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Morning roundup of research and analysis by The Globe and Mail’s market strategist Scott Barlow

A chart from the World Health Organization (WHO) showing that the number of reported cases of the coronavirus are declining goes a long way in explaining the stronger equity markets this week.

The thinking is that as bad as the economic damage from the virus will be (I found this chart showing passenger rail traffic in China particularly alarming) the recovery will happen reasonably soon, and make up for all the lost ground.

“Investors charge back into stocks on signs coronavirus spread is slowing” – Reuters

“'Everyone is guessing' about coronavirus economic impacts, say experts” – Reuters


Citi analyst Anthony Yuen expects the slowdown in Asia to have severe effects on commodity demand,

“Energy demand should continue to stay weak until there is a sustainable uptick in passenger traffic at least to get workers back in place before industrial and other business activities start. China’s oil demand could weaken by [about 1.5 million barrels per day] for 1Q20 … For copper … net refined imports were ~270kt per month and copper in concentrate imports were 420kt during 2019. We estimate that if end use, semi-fabrication and smelter output are all cut 35%, refined stocks will be under upward pressure of about 100kt per month and concentrate stocks could build by around 150ktpm, most likely outside of China.”

“@SBarlow_ROB C: "China demand remains down and out"” - (research excerpt) Twitter

“@SBarlow_ROB C on Chinese copper and aluminum demand” – (research excerpt) Twitter

“Vietnam’s exports plunge as coronavirus knocks trade” – Bloomberg

“ @SBarlow_ROB Nomura: A V-shaped pickup is likely in Q2 on pent up demand, albeit with downside risks. HK, Singapore and Thailand are most exposed" – (research excerpt) Twitter


TD economist Rishi Sondhi ‘s forecasts for the Canadian housing market holds good news for sellers but not those looking to jump on the real estate ladder,

“[In 2019] the combination of increasing home sales and falling resale supply tightened markets, especially in the second half of the year. Accordingly, after falling in 2018, average price growth returned to positive territory, spurred by solid advances in Ontario and Quebec … Looking ahead to 2020, the drivers supporting last year’s recovery should remain largely in place and manifest across most provinces, resulting in higher sales and prices (Table 1). However, they are unlikely to provide the same thrust to activity as they did in 2019, setting the stage for sales gains to decelerate as the year progresses.”

“@SBarlow_ROB TD on Canadian housing market in 2020” – (research excerpt) Twitter

“@SBarlow_ROB TD: Province by province housing price forecasts” – (table) Twitter


A disquieting report from Barrons (published by Bloomberg) warns that a number of cannabis companies are very close to running out of cash,

“As pot stocks plunged over the past year, big spenders like Canopy Growth (ticker: CGC), Aurora Cannabis (ACB) and Tilray (TLRY) have found that capital markets have yanked the welcome mat and forced the pot producers to cut costs. “The cannabis industry is currently entering a new period where companies are focusing on corporate governance and operational efficiency,” says Ello chief executive Hershel Gerson… Using the latest-reported financials of 20 pot producers, Ello’s Gerson estimates that companies like Aurora and Tilray had less than 6 months of cash based on their capital spending and negative operating cash flows.”

“Some of the Biggest Marijuana Companies Could Burn Through Cash in Months” – Bloomberg


Diversion: “Alberta has been cheated’: Wexit supporters on what drives them” – Macleans

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