The Big Three: Market rebound; record WCS discount; China's trade surplus
We’re seeing a reprieve from the stock market rout overseas this morning. All the major Asian and European indices are posting (mostly modest) gains and futures are pointing to a surge at the start of trading for the Dow Jones Industrial Average. The upswing comes after two per cent losses for the Dow and S&P 500 yesterday, and only slightly less severe drops for the TSX Composite and Nasdaq. Earnings and management outlooks will be the attention-grabber today, with results from JPMorgan, Wells Fargo and Citigroup coming up this morning.
TSX LEADERS TURN LAGGARDS
The TSX’s five-session losing streak has pulled the index down almost five per cent, and turned many of Bay Street’s best performers over the last 12 months into laggards. Shopify (-19.1 per cent), Canada Goose (-18.5 per cent) and Bombardier (-16 per cent) are among the cellar dwellers over the last week. We’ll ask money managers about hunting for value during a downdraft.
‘DIRT CHEAP’ CANADIAN OIL
That’s how BMO characterized the collapse in WCS prices in a note to clients yesterday, while warning of the implications for Canada’s trade balance, our currency, and the broader economy. Meanwhile, National Bank is telling clients there’s “material upside to gain” for investors, pointing to an expectation differentials will narrow. We’ll explore the investment thesis and the stakes for the Albertan and Canadian economies with Western Canadian Select trading at a ~US$50 per barrel discount to West Texas Intermediate.
MORE FUEL FOR CHINA-U.S. TENSION
China’s export growth nearly doubled expectations in September, rising 14.5 per cent year-over-year compared to the 8.2 per cent gain that was anticipated. Exports to the U.S. hit an all-time high; we’ll see how that goes over with the Trump administration, particularly in light of Bloomberg’s reporting that Treasury staff has advised Steven Mnuchin that China is not manipulating its currency.
Canada’s tomato capital is turning into a hotbed of pot industry activity. Watch out for a feature story on BNNBloomberg.ca later today about how Leamington, Ont. is embracing cannabis capitalism.
OTHER NOTABLE STORIES
-Aphria's revenue more than tripled in its fiscal first quarter, reaching $13.3 million. Net income also rose, but adjusted EBITDA swung to a loss of almost $4 million. And as Andrew Bell has pointed out, the company says it dumped 13,642 plants amid “a lack of qualified local labour, which left it with insufficient staff" for harvest.
-Enbridge confirmed late yesterday gas is now flowing through the 30-inch pipeline that was shut down for precautionary purposes after its larger neighbour near Prince George ruptured earlier this week. The company says it still doesn’t have a timeline for how long it will take to repair that larger pipe.
-The Globe and Mail is reporting influential U.S. senators Marco Rubio and Mark Warner are urging Prime Minister Justin Trudeau to distance Canada from Huawei.
-Notable earnings: Aphria, JP Morgan, Citigroup, Wells Fargo & Co.
-Notable data: US University of Michigan Consumer Sentiment Index
-6:30 a.m. ET: Prime Minister Justin Trudeau holds media avail in Yerevan, Armenia
-G20 Meeting of Finance Ministers and Central Bank Governors
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg'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.bnnbloomberg.ca/subscribe.