Scotiabank's Leading Experts Discuss The 2010 And 2011 Outlook For Global
Economies, Markets and Currencies

TORONTO, Dec. 1 /CNW/ - In a presentation earlier today moderated by ScotiaMcLeod Equity Trading Director Fred Ketchen, Scotiabank Chief Economist Warren Jestin was joined by Scotia Capital's Director of Portfolio Strategy Vincent Delisle and Currency Strategist Camilla Sutton to share their outlook on what 2010 and 2011 will bring for the global economy, capital markets and currencies.

In the 2010-11 Economic and Market Outlook Report, titled From Recession to Recovery, Mr. Jestin discusses the opportunities and challenges facing the Canadian, U.S. and global economies.

"The global economy is moving from recession to recovery, fuelled by massive government stimulus, an uneven revival in consumer demand and the re-ignition of production as firms react to improving sales prospects," said Mr. Jestin. "China and a number of other emerging nations have already regained altitude, driving energy and commodity prices higher. At the same time, the U.S., major European nations and Japan are still struggling to achieve takeoff, held back by historically high levels of unemployment, weak consumer confidence and the prospect of a protracted period of convalescence in key sectors such as housing."

    -   In many respects, Canada's domestic economic fundamentals are
        stronger than those in the U.S. and most other developed nations. Our
        banking system is widely regarded as the strongest in the world. Our
        labour market has shown greater resilience, with job losses running
        about half the rate of decline evident south of the border.
    -   There is a risk of economic relapse in North America and abroad later
        in 2010 as governments begin unwinding unprecedented monetary and
        fiscal stimulus. However, the most likely outcome is not renewed
        recession, but a fairly turbulent and generally weak take-off.
    -   In Canada and the U.S., growth in 2010 will probably be around three
        per cent, doing little more than backfilling the hole created by the
        steep decline in activity over the past year.

In the report, Mr. Delisle shared his views and analysis of what is to come for capital markets.

"Entering 2010, we are inclined to stick to our constructive equity view, but caution that the economy may beat markets in coming months," said Mr. Delisle. "Improving macroeconomic data and positive profit trends should continue in the first half of the year, thus supporting further outperformance from cyclical assets and sectors. Robust earnings growth, 25 to 30 per cent, and positive funds flows could lift equity indices another 10 per cent. The equity risk-reward outlook is not as compelling as it was at the start of 2009, however, and investors should expect more modest equity gains now that the normalization phase is in the latter stages."

    -   Rising interest rates should represent one of the main challenges
        next year as Central Banks likely implement their "exit strategies"
        in the second half of 2010.
    -   Cyclical sectors have been leading the charge since the spring
        rebound started in March and 2009 sector performance has provided a
        text-book illustration of late-stage recession leadership. We expect
        this cyclical domination to continue in 2010, albeit at a lesser
    -   Key items to watch in 2010 will be the behaviour of the USD and the
        timing of Fed rate hikes and a public/private sector handoff.
        Tangible improvements in business spending early in 2010 could set
        the stage for employment growth and a sustained consumer spending

During the presentation Camilla Sutton discussed what we can expect from the loonie and the U.S. dollar for the next year, as well as how currencies will be affected globally.

"As we look out to 2010, the most common question we field is: when will the Canadian dollar reach parity. We expect this on a sustainable basis to begin in the second quarter of 2010 and for Canadian dollar appreciation to continue through year-end and into 2011," said Ms. Sutton. "Forecasting the exact timing of parity is difficult as markets can violently shift course."

    -   In the U.S., rising unemployment rates combined with contained
        inflation and a fragile recovery do not lay the foundations for early
        interest rate hikes. Accordingly, we expect the Federal Reserve to
        leave interest rates on hold until the third quarter of 2010.
    -   In Canada, the economy is on firmer footing; however, a strong
        Canadian dollar should keep the Bank of Canada patient and
        accordingly we would expect them to move in tandem with the Fed.
    -   As we look out to 2010, our forecast calls for ongoing Canadian
        dollar strength combined with a broadly weaker U.S. dollar. The
        market's focus will be squarely on relative monetary policy, the
        negatives associated with the large US government deficit and bearish
        U.S. dollar sentiment.

A replay of the conference call is available by calling 1-800-408-3053 (local: 416-695-5800) and entering passcode 6420042. A copy of the report and presentation can be found on the economics page at:,1608,CID8339_LIDen,00.html. A video of the presentation will be made available at on Wednesday, December 2nd, 2009.

Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.

A subsidiary of Scotiabank, Scotia Capital offers lending, investment banking and capital markets products to corporate, government and institutional clients. It provides full-service coverage across the NAFTA region, as well as a niche focus in select markets globally. Scotia Capital has 27 offices and more than 300 relationship managers organized around industry specialties.

Scotiabank is one of North America's premier financial institutions and Canada's most international bank. With close to 69,000 employees, Scotiabank Group and its affiliates serve approximately 12.8 million customers in some 50 countries around the world. Scotiabank offers a diverse range of products and services including personal, commercial, corporate and investment banking. With more than $485 billion in assets (as at July 31, 2009), Scotiabank trades on the Toronto (BNS) and New York Exchanges (BNS). For more information please visit

SOURCE Scotiabank - Economic Reports

For further information: For further information: Robyn Harper, Scotiabank Public Affairs, (416) 933-1093,; In Calgary: Deborah Spence, Scotiabank Public Affairs, (403) 601-4855,; In Vancouver: Michelle Cobb, Scotiabank Public Affairs, (778) 327-5451,

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