A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
U.S. sources are reporting that a trade deal with China has been struck, but nobody in China has confirmed this at time of writing,
“While Mr. Trump was ‘upbeat and enthusiastic about this breakthrough,’ in the words of Michael Pillsbury, an adviser to the president during the trade talks, the mood in Beijing has been decidedly more sober. None of China’s state-owned media outlets or economic agencies involved in the trade negotiations made any public statement on Friday about the deal endorsed by Mr. Trump … ‘The U.S. side talks too much, and that’s the American style,’ said Mei Xinyu, a trade analyst at a think tank affiliated with China’s Commerce Ministry. ‘If there is an agreement, both sides will have to make an official announcement. Without that, anything is possible.’”
“China Offers No Confirmation on U.S. Trade Deal” – Wall Street Journal (paywall)
“U.S. sets China trade deal terms, sources say, but Beijing mum” – Reuters
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Merrill Lynch strategists believe a profits rebound is coming in 2020, but they warn that if it doesn’t, a global recession may be in the offing,
“With sentiment now neutral, 2020 upside needs a profits rebound. Five reasons to expect one: trade peace, a capex & inventory rebound, Frozen Fed support, global QE, and a fiscal surprise. The alternative is a rising risk of recession. The gap between large-cap profits and the rest of the economy is the widest on record “
“@SBarlow_ROB ML: "with sentiment now neutral, 2020 upside needs a profits rebound.. The alternative is a rising risk of recession" – (research excerpt, chart) Twitter
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Also from Merrill Lynch, economist Olivia Lima predicts a small decline in Canadian economic growth next year, and expects a volatile loonie,
“We expect 1.5% GDP growth in 2020 with resilient services but weak industry. This would be a deceleration from 1.7% in 2019, which we revised upwards after stats Canada revised GDP higher … USMCA is likely to be in effect in 2020, which is positive for investment. High household indebtedness continues to be the main domestic risk … CAD: hope for the best, prepare for the worst. A cyclical currency, the Canadian dollar continues to be buffeted by crosswinds affecting the global economy and financial markets. Global trade policy remains the key wild card. In our view, uncertainty may persist near-term but should decline next year, benefitting the loonie against the greenback but by less than for G10 FX peers. Admittedly there are significant risks in both directions around this outcome.”
“@SBarlow_ROB ML on CAD: "hope for the best, prepare for the worst" – (research excerpt) Twitter
“Loonie may face rapid selling pressure as growth resurgence remains scarce” – Barlow, Globe Investor
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Citi chief economist Catherine Mann sounds a bit skeptical on the global economy’s growth path next year,
“A lot has to go right for 2020 to show a synchronized and stronger global growth outturn… While our expectations are for a stabilization in global growth, we consider the balance of risks to be tilted to the downside as the several risks that have been weighing on the global outlook have not dissipated, and there is a non-small probability that these intensify in 2020 (and even more in 2021). Downside risks include trade and political uncertainty, fading US growth outperformance of the rest of the world and non-fading recession concerns, spreading of manufacturing weakness to the rest of the economy, and monetary policy without fiscal policy exacerbating current uncertainties. Upside risks include a rebound in manufacturing, potential de-escalation of trade tensions, and central bank and more fiscal stimulus in the pipeline.”
“@SBarlow_ROB C: "What are the risks to the global outlook?"” – (research excerpt) Twitter
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Diversion: “The first flight of a fully electric commercial aircraft has taken place in Canada” – M.I.T. Technology Review
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