A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
A surprise rate cut by the Bank of Canada yesterday kicked off one of the most exciting days in domestic markets in recent memory. The loonie plummeted and short term bonds surged immediately on the announcement – the two year government of Canada bond ended the day with a yield 30 basis points lower at 0.55 per cent.
The fun continues this morning with Toronto Dominion Bank's interesting decision to keep lending rates where they are and not follow the central bank's lead. By not passing the rate cut through to clients, TD is bolstering their profitability and, to some extent, not allowing Governor Poloz's decision to translate into economic activity. There is definitely a risk of reading to much into this, but the question needs to be asked; does TD see difficult financial times ahead in the domestic economy?
"TD won't follow Bank of Canada rate cut" – Kiladze, Report on Business
Royal Bank of Canada announced the $5.4-billion acquisition of Los Angeles-based City National Corporation, a private and commercial bank, early Thursday morning. The ROB has more details on the strategy behind the move:
"RBC to buy U.S.-based City National in $5.4-billion deal" – Kiladze, Report on Business
"RBC's red carpet move: L.A.'s City National is 'Bank of the stars'" – Nelson, Report on Business
The other big surprise in the wake of the rate cut was rapidly-built consensus that another rate cut is coming. BNN's Amber Kanwar noted on Twitter that economists now predict an 80 per cent chance of further cuts between now and October.
"Market wastes no time pricing in ANOTHER rate cut by Bank of Canada " – Kanwar, Twitter
Foreign exchange traders will likely be more careful what they asked for in the future. After complaining about a lack of market volatility for months, the Bank of Canada, European Central Bank and Swiss National Bank have combined to swamp traders to the point where "Prices on a screen can no longer be trusted," according to a Bloomberg report.
"Traders once starved for volatility now see too much" – Bloomberg
"'My jaw hit the desk': A Canadian currency trader's wild morning" – Report on Business
The European Central Bank did not disappoint (for once) as ECB President Mario Draghi announced a €60-billion ($85.1-billion) asset purchase plan beginning in March 2015. The euro fell less than a third of a per cent against the U.S. dollar in the aftermath, a sign that markets had already priced in the bulk of the effects on asset prices. In comparison, the surprise move by the Bank of Canada yesterday caused the loonie to plummet 2.6 per cent against the greenback.
"Introductory statement to the press conference" – ECB (full statement)
Former U.S. Treasury secretary Lawrence Summers sounded a pessimistic note on the potential effectiveness of monetary stimulus in Europe during a speech at the annual lovefest of filthy rich people in Davos, Switzerland,
"[Mr.] Summers outlined three reasons why Europe's QE program might not be as impactful as those undertaken in the U.S.. U.S. QE came earlier when bond yields were higher and could be forced down by the policy. QE in the U.S. was unexpected so gave the economy a jolt. U.S. QE worked through the capital markets, but European credit is largely bank based, so cannot work so freely."
"'There is every reason to expect QE will be less impactful in Europe'" – Business Insider
Statements by Suncor management provide a welcome ray of optimism for the domestic energy sector. The Wall Street Journal reports that the company is treating low oil prices as a temporary inconvenience in expectations that the commodity price will double from current levels.
"[Suncor] won't delay its biggest long-term growth projects because it expects crude oil prices to double from current levels within the next three to four years. 'In the longer term, oil is going to go back to $90-$100,' Alister Cowan, the oil sands producer's chief financial officer, told investors."
"Suncor executive says growth plans based on bullish crude price outlook" – Wall Street Journal
Tweet of the day: "@ReutersGMF Is the tide finally turning in favour of Europe stocks after yrs of underperformance? reut.rs/1BFq3RG "
Diversion: "An 86-year-old woman has been living on cruise ships for a decade" – Factually
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow