Markets wait on Carney as rout continues

The Chase by Marty Cej:

Asian stocks tumbled, European equities are sliding and U.S. index futures are pointing to declines at the open of North American trading. Judging from the number of photographs of floor traders pinching the bridges of their noses on front pages and news websites, it could be another rough ride for equity investors.

Not so much for bond markets and gold investors, though. Government bond yields in Canada and the U.S. were driven to record lows yesterday and remain close to those levels while gold has pushed to new records. With no U.S. data out this morning to confirm or undermine economic worries, investors will be hard pressed to come up with an easy excuse to buy or sell.

It will be a different story in Canada, however, as Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney testify before a parliamentary committee on the impact the European debt crisis and U.S. slowdown will have on the Canadian economy and financial markets. We'll take Minister Flaherty's testimony live beginning at 9 am Eastern. Carney sits down at 10 am. TD Bank Chief Economist Craig Alexander will follow the testimony for us in studio.

Economists and traders expect the Canadian fiscal- and monetary policy decision makers to insist that the Canadian economy and Canuck companies will remain resilient in the event of a more severe economic downturn.

Inflation is not a major concern, as evidenced by this morning's Canadian CPI data; corporate balance sheets are strong and many commodity prices are at or near record highs. They can expect Flaherty to tout the "soundness" of the Canadian banks and scold the profligate ways of other nations. Governor Carney will assure the committee that the central bank has all the tools necessary to help stimulate the economy in the event of a severe downturn and the Bank of Canada is one of the few members of the Group of Seven that is able to cut rates if needs be. But is there a need?

The markets should brace for any change in the fiscal projections by the government or cuts to economic growth assumptions.

Canadian tech stocks could garner a lot of attention this morning. Research In Motion continues to be the subject of intense takeover speculation in the wake of Google's $12.5-billion takeover of Motorola Mobility and the successful multi-billion-dollar auction of Nortel's patents. Bloomberg reports this morning that analysts at Morgan Keegan estimate that RIM may now be worth $25 billion thanks to the value of its patents.

Sure, that's a far cry from the $83 billion that RIM was valued at during its peak, but it's a nice premium on the $13.5 billion market cap the company now sports. Analyst Peter Misek at Jefferies raised the stock to "hold" from "underperform."

Open Text will also be in focus after HP said it would buy Autonomy of the UK for $11 billion. Analysts at National Bank say Open Text could be the next target in the industry and IBM the most likely buyer. National Bank also says a bidding war between SAP and Oracle is not out of the question.

Banks will be a key sector for us to follow today and in the coming weeks. How "sound" are Canadian banks relative to the rest of the world? How do they measure up in terms of Tier 1 capital, for example, or tangible common equity? It is not enough for us to refer back to a report written months ago. Times have changed and so have the banks.

Gold has soared to another record high. The commodity, the companies, the ETFs… buy, sell, hold? They are all angles.

Oil is slumping. Same deal as gold, only different.