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Daily Pulse


Bank of Canada Governor Tiff Macklem warned the nation’s economy could temporarily shrink again amid a second wave of virus cases, tempering good news on the start of inoculations against COVID-19. In his last speech of the year on Tuesday, Macklem said uncertainty remains elevated and new restrictions could trigger a small contraction at the start of 2021. On the plus side, “news on vaccines provides some reassurance that more normal activities can resume sometime later next year.” Speaking to reporters after his remarks, Macklem said data suggest only a marginal increase in output in the final months of 2020, followed by a modest negative or small positive in the first three months of next year. Overall, Macklem’s comments reflect a central bank that is in a holding pattern on policy, waiting for economic developments for cues on its next move.

Shareholders of two rival energy companies voted in favour of joining forces on Tuesday, clearing the way for Cenovus Energy Inc.'s multi-billion dollar takeover of Husky Energy Inc. The two Calgary-based companies each held special shareholder meetings to vote on the $3.8-billion all-stock buyout. The endorsement by investors of both firms was resounding, with more than 90 per cent of votes cast in favour of the acquisition. The backing of shareholders leaves regulatory approval as the deal's last major hurdle. The surprise transaction, announced in October, is expected to close in the first quarter of 2021.


Global investors are turning cautious on investing in some Chinese companies named in a U.S. government executive order. MSCI, one of the largest stock index companies in the world, announced Tuesday that it would remove 10 Chinese securities from its indexes effective at the close of businesses on Jan. 5, 2021. The removals follow U.S. President This link will open in a new tab. Donald Trump’s order on Nov. 12 that This link will open in a new tab. bans American companies and individuals from owning shares of Chinese companies that the White House alleges supports China’s military. MSCI said in a release its decision was based on responses from more than 100 market participants worldwide, who noted the “extensive presence” of U.S. financial entities in the investment processes of global investors could significantly hinder transactions in the affected stocks.

The Fed may see a brighter long-term outlook when it releases its economic forecasts Wednesday due to vaccine developments, but it also has the opportunity to disappoint at least some investors who are expecting immediate changes in its bond buying program. The market has been divided about whether the Fed would extend the duration of its $80 billion Treasury purchases, meaning increase the purchases at the long end, like the 10-year note and 30-year bond. Theoretically, that should help keep down the longer term rates that impact mortgages and other loans. The Fed will release its statement at 2 p.m., and Fed Chairman Jerome Powell holds a 2:30 p.m. ET briefing.


Business activity in the euro zone is having a fairly robust December, according to the latest preliminary purchasing manager’s index (PMI) data for the region. The flash euro zone PMI composite output index, which looks at activity in both manufacturing and services sectors, came in at 49.8 in December, up from 45.3 in November. A reading below 50 still indicates a contraction in business activity, however. Commenting on the flash PMI data, Chief Business Economist at IHS Markit Chris Williamson noted that “the euro zone economy is faring better than expected in December.”

This link will open in a new tab. Sterling broke through the long-awaited $1.35 barrier on Wednesday morning after European Commission President Ursula von der Leyen said progress had been made toward a post-Brexit trade deal between the U.K. and the European Union. Addressing the European Parliament, von der Leyen said that while she could not say whether there would or would not be a deal, “there is a path to an agreement now” and the next few days will be critical.


Australia will formally request the World Trade Organization’s involvement in an ongoing trade dispute with China. Beijing this year slapped This link will open in a new tab. anti-dumping and anti-subsidy duties to the tune of 80.5% against Australian barley. That is just one of several measures China has undertaken against Australian exporters in 2020. Australia’s government and officials have exhausted all avenues in their attempts to engage China in a dialogue to iron out trade issues, Agriculture Minister David Littleproud told CNBC. Apart from tariffs on barley, China has also taken several measures against other Australian exporters. They include an import ban on several red meat abattoirs. This link will open in a new tab. Beijing is also reportedly giving state-owned utilities and steel mills verbal notice to stop importing Australian coal. In October, two cotton industry groups in Australia said China has started discouraging its This link will open in a new tab. spinning mills from using cotton imported from Down Under.

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.