A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Two remarkable charts from Citi credit strategist Matt King imply that global equity returns are dependent on Chinese monetary stimulus to a significant degree.
The first chart (link below) compares global credit creation to returns on the MSCI World Index and shows a high degree of correlation. The chart also underscores the fact that, with most developed world central banks slowing stimulus, China is supporting equities virtually on their own.
The second chart compares U.S. and European demographics to Japan in 1992 and again finds similarities. The relationship implies a period of high debt and low growth for developed markets for an extended period.
The China credit chart is made more topical by weak Chinese economic data released early Wednesday morning.
“@SBarlow_ROB King: China credit supporting .... well, everything” – (chart) Twitter
“ @SBarlow_ROB Demographically, lot of DM looks like Japan in 1992” – (chart) Twitter
“Premarket: Global stocks bounce fades on grim China data, Italy woes” – Report on Business
“It turns out that China's economy was already losing steam again before the new tariffs” – Bloomberg
“@S_Rabinovitch We've seen this movie before: with China's economy under pressure, the state sector is once again propping up investment growth. And this trend is likely to become clearer as the trade war heats up.” – (chart) Twitter
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CIBC economist Benjamin Tal believes domestic housing demand is understated in official statistics,
“'We need to know whether or not we are building too much or too few houses. It’s not clear, quite frankly, if you look at the overall situation,' Tal said in an interview Tuesday, arguing data that’s collected by Statistics Canada and the Canada Mortgage Housing Corporation is incomplete. ‘Regardless of who measures it, we are undercounting, because we don’t take into account students – and that’s very important.’”
“Housing demand in Canada may be undercounted, says CIBC’s Tal” – BNN Bloomberg
“How Canadians' HELOC thirst could come back to haunt them” – BNN Bloomberg
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The International Energy Agency simultaneously lowered it’s global crude demand forecasts and warned of a potential oil shortage in the very near term,
"Global oil demand will grow more slowly than previously thought following an economic lull in Asia, the International Energy Agency said, while warning that supplies stand to tighten due to U.S. sanctions on Iran. Disappointing fuel consumption in China, Japan and Brazil meant 2019 started with a “tough quarter,” the agency said, lowering its global demand estimate for the first time since October. As a result, world oil inventories surprisingly swelled during the first three months of the year. Nonetheless, stockpiles are set to plunge sharply this quarter as demand picks up and as U.S. sanctions squeeze production in Iran, which could fall this month to the lowest since the country’s war with Iraq in the 1980s, the IEA said.”
“IEA cuts oil demand forecast, but sees market tightening on Iran” – BNN Bloomberg
“Oil Market Report: Markets remaining calm” – IEA
“ Canadian oil prices weaken as crude tanks fill on refinery work” – BNN Bloomberg
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Tweet of the Day:
Diversion: “Arcade Games, Ranked” – The Concourse
Scott Barlow