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Daily Pulse

Canada

Enbridge Inc.’s Line 3 oil pipeline replacement and expansion project won’t face a challenge in front of the Minnesota Supreme Court from groups opposing it, removing one potential roadblock for the already-delayed proposal. The decision removes one possible obstacle for Line 3’s replacement and expansion, a key project for Canadian crude producers suffering from a lack of pipeline capacity. The proposal already had been set back by a year because of permitting issues, a delay that ultimately prompted the Canadian production hub of Alberta to extend its mandatory output cuts for a year to prevent a glut of oil from overwhelming the province.

United-States

Under pressure from Wall Street and President Donald Trump, the Federal Reserve is widely expected to reduce interest rates on Wednesday for a second straight meeting, but its sharply divided policy panel may be reluctant to forecast further cuts. The Federal Open Market Committee is likely to lower rates a quarter percentage point to insure against risks from a global slowdown and uncertainty over Trump’s trade policies, while forecasting no more reductions this year, according to economists surveyed by Bloomberg.

The New York branch of the U.S. Federal Reserve will step in and offer billions more in liquidity to gummed-up intrabank lending markets Wednesday following the first intervention in more than a decade only yesterday as a worrying spike in overnight borrowing costs continues to perplex investors and complicate today's Fed rate decision. The New York Fed will offer as much $75 billion in cash to broader markets, in exchange for eligible collateral such as U.S. Treasury bonds or mortgage-backed securities, in order to hold the Fed's key rate inside its target range of between 2% and 2.25%.

FedEx Corp. tumbled after slashing its profit outlook and warning that the global economy is slowing down because of worsening trade tensions. The shares tumbled 9.2 per cent in late trading to US$157.40, wiping out this year’s gain. FedEx was already trailing the shareholder returns of rival United Parcel Service Inc. and a Standard & Poor index of U.S. industrial companies. In the fiscal first quarter, adjusted earnings dropped to US$3.05 a share, trailing the US$3.15 average of analyst estimates compiled by Bloomberg.

Europe

Deutsche Bank AG faces another potential clash with regulators as the European Central Bank weighs whether to open a formal investigation into unapproved purchases of its own subordinated bonds. The ECB is looking at Deutsche Bank’s buying of the notes over several years up until 2017, when it got approval for future deals, according to people familiar with the matter. Because the securities are designed to help banks absorb losses when they run into trouble, the regulator needs to sign off on any repurchases. Deutsche Bank could be subject to a fine if formal proceedings are opened.

U.K. inflation fell to its lowest rate since the end of 2016, driven down by the price of computer games and clothing. Consumer prices rose 1.7% in August from a year earlier, down from 2.1% in July and well below the Bank of England’s 2% target, Office for National Statistics figures published Wednesday show. Core inflation slowed to 1.5%.

Asia

President Hassan Rouhani said Iran is not looking for a war in the Gulf following weekend strikes on Saudi Arabia’s biggest oil installation, as the Islamic Republic sent a cable to Washington formally denying any role. The attacks raised the specter of a broader war in the Gulf as any military retaliation by the Saudis and their U.S. ally could draw in Iranian proxy groups around the region, and provoke a dramatic spike in oil prices at a vulnerable time for the world economy. The Iranian appeals come hours before Saudi Arabia unveils what it says is evidence of Iran’s involvement in the attack, which shook crude markets and slashed output at OPEC’s largest producer. U.S. Secretary of State Michael Pompeo is also due to arrive in the kingdom on Wednesday.

Huawei Technologies Co. is offering up its most valuable 5G secrets and $1.5 billion to software developers, courting the global tech community at a time the U.S. is heightening scrutiny of the Chinese giant. China’s largest technology company aims to ramp up investment in its developer program over the next five years, Deputy Chairman Ken Hu told attendees at an annual conference. That effort is gaining urgency with Huawei in danger of losing access to American circuity and code, including the Google software it needs to run the world’s No. 2 mobile device business.

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.