A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
We know from website traffic statistics that Report on Business readers aren't interested in the Chinese economy at the moment, but for investors in mining and energy stocks, I don't think they have a choice unless they want to risk having their portfolios blindsided.
Commodity prices are lower across the board Wednesday morning on signs that China's leadership is shifting economic focus away from infrastructure development and real estate development,
"The Bloomberg Commodity Index extended declines after sliding the most in six months on Tuesday. Futures in China also plunged in overnight trading. Concern is increasing that demand will weaken as the world's second-biggest economy dials back amid a pledge by President Xi Jinping to focus on the quality of expansion rather than the pace of it. Nickel, iron ore and oil all dropped, and shares of resources companies slipped."
"Fear of Glut Grips Commodities as Xi Shifts China Economic Focus" – Bloomberg
"China's Commodity Beast Enters Hibernation" – Gadfly
"Commodities extend losses as traders take profits after weaker Chinese data" – Financial Times
"China's Indicators Point to Slowing Economy" – Wall Street Journal
Macquarie analyst Viktor Shvets is concerned that central banks are withdrawing monetary stimulus before the global economy can sustain growth without it,
"Our key concern is the impact of liquidity withdrawal and persistence by CBs in trying to raise cost of capital, irrespective of evidence that neither supply nor demand can support higher rates. If we take CBs' rhetoric at face value, it is likely that liquidity injections could compress by more than US$1 trillion in '18, turning negative in '19. While CBs promise to be careful, this is a fundamental shift, akin to mixing combustible elements, with highly unpredictable results … We remain convinced that there is no evidence of sustained private sector recoveries."
"@SBarlow_ROB Macquarie is worried about 2018" – (research excerpt) Twitter
"Top central bankers vow to talk investors out of easy money" – Reuters
Gadfly details how desperately Canadian oil companies need access to global markets,
"Heavier, higher in sulfur and far from the American refineries on the Gulf Coast optimized to take it, Western Canada Select crude oil tends to trade at a discount to West Texas Intermediate. It also trades at a discount to Mexican Maya crude … the discount of WCS versus Maya usually reflects the extra cost of piping those Canadian barrels south, roughly $7 to $10 a barrel. Recently, though, the spread has blown out … the bigger issue is that Alberta's production is outpacing its pipelines. And the problem will get worse before it gets better: Futures imply average spreads of about $17 a barrel over the next two years."
"Forgot About Keystone? Canada's Oil Majors Haven't" – Gadfly
I don't have space here to explain why, but these two charts worry me,
"@SoberLook Chart: High-yield debt diverging from equities ($SPY vs. $HYG) " – Twitter
"@SBarlow_ROB GS: Low leverage outperforming. My subconscious is telling me to be worried, but not telling me why yet" – Twitter
"@FerroTV JNK close to erasing 2017 advance" – Twitter
Tweet of the Day: "@M_C_Klein SF Fed says "easy money has been made" on US stocks frbsf.org/economic-resea… " – Twitter
Diversion: "What did 17th century Food Taste Like?" – Res Obscura