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Daily Pulse

Canada

Pot companies say they’re not interested in replicating Canopy Growth Corp.’s deal for Acreage Holdings Inc., arguing that a structure that depends on U.S. legalization creates risks for both sides. Canopy said last month that it will buy Acreage for $3.4 billion in a deal conditional on the U.S. legalizing marijuana at the federal level in the next 90 months. The value of the cash-and-stock offer has fluctuated since then and is currently worth about $29 a share. That’s about $10 above Acreage’s current stock price, indicating investors aren’t convinced the deal will get done.

The Bank of Canada may be underestimating the extent of the cooling in the country’s housing market as well as its knock-on effects for the consumer-driven economy, according to research firm Capital Economics. Sales of pre-construction units in Toronto and Vancouver slowed in 2018, making it harder for developers to secure financing for their projects, said Stephen Brown, the firm’s senior economist for Canada. That in turn is likely to impact employment and consumption, which accounts for about 60 percent of the country’s output.

United-States

President Donald Trump plans in coming days to sign an executive order that would prohibit American firms from using gear made by foreign telecommunications companies that pose a security threat, according to an administration official. The official, who was granted anonymity to discuss a sensitive issue, said on Tuesday night that the order was not meant to single out any country or company. U.S. officials have said that equipment made by Huawei Technologies Co.., a Chinese telecommunications firm, could be used to spy on behalf of the Beijing government. Huawei has denied the allegations.

For more than a year, Apple Inc. avoided major damage from the U.S. trade war with China, thanks in part to a White House charm offensive by Chief Executive Officer Tim Cook. But the company now faces its first major hit – from both sides of the dispute. A new round of tariffs proposed by the U.S. on Monday includes mobile phones, meaning the iPhone, Apple’s most-important product that is made almost entirely in China, may be encumbered with a 25% import levy. There are other products on the list that would affect Apple too, such as laptops and tablets. That leaves the company with a difficult choice: Raise prices on already– pricey products and risk missing out on sales, or absorb the extra cost and let profits suffer.

Europe

Germany’s economy emerged from stagnation at the beginning of 2019, returning to growth despite a slump in manufacturing that could worsen because of escalating global trade tensions. The 0.4% expansion signals some strength across the euro area in the first quarter amid a better-than-expected performance in a number of countries. But industry is under pressure and the region is at risk of being sucked into an increasingly tense U.S.-China trade conflict.

Theresa May set a date for her final Brexit showdown, promising to bring her deal back to Parliament at the start of June. Talks with the opposition Labour Party haven’t yielded an agreement, but she’s hoping members of Parliament, stung by voter revolts, will back her in order to end the process that’s tearing both main parties apart.

Asia

China’s economy lost steam in April, underscoring the fragility of the world’s second-largest economy as it girds for an intensified face-off with the U.S. over trade. Industrial output, retail sales and investment all slowed more than economists forecast. The state sector continued to boost investment while private business eased off, and growth in manufacturing investment came in at the slowest pace in data dating back to 2004.

Japanese Prime Minister Shinzo Abe said propping up domestic demand would be a priority for his government as economic data show signs of weakness ahead of a planned increase in the sales tax in October. Abe has twice before backed away from a sales tax hike and his government has insisted that it is going ahead with the increase from 8% to 10% to help ease the developed world’s biggest debt load. But his comments are closely watched for signs he may again get cold feet after previous increases threw the economy into reverse.

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.