Author: Consultant

China grapples massive COVID wave with full emergency wards and crowded crematoriums: ‘Many people dying’

Experts have forecast China will eventually experience a million to 2 million deaths over 2023

China’s ongoing battle with a COVID surge has completely devastated the country’s healthcare infrastructure, especially in the Hebei province.

Hospitals in Baoding and Langfang have been forced to turn away ambulances and ill patients seeking treatment, while health administrators have been required to treat patients in over-capacity intensive care units on benches or the floor, officials said.

“I don’t have much hope,” said Yao Ruyan, whose elderly mother-in-law requires urgent medical care as she contracted the coronavirus. However, Yao has been unable to find a hospital with room to treat her, the Associated Press reported.

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Taiwan scrambles jets, readies missile defenses as Chinese military vessels near island, defense ministry says

Several Chinese aircraft and naval vessels neared Taiwan early Saturday morning, prompting the Taiwanese defense ministry to scrambled fighter jets and ready its missile defense system, officials said.

The Ministry of National Defense for the Taiwan government, officially identified as the Republic of China, said its forces detected over a dozen vehicles operated by China’s military near its island at approximately 6 a.m. Saturday.

“11 PLA aircraft and 3 PLAN vessels around Taiwan were detected by 6 a.m. today,” its government said, prompting officials to send naval vessels of their own and ready land-based missile systems “to respond to these activities.”

https://www.foxnews.com/world/taiwan-scrambles-jets-readies-missile-defenses-chinese-vessels-near-island-defense-ministry-says

TC Energy receives regulatory approval to restart part of Keystone pipeline shut by spill in Kansas

TC Energy Corp. TRP-T +2.33%increase has received regulatory approval to restart the remaining segment of the Keystone pipeline that has been shut down since suffering its worst oil spill in the pipeline’s history on Dec. 7.

The Calgary-based company said Friday the U.S. Pipeline and Hazardous Materials Safety Administration has approved a restart plan for the 154-km stretch of pipeline that runs from just south of Steele City, Nebraska to Cushing, Oklahoma.

The company said its restart plan will take several days and will include rigorous testing and inspections. It did not provide a date for when the entire pipeline system will be fully operational again.

Immediately following the spill, which saw 14,000 barrels of oil released into a creek in Washington County, Kan., TC Energy shut down the Keystone pipeline system, which stretches 4,324 km and helps transport Canadian and U.S. crude to markets around North America.

TC Energy restarted most of the pipeline, at a reduced pressure, on Dec. 14, although the section that runs from just south of Steele City, Nebraska to Cushing, Oklahoma remained shut down.

TC Energy and U.S. regulators are still investigating the cause of the spill, which eclipsed a 2017 6,600-barrel spill in North Dakota and a 2019 4,500-barrel spill in South Dakota as the worst oil spills in the Keystone pipeline’s history.

The 2017 spill, in particular, was a blow to the Canadian oil industry. For the 10 days the pipeline was shut down, a lack of transportation capacity both to the U.S. storage hub in Cushing, Okla. and to refiners along the U.S. Gulf Coast caused a backlog of Canadian crude and forced producers to sell barrels at an increased discount.

That price depreciation didn’t happen this time, however – in part because Canada now has more pipeline capacity than it did. (The addition of Enbridge’s Line 3 replacement project came online in 2021, and Canada will have even more pipeline capacity next year after the TransMountain expansion project comes online.)

But Rory Johnston, a Toronto-based oil markets analyst and founder of the Commodity Context newsletter, said even with that additional capacity, any future pipeline outages that last for more than a few weeks could still cause significant problems.

“The Keystone outage reminds us of our vulnerability,” Johnston said in a Dec. 21 interview.

“All of our pipelines (in Canada) are pretty large pipelines. We don’t actually have that many pipelines. So if anything goes wrong with any one of those assets, we don’t actually have a lot of resiliency in the system. And I think that’s what Keystone has showed us.”

Pipelines are widely considered by experts to be a safer mode of crude transport than either rail or truck. Still, the risk of a spill has long been a factor cited by environmentalists and others who have opposed North American pipeline construction projects in recent years.

For example, fears about potential pipeline leaks (as well as concerns about climate change) helped stoke opposition to TC Energy’s proposed Keystone XL extension. That project would have cut across Montana, South Dakota and Nebraska but ultimately had its permit cancelled by U.S. President Joe Biden in 2021.

U.S. government data shows that the Keystone pipeline’s safety record has been deteriorating in recent years.

A report released last year from the U.S. Government Accountability Office (GOA), a congressional watchdog agency, said Keystone’s accident history has been similar to other crude oil pipelines since 2010, but the severity of spills has worsened in recent years.

The GOA report identified “construction issues” leading to the material failure of pipe or welding material as a leading factor in past Keystone accidents.

It said the 2017 Keystone leak was caused by issues in the construction, installation, or fabrication of the pipeline, while the 2019 North Dakota accident was caused by defects in the original pipe manufacturing.

Investors look for ‘Santa Rally’ after grim year in U.S. stocks

Bruised investors are hoping a so-called Santa Claus rally can soften the pain of a tough year in U.S. stocks and potentially brighten the outlook for 2023.

Without a doubt, the market could use some holiday cheer. In December – typically a strong month for equities – the S&P 500 has so far lost around 6%, weighed down by hefty declines in shares of Tesla Inc, Amazon.com Inc and other names that had led markets higher in previous years. The index is down nearly 20% year-to-date and on track for its worst annual performance since 2008.

History shows the market still has a better-than-average chance to pare those losses. U.S. stocks have risen during the last five trading days of December and the first two days of January about 75% of the time, CFRA Research data showed, a pattern attributed to low liquidity, tax-loss harvesting and investing of year-end bonuses.

Friday is this year’s start date for this rally named after Santa Claus – if it happens. It will only be clear around the second trading day of 2023.

The phenomenon has lifted the S&P 500 an average of 1.3% since 1969, according to the Stock Trader’s Almanac. A December without a Santa rally has been followed by a weaker-than-average year, data from LPL Financial going back to 1950 showed.

The S&P 500 has gained an average of 4.1% in the year after a December without a Santa rally, compared to a 10.9% gain following a period when one takes place. January gains are also muted in a non-Santa year, with the index falling an average of 0.3% compared to a 1.3% gain after a Santa year, the data showed.

“When Santa Claus doesn’t arrive that typically means that there’s something in the market that is causing confusion or an obstacle that it is facing. Negative sentiment doesn’t change because it’s a new year,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.

This month’s steep decline underscores how seasonal trends seem to be offset by worries over whether the Federal Reserve’s monetary tightening will plunge the economy into recession.

The S&P 500 has posted only 18 Decembers with losses since 1950, Truist Advisory Services data showed. The index has gained an average of 1.6% in December, the highest of any month and more than double the average 0.7% gain of all months, according to CFRA data.

This December is shaping up to be one of the exceptions. Investors shed stocks at the highest weekly rate ever in the week to Wednesday, selling a net $41.9 billion, according to a BofA Global Research report on Friday. It attributed the sell-off to “tax loss harvesting,” a strategy that involves selling assets at a loss to offset capital gains taxes.

“The lack of a ‘Santa Claus rally’ this month, with a ‘lump of coal selloff’ in its place, is a troubling sign about 2023 US equity returns,” strategists at DataTrek wrote.

Few economic reports are due next week, with readings on the U.S. housing market and jobless claims, while stock market liquidity is expected to fall near its lowest levels of the year with many on Wall Street off for the holidays.

Much of the market’s trajectory will be dictated by whether inflation can continue to subside and allow the Fed to stop raising interest rates sooner than it has projected.

U.S. consumer spending barely rose in November, while annual inflation increased at its slowest pace in 13 months, but demand is probably not cooling fast enough to discourage the Fed from driving interest rates higher next year.

Other inflation measures have also shown signs of slowing, with consumer prices rising less than expected for a second straight month in November.

“If investors start to see the economy slowing more rapidly than people are anticipating and the Fed ends its rate hikes in the first quarter, we could see a tale of two halves” and a strong positive return next year, said Sam Stovall, chief investment strategist at CFRA.

Canada’s inflation rate fell to 6.8% in November as lower gas prices offset higher food, rent costs

Canada’s inflation rate eased in November, as an acceleration in grocery and rent prices was offset by a decline at the gas pump.

The Consumer Price Index rose 6.8 per cent compared to the previous year, Statistics Canada reported Wednesday. That’s down from 6.9 per cent in October, although slightly ahead of economist expectations of 6.7 per cent.

On a monthly basis, CPI rose 0.1 per cent compared to a 0.7-per-cent gain in October.

While overall CPI inflation continued trending down from a peak of 8.1 per cent reached in June, core inflation measures that strip out volatile food and gasoline prices ticked up in November. That could increase the odds that the Bank of Canada raises interest rates again in January.

The central bank has signalled that it’s approaching the end of its aggressive rate-hike cycle, and officials have said they may consider pausing rate hikes in January. Markets are pricing in a roughly 50 per cent chance that the bank halts at its next meeting on Jan. 25.

“Turning the temperature down on inflation is proving to be an achingly slow process, and we suspect this may be a theme for 2023,” Bank of Montreal chief economist Doug Porter wrote in a note to clients following the CPI data publication.

“While lower pump prices will help chop next month’s rate, the fact that many measures of core inflation are still nudging higher is a clear warning sign of persistent underlying pressures. We are leaning to the view that the Bank of Canada hikes rates one more time in January to 4.5 per cent, and this firm report does nothing to doubt that call.”

Canadians got a break at the gas pump, where prices fell 3.6 per cent compared to October. The price of gasoline was still 13.7 per cent higher than last November.

There was little relief at the grocery store, where prices were up 11.4 per cent compared to the previous year – a bigger annual jump than in October. The price of chicken was up 9.3 per cent, partly because of reduced global supply following an outbreak of avian influenza, Statscan noted. Coffee and tea prices were up 16.8 per cent, while cereal prices rose 15.7 per cent.

Canadians also paid more for shelter in November. Rent was up by 5.9 per cent year-over-year, compared to a 4.7 per cent increase in October. Meanwhile, mortgage interest costs rose 14.5 per over the previous year, the largest increase since 1983.

“The rise in rental inflation will concern the Bank [of Canada] because, unlike in the U.S., there is little sign in the private sector measures that rental growth will soon slow sharply,” Stephen Brown, senior Canada economist with Capital Economics wrote in a note to clients.

Of the central bank’s two preferred core inflation measures, CPI-trim remained steady at 5.3 per cent, while CPI-median ticked up 0.1 percentage point to 5 per cent.

Cenovus shareholders set for another good year, even if oil prices remain static

Canadian energy stocks have retreated since early November, weighed down by stumbling crude oil prices and economic uncertainty.

But there’s good news for dividend-focused investors here: The hefty distributions that have flowed from the energy sector in 2022 should continue to delight shareholders next year as well, even if the price of oil fails to embark upon a fresh winning streak.

Jason Bouvier, an analyst at Bank of Nova Scotia, took a closer look at Cenovus Energy Inc. and found that the oil producer’s annualized distribution of about $800-million a year – or 42 cents a share – has plenty of room to rise.

He estimated that the total base distribution could increase to a range between $1.2-billion and $1.4-billion a year, even if oil prices slide further to about US$50 a barrel.

This distribution increase, even if it takes a few years, implies a dividend hike of 50 per cent to 75 per cent from the current level. That will give a lift to the modest dividend yield sitting below 2 per cent right now and it could bring the stock in line with energy dividend powerhouses such as Suncor Energy Inc. and Canadian Natural Resources Ltd.

Mr. Bouvier said in a recent research note that with oil prices at about US$75 a barrel, which is close to Tuesday’s price of about US$76, investors can do significantly better.

