Call: 1-204-414-9106
Elon Musk files another notice to terminate Twitter acquisition, citing additional reasons
Bullish on Vermilion Energy Inc.
Vermilion Energy VET-T +0.34%increase (Friday’s close $38.07) declined from $49.67 in 2018 to $2.20 in 2020 (A-B) below a falling trendline (dotted line) and below the falling 40-week Moving Average (40wMA). It then settled in a horizontal trading range between $3 and $9 in 2020 and another between $7 and $11 for most of 2021. This price action produced a bullish technical pattern known as a Duplex Horizontal (dashed lines).
The stock had a breakout from this pattern and reached $30.76 (C), but then was far above the 40wMA. It had a correction to its Average and the rising trendline (solid line), where it found good support (D). The stock has since resumed the uptrend (E).
There is good support near $27-$28 and at the 40wMA (currently near $24-$25); only a sustained decline below this level would be negative.
Point & Figure measurements provide targets of $40 and $44. Higher targets are visible.
U.S. Federal Reserve to stay focused on inflation, markets will be volatile: UBS Global Wealth
The U.S. Federal Reserve will not back away from “talking tough” on the markets until there is significant progress on inflation, which will perpetuate volatility into mid-2023, UBS Global Wealth Management’s chief investment officer said on Monday.
Mark Haefele told the Reuters Global Markets Forum he saw the S&P 500 ending the year at 3,900 points and around 4,200 by next summer, compared to its current 4,057 level.
Chair Jerome Powell said on Friday the Fed would raise rates as high as needed to restrict growth and keep them there “for some time” to bring down inflation running well above its 2 per cent target.
Haefele expected the Fed to hike an additional 100 basis points this year, but did not see major recession in the United States.
“We do think that inflation is going to start to come down,” said Haefele, who runs investment strategy for the world’s largest wealth manager with $2.8-trillion in assets.
Fed funds futures priced in as high as a 73 per cent chance it will hike by 75 bps and see rates peaking at 3.75 per cent to 4.0 per cent.
Haefele noted value stocks have always outperformed growth during inflationary periods, providing attractive valuations.
“(Value) is one area where we would be more focused,” he said, adding that many of these opportunities were outside the U.S.
Even as Haefele expected Europe to enter a recession, for which equity markets were already priced, he said there were pockets of value in consumer staples and some defensive sectors such as health care.
While not currently “overweight” on emerging markets (EM), Haefele expected EMs to become attractive once the Fed pivots on policy.
“We’re very focused on when there is a catalyst because many EM stocks are much cheaper than U.S. stocks,” he said. “And so over the longer term, prospects for EM, both in terms of valuation (and) growth rates make it very attractive.”
Canada challenges U.S. softwood lumber duties under USMCA trade pact
International Trade Minister Mary Ng says Canada is formally initiating a challenge against “unwarranted and unfair” U.S. duties on Canadian softwood lumber.
The Canadian government filed notice of the challenge Monday under the U.S.-Mexico-Canada trade agreement’s dispute resolution system.
Ms. Ng says in a statement that the duties harm Canadian businesses and workers but also serve as a tax on U.S. consumers already dealing with inflation and supply-chain issues.
The U.S. cut its anti-dumping and countervailing duty rate in half earlier this month to 8.59 per cent from 17.61 per cent, but Ms. Ng signalled that Canada would still fight the measures.
The crux of the U.S. argument is that the stumpage fees provinces charge for timber harvested from Crown land are akin to subsidies, since U.S. producers must instead pay market rates.
Ms. Ng says that Canada is willing to work toward a negotiated solution in the long-running dispute.
Before the Bell: Aug 30
Equities
Wall Street futures were higher early Tuesday after two negative sessions in a row. European markets were also positive. TSX futures were up with the last of bank earnings due.
