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Daily Pulse

Canada

Bank of Canada Governor Stephen Poloz makes comments in an interview with CTV News: While prices for heavy Canadian crude have rebounded, global oil prices are still far below what the Bank of Canada projected in October. On interest rates: The economy is operating at more or less capacity, unemployment at four decade lows, and inflation on target means interest rates should be more normal and move toward a neutral range of 2.5 percent to 3.5 percent. On financial markets: Markets are wrestling with the prospect of a trade war between U.S. and China. If there is a trade war, the whole world economy will slow. Stock market will reflect that. On potential recession: Poloz says he isn't expecting a recession in 2019, but people should be prepared for volatility. "The Canadian economy begins this new year in a pretty good place." Picture much better than two or three years ago. "Our fundamentals are quite solid. Domestically, biggest risk is household debt. The Bank of Canada is watching carefully how people adjust to higher rates.

United-States

Investors in U.S. homebuilders are holding their breath heading into the New Year as experts predict softening demand in 2019, mainly driven by higher borrowing costs.Gradual interest rate hikes by the Federal Reserve helped slow the housing market in the second half, with weakness starting over the summer and becoming more pronounced in the fall. Confidence among U.S. homebuilders has plummeted to the lowest level since 2015, signaling that the industry's struggles are intensifying, data released Monday showed.To lure buyers, homebuilders are cutting prices. This is adding to margin pressures in an industry that's yet to see any meaningful relief in development costs or prices for building materials, financing and labor, according to a report from Wells Fargo.

Europe

Banks in the European Union will have to apply tougher provisioning rules to loans that turn sour after Brussels policy makers struck a final agreement on the new regulations.Under the deal reached on Tuesday, banks will get between three and nine years to fully provision for different types of exposures. In March, the European Commission presented the plan to make sure banks set aside enough capital to cover new nonperforming loans, to prevent them from piling even more bad debt on top of the 811 billion-euro ($922 billion) mountain that's weighing on lenders, particularly in Italy, Portugal and Greece.

Asia

President Xi Jinping said China would stick to its policy agenda, despite pressure from the U.S. and others to allow more competition in its economic system and reduce support for state industry.Xi told an audience of party officials, military leaders and entrepreneurs in a speech Tuesday that "no one is in the position to dictate to the Chinese people what should and should not be done." While the speech was being watched for potential policy announcements, Xi offered no new ideas to boost the economy or assuage U.S. concerns. Instead, he reiterated the need for the Communist Party to exercise leadership and control over all aspects of the country's development.

The author

Michel Doucet

Michel Doucet

Vice-President and Portfolio Manager
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.