

Key Numbers to watch this week:

· Canada – Consumer Price Index - March (Friday, 7:00AM) – Year-on-year headline inflation should see an increase to 1.8%. New auto prices have been on an uptrend, softened only by discounts being offered by manufacturers to woo back customers.

· USDurable Goods Orders – March (Friday, 8:30AM) – US durable good orders have been on a clear upward trend since March 2009, however we may see a slowdown as orders for commercial aircraft continues its decline.

Equity Insight:

· The S&P 500 is finally trading above pre-Lehman Bros levels. As well, 80% of reporting companies have met Q1 EPS expectations. This may be more difficult in Q2 and Q3 if reduced inventory building and fiscal support slow the economy

· For the last decade, the TSX and C$ have followed a very close path, both responding to common driving factors. This is a departure from the 80s and 90s where the currency moved one way when the markets went the other.

· In the non-residential construction market, government stimulus appears to be the dominant force. Private investment has fallen more into capital equipment and machinery, and surveys show this to continue into 2010.

Currency Currents:

· Only once in the last three decades has the Bank of Canada started a tightening cycle when the output gap was still negative. The C$ may struggle a bit if the Bank takes this into consideration and hold interest rates steady through to the end of Q2.

· Revisions for the Spring Edition of the MPR are expected this upcoming week. If past revisions and the ToTEM model is any indication, future editions may see a drop off of approximately 0.3% to account for the increase in the C$

· The BoC’s Business Outlook Survey came out this past week. Of note is that respondents expect the CPI to stay within the BoC’s 1-3% target.