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Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Oil prices are a different category I think, but if readers are wondering why I'm skeptical about the rally in broader commodities, we need look no further than the London Metals Exchange. The past two days has seen a 30-per-cent jump in copper inventories at the LME as excess supply magically appeared.

The past few years has seen global investors move to commodities every time the U.S. dollar weakens. This is reasonable – commodities are priced in greenbacks and the dollar can reflect the relative growth prospects for the developed world relative to the resource-intensive emerging economies.

But I think this investment trend, which might be Pavlovian reflex at this point, makes less sense when China is slowing. The weakening dollar resulted from poor U.S. economic data, and if the U.S. isn't going to pick up the resource demand slack from China, who will?

"@tbiesheuvel #Copper stockpiles surge 30% in two days bloom.bg/1t3MlKJ pic.twitter.com/fZFOXWI5at " – Twitter
"U.S. Economy Projected to Expand This Year by Least Since 2012" – Bloomberg
Counterpoint: "@RenMacLLC Rebound in ISM new export orders presaging turn in profits from RoW. Drop in USD to support corporate earnings in H2 pic.twitter.com/QVfQROMKfM " - (incl chart) Twitter
Related: " China's Debt Load Is (Much) Higher Than Previously Thought, Goldman Says " – Bloomberg

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I wrote a column touting domestic bank stocks yesterday and Standard & Poor's decided to shove a finger in the eye of that idea by downgrading the credit outlook for Royal Bank Tuesday morning,

"The credit-ratings firm said Monday it was revising its outlook on RBC, Canada's largest bank by assets, to 'negative' from 'stable,' but would leave its credit ratings untouched. 'The outlook revision reflects concerns over what we see as RBC's higher risk appetite, relative to peers,"' said S&P credit analyst Lidia Parfeniuk in a release. 'We see one example of this in its aggressive growth in loans and commitments in the capital markets wholesale loan book, particularly in the U.S., with an emphasis on speculative-grade borrowers, including exposure to leveraged loans,' she added.

"S&P Downgrades Royal Bank of Canada Outlook" – Wall Street Journal
"Here's why Canadian bank stocks are attractive" – Barlow, Inside the Market

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I was honestly hoping to avoid the Brexit issue altogether, not thinking the Brits would be dumb enough to risk economic growth by leaving the economically attractive deal they have now. The polls, however, have tightened up and the risks to the U.K. economy are rising. There was considerable volatility in currency markets overnight, and, although the pound's gyrations were attributed to a 'fat finger' mistaken trade order, it might be a wakeup call for global investors.

"Pound's Round Trip Shows Trader Fickleness as Brexit Vote Nears" – Bloomberg
"Brexit meets sterling: A chart" - FastFT
"Brexit: How long would Britain take to leave?" – Financial Times
"AEP: 'Irritation and anger' may lead to Brexit, says influential psychologist" – Evans-Pritchard, Telegraph U.K.

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Tweet of the Day: "@SMTuffy El Erian: The advanced world has lost the ability to grow in a high & inclusive manner. This leads to the discontent we're seeing " – Twitter (excerpt from Mohammed El-Erian speech in Berlin )

Bonus Tweet of the Day: "@Telegraph Oil demand to peak in 2030 as energy experts slash forecasts telegraph.co.uk/business/2016/… pic.twitter.com/piUkwttRkw " – Twitter

Diversion: "For Sale: English Tower That Rich Guy Built to Imprison Wife" – Climateer Investing

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