A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
The oil price fell down an elevator shaft at 6:30 a.m. ET after a difficult day Wednesday, and West Texas Intermediate crude is now trading below the $50 per barrel level at about $49.50. The catalyst for the sell-off was Wednesday's report on U.S. inventories that showed a larger increase than expected.
I noted the distinct possibility of short-term oil price weakness in a column earlier this week. The combination of record bullish speculation in futures markets, combined with a stubbornly flat (at that point) commodity price and rising storage levels meant something had to give. My short-terms views are always subject to change, but I think that as long as annual global demand growth remains intact at 1.0 to 1.4 billion barrels per day, the mid-term outlook remains constructive. What we are likely seeing is the unwinding of speculative bullishness that got out of hand.
"Oil plummets more than 5% as crude stockpiles, production climb" – Report on Business
"Oil breaks below $50 for first time in 2017 in sudden selloff" – Marketwatch
"WTI oil prices fall below $50 for first time since December" – FastFT
"Shale Billionaire Hamm Says Industry Binge Can 'Kill' Oil Market" – Bloomberg
Bank of Montreal chief investment strategist Brian Belski is very bullish on Canadian banks. In a report released Thursday, Mr. Belski wrote,
"Financials have been the pace setter for the TSX since the U.S. election. However, we believe this has been largely a catch-up move from their early 2016 doldrums, with fundamentals improving long before the U.S. election and the recent rise in U.S. interest rates. Interest rates have been a positive tailwind, but outperformance has more to do with an improving economic outlook. In fact, the unemployment rate in Canada has returned to previous cycle lows while GDP has been coming in above expectations. Analysts have been cautious on banks for a long time [but] Earnings have consistently beat expectations for the past nine quarters and revisions have been clearly positive."
"@SBarlow_ROB BMO's Belski likes Canadian banks" – (research excerpt) Twitter
"Reaching for yield" remains a consistent investment theme and one that, in light of credible predictions of higher bond yields, should be of concern for investors in credit markets and dividend stocks,
"Yields are falling despite a torrent of headwinds including an interest-rate hike from the Federal Reserve that looks all but certain, looming European elections that threaten the future of the single currency union, and latent political turmoil in Asia. That's prompted analysts from banks including Goldman Sachs Group Inc. and Citigroup Inc. to question whether the valuations are sustainable … Stretched valuations in junk-rated U.S. corporate debt prompted Goldman analysts led by Bridget Bartlett to warn this week: 'Overall, the combination of tight valuations in high-yield coupled with rising policy risk, and thus volatility, should fuel decompression ahead in the credit markets.'"
"Seven Charts That Show the Search for Yield Is Alive and Well" – Bloomberg
"Risk of faster US interest rate cycle looms" – Financial Times
"Is the Fed Behind on Tightening? Watch This Inflation Indicator" – Bloomberg
Tweet of the Day: "@wfrick "We're bemoaning what's happening to labor, but we keep subsidizing capital" relative to labor. -Daron Acemoglu " – Twitter
Diversion: "What if Donald Trump and Hillary Clinton Had Swapped Genders?" – New York University