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

Morgan Stanley currency strategists are recommending a short position on the loonie.

It would be bigger news if the trade idea was shorting the Canadian dollar against the greenback, but even though it’s the New Zealand dollar the explanation offers insight into speculative hedge fund positioning,

“We view long NZD/CAD positions as attractive given relative positioning and our expectation that CAD has further room to weaken following dovish BoC forward guidance … Our positioning tracker continues to indicate that CFTC non-commercial [futures market] positioning is shortest NZD and longest CAD among G10 FX. We expect a continued dovish tone from the BoC as global trade uncertainty is likely to linger even if a phase one deal is signed between the US and China.”

The CFTC non-commercial futures data is a proxy for aggregate hedge fund trades. I was unaware previously that speculative funds were so bullish on the loonie.

“@SBarlow_ROB MS: Short loonie vs NZL” – (research excerpt) Twitter

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BMO economists note that Canadian companies are investing abroad while U.S. firms are increasingly investing here,

“Canadian companies continue to park more funds abroad than foreign firms send to Canada, though the gap has been narrowing since the 2015 oil shock. One encouraging sign is an upward trend in funds coming into the country, notably from the United States. Some reflects Newmont Mining’s takeover of Goldcorp earlier this year. And some is from U.S. technology firms expanding their footprint to tap Canadian high-tech talent. Now if only Canadian companies were similarly upbeat about the nation’s prospects.”

“@SBarlow_ROB BMO: " Canadian companies continue to park more funds abroad than foreign firms send to Canada" – (research excerpt) Twitter

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Nomura auto industry analyst Masataka Kunugimoto highlighted a very important year ahead for the sector (my emphasis),

“Global auto demand should stabilize in 2020, up 0.8% y-y, after falling 4.0% in 2019. The US is the only major market likely to stay healthy supported by a strong job market and lower interest rates… 2020 would be a watershed year for the auto industry in Europe as the EU’s new CO2 regulations come into effect. For [manufacturers], this means: 1) higher production costs which they cannot fully pass on to buyers, 2) lower market volume, 3) product mix deterioration, and 4) fines for missing CO2 targets. To cope, EVs/ PHEVs should become the linchpin of most [manufacturers’] strategies to drive down CO2 and avoid EU fines.”

Mr. Kunugimoto’s top stock pick is Toyota Motor because of its dominant market position in hybrid vehicles.

“@SBarlow_ROB Nomura highlights huge year ahead for global auto industry” – (research excerpt) Twitter

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A Bloomberg feature lists signs of financial stress in China.

I am well aware that Report on Business readers are deeply apathetic about data on the Chinese economy (I follow the website traffic reports here more closely than most), but investors should note that all bets are off in terms on global economic growth – particularly commodities demand – if China has a financial meltdown,

“Policy makers are attempting to do the “minimum necessary to keep the economy on the rails,” Andrew Tilton, chief Asia-Pacific economist at Goldman Sachs Group Inc., said in a Bloomberg TV interview… Confidence in [smaller banks’ financial health] has waned since May, when regulators seized control of a lender in Inner Mongolia and imposed losses on some creditors. Authorities have since intervened to quell at least two bank runs and orchestrated bailouts for two other lenders… China’s central bank described 586 of the country’s almost 4,400 lenders as “high risk,” slightly more than last year. “

“China Financial Warning Signs Are Flashing Almost Everywhere” - Bloomberg

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Column: “Global trade trends suggest trouble ahead for TSX” – Barlow, Inside the Market

Diversion: The pictures here are amazing, “How billions in gold was secretly moved from London to Poland” – G4S International Logistics

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