Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Scotiabank strategist Jean-Michel Gauthier wrote a note entitled As Canadian Housing Prices Collapse, Rents are Surging,
“The Canadian housing market continued to slow down in September as surging mortgage rates put a dent in buyers’ enthusiasm. Sales fell 3.9% month-over-month (down 32 per cent year-over-year) as average selling price retreated -1.2% MoM (-6.3% YoY). Deteriorating conditions are also hurting sellers’ willingness to list (new listings -0.8% MoM, -1.4% YoY). … Fewer buyers can afford current prices at a five-year mortgage rate of 5.14% (was 1.93% in Q1/22), and just as few sellers are willing to lose their likely low locked-in rate on their current property … Interestingly, even if prices are broadly retreating, rent levels continue to surge across Canada. As highlighted in our lower Chart of the Day, asking rents on available Toronto condos remain up 22% YoY/+11% QoQ based on preliminary data. Average asking rental rates across the nation and property types would also be facing strong upward pressure according to rentals.ca (+14% YoY) and Zumper (+14% YoY).”
“Scotiabank: “As Canadian Housing Prices Collapse, Rents are Surging”” – (research excerpt) Twitter
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Reuters energy specialist John Kemp wrote “Diesel’s gloomy message for the global economy”,
“Global shortages of middle distillates such as diesel, gas oil and heating oil are intensifying rather than easing – making it more likely a relatively severe slowdown in the business cycle will be necessary to rebalance the market: U.S. inventories of distillate fuel oil depleted to 106 million barrels on Oct. 7, the lowest seasonal level since the government began collecting weekly data in 1982. EU distillate inventories were just 360 million barrels at the end of September, the lowest seasonal level since 2004. Singapore mid-distillate inventories have fallen to just 8 million barrels, the lowest seasonal level since 2007… U.S. refinery closures brought on by the pandemic, equipment failures and the planned shift to electric vehicles have left insufficient capacity to meet both domestic and rising export demand … There is not enough crude available to satisfy a big increase in demand from the refiners in China without depleting inventories further and sending prices higher … The need for a major reduction in consumption from trend implies a relatively severe downturn in the business cycle across North America, Europe and Asia.”
“Column: Diesel’s gloomy message for the global economy” – Reuters
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Wells Fargo U.S. equity strategist Christopher Harvey argued persuasively that Thursday’s market strength last week was not caused by short covering, as others have posited,
“In our view, the main rally catalyst was not short-covering as: (1) conversations suggested there was long-only buy-in, with buyers live higher the theme of the day; and (2) our Short Interest basket (WFSSHORT) was only +0.9%. And while the 24bp drop in UK 10yr Gilt yields was supportive, it was not the main catalyst, either. Rather, it was mainly the well-received Q3 reports from DAL, WBA, and DPZ, supporting the notion that earnings season will not be a bad as feared. The standout rally in regional banks (KRX: +4.4%) supports this; many Banks were at/near 52-week lows. Overall, long-only money appeared to go to work at/near the lows in front of an earnings season that (so far) shows resilience. "
“It wasn’t short covering (Wells Fargo)” – (research excerpt) Twitter
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Diversion: “Mortgage fraud caught on camera” – CBC
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