In the early premarket period, futures tied to the three key U.S. indexes advanced with Nasdaq futures up more than 1 per cent at one point. On Monday, all three marked another day of declines with the S&P 500 losing 0.67 per cent while the Dow ended down 0.57 per cent and the Nasdaq fell 1.02 per cent. The S&P/TSX Composite Index finished the session 0.19-per-cent lower.
“If the market price action of the last few days is any guide the penny finally appears to have dropped that the Federal Reserve is willing to risk a recession to get inflation under control,” Michael Hewson, chief market analyst with CMC Markets U.K., said.
“[Fed chair Jerome] Powell’s message from last week’s speech at Jackson Hole on Friday, couldn’t have been any clearer, that the Fed would keep going until the job is done, the pity being it took so long for investors to take notice, as stock markets dropped, and bond yields spiked higher.”
In Canada, bank earnings are back at the forefront with results from Bank of Montreal. The country’s other big banks reported results last week.
BMO reported net income, excluding one-off items, of $2.13-billion, or $3.09 a share, in the three months ended July 31, from $2.29-billion, or $3.44 a share, a year earlier.
Quebec-based convenience store giant Alimentation Couche-Tard reports after the close of trading. In the U.S., electronics retailer Best Buy releases its latest quarterly results Tuesday morning.
Overseas, the pan-European STOXX 600 gained 0.80 per cent. Germany’s DAX and France’s CAC 40 were up 1.32 per cent and 1.01 per cent, respectively. Britain’s FTSE 100 gained 0.44 per cent.
In Asia, Japan’s Nikkei closed up 1.14 per cent. Hong Kong’s Hang Seng slid 0.37 per cent.
Commodities
Crude prices pulled back somewhat after the previous session’s sharp gains with recession concerns offsetting worries about supply.
The day range on Brent is US$104.09 to US$105.45. The range on West Texas Intermediate is US$96.48 to US$97.66. Both benchmarks added more than 4 per cent on Monday.
“The one trade that everyone can agree upon is that the oil market will likely remain tight,” OANDA senior analyst Ed Moya said.
“Oil rallied on rising risks of a potential civil war that could put Libyan output at risk and over growing expectations that OPEC+ is positioning themselves to cut production.”
Traders are now awaiting next week’s OPEC+ meeting after some members have suggested that the group could cut output to shore up prices. The meeting is set for Sept. 5.
Later Tuesday, markets will get the first of two weekly U.S. inventory reports with new numbers due from the American Petroleum Institute. Official government figures follow on Wednesday morning.
Analysts are expecting to see a decline in crude stocks by about 600,000 barrels last week.
In other commodities, gold prices were lower, weighed down by a still-high U.S. dollar.
Spot gold was down 0.3 per cent at US$1,732.10 per ounce by early Tuesday morning, having hit a one-month low of US$1,719.56 in the previous session.
U.S. gold futures were also down 0.3 per cent at US$1,744.10.
Currencies
The Canadian dollar was higher, trading around 77 US cents early Tuesday morning, as risk sentiment steadied on global markets.
The day range on the loonie is 76.77 US cents to 77.10 US cents.
There were no major Canadian economics releases due Tuesday. Traders will get June and second-quarter GDP figures from Statistics Canada on Wednesday morning.
On world markets, the U.S. dollar index, which weighs the greenback against a group of world currencies, stood at 108.46, after dropping back from 109.48 overnight, a high not seen since September 2002, according to figures from Reuters.
The U.S. dollar was down 0.27 per cent against the Japanese yen while Britain’s pound gained 0.32 per cent to US$1.1743.
The Australian dollar, often seen as a proxy for risk sentiment, rallied 0.5 per cent, Reuters reports.
In bonds, the yield on the U.S. 10-year note was lower at 3.063 per cent in the predawn period.
Economic news
(9 am ET) U.S. FHFA House Price Index for June.
(9 am ET) U.S. S&P CoreLogic Case-Shiller Home Price Index for June.