At that price, according to the analyst’s estimates – which include some assumptions for the discount of Canadian heavy crude oil compared with the U.S. benchmark, West Texas Intermediate (WTI) – Cenovus is capable of generating cash flow of $10-billion to $11-billion a year.

Subtracting $5-billion from the middle of this range for capital expenditures and other expenses leaves about $5.5-billion in free cash flow. This fountain of cash can provide the current dividend and another $4.7-billion for other shareholder returns.

“Even after the base dividend increase, we expect significant available free cash flow for both share buybacks and additional dividends,” Mr. Bouvier said in the note.

The stock might not be reflecting this dividend-friendly outlook.

Cenovus shares have been underperforming the broader energy sector in recent weeks, falling nearly 15 per cent since early November, amid broad concerns over the economy and commodity prices. Earlier this month, crude oil fell to its lowest level in about a year.

In its 2023 lookahead, analysts at Credit Suisse argued that the energy sector – by far the best performer in North America in 2022, with the S&P 500 energy sector up 53 per cent this year – will struggle next year as producers not aligned with OPEC (the Organization of the Petroleum Exporting Countries) increase supply as demand slows with the slumping global economy.

U.S. economic growth, Credit Suisse said in its lookahead, “will generally remain low in 2023 against the backdrop of tight monetary policy conditions and the ongoing reset of geopolitics.”

Nevertheless, the analysts’ 2023 year-end target price for WTI is US$80 a barrel – compared with a brief peak above US$100 in June – suggesting that even cautious economic forecasts can underpin a bullish scenario for Canadian energy producers such as Cenovus.

Some analysts expect oil prices will rise higher.

Michael Hartnett, an investment strategist at Bank of America, estimates WTI will trade at an average of US$94 a barrel in 2023, and rally to a peak of US$104 a barrel in the third quarter, as China’s economy rebounds from its current slump.

No doubt, Canadian energy stocks could be volatile as markets react to everything from inflation readings and economic activity to the war in Ukraine, in a year that is bound to be full of surprises. And yes, the price of oil can be unpredictable, making a mockery of forecasts.

But Cenovus – and, more generally, the energy sector – is not reflecting a particularly upbeat future for oil right now. Share prices are well off recent highs, suggesting valuations are anything but stretched.

The best part: The bullish case for dividend investors doesn’t rest on the return of sky-high crude oil prices.

Dow surges 500 points, led by Nike, on hope earnings will be better than feared

Stocks rose for a second day Wednesday after earnings reports from two bellwethers raised hopes that corporate earnings may be better than feared even with a potential recession.

The Dow Jones Industrial Average gained 532 points, or 1.6%. The S&P 500 and Nasdaq Composite jumped 1.6% and 1.8%, respectively.

“We got sort of oversold and I think the market was looking for an excuse to rally, and the Nike and FedEx number provided that,” said Sam Stovall,  chief investment strategist at CFRA Research. “I really question, however, if this is something that’s going to be long-lasting.”

Nike surged 13% after beating Wall Street’s expectations for quarterly earnings and revenue. The results lifted other retail stocks. The sports apparel maker also showed progress in its attempt to clear through inventory, posting a decline over the previous quarter.

Meanwhile, FedEx gained 5% after reporting earnings per share that beat estimates. The company also shared a slew of cost-cutting plans.

Better-than-expected consumer confidence data for December further fueled bullish sentiment in the market, and jumped to its highest level since April.

With the end of 2022 in sight, all three major averages are on pace to snap a 3-year win streak and post their worst year since 2008. The Dow’s down 8.2% for the year and 3.6% this month, while the S&P’s shed 18.6% and 5%, respectively. The Nasdaq’s plummeted 31.5% in 2022 and 6.6% in December.

Earnings season continues before the Christmas holiday, with Micron reporting after the bell.

