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Daily Pulse

One of our most accessible tools, this daily comment keeps you abreast of developments on the North American and international financial markets.

Michel Doucet

Michel Doucet
Vice-President and
Portfolio Manager

November 15, 2018

Canada

Higher interest rates and tougher mortgage qualification rules have significantly improved the quality of new lending in Canada, the country’s central bank said in a report Wednesday, adding to evidence of easing risks to the financial system from elevated consumer debt. The share of new mortgages going to highly indebted borrowers -- those with loan to income ratios of above 450 percent -- dropped to 13 percent in the second quarter of this year, down from more than 18 percent last year, the Bank of Canada said in an analysis of recent developments to the housing finance market.

Canada’s oil sector is divided over whether to force a temporary cut to production, with some major producers pushing the controversial idea in a bid to ease a supply glut and halt a steep plunge in prices, according to seven people familiar with the matter. Executives from Canadian Natural Resources Ltd. and Nexen Energy ULC are among those who made the pitch to Alberta’s premier last month, the people said, speaking on condition of anonymity as the meeting was private. Cenovus Energy Inc. is also publicly advocating for a forced cut.

United States

Apple Inc. is aggressively hiring engineers in Qualcomm Inc.’s home base of San Diego, seeking designers to develop wireless components and processors that would further weaken the chipmaker’s chances of again supplying chips for the iPhone maker’s future devices. This month, Apple published 10 job listings on its website for chip design-related positions located in the city, marking the first time the Cupertino, California-based technology giant has publicly recruited for such roles in the Southern California hotbed for chip design. Apple is advertising for engineers to work on multiple types of chip components, including engineers to work on the company’s Neural Engine artificial intelligence processor and wireless chips.

Walmart on Thursday reported quarterly earnings that topped analysts' expectations but revenue that fell short due to currency headwinds. The retailer also raised its forecast for earnings and same-store sales in the U.S. for the full year, having said it expects a strong holiday season.

Warren Buffett famously used to avoid technology stocks. Now he seems to have embraced them. Berkshire Hathaway reported a 41.4 million share stake of computing giant Oracle as of the end of September, according to a regulatory filing on Wednesday. Buffett's conglomerate also has been building a substantial stake in Apple for the last two years, ending the third quarter with approximately 252 million shares, about 500,000 more than it owned at the end of June.

Europe

The pound slumped, European stocks dropped and U.S. equity futures fluctuated as a series of British ministers quit in protest at Theresa May’s Brexit deal, plunging the U.K. government into crisis. Investors turned to havens including Treasuries, bunds and gilts. Sterling tumbled after Brexit Secretary Dominic Raab announced his resignation on Twitter, the highest profile of several departures on Thursday morning. The events throw into doubt the ability of Prime Minister May to secure Parliament’s support for her plan -- and even to survive as leader. Poor retail data compounded the currency’s drop. As the resignations rolled in, gilts surged and the FTSE 100 Index trimmed its gains in trading volume double the 30-day average. Futures for the S&P 500 pared an advance before recovering some gains. The yen rose with the Swiss franc and gold was steady.

Asia

China’s biggest lender pulled an offering of dollar bonds in the U.S. market on Wednesday, adding to concern that American investor demand for Chinese offerings is dwindling amid the trade war. Industrial & Commercial Bank of China Ltd. had been marketing three-year and five-year floating-rate notes through its New York branch, then decided not to proceed with pricing, according to people familiar with the matter. A call to ICBC’s press officer in Beijing went unanswered. The move came on a day when four other Chinese issuers, including a junk-rated firm, successfully priced dollar notes in Asia. ICBC’s securities were aimed at buyers in the U.S., where investor sentiment toward investment-grade credit has been shifting thanks to worries over a slowdown in growth amid Federal Reserve policy tightening. China’s sovereign offering last month also saw diminished American demanddemand as trade tensions escalated.

The central banks of Indonesia and the Philippines -- among Asia’s most aggressive interest-rate hikers this year -- took more policy action on Thursday to shore up their currencies and tamp down inflation. Bank Indonesia raised interest rates for a sixth time this year to 6 percent, catching most economists off guard. Bangko Sentral ng Pilipinas increased its benchmark for a fifth straight meeting to 4.75 percent, a move predicted by 11 of 19 economists in a Bloomberg survey.

  

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