Markets are under pressure again this morning, after yesterday’s selloff that saw U.S. and Canadian stocks drop around 1 per cent, amid turmoil in Washington.
U.S. indices are pointing to a lower open in the wake of new U.S. President Donald Trump’s dismissal of acting Attorney General Sally Yates. She told lawyers on her staff not to defend Trump’s abrupt order suspending immigration from seven countries.
The White House excoriated Yates, saying she “betrayed the Department of Justice by refusing to enforce a legal order designed to protect the citizens of the United States.”
At 2:15 p.m. ET, we’ll be joined by Phil Orlando, chief equity market specialist at Federated Investors, which oversees more than US$300 billion. He cautioned this month that U.S. stocks have cooled because investors who priced in the upside from the U.S. Republican electoral sweep are now “worried about inflation and what the Fed is going to do, and a stronger dollar and trade wars and tariffs and the like.”
PROTECTION POLICY
Trump’s protectionism may menace Canada’s export-addicted economy. At 2:30 p.m. ET, we’ll get insight from Angelo Katsoras, geopolitical analyst at National Bank of Canada.
“Should policymakers fail to reach an agreement to exempt Canada from upcoming U.S. trade barriers, Canada’s exports and hence economic growth would take a significant hit,” the bank warns.
And there’s a real estate angle. The bank fears that such an export slump “would keep the country’s economic growth model skewed to housing/consumer spending to an unhealthy extent.”
GDP NUMBERS
Manufacturers led the way as Canada's economy outpaced expectations in November. Gross domestic product rose fourth-tenths of a percentage point in the month amid a surge in activity inside Canadian factories. CIBC's economics team says the growth spurt nixes the possibility of a near-term rate cut from the bank of Canada. But context is everything, so today we'll focus on how the outlook has evolved since Donald Trump took office.
CURRENCY CONFLICT
Speaking of trade wars, The new U.S. administration is tangling with Germany, accusing Europe’s biggest economy of using a weak euro to steal an advantage over trading partners.
Top trade advisor Peter Navarro told The Financial Times that the currency is “grossly” undervalued.
His “comments highlight a growing willingness by the Trump administration to antagonize EU leaders and particularly Angela Merkel, the German chancellor,” the FT says.
Canada has in the past been branded a branch-plant economy where multinationals add little local economic value. Navarro apparently feels the same about the United States. “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he said. “We need to manufacture those components in a robust domestic supply chain that will spur job and wage growth.”
GOOD NEIGHBOURS
David MacNaughton, Canada’s ambassador to Washington, told BNN yesterday that domestic companies can’t rely on the federal government to protect trade flows but must also actively sell the benefit of the relationship to Americans. “While there’s a tremendous good will between Americans and Canadians, I don’t think they fully appreciate the degree to which their economy benefits from investment, trade [and] their sales to Canadians.”
Meanwhile, online investment manager Wealthsimple says it’s expanding into the United States with help from a $20 million investment from Power Financial. “We hope our growth will inspire Canadian companies to think beyond our borders,” founder and CEO Michael Katchen says. “There is no reason the next big global company can't come out of Canada."
We’ll talk to Katchen tomorrow at 10:10 a.m. ET.
GETTING FRESH
In a suddenly more unpredictable world, foods such as nuts, avocados and salmon can be stress busters.
At 9:40 a.m. ET today, we’ll talk to Matthew Corrin, CEO of health-focused restaurant chain Freshii Inc. which has raised more than $125 million in its initial public offering. The subordinate voting stock is set to start trading today under the symbol FRII.
Every morning Commodities host Andrew Bell writes a ‘chase note’ to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnn.ca/subscribe.
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