Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
BMO REIT analyst Michael Markidis highlighted an important decline in borrowing costs in the sector,
“The S&P/TSX Capped REIT Index was -0.8% for the week ended September 27. Index constituents with strong performance included: AP (+3.6%), NWH (+2.5%), and PMZ (+2.5%). MF REITs lagged: BEI (-4.1%), CAR (-2.9%), IIP (-2.6%) and KMP (-2.1%). In the week ahead, we look forward to (1) DIR’s Investor Day (8:30am-12pm on October 1) and (2) our Toronto-Montreal property tour (October 1-3). Robust population growth is starting to slow. The 41.3M estimate for July 1 was +250.2K (+0.6%) q/q and +1.2M (+3.0%) y/y. As highlighted in our note, the net increase in temporary residents (TR) slowed for the third consecutive quarter; however, the TR weighting (7.3% of the total population) remains well-above the federal government’s 5% objective. Barring a snap election, the minority Liberal government will update its Immigration Levels Plan by November 1 … Unsecured debt costs have meaningfully improved. $950M of new issuance was announced this week, including: (1) $250M from AP (4Y term with a 5.5% coupon), and (2) $700M from REI (a $200M 3.4Y deal at 4.0% and a $500M 7Y deal at $4.6%). All-in costs for investment grade issuers are at their lowest levels since mid-2022. The improvement year-to-date reflects credit spread compression (50-60bps for 5-10Y maturities, on average) and the bull steeping of the Canadian yield curve”
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BofA Securities quantitative strategist Nigel Tupper noted a slowdown in global earnings revisions,
“The Global Earnings Revision Ratio [ratio of upwards consensus earnings adjustments to downwards] fell in September from 0.94 to 0.73 as the Ratio moderated in almost every region and global sector. This is partly explained by seasonality given September is typically one of the weakest months for the Global Ratio. The US Ratio (0.86) fell below 1.00, and the China Ratio (0.36) collapsed to a four-year low, but monetary policy has been eased in the US and China last week so it will be interesting to see whether this positively impacts the Ratio in October. Nonetheless, by itself, the recent fall in the Global Ratio provides a cautionary tone for equities. The Ratio increased in Japan Japan was the only region in which the Ratio improved last month (1.31 to 1.41). Elsewhere, the Ratio fell in the US (1.17 to 0.86), Europe (0.91 to 0.76), Asia Pac ex[1]Japan (0.77 to 0.52), and Emerging Markets (0.83 to 0.58)”
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OPEC does not see peak oil demand happening anytime soon according to TD Cowen analyst Menno Hulshof,
“OPEC boosts long-term oil demand forecast; no peak oil demand in sight: Despite lowering its near-term (2024/2025) oil demand forecast in its latest monthly report, OPEC boosted its longer-term forecast in its annual outlook. It now expects world oil demand to reach 118.9mmbbl/d by 2045, 2.9mmbbl/d above its prior forecast. We continue to believe China and other developing countries will be the longer-term drivers of oil demand growth. 2) U.S. gasoline demand set to close out Q3/24 on a positive note: Following a string of below-average demand prints through Q3/24, U.S. gasoline demand rebounded last week, sitting 4% above norms. In our view, the w/w increase in gasoline demand, combined with falling U.S. refinery utilization (down 1% w/w to 91%) has helped to reverse the negative trend in U.S. 321 refining margins, which were up 9% w/w to US$15.20/bbl on average. ~284mbbl/d of U.S. GoM oil output shut-in as Tropical Storm Helene approaches”
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Diversion: “Judge Throws the Book at Climate Activists Who Threw Soup on Van Gogh Painting” – Gizmodo