TC Energy has submitted plan to restart Keystone pipeline after spill in Kansas, source says

TC Energy Corp TRP-T -0.42%decrease has submitted its plan to restart the Keystone pipeline to U.S. regulators, a source familiar with the matter said on Tuesday, nearly two weeks after the line ruptured in the worst oil spill in the United States in nine years.

The 622,000 barrel-per-day (bpd) pipeline was shut after it spilled 14,000 barrels of oil in rural Kansas on Dec. 7, the third major spill from the line in the last five years. The undamaged parts of the pipeline reopened last week.

Even though cleanup will take weeks or months, the line can still restart once it is repaired and the plan approved by the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA).

TC Energy did not answer questions about when it hopes to restart the line or what caused the incident.

“This segment will not be restarted until it is safe to do so and when we have regulatory approval from PHMSA,” the company said.

The U.S. Environmental Protection Agency (EPA) said it could not immediately comment.

The line leaked diluted bitumen, a heavy oil that tends to sink in water, making it harder to collect than oils that float. More than 400 people are involved in the cleanup, including TC workers, pipeline regulators, state and local officials and the EPA.

TC is required to complete an analysis of the root cause of the line’s failure by early March, or 90 days after PHMSA issued a corrective action order.

The response team has so far recovered 7,233 barrels of oil from Mill Creek.

TC is not required to identify the cause to restart, but it needs to satisfy PHMSA that the problem is not systemic and likely to cause other incidents along the pipeline, said Richard Kuprewicz, president of pipeline consulting company Accufacts Inc.

Kuprewicz said he suspects that a weld failed between segments of pipeline and does not represent a systemic problem.

“It’s pretty straightforward and PHMSA should have enough information,” Kuprewicz said, adding that PHMSA could allow TC to restart the segment within the day.

TC shares dipped 0.7 per cent in Toronto. They are down 7 per cent since the spill.

The portion of the line that is shut covers 96 miles (155 km), starting south of a key junction located at Steele City, Nebraska. The line splits at that locale, with one leg heading to Midwest refineries. That leg reopened last week.

Completion of the cleanup depends on weather and other factors.

Used cars, lumber and other sectors defying inflation and seeing price drops

Lumber

Remember the frenzy around lumber prices in 2021? In May of that year, benchmark prices reached a peak of US$1,686 per thousand board feet, an enormous increase from its usual range around US$200 to US$500.

Today, prices have come back to earth around the US$400 mark after sustained declines since February.

Keta Kosman, owner of the Madison’s Lumber Reporter in Vancouver, said it may still take some time for the average consumer to notice decreases in pricing, since the complicated economy of lumber sales means that retail outfits receive product months down the road.

She said there will could be a lag time of around six months before retail prices meaningfully come down from their current high levels.

Retailers are also trying to figure out where prices will stabilize after such a volatile period. However, it’s safe to assume that buying wood at your hardware store and the cost of materials when booking a local contractor will begin to decrease in the new year.

Ms. Kosman also said that lumber prices also affect packaging-related items, such as pallets and crates, which could point to downward price pressure in other products as well.

It feels like there’s no escaping inflation, no matter where you are in the world or what you’re buying.

Rising interest rates are jacking up borrowing costs, while supply chain issues and high demand are bringing up the price of just about everything else. Earlier this year the headline inflation rate in Canada hit a multidecade high of 8.1 per cent, and the most recent reading, for October, sat at 6.9 per cent. Statistics Canada releases its latest Consumer Price Index numbers on Wednesday.

But even as the cost of living has risen at an alarming pace, there are some products that are seeing prices fall, and we cite a few of them below. Some goods, such as lumber, are on the cusp of having prices drop, while others, such as certain produce items, have seen price declines already that could be at risk of reversing.

Used cars

Everyone wanted a car when the pandemic started, and the timing couldn’t have been worse.

Baris Akyurek, director of analytics with AutoTrader.ca, said the production of new cars slowed because of microchip shortages, while demand rose sharply as people looked to avoid public transport and moved further out of urban centres.