(10 am ET) U.S. Conference Board Consumer Confidence Index for August.
(10 am ET) U.S. Job Openings & Labor Turnover Survey for July.
With Reuters and The Canadian Press
US Coast Guard cutter denied entry into Solomon Islands port sparking concerns of China’s growing influence
A United States Coast Guard cutter conducting patrols on an international mission in the Pacific Ocean was denied entry to a port in the Solomon Islands raising concerns about China’s growing influence in the area.
The cutter Oliver Henry was taking part in Operation Island Chief monitoring fishing activities in the Pacific, which ended Friday, when it sought to make a scheduled stop at Guadalcanal, Solomon Islands, to refuel and re-provision, the Coast Guard office in Honolulu said.
There was no response from the Solomon Islands’ government for diplomatic clearance for the vessel to stop there, however, so the Oliver Henry diverted to Papua New Guinea, the Coast Guard said.
Stocks are starting to look vulnerable as the ‘cruellest month of the year’ approaches
Uh-oh: September is approaching, ratcheting up the drama on a precarious stock market.
The month arrives at a time when recovering stock prices face rising interest rates, slower economic activity and muted corporate profits.
If that’s not enough to rattle investors, consider that September historically has delivered the worst average returns of any month for U.S. stocks.
According to Bespoke Investment Group, the Dow Jones Industrial Average in September has declined by 1.2 per cent, on average, and showed a positive return just 40 per cent of the time over the past 100 years – making it by far the worst month for stocks.
“In our business, September has often tended to be the cruellest month of the year,” Ed Yardeni, chief investment strategist at Yardeni Research, said in a note this week.
While he’s not spooked by the coming month’s poor track record, there are plenty of reasons why many observers believe next month could be particularly important in establishing whether the summer’s stock market recovery has legs.
For one thing, it’s a big month for central bank policy, which has been focused on fighting inflation at the expense of economic activity.
Federal Reserve chair Jerome Powell’s Friday speech at the central banker Jackson Hole conference in Wyoming, which weighed on markets all week, added to widespread concerns the Fed will continue to hike rates even if it brings pain to households and businesses.
“Those are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” Mr. Powell said.
The S&P 500 index fell 3.4 per cent on Friday, suggesting those comments weren’t what investors had hoped to hear when economic activity is already stumbling.
In one of the more alarming indicators, S&P Global’s flash composite purchasing managers’ index for U.S. companies – a reading of manufacturing and service sector activity – slumped to 45 in August, down from 47.7 last month.
Any reading below 50 shows a contraction. And this particular one, according to Capital Economics, is consistent with a deep recession.
Corporate profits are also starting to look vulnerable.
Most of Canada’s biggest banks reported their latest quarterly financial results this week, with some missing forecasts and bolstering provisions for loan losses in expectation of problems ahead.
Though companies in the S&P 500 reported profit growth of 8.5 per cent in the second quarter, year over year, according to Refinitiv, results from the red-hot energy sector are masking broader problems. Indeed, exclude the energy sector, and S&P 500 profits are down 2.2 per cent.
Perhaps this wouldn’t matter much if stocks were in the dumps.
But after the S&P 500 turned in its worst six-month performance since 1970 at the start of this year, the index has embarked upon an impressive – if fitful – comeback in the second half: It has risen 13.5 per cent from its low in mid-June.
Investors are showing more interest by putting money back into equity mutual funds and exchange-traded funds.
According to data from Refinitiv Lipper, investors put a net US$11.7-billion into equity funds over a two-week period earlier this month, reversing US$44.1-billion of outflows in June and July.
These enthusiastic investors likely hope U.S. inflation peaked in June at 9.1 per cent. Key commodity prices, such as crude oil, have declined since then. The Commerce Department’s personal consumption expenditures index, released Friday, showed consumer prices subsided in July.
But Mr. Powell’s comments on Friday suggest the Federal Reserve isn’t content.
