A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Canada's interest rate environment is going to make it very difficult to attract foreign investment, might drive Canadian assets into other currencies, and signals that the loonie may have much further to fall,
"With traders expecting the Federal Reserve to raise its benchmark interest rate before the end of the year and signs that Canada may need to cut its further, the interest-rate advantage luring capital south may only grow…
"If I'm an investor and I can get an extra percentage point buying a five-year Treasury compared to a five-year Canada, I'm tempted to buy that Treasury," Sal Guatieri, an economist at Bank of Montreal, said by phone from Toronto Friday. "U.S. debt markets are simply more attractive than Canadian markets.""
Canadian bond yields almost always track U.S. yields closely, but it appears we may be on the verge of an exceptional environment for fixed income. The unattractive nature of Canadian bond yields could make the differential relative to the U.S. bonds even larger as selling pressure takes hold. IF the trend of weak fixed income markets spreads to corporate issues, this would be a major problem for smaller energy and mining companies that need to borrow – interest costs will rise at the worst time.
"It's Never Paid Less to Lend to Canada Compared With the U.S." – Bloomberg
China's equity market slipped four per cent intraday Tuesday before government–led support (repeatedly beginning with the country's two largest oil stocks) caused a recovery that left the Shanghai Composite down 1.7 per cent for the session.
Joe Wiesenthal conveniently posted a snippet of Goldman Sachs research outlining the Squid's "five reasons for the China equity sell-off Monday" here.
"The Chinese government's massive stock market stimulus is having the opposite effect" – Quartz
"China losing control as stocks crash despite emergency measures" – Telegraph U.K.
"Canadian investors have to take China's growth seriously" – Barlow, Report on Business
Global energy markets remain weak this morning and the Financial Times reports that stability in the oil sector is still a ways off,
""While speculative positioning in oil is not as overwhelmingly negative as it currently is for the four main precious metals, it has helped exert downwards pressure on prices over the past month in particular," analyst Paul Horsnell wrote.
"Factors that might calm sentiment and stabilise the market have proved elusive. In our view they may remain so for a while yet."
Bank of America Merrill Lynch trimmed its oil price forecasts on Tuesday.
"We lower our near-term end-of-3Q15 targets to $45/bbl for WTI, from $50/bbl prior, and to $50/bbl for Brent, from $54/bbl prior."
"Oil down in the dumps yet again" – FastFT
The Wall Street Journal also presented a series of informative graphics on the global energy sector.
"Big Oil's Big Problems" – Wall Street Journal
A combination of executive departures and huge short interest must have shareholders of Home Capital Group Inc. nervous. U.S. investors are betting heavily against the U.S.–listed version of Home capital's stocks - short interest has climbed to almost 13 per cent of the total float - while prominent employees keep leaving the firm.
"Veteran corporate director James Baillie resigns from Home Capital board" – McMahon, Report on Business
Tweet of the Day: "@ReutersJamie Emerging market GDP growth ex-China ground to a standstill in Q2, estimates JP Morgan http://t.co/7nQCCHeTQw " – Twitter
Diversion: I love HBO's John Oliver, but I cannot support this type of Canada bashing or I'm a bad patriot.
"John Oliver says affairs are 'unCanadian' in sketch mocking Ottawa" –HBO via CBC
Scott Barlow