Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Not even 24 hours ago, I filed a column touting a bullish outlook on oil from Morgan Stanley, but I'm already having to question the thesis. MS analyst Adam Longson believes gasoline and other distillate demand from the emerging markets will eventually pull the energy sector out of its bear market.
But Tuesday, the Shanghai Composite tumbled six per cent and more importantly, a report on Chinese rail freight traffic – viewed as one of the most reliable indicators of the country's economy – showed a 10.2-per-cent year-over-year decline. Elsewhere in Asia, Thailand's currency fell to a six-year low and the Financial Times reported on a stomach-churning collapse in Indonesian trade activity. Combined, none of this sounds like a region ready to pull any sector out of the doldrums.
"Morgan Stanley sees glimmer of hope for energy sector" – Barlow, Inside the Market
"The 'Keqiang Index' shows China is growing at this ridiculously low rate" – Business Insider
"Thailand's currency sinks to a 6-year low" – Business Insider
"Indonesian trade collapses as oil traffic slides" – FastFT
"@Emergingtrends For those who question the extent of the selloff in EM, this chart might lead to some reconsideration http://t.co/siq5jHhHGz" – Twitter
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There is, thankfully, some positive economic news this morning as U.S. housing starts were reported at an eight-year high,
"Residential starts rose 0.2 percent to a 1.21 million annualized rate, the most since October 2007, from a 1.2 million pace in the prior month that was higher than previously estimated, a Commerce Department report showed Tuesday in Washington. The median forecast of 77 economists surveyed by Bloomberg was 1.18 million. A drop in permits, a proxy for future construction, signals additional gains will take time to develop."
The historically close relationship between U.S. consumer spending and Canadian export growth makes this an important report for domestic investors.
"Housing Starts in U.S. Climbed in July to Almost Eight-Year High" – Bloomberg
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George Mason University economics professor Tyler Cowen points out that "malinvestment" – the allocation of investment dollars in unproductive industries and projects – is the most under-used word in modern economics.
This is an extremely important topic for Canadians as the election approaches. The CBC has noted that election promises are looking more and more economically unfeasible and voters will have to decide whether the proposed spending from each candidate makes long-term sense. I'll point out government support for the auto sector as a particularly sticky issue as Canada continues to lose market share to Mexico.
"Further results in Austro-Italian business cycle theory – Cowen, Marginal Revolution
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Tweet of the day: "@bySamRo: Canada and the loonie have got problems (via Macquarie) https://twitter.com/bySamRo/status/633433295330615297/photo/1 " – Twitter
Diversion: "These 10 Countries Will Have the World's Biggest Populations By 2050" – Bloomberg