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

Semiconductor stocks are a leading indicator for the technology sector in the same way that lumber prices lead housing prices. The news for chip stocks now is not encouraging according to the Financial Times,

“Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, expects a sharp downturn in revenue growth in the first three months of 2019 … TSMC chief executive CC Wei, speaking in Taipei on Thursday, struck a cautious tone. He pointed to a “sudden” drop in high-end smartphone demand, a sharp decline in demand for chips for cryptocurrency mining and a worsening global macroeconomic outlook.”

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“Apple chipmaker TSMC sees slower growth ahead” – Financial Times (paywall)

“TSMC is starting 2019 with near-record inventory while forecasting almost no revenue growth for the year” – Bloomberg

Counterpoint: “@SBarlow_ROB C on semis: "we expect another cut to Consensus estimates, we believe it will be smaller than the cut in October, which should be good for semiconductor stocks and would indicate a bottom is forming” – (research excerpt) Twitter

***

Bullishness in global oil markets is still scarce despite the price recovery,

“Why have the oil bulls been slow to emerge? Traders and analysts point to two interlocking factors: fear and a loss of faith in crude oil’s ability to sustain rallies in the age of US shale. .. 2018 illustrated that once Brent prices get much above $65 a barrel, the US shale industry starts adding output at an astonishing rate. That reduces the incentives to be long crude oil.”

“Being bullish on oil is getting harder and harder” – Financial Times (paywall)

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“Oil tumbles on increased U.S. output and persisting trade fears” – Reuters

“@jsblokland The GAP! #Oil prices v Energy stocks” – (chart) Twitter

***

Credit Suisse strategist Andrew Garthwaite has been prominent and respected for a long time, often ranked No. 1 in the annual Institutional Investor survey. Mr. Garthwaite’s most recent report is bullish, but he also argues that investors should sell the upcoming rally,

“If history is a guide, then to get a fall of more than 20% in US equities, a recession is needed in the second half of this year; this seems too pessimistic… Why still sell into the rally? 1) Excess liquidity is consistent with a de-rating (of c15%); 2) Earnings revisions are consistent with falling equities and normally take another 7 months to improve… 3) US wage growth has now risen to a level implying a small margin squeeze…4) US cyclicals do not yet look cheap (unlike in Europe)”

“@SBarlow_ROB Garthwaite predicts rally but advocates selling into it” – (research excerpt) Twitter

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***

Bloomberg posits the alarming in “Forget the Trade War. China Is Already in Crisis,”

“Economic growth in the third quarter sank to 6.5 percent, the slowest pace since the depths of the global financial crisis in 2009. Car purchases fell last year for the first time in more than two decades. Apple Inc.’s warning in early January that iPhone sales in China were sagging alerted the world to how a slowing Middle Kingdom would drag down global growth and corporate profits… What goes widely unnoticed is that China is already in crisis. No, it’s not the sort of hold-on-for-dear-life collapse the U.S. had in 2008 or the surprising, ferocious meltdowns the Asian Tiger economies experienced in 1997. Nonetheless, it’s a crisis, complete with gutted banks, bankrupt companies, and state bailouts. Since the Chinese distinguish their model of state capitalism as “socialism with Chinese characteristics,” let’s call this a “financial crisis with Chinese attributes.””

China’s economy has been responsible for about 30 per cent of GDP growth for the entire world, so this is a big deal for all investors.

“Forget the Trade War. China Is Already in Crisis” – Bloomberg

“China's growth set to slow to 6.3 percent in 2019, more stimulus seen: Reuters poll” – Reuters

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“ @tracyalloway We now have at least five Hong Kong stocks that have fallen by double-digits. Three of them are down more than 70%” – (link to further Bloomberg coverage of overnight trading) Twitter

***

Tweet of the Day:

Diversion: “Impeach Donald Trump” – The Atlantic (new cover story)

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