Briefing highlights
- A new era of disquiet
- A scene I’d love to see
- Global markets mixed so far
- New York poised for stronger open
- Canadian dollar above 79.5 cents
- U.S. bank earnings see solid start
- March home sales sink from year ago
- China’s trade surplus with U.S. soars
Nervous Nellies, for good reason
— Sal Guatieri, Bank of Montreal
To say today’s climate is uncertain wouldn’t just be stating the obvious, but understating it.
Understating by how much?
As Bank of Montreal senior economist Sal Guatieri notes, policy uncertainty is higher today than it was even during the Great Recession.
This is, of course, key for markets, which don’t like uncertainty but have suffered a mighty bout of it in just a few short months.
Mr. Guatieri was referring in a research note to a measure that tracks economic policy uncertainty, globally and in select countries.
In Canada, the Economic Policy Uncertainty Index is based on the number of reports in five news groups that refer to uncertain, uncertainty, economic, economy and other words.
Here’s what the latest shows:
As Mr. Guatieri put it, we’re nervous Nellies, for good reason.
“If Canadian businesses are shy to invest these days, blame a rocky policy climate,” Mr. Guatieri said.
“Will NAFTA end? Is a global trade war brewing? How high will minimum wages go?”
And that’s just the short list.
“No wonder the news-based Policy Uncertainty Index just hit its second-highest level on record (a four-standard deviation event!),” Mr. Guatieri said.
“The highest was November, 2016, when Donald Trump became president.”
And note this: “The comparable U.S. measure is only moderately above its long-run norm. This means much of the uncertainty is made in Canada rather than in the White House.
Note, too, that Société Générale looked at the issue via a different measure to ask if we’re about to enter “a new age of turbulence.”
It looked at the correlation between the U.S. dollar and interest rates, which “has weakened, and may be breaking as we enter a period of turbulence.”
Not yet, though.
“It suggests that when the dollar decouples from U.S. rates, financial market turbulence isn’t far behind,” said Société Générale’s Kit Juckes, chief global foreign exchange strategist.
“So far, all we have are (geopolitical) straws in the wind,” he added, but after the “relative calm” of 2014-17 markets may be headed for a period of decoupling “that eventually leads to a higher volatility regime.”
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A scene I’d love to see
Just imagine the possibilities if its rivals followed Second Cup into the marijuana business.
Photo illustration
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Markets at a glance
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U.S. bank earnings kick off
JPMorgan Chase and Co. kicked off first-quarter reports of the big U.S. banks with a hefty jump in profit buoyed by U.S. tax reform.
Profit rose to US$8.7-billion, or US$2.37 a share, from US$6.4-billion or US$1.65 a year earlier, the bank said today.
“The global economy continues to do well, and we remain optimistic about the positive impact of tax reform in the U.S. as business sentiment remains upbeat, and consumers benefit from job and wage growth,” said chief executive officer Jamie Dimon.
Citigroup and Wells Fargo also posted stronger profits.
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- JPMorgan profit jumps on higher interest rates, lower taxes
- Citigroup profit rises on consumer banking, lower taxes
- Wells Fargo profit rises on lower U.S. tax rate
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