A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
JP Morgan warned that without NAFTA, the loonie could fall ten per cent against the U.S. dollar,
“[JP Morgan] forecast that the loonie could crumble nearly 10 percent against the dollar in the worst case ‘NoFTA”’scenario. A U.S. withdrawal would likely entail 25 percent tariffs on autos and dairy, disrupting supply chains and forcing the Bank of Canada to slash interest rates, according to analysts including Daniel Hui … ‘The worst-case NoFTA could mean USD/CAD at 1.43 as the market prices a ‘safety-net’ 50bp cut by BoC,' they wrote in a Sept. 21 note. ‘A potential overshoot would also probably be unbound and thus larger versus the best-case scenario, given the large unknowns.’’
“Nafta Blowup Could Sink the Loonie by 10 Percent, JPMorgan Says” – Bloomberg
“Canada not making concessions needed for a NAFTA deal, says U.S.” – CBC
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I also wrote about the Canadian dollar for Wednesday’s paper, noting that Nomura analysts are recommending AUDCAD, which also implies weakness for the domestic currency,
“'We still believe the Bank of Canada will hike at a slower pace than the Fed, with growth rates in Canada to slow,' Sam Bonney, London-based foreign exchange strategist for Nomura Securities International, said in a Sept. 24 research report. He further warned that ‘a lot of positivity’ has already been priced into the loonie, despite stalled talks on the North American free-trade agreement.”
“Wednesday’s Fed meeting is vital for the Canadian dollar” – Barlow, Inside the Market
“Is Canada's trade outreach to China driving a wedge into the NAFTA talks?” – CBC
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Merrill Lynch research reported that the company’s clients are fleeing technology stocks at a rapid pace,
“Clients’ sales of Tech stocks last week were the biggest since Jan.’16 and the sixth largest in our weekly data history since ’08. This is the fourth consecutive week of big outflows from Tech, and the sector has seen broad-based sales across all three client groups in four of the last five weeks. Energy has seen the most persistently negative flow sentiment (sales for 11 weeks).”
“@SBarlow_ROB ML clients, "Near-record Tech outflows"” – (research excerpt) Twitter
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Citi’s chief U.S. equity strategist (and Montreal’s own) Tobias Levkovich also warned about technology ahead of earnings season,
“Overall index earnings are slated to slow from its powerful 1H18 growth of 20%+, but the easing of IT EPS expansion may be more challenging for that sector’s momentum driven investor base. Several issues including regulation, taxation, higher discount rates on terminal values, valuation and some small fissures in the fundamentals (softer memory prices, higher employee costs and sales misses) are coming together to undermine the tech story.”
“@SBarlow_ROB Levkovich warns on tech earnings” - (research excerpt) Twitter
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Tweet of the Day:
Diversion: “These Photos of Typhoon Trami Are Jaw-Dropping” – Earther