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inside the market

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

Goldman Sachs disappointed this morning with adjusted earnings per share of $2.64 (U.S.) that fell well short of the expected $3 per share. This comes on the heels of JP Morgan Chase's earnings miss earlier in the week. In Canada, the major banks continue to announce layoffs, cost cutting and restructurings that strongly suggest management sees profit-related headwinds on the horizon. The pattern in North America is clear; the banks are struggling to maintain growth.

"Goldman Sachs misses, blames the world" – Crowe, Business Insider

"JPMorgan kicks off bank earnings with a miss" – USA Today

"Canadian banks tighten expenses amid shifts in sector, slower growth" – Berman, Report on Business


Valeant Pharmaceuticals International Inc. – the stock that was almost singlehandedly keeping the TSX from disaster in the first half of 2015 – is trading sharply lower Thursday morning on news of a U.S. government investigation of the company's drug pricing strategy. Reportedly, subpoenas were issued by the Massachusetts Attorney's office and the Southern District of New York Attorney's office.

There were stirrings in U.S. congress last month on the same issue but Morgan Stanley analysts wrote at the time that nothing would come of it because of the republican control of the House of Representatives.

I'm not sure how far this goes but one thing is certain – the TSX will have a tough time today with one of its largest stocks heading due south.

"Valeant shares plunge on probe by U.S. prosecutors over drug pricing" – Report on Business

"Valeant Comes Under Fresh Scrutiny With New Subpoenas on Prices" – Bloomberg


Barclays has stepped to the front of the bullish pack on the energy sector by predicting a much more rapid recovery in the commodity price than the market generally believes, based on decline rates for shale wells:

"Although all suppliers are locked in a battle for market share at the moment, before too long, tight oil will be urgently required. More than two-thirds of non-OPEC output producing today started up before 2010 and before the U.S. tight oil boom. From 2010- 2015, this pre-2010 base declined by around 3 per cent per year. This rate is forecast to accelerate when prices are low and when capex falls. With capex expected to fall by 20 per cent globally in 2015 and a further 5-10 per cent in 2016, the stage is set for a supply crunch. Shale needs to be additive to non-OPEC supply growth, not a drag on it. Eventually for prices, our models suggest the only way is up."

"BARCLAYS: Oil prices will come surging back much faster than the market expects" – Business Insider

"How stock and bond indices could signal end of oil rout" – FastFT


The massive outflow of investment assets from emerging markets represents a reversal of a 30-year trend in global investment flows. Developing world central bank and government finances are in much better shape than during the 1997 "bahtulism" crisis but there will still, in my opinion, be a lot of upheaval in their economies going forward.

"The last 30 years of global economic history are about to go out the window" – Quartz

"Is EM turmoil the third wave of the financial crisis? Goldman thinks so" – CNBC

"Emerging markets losing streak is bad news for the TSX" – Barlow, Inside the Market (June, 2015)

According to the website traffic meter here at The Globe and Mail, Canadians have an insatiable appetite for election coverage. Our complete coverage of the election is here and when readers are finished with that, Bloomberg has produced an interesting online newsletter with a foreign (mostly U.S.) perspective on the Canadian election. There are a number of fascinating charts showing voter preferences by party affiliation and the traitorous (former Globe reporter) Luke Kawa explains why Americans should be following our election closely:

"When the Great White North catches pneumonia, the U.S. comes down with toothache, at very least. Through the first eight months of 2015, U.S. exports of goods to Canada fell $17.5-billion compared to the same period last year, accounting for a huge chunk of the $64.5-billion total drop-off.

'While the market has tied itself up in knots stressing over the extent of China's slowdown, the direct impact of how Canada's economy is faring is arguably more important for U.S. exports and overall growth,' wrote Bank of Montreal chief economist Douglas Porter."

"Not Worrying About Canada's Election? Maybe You Should" – Kawa, Bloomberg Briefs


Tweet of the Day: "@johnauthers Hmmm. When [Wal-Mart] most underperforms the S&P, it tends to signal a peak in the market. And vice versa. Not reassuring." – Twitter

Diversion: "Watch R.A. Dickey's jubilant celebration with fans after ALDS win" – CBC News