/Posthaste: The worst month of the year for equities is here, oilsands to dominate heavy oil market and big week for Bank of Canada

Posthaste: The worst month of the year for equities is here, oilsands to dominate heavy oil market and big week for Bank of Canada


Good morning!

A big week for Bank of Canada starts with jittery times for global financial markets. While the U.S. and Chinese officials can’t seem to agree on a date for the next round of trade talks, in the UK, the Brexit crisis coming to a head.

Scotiabank notes that the Bank of Canada may walk the line between downside risks to the outlook while flagging recent strengths, as it makes a decision on interest rates on Wednesday.

“The case against easing entails pointing at core inflation that is on-target, escalating wage growth in the context of strong second quarter economic growth, and the impact easing could have upon reigniting imbalances in the housing market,” Derek Holt, head of capital markets economics at Scotiabank said in a note yesterday. “The case in favour of easing entails referencing persistent slack and added downside risks to growth that could lead to slack persisting for longer than the BoC previously anticipated.”

Can Canadian heavy oil evolve into a global pricing benchmark? The question may seem laughable given that the world’s third largest oil reserves are hemmed in by provincial infighting, lack of pipeline capacity and steeply discounted prices. But National Bank of Canada analysts argue that the decline in Mexican and Venezuelan heavy crude production provides an opening for Canada’s thick oil to become the dominant supplier to U.S. refineries.

“Despite a lower growth outlook, we would argue that Canadian heavy production currently has the capacity to backfill a substantial portion of declining Latin American volumes,” analysts Travis Wood, Dan Payne and John Hunt said in a note. “New pipelines into the USGC and into Asia could serve as the catalyst to support accelerated growth, propelling WCS to outcompete and displace other global heavy grades.”

Here’s what’s you need to know this morning:

  • Transport Minister Marc Garneau makes a funding announcement at the Montreal Airport
  • Environment Minister Catherine McKenna announces an investment through the Strategic Innovation Fund in Kanata, Ont.
  • The Alberta government releases a report, written by former Saskatchewan finance minister Janice McKinnon, on the state of the province’s finances in Calgary
  • Crown-Indigenous Relations Minister Carolyn Bennett and Max FineDay, executive director of Canadian Roots Exchange, take part in an announcement in Saskatoon.

Canada’s economy surprised with a growth spurt that beat expectations Friday. GDP surged 3.7% past expected gains of 3%. The rebound follows two straight quarters of almost no growth, but the Bank of Canada — which decides on rates tomorrow — might not find much comfort in the data’s details. The biggest increase in exports in five years drove the rebound, but here at home the picture was bleaker. Household consumption stalled and business investment shrank by the most in two years.

 

Send your news, comments and stories to yhussain@postmedia.com — Yadullah Hussain @Yad_fpenergy
With files from The Canadian Press, Thomson Reuters and Bloomberg

 

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