A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
Deutsche Bank economic analyst Amy Tan wrote a very good, succinct paragraph covering the forecast for the loonie and Canadian interest rate policy,
"USD/CAD is apt to show considerable amplitude in the current cycle, given the way the US housing precipitated the Global Financial crisis in 2007/8, leaving a better regulated Canadian housing market to support the economy and CAD strength in the immediate aftermath of the Great Recession. Unfortunately Canada imported overly easy monetary policy from the US and the rest of the world, creating its own housing and household sector vulnerabilities, while the US household sector was deleveraging its way back to health. With the US now pursuing aggressive fiscal easing relative to Canada, the BOC will not be able to keep up with the Fed's response to fiscal accommodation. USD/CAD is set to go higher."
"@SBarlow_ROB DB: "Unfortunately Canada imported overly easy monetary policy from the US and the rest of the world, creating its own housing and household sector vulnerabilities ... the BOC will not be able to keep up with the Fed's response to fiscal accommodation." – (research excerpt) Twitter
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Wednesday's report on U.S. oil inventories showed much bigger draws than expected and the commodity price rallied as a result. There's a catch though – declining inventories are in part the result of rising U.S. oil exports which are just moving the glut elsewhere,
"'The U.S. is pumping out a record amount of oil,' said Naeem Aslam, chief market analyst at Think Markets UK Ltd. 'The bull rally which we have seen for the black gold could fade away as the U.S. oil production undermines the OPEC production cut commitments,' he said."
"Oil slips toward $66 a barrel as U.S. output offsets OPEC curbs" – Reuters
"Oil Heads for Second Weekly Gain After Surprise Stockpile Drop" – Bloomberg
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Big trouble in China?
As someone who's been suspicious about China's credit markets and waiting for cracks to appear since 2012, I'd say probably not. But the nationalization of one of the country's biggest lenders might be the start of some uncomfortable realizations about the explosion of lending that has driven growth in the world's second largest national economy,
'China's government said Friday it was taking control of Anbang Insurance Group Co. for at least a year for a restructuring that may include asset sales."
"Billions of Dollars of Anbang Assets That Could Go on the Block" – Bloomberg
"China seizes control of Anbang Insurance as chairman prosecuted" – Reuters
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The possibility of a major short squeeze in global markets is not something long-term investors need to be concerned about, but it would make a big mess in markets when it happens, particularly among leveraged speculative funds,
"Short positioning in Treasury futures has climbed to a record, increasing the potential for an unraveling of trades betting on further declines in bond prices, Marko Kolanovic wrote in a note to clients. There's also been an extreme swing in sentiment, with investors unduly focusing on higher inflation risks, said Kolanovic, who heads the team in New York."
"JPMorgan's Quants Warn Risks Are Growing for Bond Short-Squeeze" – Bloomberg
"This Wall Street Inflation Scare Looks Tamer Than the One in 2016" – Bloomberg
"Bond Traders Aren't Sure What to Believe" – Business Week
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Tweet of the Day: "@MaleehaMBCC US #etfs continue to see withdrawals $100bln since q117. Has the #active over #passive tide turned for good? #hedgefunds #assetmanagement $spy $tlt " – (chart) Twitter
Diversion: "'M*A*S*H' Finale, 35 Years Later: Untold Stories of One of TV's Most Important Shows" – Hollywood Reporter
Scott Barlow