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Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Citi analyst Shreyas Madabushi remains bullish on the mid-term prospects for lithium prices.

“Lithium spot prices were under pressure this week amid concerns of weakening demand in China. The trigger was news reports of battery producers cutting their cathode production forecasts and the possibility that China electric vehicle subsidies may not be extended into 2023. Prices remain extremely high relative to miners’ production costs of $5-10k/t and compared with average prices of $13k/t over the 2017-2021 period. We remain very bullish on the outlook for electric vehicle sales and penetration rates, and we mark-to-market higher our 0-3 month price for lithium carbonate to $72,000/t (up from $65,000/t), while our $50,000/t 6–12-month forecast remains unchanged. ... Lithium spot prices declined this week after a massive ~1,300% rally which started in 2H’20 — Reports that a major cathode producer was cutting its production forecasts was the main trigger for the pullback.”

The sell-off combined with the analyst’s bullishness suggests a potential buying opportunity in lithium miners for patient investors.

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BMO senior economist Sal Guatieri published a short note entitled ‘Some rates peaking?’

“Ramped up COVID restrictions in China, a 4% spill in oil prices, and weaker U.S. labour market data helped extend the recent bond rally. The 10-year Canada rate slipped below 3% for the first time since August and is down from a recent peak of 3.67% a month ago. Whether the rally sticks will ultimately depend on inflation. We are skeptical, and still see a backup to the 3.4% range if the BoC rattles off another 75 basis points in rate hikes by early next year. That said, if inflation has truly peaked and trends lower, long-term rates shouldn’t revisit their earlier highs.”

“Some rates peaking? (BMO)” – (research excerpt) Twitter

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JPMorgan economist Michael Feroli takes a look at the Fed minutes and predicts a less hawkish central bank.

“Slower hikes coming soon … The minutes to the Nov 1-2 FOMC meeting observed that “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.” In Fed-speak “soon” is usually the next meeting, and so this should reinforce expectations that the Committee intends to step down to a 50bp hike at the December meeting. Consistent with Chair Powell’s remarks at the post-meeting press conference, it was also noted that “various” participants thought that the terminal funds rate would be “somewhat higher” than previously expected (the median terminal dot in September was 4.625%). The rest of the minutes were perhaps a little less hawkish than those from other recent meetings. There was a long discussion of policy lags; while there is a lot of uncertainty about lag length, the general sense was that the full extent of the effects of policy tightening was “yet to be realized.” There was also a discussion of risk management considerations. The conclusion appeared to be that it made sense to move rapidly to restrictive territory but that now risks were increasing that they could overdo it or generate financial instability”

“JP Morgan: “Slower hikes coming soon”” – (research excerpt) Twitter

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Diversion: “This $3.8-million Ontario home was made from five reclaimed barns” – Macleans

Tweet of the day: “As #offshorewind is one of the key technologies that will power global #decarbonisation, growth is set to explode. Read our insight to discover how the industry is not only expanding, but also changing: https://okt.to/ztQhRW” – Twitter