Consumers turned to the used market, and prices exploded as a result. The average price of a used car on the AutoTrader platform peaked at just over $38,000 in June, 2022, an enormous increase from the average price of $26,759 in February, 2020.

However, prices have been steadily decreasing each month since June; in November, the average price of a used car was $36,682.

There was also good news on the supply side: As of October, the site had 27 per cent more cars available than a year prior, which will add to downward pressure on prices.

Mr. Akyurek expects car prices will continue to soften into the new year, but the caveat is that they likely won’t return to prepandemic prices any time soon, especially because car makers continue to struggle with supply chain issues, and demand remains strong.

Certain fresh produce items

Grocery stores have been a focus of people’s frustration over inflation, as the cost of food has cut into people’s paycheques.

But Sylvain Charlebois, a Dalhousie University professor specializing in food distribution and economics, said there have been a few key products that have actually decreased in price over the past year.

As of the end of November, broccoli was 13 per cent cheaper compared with a year prior. Peppers were down 12 per cent, while cucumbers were down by the same percentage.

Meanwhile for meats, Dr. Charlebois said pork prices had dropped by 9 per cent, owing to oversupply. Chicken drumsticks, generally a loss-leader, were down by 7 per cent, although chicken in general has become more expensive.

Dr. Charlebois cited favourable growing conditions as the reason why prices for certain types of produce products had dropped. However, he said this trend could reverse in the new year, and advised consumers to take advantage of relatively low prices now.

A breakdown of everything you need to know about inflation

Lumber

Remember the frenzy around lumber prices in 2021? In May of that year, benchmark prices reached a peak of US$1,686 per thousand board feet, an enormous increase from its usual range around US$200 to US$500.

Today, prices have come back to earth around the US$400 mark after sustained declines since February.

Keta Kosman, owner of the Madison’s Lumber Reporter in Vancouver, said it may still take some time for the average consumer to notice decreases in pricing, since the complicated economy of lumber sales means that retail outfits receive product months down the road.

She said there will could be a lag time of around six months before retail prices meaningfully come down from their current high levels.

Retailers are also trying to figure out where prices will stabilize after such a volatile period. However, it’s safe to assume that buying wood at your hardware store and the cost of materials when booking a local contractor will begin to decrease in the new year.

Ms. Kosman also said that lumber prices also affect packaging-related items, such as pallets and crates, which could point to downward price pressure in other products as well.

Why lumber price trends are so hard to nail down

Cellphone bills

In a report earlier this year, Priscilla Thiagamoorthy, senior economist at Bank of Montreal, noted that phone services were bucking the inflation trend, with three consecutive months of dropping prices over the summer.

“The CRTC ruled in favour of policy aimed at increasing competition and lowering mobile services prices, providing one bright spot amid an otherwise dreary inflationary picture,” Ms. Thiagamoorthy wrote in a note last month.

Phone service costs increased slightly in October from the previous month, but year over year, the costs were lower by 4.2 per cent, according to Statistics Canada.

Used bikes

Biking was one of those activities that everyone turned to after the onset of the pandemic. It was an obvious way for people to get outside and exercise when everything else in life was limited.

Bike shops were among the first businesses in those days to see their stocks completely clear out, especially when it came to entry and mid-level bikes. Then, people turned to the used market, and Tom Sands, a volunteer of Bike Pirates in Toronto, said the used market went haywire.

People were starting to flip new bikes on the used market for much more than they were originally worth. Used bikes that may have fetched a couple hundred dollars before the pandemic were going at double that rate.

Even shops like Bike Pirates, which Mr. Sands said aims to keep used bike prices low for those new to the activity, had to slightly raise their prices because of difficulties in attaining bikes and the parts to fix them.

While it’s hard to pin down data on used bike sales, Mr. Sands said it’s clear that prices have come down from their pandemic highs, although they’re still slightly more expensive than prepandemic.

However, he said consumers can look forward to a regular winter season this year, where bike shops are cutting deals to get rid of old stock, and where it might be easier to find reasonably priced used bikes since demand is lower.