“Overall, Powell tried to make clear that policy rate tightening would continue and they wouldn’t be deterred by a sustained period of below-trend growth,” Taylor Schleich and Jocelyn Paquet, economists at National Bank Financial, said in a note.
What does this mean for stocks?
They could always continue to rebound as inflationary pressures subside and the economy glides toward either a shallow recession or avoids one altogether.
But plenty of observers are cautious. Morgan Stanley’s Global Investment Committee believes the recent rebound is a bear market rally – short-term gains that occur within a broader downturn. In part, the gains point to relatively high stock valuations that might not reflect slowing profits.
“It’s not unusual for stocks to rally during a bear market,” Lisa Shalett, Morgan Stanley’s chief investment officer, wealth management, said in a note this week.
Rallies have occurred in nearly every bear market over the past 95 years, she said. The average gain during these rallies was 18 per cent, before the downward slide resumed.
September is not going to be easy.
NASA is set to launch the Artemis 1 mission on its most powerful rocket yet — here’s what you should know
https://www.cnbc.com/2022/08/27/nasas-artemis-1-mission-what-you-should-know-about-sls-orion.html
EEconomic Calendar: Aug 29 – Sept 2
(1030 am ET) Dallas Fed Manufacturing Activity
—
Tuesday, August 30
Euro area economic and consumer confidence. Germany consumer price index for August.
(830 am ET) Canada current account balance for the second quarter
(9 am ET) U.S. FHFA House Price Index for June. Consensus is for a 17.6% rise from a year ago.
(9 am ET) U.S. S&P CoreLogic Case-Shiller Home Price Index for June. Consensus is for a 19.6% rise from a year ago.
(10 am ET) U.S. Conference Board Consumer Confidence Index for August.
(10 am ET) U.S. Job Openings & Labor Turnover Survey for July.
Earnings include: Alimentation Couche-Tard; Bank of Montreal; Best Buy; Big Lots; Chewy; Hewlett Packard Enterprise; Crowdstrike Holdings
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Wednesday, August 31
China purchasing managers indexes. Japan industrial production, retail sales and consumer confidence data.
Euro area Consumer Price Index for August. It’s expected to be up 9% on an annualized basis, with core CPI at 4.1%. Separate CPI reports due out from France and Italy.
(830 am ET) Canada real GDP for the second quarter. Consensus is for annualized growth of 4.4%, accelerating from the first quarter’s 3.1%. For June, consensus is for growth of 0.2%.
(815 am ET) U.S. ADP National Employment Report
Earnings include:Laurentian Bank of Canada; Barnes & Noble Education
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Thursday, September 1
China Caixin Manufacturing PMI. Japan capital spending and manufacturing PMI data.
Euro area jobless rate for July and manufacturing PMI for August. Plus, Germany retail sales for July, and Italy’s latest jobless figures and real GDP. U.K. releases nationwide house prices and manufacturing PMI
(830 am ET) Canada building permits for July. An unchanged reading is expected after falling 1.5% in June.
(830 am ET) U.S. jobless claims for last week
(830 am ET) U.S. productivity and unit labour costs for the second quarter.
(930 am ET) Canada S&P global manufacturing PMI.
(945 am ET) U.S. S&P global manufacturing PMI, followed by the ISM manufacturing PMI
(10 am ET) U.S. construction spending. Consensus is for a decline of 0.1%.
North American auto sales
Earnings include:Lululemon Athletica; Hormel Foods; Weibo; BRP
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Friday, September 2
Euro area producer price index
(830 am ET) Canada labour productivity for the second quarter
(830 am ET) U.S. nonfarm payrolls for August. Consensus is for net job gains of 300,000, down from July’s 528,000. The unemployment rate is expected to hold steady at 3.5%. Average hourly earnings are expected to be up 5.3% from a year ago, up from July’s 5.2%.
(10 am ET) U.S. factory orders for July. Consensus is for a rise of 0.2%.
