A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Canadian banks are fine, and likely always will be fine, thanks to diversified revenue sources and a central position in the domestic economy.
CIBC analyst Robert Sedran, however, sees a far more difficult path ahead for bank sector profits,
“On average, we call for 3.5% average EPS growth in F2020, followed by 5% in F2021 … it does feel like the risks outnumber the opportunities at this stage in the macroeconomic cycle … [the personal and commercial ] business has slowed as margin and loan loss tailwinds have mostly reversed… we also think it is time to move the minute hand on our Credit Doomsday Clock one minute closer to midnight as the loan loss headwind feels like it has stiffened … There was clearly something more than a “normalization” at play this quarter as credit losses jumped to 39 basis points (+5 bps Q/Q), which is the highest loss ratio experienced since the Oil & Gas loan loss-related spike during F2016. Higher provisions were attributed to both provisions on performing loans (~40% of the Q/Q increase)”
The conclusions section of the report was titled “Not As Easy As It Was.”
“@SBarlow_ROB CM on Canadian banks: "it does feel like the risks outnumber the opportunities at this stage in the macroeconomic cycle" – (research excerpt) Twitter
“ @SBarlow_ROB CM: Loan losses in Cdn banking system rising” – (Chart) Twitter
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Most domestic investors were confident that tri-national bureaucratic bickering would result in the enactment of a new trade agreement to replace NAFTA.
Still, the official signing of the deal in U.S. congress Tuesday could be important for investors if it results in an increase in corporate investment now that the rules are clear.
“U.S. reaches deal with Canada, Mexico on revised USMCA trade pact” – Report on Business
“Meltdowns and touchdowns: How the U.S. scored a Canada-Mexico trade deal” – Reuters
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A former U.S. trade official, quoted in the South China Morning Post, speculated that the deadline for a U.S. China trade deal is likely to be misses. Equity markets are positioned for a global economic recovery next year and may not like that at all,
“A former US government trade official has warned that China and the United States are likely to miss a looming deadline to reach an agreement meant to pave the way for an end to their trade war. “Both sides have said that they are very close, but I can tell you as a trade negotiator that the last mile is always the most difficult,” former acting deputy US trade representative Wendy Cutler said … “What China is telling the United States is that it is not enough just to not go ahead with the December tariffs, but they also want to see some existing tariffs lifted.”’
I’m just speculating, but the White House has been sensitive to market fluctuations in the past so I think an extension for the December 15 deadline will be announced before selling starts in the stock market.
“Trade war: US-China deal deadline ‘likely to be missed’, former US trade negotiator Wendy Cutler says” – South China Morning Post
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Copper prices have been surging in recent days but Ole Hansen, head of commodity research at Denmark-based Saxo Bank thinks the move is just hedge funds removing short positions and the rally is unsustainable,
“ Hedge funds are throwing in the towel on holding short position after copper broke a trifecta of resistance. First its 200-day moving average, then the Nov 7 top and finally the downtrend from June 2018.” – Twitter
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Diversion: “10 Weirdest Stories From 2019” – Irrelevant Investor
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Scott Barlow