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Daily Pulse

Canada

Commodities investors are in line for a comprehensive update on the state of energy, metal and agricultural markets this week. Leading the charge, the World Energy Council kicks off Monday in Abu Dhabi, with ministers and executives attending, while OPEC+ officials meet on the sidelines later in the week. Those events will carry extra significance following the installation of Prince Abdulaziz bin Salman as Saudi Arabia’s new energy minister. There’s a triple hit in crops, with the USDA’s World Agricultural Supply and Demand Estimates report to land on Thursday, with attention focused on corn yields. That comes the same day China releases its homegrown version for local figures, while on Tuesday, France updates grain output estimates. On top of that menu, investors will learn whether nickel’s impressive rally is set to go on, as insiders from the industry huddle in top producer Indonesia. Among corporates, lithium heavyweights SQM, Albemarle Corp. and Livent Corp. may offer their take on a challenging market. And for gold, additional stimulus from the European Central Bank, if that’s announced, may well stir the market.

Friday the 13thcould turn out to be Air Canada’s lucky day – that’s when S&P Dow Jones Indices will announce changes to the benchmark S&P/TSX 60 index. The betting favorite on trading desks is that the carrier will be among those added after a 72% rally this year. The index changes – important in the age of passive investing since they drive the composition of exchange traded funds – may turn out to be the biggest news in what’s expected to be a relatively quiet week. While Air Canada is seen as a winner, expect CannTrust Holdings Inc. to be among the losers after it fell beneath its listing price of C$2.50. Air Canada has earned its spot in the TSX index not just with this year’s performance; it’s climbed 300% since 2016 and is the best-performing stock in the Bloomberg World Airlines Index this year. The carrier’s performance has been boosted this year by its planned acquisition of tour operator Transat AT, which will accelerate its global presence in the leisure industry. CannTrust, on the flipside, has fallen almost 85% from its 2018 peak. A demotion from the TSX 60 would mean it has spent a mere six months in the index.

United-States

Fixed-income investors are gearing up for another wave of deals across the U.S. debt capital markets after blue-chip companies sold bonds at the fastest pace ever last week. There’s one high-yield deal in the pipeline and the leveraged-loan market has 12 bank meetings on deck. Investment-grade syndicate desks are anticipating $35 billion in new bond sales for the week. That’s $5 billion shy of last week’s forecast that was smashed when Coca-Cola Co., Walt Disney Co., and Apple Inc. led other high-quality companies in borrowing $75 billion, the most for any comparable period since records began in 1972.

Europe

Boris Johnson is refusing to back down and pushing on with his hardline Brexit strategy despite the risk of being taken to court and the threat of more resignations from his Conservative Party. After a bruising week of defeats for his Brexit strategy culminating in the resignations of his own brother and cabinet minister Amber Rudd, Johnson faces further setbacks on Monday. The prime minister will probably lose another vote in the House of Commons and his Irish counterpart, Leo Varadkar, played down the chances of a breakthrough when Johnson visits Dublin earlier in the day.

The next U.K. recession could be “unnecessarily painful” because the tools to combat it are lacking, according to the Resolution Foundation. Britain is facing the highest likelihood of a recession since the financial crisis a decade ago, and yet monetary and fiscal policy are ill-equipped to support the economy, the London-based think tank said in a report published Monday.

Asia

Car sales in India suffered their biggest monthly drop on record, as the slump in the country’s auto sector shows no sign of letting up. Deliveries slid 41% in August from a year earlier to 115,957 units, while sales of passenger vehicles including SUVs fell 32%, according to data released by the Society of Indian Automobile Manufacturers on Monday. Truck and bus sales dropped 39%, and two-wheeler sales – a key indicator of demand in rural India – fell 22% to 1.5 million units. The automobile sector is a key part of Asia’s third-largest economy, employing millions of people directly or indirectly and contributing more than 7% to the nation’s gross domestic product, according to McKinsey & Co. Slowing income growth for farmers in rural India has contributed to a fall in sales.

The outlook among Japan’s restaurant managers, taxi drivers and shopkeepers fell to a five-year low in August, reflecting concerns over the impact of a looming sales tax increase on the economy.

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.