Equities appear to be trending upwards following dovish comments from two Fed officials

JULY 22,2019


Equities appear to be trending upwards following dovish comments from two Fed officials (Vice-Chairman Clarida and NY Fed Chief Williams). Williams iterated that central banks must take “swift action” when faced with adverse economic conditions, which some investors interpreted as signaling an upcoming 50bps rate cut. WTI Crude gained 1.1% overnight as U.S.- Iran tensions continue to escalate. Canada reports Retail Sales data this morning and the U.S. reports their Michigan Consumer Confidence Index shortly after.

The News Canada

  • GM: “B.C. posts $1.5-billion surplus even as the real estate market cools” (https://tgam.ca/32ANKeK) // Chad Hipolito: “The 2018-19 public accounts released on Thursday by Finance Minister Carole James show the province has eliminated its operating deficit for the first time in 40 years. The higher-than-expected surplus is primarily the result of $2.9-billion in increased revenue, largely driven by higher personal and corporate income tax and new taxes including a speculation tax and employer health tax. Ms. James also says her government has chosen to confront financial challenges at the Insurance Corporation of British Columbia and BC Hydro, and both Crown corporations are now on more sustainable paths.”

  • REUT: “Canada says it is close to deal with EU on possible fix to WTO deadlock” (http://bit.ly/2Y0g9Yr) // David Ljunggren and Andrea Shalal: “Canada and the European Union are close to agreeing on a possible temporary solution to a U.S. block on appeals in disputes at the World Trade Organization, Prime Minister Justin Trudeau said on Thursday. Trudeau, speaking after a meeting with top EU officials in Montreal, said Canada backed existing attempts to restore a fully operational Appellate Body. “In the event that those efforts are unsuccessful, we need to be prepared. So we have been working with the European Union to find an interim fix,” he told a news conference.”

  • BNN: “Economic Rebound Gives Trudeau Momentum Ahead of Fall Election” (https://bloom.bg/2JWd0DI) // Stephen Wicary: “The Liberal prime minister is pulling ahead of his main rival on the crucial question of economic stewardship in the run up to the October election. According to a survey by Nanos Research Group for Bloomberg News, 31% of respondents say they trust Trudeau most to promote economic growth, compared with 26% for Conservative Leader Andrew Scheer. Nearly a third of those polled don’t trust anyone or are unsure, with the remainder split among smaller parties. Trudeau and Scheer had been neck-and-neck on the issue for two straight months, though Canada’s economic performance has been firming up, with rising consumer confidence putting a wind in Liberal sails.”

The News International

  • FT: “US navy shoots down Iranian drone in Strait of Hormuz” (https://on.ft.com/2JGTaxu) // Demetri Sevastopulo, Aime Williams and Najmeh Bozorgmehr: “President Donald Trump said the US has shot down an Iranian drone in the Strait of Hormuz after it threatened an American warship, adding to tensions in the critical oil shipping lane. Mr Trump said the USS Boxer took defensive action after the drone came within 1,000 yards of the amphibious assault vessel and ignored “multiple” calls to stand down.”

  • REUT: “U.S.-China officials discuss trade; Mnuchin eyes possible in-person talks” (http://bit.ly/2M9WFyj) // David Lawder, Susan Heavey, Andrea Shalal and Koh Gui Qing: “Mnuchin and U.S. Trade Representative Robert Lighthizer spoke with their Chinese counterparts over the phone, Lighthizer’s office said on Thursday, following earlier comments by the Treasury secretary in an interview on the sidelines of the G7 meeting in Chantilly, France. China’s foreign ministry said on Friday the two sides had discussed ways to implement the consensus reached by the two countries’ presidents, but gave no other details.”

  • REUT: “China warns of war in case of move toward Taiwan independence” (https://reut.rs/2YaybXP) // Michael Martina: ““However, we must firmly point out that seeking Taiwan independence is a dead end,” Wu said. “If there are people who dare to try to split Taiwan from the country, China’s military will be ready to go to war to firmly safeguard national sovereignty, unity, and territorial integrity,” he said. The United States is the main arms supplier to Taiwan, which China deems a wayward province. Beijing has never renounced the use of force to bring the island under its control.”

  • FT: “UK government borrowing rises sharply in June” (https://on.ft.com/2Z00v0v) // Delphine Strauss: “UK government’s borrowing rose sharply in June, in large part due to movements in the flawed retail prices index that pushed up the cost of interest payments on outstanding debt. Public sector net borrowing of £7.2bn was £3.8bn more than a year earlier and the highest June borrowing since 2015, the Office for National Statistics said on Friday. Analysts’ average forecast had been for borrowing of £3.9bn. The biggest single factor behind the rise in borrowing was a £2.1bn increase in the government’s interest payments on outstanding debt, which the ONS said was largely due to movements in the retail prices index, to which index-linked bonds are pegged.”


Thoughts & Trades

The graph shows the Goldman Sachs Financial Condition Index (FCI) against the ISM.  The FCI tends to lead the ISM.  We showed last week that the Regional Fed indicator were starting to point towards renewed strength.  The FCI is also pointing in the same direction. 

2019 Casgrain & Cie. All Rights Reserved

2019 Casgrain & Cie. All Rights Reserved