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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

The oil price is lower this morning and the world's largest independent crude trader is warning that the easy money in the sector has already been made,

"'I cannot see the market really roaring ahead,' Vitol Group of Cos. Chief Executive Officer Ian Taylor told Bloomberg Television in an interview. 'We have a lot of oil in the system and it will take us considerable time to work that off.'… 'We probably expect demand growth to be slightly less in the second half of the year,' he said. 'There is a little less pull from the Far East" and basic Chinese refineries, known as teapots, seem well satisfied after having 'overbought' crude in the first months of the year,' he said.

"The summer driving in the U.S. may not be so bullish for oil because 'the refinery system of the world has clearly been able to make enough gasoline, and the gasoline stocks are healthy,' Taylor said."

"World's Top Oil Trader Says Prices Won't Rise Much Further" – Bloomberg
"U.S. shale firms' first-quarter hedging rush may squeeze margins, spur output" – Reuters

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The Wall Street Journal has identified Italian banks as the most likely source of the next financial crisis,

"In Italy, 17% of banks' loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5% ... 'Brexit could lead to a full-blown banking crisis in Italy,' said Lorenzo Codogno, former director general at the Italian Treasury. 'The risk of a eurozone meltdown is clearly there if Brexit concerns are not immediately addressed.'"

Italy's banks could also be a source of political turmoil. The country's government is threatening to provide financial support for the sector in defiance of European Union rules. This would not help the already fragile state of regional cohesion.

"Bad Debt Piled in Italian Banks Looms as Next Crisis" – Wall Street Journal
"A Prime Minister, a Referendum and Italy's Turn to Get Worried" – Bloomberg
"Italy Said to Consider Capital Injection in Monte Paschi" – Bloomberg
"@EuroBriefing Forget Brexit for a moment. Italy is in a very serious banking crisis right now - eurointelligence.com " – Twitter

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The fallout from the U.K. referendum has 10-year and 30-year U.S. Treasury yields hitting record lows Tuesday morning. Economists and traders are arguing vehemently about what this means for the economic outlook but for elderly savers, it's clearly not great news.

"Worries over China, Brexit push Treasury yields to record low" – Reuters
"This reliable indicator is flashing U.S. recession warning" – Barlow, Inside the Market

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A U.K. REIT suspended redemptions in a story that is unlikely to affect Canadian income-oriented investors but still put a chill up their spine. A Standard Life REIT was hit by large redemptions after Brexit and was unable to come up with the cash quickly,

"The decision of Standard Life to cease trading on its property fund is a real sign of the outflows which funds are experiencing and managers' expectations that more investors will head for the exit door. It is likely that other managers will be experiencing similar levels of outflows and so we can expect them to follow suit, even if only as a precautionary measure."

"Property stocks under pressure after Standard Life fund move" – Financial Times

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Tweet of the Day: "[Canadian] @jason_kirby Business investment hasn't been this crummy in 40 years macleans.ca/economy/econom… via @MacleansMag pic.twitter.com/ZixCt0wg8B " – Twitter

Diversion: "'We just did the hardest thing NASA's ever done.'" – The Atlantic

See Also: "'Welcome to Jupiter': NASA's Juno probe survives high speed arrival" – Globe and Mail

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