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Why many Canadians are missing the biggest issue facing global markets today

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Quick note on Twitter links: U.S. political arguments on social media were driving me nuts so I've locked my Twitter account – it was that or risk permanent residence in an Ontario Home for the Permanently Befuddled.

In the past, I've posted sell-side research excerpts on Twitter and linked to them in this daily post, but now they'll be harder to access.

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I'll still post the excerpts, quote them at length, and readers that want to see the original tweet can request to follow my account. Apologies in advance.

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The surging U.S. dollar is, along with rising bond yields, the biggest issue in global markets lately. Canadians are less aware of this because the loonie has fall relatively less than most other currencies. This means however that the loonie is rising versus many non-U.S. currencies and makes domestic exports less competitive in those markets.

"Runaway dollar sends shiver through world markets" – Reuters
"Gold Recovers From Nine-Month Low as Dollar's Rally Fizzles" – Bloomberg
"@Callum_Thomas - BCA sounding the warning on US stocks from the danger of a strong US dollar" – (this link will work, it's only mine that are temporarily protected) Twitter
"Canadian Exporters: No Simple Currency Fix" – BMO

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A Brookings Institute report highlights how automation is making job creation in the manufacturing sectors far more difficult than in the past,

"Boston Consulting Group reports that it costs barely $8 an hour to use a robot for spot welding in the auto industry, compared to $25 for a worker — and the gap is only going to widen. More generally, the "job intensity" of America's manufacturing industries — and especially its best-paying advanced ones — is only going to decline. In 1980 it took 25 jobs to generate $1 million in manufacturing output in the U.S. Today it takes five jobs."

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"It won't be easy to bring back millions of manufacturing jobs" – Brookings Institute

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The Great Rotation – from fixed income and low volatility equities – into more growth oriented market sectors continued this week as the Financial Times detailed,

"More than $5.1-billion flowed into these funds for the week ending November 23, according to data from EPFR. It was a lighter intake than the previous record-setting week but still accentuated the rotation from bond funds to equity funds that has characterised investor flows since Donald Trump's election victory on November 8. Globally, bond funds lost $8.6-billion, with $2.5-billion coming from the U.S., as yields, which move inversely to price, have risen sharply since the election victory. Emerging market bond and equity funds also continued to shed money, with investors pulling out $2.9-billion and $1.9-billion, respectively."

"More than $5.1bn flows into US stock funds" – Financial Times
"@SBarlow_ROB Citi: assets flee bonds and EM, pour into U.S. equities " – Twitter (no link)

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In a related story, copper prices continue to climb but some analysts are warning things are overdone and red metal prices are set to fall

"Copper has surged 21 percent in November, and neared a 17-month high after better-than-estimated U.S. data on durable goods and manufacturing Wednesday. The rally prompted Deutsche Bank AG and Goldman Sachs Group Inc. to warn that prices have overshot fundamentals. "The rally probably still has legs, but it isn't due to extremes in fundamental conditions, but rather shifts in investor participation," Nicholas Snowdon, a metals analyst at Standard Chartered Plc, said on Thursday. The move has been primarily driven by a change in sentiment among investors in China, he said."

"Copper Set for Best Month in a Decade as Speculators Pile in" – Bloomberg

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Tweet of the day: (Click through for entire argument) "@acoyne In short, the whole narrative of "the rich get richer, the poor get poorer and the middle class can barely get by" is an utter crock. ' – Twitter

Diversion: High-end reading list from George Mason University economics professor, former chess prodigy and all-around polymath Tyler Cowen,

"Best fiction of 2016" – Cowen, Marginal Revolution

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More

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