Posthaste: Because CannTrust could lose its license altogether, the Saudis turn their lives to Iran and the US Fed's money explosion

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Good morning!

Is the calm before the storm?

Markets are held back in view of the US Federal Reserve meeting, which is expected to generate a rate cut. But members of the Federal Open Market Committee remain divided and future rate cuts may not be as imminent as the market is anticipating.

Oil prices, meanwhile, continue to recede after Saudi Arabia has assured customers that full production will resume by the end of the month. However, the kingdom should also provide "material evidence" today that would indicate Iran's involvement in attacks on Saudi oil facilities, raising the oil risk premium.

"In any scenario, the increased risk premium marks a surprising reversal of the market," said Roger Diwan, vice president of IHS Markit. "The combination of weak demand fueled by macroeconomic fears and the potential for US-Iranian easing to unblock significant oil volumes currently under penalty had weighed on the market. A sustained increase in the market risk premium is now justified. "

For now, the risk premium has evaporated, with US crude oil futures trading just under one percent at US $ 58.89.

Canaccord Genuity has reduced its price target for CannTrust Holdings Inc. to $ 2 (from 42.5 previously) after Health Canada suspended its license and claims that things can still get worse for the company.

"Previously we expected a complete suspension and revocation of all CannTrust licenses," Canaccord analyst Derek Dley said in a note to customers yesterday. "And while today's news involves only a suspension, we note that there is still significant uncertainty about the prospects of the company, and our previous vision may indeed prove to be correct."

Health Canada has provided CannTrust with a route that, if implemented, could remove the CannTrust license suspension.

"On the contrary, this could be the first step in the possible removal of CannTrust licenses, which we believe remains a distinct possibility," noted Dley.

Move into the millennials with your hooded sweatshirts, the empty-nest Boomers are at the forefront of entrepreneurship, according to a new RBC survey on small businesses.

The bank's latest survey shows that around 42% of small business owners are Boomers compared to 24% who are millennials.

"Among Canadians who have thought about starting an enterprise, empty nester are the most likely (46%) to have actually started or bought one," according to the RBC Small Business survey of 2019.

The Boomers' motivation is mainly to channel their rich experience to supplement their pensions. However, millennials have also caught the entrepreneur's bug. About 70% of millennials thought they had an enterprise – an increase of seven points compared to 2018 – and 53% of the millennial non-business owners are currently participating in the secondary concerts economy, show the RBC survey.

Here's what you need to know this morning:

  • Statistics Canada will release the consumer price index for August at 8:30 am ET
  • US Federal Reserve interest rate decision at 14:00 ET
  • St. Francis Xavier University president, Dr. Kevin Wamsley, and former Prime Minister Brian Mulroney will officially open the Brian Mulroney Institute of Government (BMIG) and Mulroney Hall, in Antigonish, Nova Scotia
  • The Canadian Sporting Arms and Mununition Association announces the results of the recently published economic impact analysis on fishing with the hunt, catch, and sport in Canada, completed by the Conference Board of Canada
  • Scotiabank hosts its 23rd annual Toronto back-to-school conference
  • The UNITE summit in Calgary
  • Corporate event: Alimentation Couche-Tard AGM in Laval, Que.

A 1.3 percent decline in Canadian manufacturing sales in July suggests gloomy prospects for the future economy, analysts say.

"Regardless of how it is divided, this is a rather distressing report and the underlying signals suggest that further damage is likely," a Scotiabank note said, adding that the inventories are getting completely out of hand, which indicates greater weakness. of future production.

Sales decreased in 11 of the 21 sectors, with the decline mainly concentrated in durable goods (-2.9 percent). In fact, primary metals (-7.3 per cent) and transport equipment (-3.4 per cent) contributed most to the decline.

TD Group says that, despite the data being disappointing, the drop in oversized volumes should be interpreted with caution.

"A certain reimbursement was expected after the June increases (primary metals) and there are also some temporary factors at stake (maintenance in the production plants of motor vehicles)", noted TD. "However, manufacturing sales and economic activity generally look set to slow down in the third quarter following a strong second quarter."

But the manufacturing industry makes up about 10% of the Canadian economy and it is possible that the rest of the economy could do the heavy lifting between low interest rates, high employment and rising wages (for some) .

"This Friday's retail expense numbers will be our next indication of how much compensation is developing," said a note from RBC Capital Markets. "For now, we continue to expect a 1.8% increase in Canadian third-quarter GDP."

– Send news, comments and stories to yhussain@ postmedia.com. – Yadullah Hussain @Yad_fpenergy

With the files of The Canadian Press, Thomson Reuters and Bloomberg

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