This week marks the start of earnings season

JULY 15,2019


This week marks the start of earnings season as American financials (Goldman, JPMorgan, Wells Fargo, Citigroup, Morgan Stanley & Bank of America) are set to report earnings, these will likely set the tone for the coming earnings season. Global Equities are trending upward with Canadian yields relatively unchanged compared to their Friday levels. This week promises to be a busy one macroeconomically however today is relatively quiet on that front, primarily marked by Australia’s Central Bank releasing the minutes of its recent meeting. 

The News Canada

  • GM: “Officials flagged 900 food items from China with problems over past two years” ( // Andy Blatchford: “Canadian inspectors intercepted nearly 900 food products from China over concerns about faulty labels, unmentioned allergens and harmful contaminants that included glass and metal between 2017 and early 2019, according to internal federal records. Only four food shipments, however, from China were refused entry into Canada over that period, CFIA’s quarterly reports show. The list from the Canadian Food Inspection Agency shows it’s not uncommon for inspectors to raise concerns about imports from China.”

  • BNN: “Big Data Week Offers Clues on Canadian Rates and Economic Outlook” ( // Chris Fournier: “With lawmakers on summer recess and the Bank of Canada’s latest decision in the can, attention turns to the economic numbers for signs of whether the recent momentum will continue, and what it might mean for interest rates. “Recent Canadian developments stand in sharp contrast to events in much of the rest of the world,” Scotiabank economists including Jean-François Perrault wrote in a July 12 research report. “Whereas U.S. growth is clearly decelerating, Canadian growth is on an upswing, with recent indicators pointing to a very sharp rebound from a somewhat sluggish start to the year.”

The News International

  • REUT: “U.S. firms may get nod to restart Huawei sales in two-four weeks - official” ( // Alexandra Alper and Karen Freifeld: “The U.S. may approve licenses for companies to re-start new sales to Huawei in as little as two weeks, according to a senior U.S. official. But late last month, after meeting with Chinese president Xi Jinping, President Donald Trump announced American firms could sell products to Huawei. And in recent days, Commerce Secretary Wilbur Ross said licenses would be issued where there is no threat to national security. Still, it is unclear which products will be granted licenses.”

  • FT: “Acting IMF chief backs monetary easing by central banks” ( // James Politi: “David Lipton, the acting IMF chief, has backed new monetary stimulus by the world’s top central banks to sustain the flagging global economy — in a thinly veiled nod to the US Federal Reserve and the European Central Bank as they consider easing policy. “Our view is that if the economy needs support, you provide support — but not inappropriate policies that contribute to the slowdown, just in order to be in a position to fight the very slowdown that has been created,” he said.  “We see some acceleration next year but that presupposes a few very important things, including that trade tensions continue to be resolved rather than intensify, and that a number of countries that had extreme stress recover somewhat,” Mr Lipton said, referring to Argentina, Venezuela, Turkey and Iran.” 

  • REUT: “China second quarter GDP growth slows to 27-year low as trade war bites, more stimulus seen” ( //  Kevin Yao: “China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure. Monday’s growth data marked a loss of momentum for the economy from the first quarter’s 6.4%, adding to expectations that Beijing needs to do more to boost consumption and investment and restore business confidence. Premier Li Keqiang said this month that China will make timely use of cuts in banks’ reserve ratios and other financing tools to support smaller firms, while repeating a vow not to use “flood-like” stimulus.”


Thoughts & Trades

In the current risk-on tone, most corporate spreads have performed very well. The top panel in the chart below shows the long Bell Canada spreads vs Canada. Despite the significant tightening, the long corporates have underperformed their 5yr counterparts. The lower panel highlights how the Bell 2023/45 credit curve is still hovering around the wides. The flattening of the Canada curve has likely contributed to the underperfomance of longer dated credits. As the Canada curve normalizes over time, we should see 30yr corporates outperform shorter dated ones as we have just begun to see.

2019 Casgrain & Cie. All Rights Reserved

2019 Casgrain & Cie. All Rights Reserved