A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Canadians should get their cross-border shopping done soon, according to CIBC,
“Given the limited scope of relying further on mortgage and consumer debt, Canada will need to produce better outcomes from exports and business spending to fuel growth, CIBC economists Avery Shenfeld and Royce Mendes said Tuesday in a report. But relatively weak productivity is hampering the nation’s businesses, making them higher-cost producers than their U.S. counterparts, they said.
The end result may be slower growth compared with the U.S., which will keep the Bank of Canada from raising rates as high as they are south of the border and lead to a weakening of the country’s currency. The Canadian dollar may need to fall below C$1.40 per U.S. dollar in order to make firms more competitive. .. Canada’s currency last traded consistently below C$1.40 against the greenback in the period between 1998 and 2003.”
“CIBC Sees Canadian Dollar Falling to 15-Year Lows on Weak Exports” – Bloomberg
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Two major Wall Street strategy teams are attempting to alleviate investor fears about a U.S. earnings slowdown,
“The threat to equities isn’t that dire, Goldman Sachs strategists said, because the downturn is heavily influenced by the likes of Apple and other large companies that account for much of the S&P 500’s per-share total. Look at each company’s expected profits individually, and the median index member will generate profit growth of 3.6 percent in the period instead of the projected 0.7 percent decline overall, according to data from Credit Suisse.”
“Credit Suisse, Goldman Downplay Market Risks From Earnings Slump” – Bloomberg
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I’ve written a few times about the negative effects of slowing global manufacturing activity on base metals prices.
Morgan Stanley recently argued, however, that low inventory levels for copper would lead to a price bounceback but new evidence shows demand for copper is falling,
“Heavy users of copper saw a solid decline in output in January, boding ill for future demand for the metal in coming months. The Global Copper Users PMI Output Index hit a near ten-year low at the start of 2019, indicating a downturn of the scale not seen since the financial crisis. This gives worrying indications of the health of the manufacturing sector and suggests a marked weakening of demand for copper from manufacturers in the months ahead, as well as providing a potential early warning signal for slower global economic growth.”
“Global copper users output index nears ten-year low prompting growth worries” – IHS Markit
See also: “Slowing U.S. economy can ill afford any more shocks: Kemp” – Reuters
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A research paper came to an interesting conclusion regarding climate change and asset markets (my emphasis),
“We analyze a direct measure: prices of financial products whose payouts are tied to future weather outcomes. We compare these market expectations to climate model output for the years 2002 to 2018 as well as observed weather station data across eight cities in the US. All datasets show statistically significant and comparable warming trends … When money is at stake, agents are accurately anticipating warming trends in line with the scientific consensus of climate models. “
“Market Expectations About Climate Change” – National Bureau of Economic Research
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I haven’t mentioned oil a lot recently because the story hasn’t changed – the positive price effects of production cuts are winning a tug of war with rising production and future demand concerns, and crude marches slower higher. New data on U.S. production is causing a halt to the price surge close to recent highs,
“Oil falls after record U.S. shale output forecast” – Reuters
“Canadian heavy crude slips with pipeline rationing set to rise” – BNN Bloomberg
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Tweet of the Day:
Diversion: “Amazon Reportedly Has Lord of the Rings Writers in a Locked Office With a Guard and Fingerprint Scanner” – Gizmodo
Newsletter: “Somebody call 9-1-1 about the global economy” – Globe Investor
Scott Barlow