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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

BMO economists point out that Canadians are once again adding to the mountain of mortgage debt, although nowhere near as fast as pre-crisis levels,

“The August credit figures, out late last week, showed a further acceleration in mortgages (+4.0% y/y). That’s little surprise with home sales perking up in recent months. Even so, mortgage credit growth remains well below the The increase is one reason the BoC might be reluctant to cut rates in the near-future, as they don’t want to worsen financial vulnerabilities… counter points: 1) mortgage rates have already plunged, so a lower overnight rate will have relatively less impact than seen historically, and 2) tighter macroprudential regulations should limit high risk borrowing. “

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“@SBarlow_ROB BMO: Canadians adding to mortgage debt mountain again” – (research excerpt, chart) Twitter

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BMO’s report covering domestic housing starts was titled, “And the boom goes on”,

“Canadian housing starts dipped slightly to 221,200 annualized units in September, but that was somewhat stronger than expected and continues the relentless level of building activity. Starts for all of Q3 averaged 223.3k, little-changed from the prior quarter, while the year-to-date average is running at 211k. This continues to reflect strong demographic demand, both from international inflows and new households created within Canada”

“SBarlow_ROB BMO on domestic housing starts, “And the boom goes on” – (research excerpt) Twitter

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Merrill Lynch quantitative strategist Savita Subramanian is the first source I read on U.S. profit forecasts. Unfortunately, Ms. Subramanian believes that the negative year-over-year profit “growth” that many have predicted previously will actually occur in the third quarter,

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"3Q Preview: get ready for negative EPS growth. We forecast $41.75 for 3Q EPS, a 1% beat vs. analysts’ $41.29 estimate, and a 2% YoY EPS decline. Analysts expected declines for the past two quarters that failed to materialize, but the further slowdown in macro data could lead to the first EPS decline since the 2015-16 EPS recession. Analysts have trimmed consensus EPS by 4% since July (above the typical 3% pre-season cut), with the biggest cuts in commodity sectors (Energy -17%, Materials -10%)…. 4Q-2020 consensus numbers still look too high to us: consensus currently expects +3% YoY EPS growth for 4Q and +10% EPS growth for 2020, which we think are overly optimistic given macro data.”

The weaker guidance for 2020 is likely to affect stock prices even more negatively than the profit decline – equities will have to readjust for an extended lower growth trajectory.

“ SBarlow_ROB ML's Subramanian: "Third time's the charm - EPS decline in the cards"’ – (research excerpt) Twitter

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Negotiations between the U.S. and China are set to begin this week, but the mood is far from encouraging,

“China is subtly toning down expectations ahead of this week’s high-level trade talks with the United States in Washington as the respective camps remain sharply divided over fundamental issues… A source, who has been briefed on preparations for the trade talks, also told the South China Morning Post on condition of anonymity that the Chinese delegation may cut short their stay in Washington … on Monday the US placed 28 Chinese public security bureaus and technology companies on a trade blacklist over Beijing’s treatment of Uygur Muslims.”

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“China tones down expectations ahead of US trade war talks as Vice-Premier Liu He leads team to Washington” – South China Morning Post

“@EdwardLawrence The Chinese Commerce Ministry says what is not in the table and never will be is changes to their laws to protect intellectual property. The Commerce Ministry telling us that the Chinese will deal with intellectual property theft through administrative regulations.” – Twitter

“US blacklists 28 Chinese entities in trade war escalation” – Financial Times (paywall)

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Tweet of the Day:

Diversion: “Rock isn’t dead. I have stats to prove it” – A Journal of Musical Things

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Newsletter: “ Why it’s dumb to be a permabear” – Globe Investor

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