Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Energy markets are flat this morning as the "Will they or won't they?" question regarding OPEC production cuts remains unanswered. A new wrinkle appeared early Thursday with officials from Azerbaijan, a non-OPEC nation, reported that OPEC will request that all oil-providing nations cut output,
"'It could be expected that OPEC members may ask non-OPEC countries to cut production volumes for the next six months starting from Jan. 1 2017 ... by 880,000 barrels from the total daily production,' Azeri newspaper Respublika quoted the country's oil minister, Natig Aliyev, as saying. OPEC itself is expected to discuss production cuts of 4.0-4.5 percent at its ministerial meeting on Nov. 30, but members Iran and Iraq still have reservations about how much they want to contribute. Such a cut would bring OPEC's current output down by more than 1.2 million bpd, according to Reuters calculations."
"Azerbaijan signals OPEC wants big cuts from non-OPEC producers" – Reuters
"Russia to OPEC: Oil Freeze Is All You Get" – Bloomberg
"Oil prices static on uncertainty over planned production cut" – Reuters
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Reuters' Jamie McGeever collected a number of the most contrarian trade ideas for 2017. The list includes falling bond yields, a rising euro relative to the U.S. dollar and a $1-trillion increase in S&P 500 earnings,
"How much offshore earnings can U.S. companies bring back if president-elect Trump follows through with his pledge to cut corporate tax? About $1 trillion, according to estimates by Deutsche Bank. This could give U.S. stocks, already at record highs, another shot in the arm. Citi reckons global equities will rise 10 percent next year, led by developed market indexes. A 10-per-cent rise in the dollar and cut in U.S. corporation tax to 20 per cent could add 6 per cent to global earnings per share. 'If other countries also cut taxes then EPS could rise further, even against an uninspiring economic backdrop.'"
"Peaks, black swans and bonanzas: Market tips, bold calls and eyecatchers for 2017" – Reuters, Report on Business
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I can't provide a link for this – hence the long research report excerpt – but felt it was important enough to post here. Deutsche Bank's 2017 outlook for credit markets includes a significant warning for investors,
"Let us be clear that the global financial system remains broken and extremely fragile. Secular stagnation trends are everywhere. The world has too big a debt burden for the current growth environment. We would feel far more comfortable if the world went through a huge creative destruction period where zombie, inefficient debt was allowed to default – thus 'right-sizing' the ratio between debt and GDP. However we've long accepted that this is highly unlikely to happen outside of perhaps a future break-up of the Euro. The debt is too systemic for policymakers to be able to let it default without a big negative feedback loop on growth that could easily lead to a depression. The problem with current policy – which at a global level has become more and more extreme on the monetary side – is that it simply props up the failed system without offering much in terms of nominal growth stimulus."
Let's hope they're wrong because the market implications of this view are not great.
"Credit Outlook 2017: Volatility Ahead" – Deutsche Bank (no link)
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Tweet of the Day: "@amberkanwar Canada's households the 5th most indebted in the world
While Canada's corporations the 12th most indebted in the world via @scotiabank " – Twitter
Diversion: "The best 100 films of the 21st century, according to 177 film critics around the world" – Quartz
Scott Barlow