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Daily Pulse

Canada

Budweiser brewer Anheuser-Busch InBev NV has joined the growing ranks of alcohol giants dipping their toes into the cannabis industry through a research partnership with Canadian pot firm Tilray Inc.The two companies said Wednesday they will jointly conduct research into non-alcoholic, cannabis-infused beverages. Each company will invest up to $50 million in the partnership, which is limited to Canada. Decisions about commercialization will be made later, as marijuana edibles and beverages won't be legal in Canada until next year. AB InBev is the third alcohol company to partner or invest in a Canadian marijuana producer after the country became the first major economy to legalize marijuana in October. Molson Coors Brewing Co. signed a joint venturewith Hexo Corp., while Constellation Brands Inc. is now the biggest shareholder in Canopy Growth Corp. Tobacco company Altria Group Inc. also announced a $1.8 billion investment in Cronos Group Inc. this month.

United-States

The House is set to vote as early as Thursday on a stopgap measure temporarily extending government funding and averting a partial shutdown following Senate passage of the legislation, which defers a fight with President Donald Trump over money for his proposed border wall.House leaders from both parties have signaled support for the legislation, which continues funding for Homeland Security, Treasury and several other departments until Feb. 8. It passed the Senate Wednesday night on a voice vote.Passage in the House would send the legislation to the White House. Trump hasn't said whether he'll sign the bill, but White House officials have signaled support for deferring the battle over the wall until the new year and avoiding a government shutdown over the Christmas holiday.

Europe

France's debt issuance agency, Agence France Tresor, said Thursday it will sell more debt in 2019 to finance a wider deficit after President Emmanuel Macron pledged tax cuts in response to the protests of the Yellow Vests movement. France will need to finance a fiscal deficit of 107.7 billion euros next year, compared with an initial estimate of 98.7 billion euros when the government presented its 2019 budget in September. The funding requirement will be covered by 200 billion euros of OAT borrowing and a 15 billion-euro increase in short-term borrowing, AFT said on its website. In September, the AFT said its OAT issuance program would be 195 billion euros. The AFT also said it would use 5.1 billion euros of cash available in its account to finance the deficit. In September, it said it would only use 1.1 billion euros.

Asia

The Bank of Japan left its stimulus settings unchanged at its final policy meeting of the year in the face of rising risks to inflation, just hours after the Federal Reserve signaled a slightly more dovish rate path. The central bank faces a deteriorating environment. With oil prices tumbling, economists see inflation falling toward zero in the year ahead. Slowing growth in China, the U.S.-China trade war and a disruptive Brexit could all hit Japan's export-dependent economy, which has contracted in two of the past three quarters. Japanese stocks entered a bear market on Thursday, with the Topix index falling another 2.5 percent as statements from the BOJ and Fed failed to soothe investors. Benchmark 10-year bond yields this week fell to 0.01 percent, the lowest since September 2017.

Canadian National Railway Company (CNR/CNI, Buy, Average Risk, Target C$127.00):

Last week, we had the opportunity to have lunch with CN's management—Doug MacDonald, Keith Reardon and Paul Butcher. Management provided an update on key growth opportunities, capacity investments and excess capacity available on the network, pricing, financial metrics and the balance sheet. Overall, both those discussions as well as our research on the company's growth prospects reaffirm our bullish stance on the name, which is among our preferred stocks for 2019.

Whitecap Resources Inc. (WCP, Buy, Average Risk, Target C$8.00):

We are formalizing estimate revisions following WCP's 2019 capex budget and production guidance released on Tuesday (December 18); our CFPS is down slightly as a result, but we believe that balance sheet preservation is the right priority in the current environment. That said, despite the indiscriminate sell-off across the energy space, we expect that softening oil prices and tax loss selling could remain a significant headwind for the stock going into year-end.

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.