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Equity futures fell hard after the close Tuesday on reports the White House has prepared a further US$200-billion in trade sanctions on Chinese goods. China vowed retaliation but also warned state media not to inflame the political situation further.

“Premarket: Global stocks, metals hit by new U.S. trade war salvo” – Report on Business

“China to its state media: keep calm, don’t inflame trade row with U.S.” – Reuters

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“@SBarlow_ROB Merrill Lynch: “If bad luck intersects with bad policy, a recession becomes a real risk ” – (research excerpt) Twitter

“China accuses U.S. of bullying, warns it will hit back at Trump’s proposed tariffs” – Report on Business

“Brent oil falls more than $2 after Trump tariff threat, Libya ports reopen” – Reuters

“Copper is tanking. The metal seen as a bellwether for the global economy falls to the lowest level in a year” – Bloomberg

**

The tone of Scotia economist Derek Holt’s report, “No Crisis in Canadian Housing” indicates he might be getting a bit annoyed with real estate doomsayers although housing expert Ben Rabidoux voiced a firm counterpoint to the Scotia report on social media. Mr. Holt first,

“If there is a housing crisis that is walloping the Canadian economy then you could have fooled me. Canadian housing starts soared to the fourth highest reading on record since before the global financial crisis in 2007… While large volatile multiple unit projects drove the gain and can easily swing the other way in the next report, the fact that permit volumes were so strong suggests there is no imminent let-up in sight on a trend basis”

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“@SBarlow_ROB BNS: “There is no crisis in Canadian housing ” – (research excerpt) Twitter

Then Mr. Rabidoux, “Terrible take. Multi fam starts represent presales from 2017, which were monster record in Toronto. Regardless of what happened in resale market, condo starts were going to be huge this year. Not affected by B20 in any way.” – Twitter

**

A Bank of Canada interest rate hike is, according to derivatives markets, all but assured Wednesday at 10 a.m.,

“The most probable is policy makers will raise the overnight interest rate, currently at 1.25 per cent, for a fourth time in 12 months to keep inflation under wraps, while acknowledging future hikes will be gradual because of the recent trade upheaval. Markets are placing the highest odds on this scenario, which includes additional hikes every six months or so until the benchmark rate settles around 2 per cent or 2.25 per cent by the end of 2019… second possibility is an increase that is accompanied by very cautious language that casts doubt on the timing and pace of future moves, a scenario known in central banking lingo as a dovish hike. Essentially, that would mean a rate hike now at the expense of one down the line.”

“Poloz Likely to Hike Rates, Perhaps Dovishly: Decision Day Guide” – Bloomberg

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I dealt with legendary emerging markets fund manager Mark Mobius frequently during my decade as a mutual fund analyst – he was extremely gracious, to the point of giving me his cell phone numbers which changed in accordance of what part of the world he was in. Mr. Mobius is far more prone to optimism than pessimism, to a fault at times, so this prediction was an unwelcome surprise,

“For Mark Mobius, there may be worse to come even after the U.S. fired new shots in its trade war with China: a further 10-per-cent drop in emerging-market stocks and a global financial crisis. ‘There’s no question we’ll see a financial crisis sooner or later because we must remember we’re coming off from a period of cheap money,’ the veteran investor in developing nations said in an interview in Singapore. ‘There’s going to be a real squeeze for many of these companies that depended upon cheap money to keep on going.’ ”

“Mobius Says Trade War Is Just a Warm-Up Act for Financial Crisis” – Bloomberg

“Market turbulence in China reflects domestic challenges more than trade tensions” – The Economist

**

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Tweet of the Day: “@TheStalwart the zinc chart is so ugly” – Twitter

Diversion: “The 27 books Marc Andreessen recommends you read this summer” – Quartz

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