Bloomberg
“Traders Are Acting Like Canada and the U.S. Are the Same Economy.”
The two biggest North American economies might as well share one central bank as far as traders are concerned.
Market-implied tightening by the Federal Reserve and Bank of Canada through 2019 is priced nearly identically despite mounting signs that the latter is presiding over an economy that’s lost much of its momentum.
Bespoke Investment Group estimates that Canada’s second-half average monthly growth in 2017 slowed to 0.13 percent, the most sluggish pace since August 2016. Yet traders still seem to be taking their cues for Bank of Canada tightening for the remainder of 2018 as well as calendar 2019 based on what they think the Fed will do.
This dynamic could be a spot of bother for Bank of Canada Governor Stephen Poloz, who has stressed that America’s neighbor to the north has ample room to set monetary policy independently of the Fed and cited the central bank’s two rate cuts in 2015 as proof.
To be sure, economic and financial linkages between the U.S. and Canada are traditionally intense. From mid-1961 through the third quarter of 2017, the two economies have either grown or contracted in sync on a quarterly basis 86 percent of the time.
The Canadian economy, however, may prove much more sensitive to rate hikes at this juncture, preventing Poloz from following in new Fed Chair Jerome Powell’s footsteps as closely as some of his predecessors had done with their southern peers. Macquarie Capital Markets analyst David Doyle has emphasized the dramatic divergence in credit cycles for the two North American economies as capping the scope for Bank of Canada interest rate increases. The U.S. deleveraged materially in the wake of the financial crisis while Canada continued to push its private sector debt-to-GDP ratio ever higher.
Reuters
“Trump says launching ‘largest-ever’ package of sanctions against North Korea.”
U.S. President Donald Trump said on Friday the United States would launch the “largest-ever” package of sanctions against North Korea, intensifying pressure on the reclusive country to giving up its nuclear and missile programs.
He said the effort will target more than 50 ”vessels, shipping companies and trade businesses that are assisting North Korea in evading sanctions.
North Korea’s missile and nuclear program, which is seeking to develop a nuclear-tipped missile capable of reaching the U.S. mainland, is the Trump administration’s biggest national security challenge. Trump and North Korean leader Kim Jong Un have taunted each other through the media and Trump has threatened him with “fire and fury like the world has never seen.”
Tougher sanctions may jeopardize the latest detente between the two Koreas, illustrated by the North’s participation in the Winter Olympics in the South, amid preparations for talks about a possible summit between North Korean leader Kim Jong Un and South Korean President Moon Jae-in.
Ivanka Trump’s visit to South Korea coincides with that of a sanctioned North Korean official, Kim Yong Chol, blamed for the deadly 2010 sinking of a South Korean navy ship that killed 46 sailors. His delegation will attend the closing ceremony and also meet Moon.
The South Korean president said South Korea cannot acknowledge North Korea as a nuclear state and talks with the North on denuclearization and improving inter-Korean relations must go hand in hand, Moon’s spokesman, Yoon Young-chan, said at a news conference.
He said close cooperation between the United States and South Korea is important for the talks.
Bloomberg
“Wall Street May Be Rethinking Its Relationship With Guns.”
That question has come up before — after the shootings in Newtown, in Orlando, in Las Vegas, and on and on.
Now, with the nation’s emotions raw over the killings in Florida last week, evidence is mounting that investors may be rethinking their long, fraught relationship with the firearms industry.
On Thursday, the day the head of the National Rifle Association issued a searing rebuttal to calls for stricter gun control, the nation’s largest privately owned bank announced it would stop issuing NRA-sponsored credit cards.
Then, the investment giant BlackRock Inc. said it was exploring ways to cull gun companies from the portfolios of clients who no longer wish to invest in them. In Florida, site of the latest tragedy, teachers expressed frustration that their retirement funds own gun stocks, following revelations that holdings included the maker of the assault rifle used to kill 17 students and educators at Marjory Stoneman Douglas High School in Parkland.
Activists have made similar appeals for years, only to see all the moments pass. Taken together, the recent developments suggest that, at least for the moment, the financial community senses the rising public pressure — and is positioning itself accordingly.
“Now is the time for the financial services industry to step off the sidelines and take a stand,” said Jonas Kron, director of shareholder advocacy at Trillium Asset Management, which focuses on sustainable investments.
The question is whether other investors, both big and small, are willing to exit investments that have plunged in value over the past year. Gun sales — and gun stocks — have tumbled since Donald Trump rose to the presidency. The thinking was that his administration, unlike the previous one, would be unlikely to push for stricter gun controls given its support from the NRA.