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business briefing

Briefing highlights

  • Why investors are spooked
  • Markets at a glance
  • Retail sales slip in November
  • RBI names CEO, raises dividend
  • From today’s Globe and Mail

Spooked

Here’s how markets economist Hubert de Barochez sums it up:

“After a fine start to the year, equity prices have come under a bit of pressure this week on concerns about the health of the global economy. Since we still think that the outlook for global growth is even worse than is generally assumed, we suspect that there is more stock market weakness to come this year.”

Indeed, after a rough 2018 but a nice bounce to kick off 2019, investors are suddenly thinking twice about the outlook. As Tuesday’s market action illustrated, they’re fretting over the economy and trade, among other things.

Already this week, for example, the International Monetary Fund cut its projections for global economic growth, while China turned in its weakest economic showing in years.

“We think that even the revised growth forecasts for the IMF, and the consensus expectations for global growth more generally, are too optimistic,” said Mr. de Barochez, of Capital Economics.

“In the next two years, we anticipate that growth will slow sharply in the U.S. while the euro zone economy continues to lose momentum,” he added.

“And even when policy stimulus from the Chinese authorities kicks in later this year, we think that growth in China’s economy will stabilize at a lower level, not rebound like it did in 2016.”

One of the reasons for early year optimism was the hope that the U.S. and China would settle their trade war before a scheduled increase in American tariffs in early March.

That “fragile optimism,” though, eroded Tuesday on reports that the Americans had called off a meeting with their Chinese counterparts, noted CMC Markets chief analyst Michael Hewson.

Larry Kudlow, President Donald Trump’s adviser, disputed the report. He added, too, the most important meeting is the one planned at the end of January with China’s vice premier.

But this “would suggest the potential for failure still remains fairly high,” Mr. Hewson said.

“These conflicting reports still serve to keep U.S. markets under pressure given they had already been trending lower after playing catch-up, or catch-down, with markets in Europe, having missed out on the move lower due to being closed [Monday] for Martin Luther King Jr. Day.”

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RBI names new chief

Tim Hortons and Burger King have a new boss, and their shareholders a higher dividend.

Restaurant Brands International, parent of both, named Burger King president Jose Cil as its chief executive officer, replacing Daniel Schwartz, who becomes executive chairman.

RBI also raised its dividend to 50 cents as it unveiled select financial results, as well.

Tim Hortons same store sales, a key measure in retailing, rose 2.2 per cent in Canada in the fourth quarter, and 1.9 per cent globally.

Markets at a glance

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Retail sales slip

Consumers aren’t quite down for the count, but they’re not exactly out throwing money around, either.

Retail sales in Canada fell 0.9 per cent in November, largely on gas and autos, Statistics Canada said. Losses at the gas pump came because of lower prices.

Factoring out price changes, overall retail sales volumes slipped 0.4 per cent.

“Consumers were apparently in no mood to spend the gains they've made from increasing job totals nor the savings from lower gasoline prices,” said CIBC World Markets senior economist Royce Mendes, noting the drop in autos and gas.

“But, even outside of those two volatile components, sales were up only a meagre 0.2 per cent. That’s somewhat surprising given that in addition to healthy employment readings and falling gas prices, there has been a trend in recent years toward more holiday shopping occurring in November and less in December.

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