A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Employment numbers for Canada and the U.S. were released at 8:30 a.m. ET Friday.
Both will ruffle market feathers, but for different reasons.
Domestically, the report was much stronger than expected at 55,900 new jobs when a marginal gain of 1,200 was expected.
For the U.S., the numbers fell well short of expectations of 180,000 jobs when 20,000 was announced.
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Before today’s data, Canadian economic reports were coming in extremely negative. This was underscored by HSBC analysts sharply reducing their expectations for domestic GDP growth in 2019,
“We are revising our forecast of GDP growth for 2019 down to 1.1%, from our prior forecast of 1.6% … we now expect the Bank of Canada to remain on hold, leaving the policy rate unchanged at 1.75% this year… Our forecast of a more moderate growth trajectory follows weaker than expected GDP growth of only 0.4% GDP in 2018 Q4. However, it was the details of the report, notably the softness in domestic demand, that convinced us to lower our forecast. In the quarter, investment fell in all key categories. As well, consumption and housing were weaker than expected due in part to slower income growth, and the impact of higher interest rates.”
“@SBarlow_ROB HSBC slashes Canadian growth forecast” – (research excerpt) Twitter
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The U.S./China trade war is having a big, negative effect on the world’s second largest economy,
“China’s exports tumbled the most in three years in February while imports fell for a third straight month, pointing to a further slowdown in the economy and stirring talk of a “trade recession” … February exports fell 20.7 percent from a year earlier, the largest decline since February 2016, customs data showed. Economists polled by Reuters had expected a 4.8 percent drop after January’s unexpected 9.1 percent jump.”
“China February exports tumble the most in three years, spur fears of 'trade recession'” – Reuters
See also: “China’s resilient commodity imports contrast with weak exports” - Reuters
“Oil drops 2 per cent as economic outlook weakens, U.S. supply surges” – Report on Business
“Global economic slowdown looms, exposing outgunned central banks” – Washington Post
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Merrill Lynch’s weekly report on investor asset flows continues to show that retail investors never really came back to the market after December’s unpleasantness,
“Bearish flows: $8.8bn into bonds, $1.2bn out of gold, $10.1bn out of equities this week; worst start to year for equity flows since 2008 … 4th biggest IG bond inflows on record ($9.5bn, Chart 3) versus flat EM equity flows (-$0.1bn net outflows past 3 weeks)”
“@SBarlow_ROB ML: Bearish flows “ – (research excerpt) Twitter
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Jefferies opened coverage on the cannabis sector with a negative outlook on Tilray Inc.,
“We start coverage at Underperform and PT of $61. Our 10-year [discounted cash flow]-driven valuation suggests the stock is too expensive for its outlook, with an appropriate discount for long term medical uncertainty not captured. .. We see Canopy and Aurora CY20 sales 2.7x and 2.2x greater than Tilray, respectively (currency adjusted).”
“@SBarlow_ROB Jefferies initiates on weed stocks: Like Canopy and Aurora a lot more than Tilray” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “Is This the End of Recycling?: Americans are consuming more and more stuff. Now that other countries won’t take our papers and plastics, they’re ending up in the trash ” – The Atlantic
Newsletter: “Strictly speaking, the only true passive Canadian investors hold one position – an S&P/TSX Composite exchange-traded fund” – Globe Investor