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

Statscan released its report on domestic gross domestic product for November at 8:30 a.m. ET Thursday.

Unfortunately, the results came in as expected, showing a 0.1-per-cent contraction in the economy.

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CIBC economist Avery Shenfeld published a quick response,

“October now looks to have been an island in the storm for the Canadian economy, as November saw a return to weakness. Real GDP fell 0.1% matching our forecast, but that now joins with the flat period for August-September to mark three of the last four months in which performance was lacklustre. October's manufacturing gain gave way to a pullback in November, joining weakness in Finance and Wholesaling, but softness was quite broadly based in the private sector. Nothing shocking here after seeing weakness in earlier data for factories, wholesaling and retailing, but consistent with our tracking for GDP for Q4 to be roughly 1%. That leaves the Bank of Canada, like the Fed, decidedly on hold for the next couple of quarters.”

“@SBarlow_ROB CIBC on Canadian GDP, "November saw a return to weakness"” – (research excerpt) Twitter

“ Canada’s economy matches forecasts with 0.1-per-cent decline in November” – Report on Business

“Canadian dollar rallies to two-month high as Fed turns more dovish” – Report on Business

***

The Federal Reserve announced it would be cautious on further rate hikes and balance sheet unwinding and U.S. equity markets immediately rallied hard. This is, for me, a clear sign that central banks and not fundamentals are driving markets, and there’s an extent to which the Fed just admitted that the market can’t handle monetary tightening,

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“ Scott Minerd, global chief investment officer at Guggenheim Partners in Santa Monica, California, said the Fed’s pause will further extend the economic expansion, allowing excesses to continue to build and increasing risks of financial instability… “The Fed refilled the punch bowl and the party goes on. Buy risk assets,” Minerd said. The Fed’s policy statement indicates the U.S. central bank will remain on a dovish path, which is very supportive for risk assets, at least on the short term, said Putri Pascualy, managing director for PAAMCO in Irvine, California. “The back-drop of slowing economic growth on a global basis is the 800 trillion gorilla in the room,” Pascualy said.”

“Stocks surge on Fed pledge to pause, dollar slips” – Reuters

“Fed draws loudest market cheer on balance sheet shift” – Financial Times (paywall)

“Powell is “definitely listening to markets." The next move “will probably be a cut at this point, probably later this year, like December or the first quarter of 2020:”” – Bloomberg

***

U.S. earnings reports Wednesday were mixed-to-positive with Facebook gliding past analyst earnings projections and Microsoft disappointing on its revenue outlook. The most important screen on Bloomberg terminals right now is <SPX> <index> <EA <GO> which summarizes earnings and sales growth for the S&P 500. I’ve posted a screenshot, link below,

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“ @SBarlow_ROB SPX earnings look more solid all the sudden” – (sector chart) Twitter

“'This story is starting to get good' — here's what analysts think about Facebook's blowout earnings” – CNBC

***

I’ve been doing a lot of reading on video game stocks and found some really startling statistics, particularly regarding the growth of eSports.

Recent tournaments have had audiences almost the same size as the 2018 Super Bowl, for one, and ESPN has an entire online section dedicated to standings for the global League of Legends esport league,

Morgan Stanley analyst Brian Nowak, in a Jan. 23 report, noted that video game stocks were at that point 35-per-cent cheaper than the 2018 peak. He also described six macro trends, including esports, that drive free cash flow higher for the sector,

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“@SBarlow_ROB MS: 6 macro trends behind video game stocks” – (research excerpt) Twitter

“Here’s why esports can become a billion-dollar industry in 2019” – CNBC (January 19)

***

Tweet of the Day:

Diversion: “A Guide to the Chemistry of Cold Weather” – Gizmodo

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