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Daily Pulse

Canada

The Bank of Canada raised interest rates on Wednesday as expected and signaled more rate hikes to come, saying that while mounting trade tensions with the United States were a concern, their impact on growth and inflation looked modest so far. The fourth rate increase since July 2017 comes as Canada grapples with the pressures of rising inflation and solid job growth despite an increasingly hostile U.S. trade policy that could choke off demand from Canada's largest export market. Governor Stephen Poloz said that while it was not easy for policymakers to set aside "all the talk" about trade, the bank hiked rates amid increasing confidence in its outlook, with Canada's economy firing on all cylinders despite the tensions. The bank's relatively sanguine view of the trade risk boosted the Canadian dollar to its strongest in nearly four weeks, and economists said they expected the central bank to hike again by year end.

United-States

Broadcom and CA Technologies on Wednesday announced that Broadcom has agreed to acquire the enterprise technology company for $18.9 billion in cash. The deal values CA stock at about $44.50 per share, or a premium of about 20 percent to the closing price of CA common stock on July 11. The acquisition represents a strategic win for Broadcom, furthering its mission to acquire "mission critical technology businesses," following its failed takeover bid for rival Qualcomm. CA Technologies, which manufactures cloud-based and traditional enterprise software, could help diversify Broadcom, should it gain antitrust approvals in the U.S., the E.U. and Japan. The boards of both companies have already approved the deal.

UBS is getting less bullish over Netflix shares after the stock's stunning rally this year. The firm lowered its rating to neutral from buy for Netflix shares, citing the internet company's high valuation. "We believe Netflix's core competencies in both content & tech should drive a virtuous circle of greater subs and increased viewing time, broadening its moat for global leadership in SVOD," analyst Eric Sheridan said in a note to clients Wednesday. "It's all priced in ... While we remain constructive on the business LT, we view the stock as a less compelling (& roughly equal) risk/reward at current levels, pricing in 5 yrs of excellent forward operating performance while likely underestimating risk factors from competition, FCF burn, & dependence on capital markets for content spending goals."

Delta Air Lines reported second-quarter profit that topped analysts' expectations. Delta posted adjusted earnings per share of $1.77, compared with Wall Street estimates of $1.72 a share. Revenue in the three months ended in June was $11.78 billion, compared with analyst expectations of $11.72 billion. Airlines are grappling with a roughly 60 percent rise in fuel costs over the past year, generally carriers' second-largest expense after labor. Delta shares are off 11 percent in 2018. Delta's second-quarter net income fell 14 percent from a year ago to $1.03 billion, as higher fuel costs ate into the airline's bottom line. The airline's fuel bill was up 40 percent in the second quarter from a year ago.

Europe

European stocks were higher Thursday morning, as investors consolidated steep losses from the previous session when heightened fears of an escalation to the U.S.-Sino trade war soured sentiment. The pan-European Stoxx 600 was up nearly 0.4 percent during early morning deals, with most sectors and major bourses in positive territory. Europe's travel and leisure stocks were the best performers Thursday morning, up around 1 percent after England's soccer team were knocked out of the World Cup semi-final late Wednesday. Shares of Paddy Power Betfair rose more than 2.4 percent as traders cited relief at Croatia's victory over England.

Asia

Japan's Nikkei rebounded on Thursday as a weaker yen offered a temporary respite to trade war fears and lifted sentiment, while index-heavyweight SoftBank soared after a source said a U.S. hedge fund took a $1 billion stake in it. The Nikkei share average ended 1.2 percent higher at 22,187.96, outperforming the broader Topix, which was up 0.5 percent at 1,709.68. The Nikkei's outperformance led the Nikkei versus Topix, the so-called NT ratio, to 12.99, the highest since March 1999.

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The author

Michel Doucet

Michel Doucet

Vice-President and Portfolio Manager

Michel Doucet

After obtaining a Bachelor's degree from the Faculty of Social Sciences at the Université du Québec in Montréal and his Master’s degree, Michel Doucet began his career as a junior economist at the National Bank head office in Montreal. In 1992 he joined the institutional equities and fixed income group at Lévesque Beaubien Geoffrion as an economist and market analyst. Over the years, he has led various projects related to the North American and international economies as well as Canadian public finances. In 1996, the team of institutional economists to which he belongs was ranked first in Canada by Brendan Wood International. In August 1997, Mr. Doucet joined the personal services division of Lévesque Beaubien Geoffrion where he served as an economist, fixed income market analyst and vice president. In 2004, he joined the Desjardins Securities full service team as Vice President. He now occupies the roles of fixed income strategist, economist and portfolio manager. He manages the Securities Portfolio Advisory Group, advisor marketing and distribution of financial planning and insurance.

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