A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Markets are rallying on hopes for an imminent Band-Aid for the U.S./China trade dispute, but both the domestic and global economies continue to deteriorate.
BMO economist Doug Porter writes that, as bad as Canadian economic growth was at the end of 2018, the immediate future could be worse,
“The GDP result itself was a disappointment, broadly and deeply. Whether it was the soggy 0.4% headline for Q4, the monthly 0.1% setback for December, the downward revisions to the first half of 2018, the weakness in capital spending, or the fall in GDP prices, the report was 47 shades of grey. As a result of that listless hand-off from December, as well as the dull investment intentions survey (out earlier this week), we chopped our call on 2019 Canadian GDP by half a point to just 1.3%, down from 1.8% last year.”
“@SBarlow_ROB BMO: Q4 GDP was bad, Q1 could be worse” – (research excerpt) Twitter
“How the Canadian dollar bulls got ‘slaughtered’” – Babad, Report on Business
News from the global economy Monday morning was little better.
I recognize that few Canadian investors follow South Korean markets, but the country’s economy has been an effective leading indicator for the global economy as a major Asian trade hub that, unlike China, has believable corporate and economic data
“Latest survey data highlighted stronger declines in new orders from domestic and overseas markets in February, leading to sharper reductions of both output and staffing levels. Consequently, the headline PMI signalled the strongest deterioration in manufacturing sector conditions since June 2015.”
The S&P/TSX Composite has historically been highly sensitive to changes in the level of global trade.
“Nikkei South Korea Manufacturing PMI®: Headline PMI dips to lowest since June 2015” – Markit
“ Citi’s global surprise index has dropped through its 2018 low to the weakest since 2013” – Bloomberg
“@C_Barraud Global #Manufacturing/#Trade Update 1/ Asian export orders are usually leading the economic cycle by around 3 months and therefore suggest a pick-up in global manufacturing activity is unlikely to happen before 2H19.” – (chart) Twitter
Citi analyst Prashant Rao picked the Canadian winners and losers resulting from delays in the Enbridge pipeline,
“Friday, in a move described by the press as "a crushing blow" to Canadian oil, ENB announced a delay to the expected in-service date for its 370 mbpd Line 3 replacement project, from end-2019 to 2H20. Ordinarily, we would expect long-term Canadian crude discounts to widen substantially on the news, but Alberta's mandated production cuts and the upcoming provincial election complicate the stock calls… The relative winners should be the Canadian rails (CN, CP) followed by some US Refiners (PSX), and more marginally, the Canadian IOCs (SU, IMO). We see greater relative downside risk to CNQ on 2019 guidance (reporting results Thursday), and more marginally, DVN & CVE.”
“@SBarlow_ROB C: winners and losers from Canadian pipeline delay” – (research excerpt) Twitter
Tweet of the Day:
Toronto is the 5th least affordable housing market in the world of metros over 5 million people, trailing only Hong Kong, Sydney, LA and London., NY is 8th, Miami 7th:https://t.co/vc2vYGLjQS— Richard Florida (@Richard_Florida) March 3, 2019
Diversion: “Lab-grown meat could be worse for the climate than beef” – M.I.T. Technology Review