Brexit - UK Funds have frozen trading combined value 20 Billion

BNN’s Daily Chase: U.K. property funds hit with investors’ Brexit fears
The chase by Noah Zivitz:

U.K. property fund suspensions rekindles crisis-era liquidity fears

If there’s a sign of fear stemming from the Brexit vote, it’s the flood of redemption requests hitting U.K. property funds. At least seven of those funds with more than $20 billion in combined assets have frozen trading in the wake of the United Kingdom’s vote to separate from the European Union. There are Canadian connections: one of the funds is operated by a unit of Great-West Lifeco – and, separately, a fund run by BMO shaved its valuation.

A conversation with Canada’s top bank regulator

Jeremy Rudin, Superintendent of Financial Institutions, will speak to BNN on The Close at 4:30 p.m. ET today. We'll discuss OSFI's strategy to make sure Canada's banking system is ready to absorb shocks -- be they from Brexit, a housing downturn, fallout from the oil crash, or who knows what else.

Seven Generation’s $1.3-billion ‘counter-cyclical’ takeover

The motives in yesterday afternoon's big Montney deal seem clear. Seven Generations views the $1.3-billion purchase as an opportunity to consolidate and derive "operational and investment synergies," while Paramount Resources cleans up its balance sheet by offloading $584 million in debt and retains some skin in the game by picking up 33.5 million VII shares. BNN will analyze this and weigh whether other dance partners will emerge with a similar deal strategy. Seven Generations, it should be pointed out, could very well be Canada’s most-loved energy stock: Fifteen buys, no holds, no sells. Its stock has soared 60.4 per cent in the last year, compared with a 3.6 per cent drop for the TSX energy group.

Canada Post pushes back lockout threat

The union representing some 50,000 postal workers says it's rejecting a proposal to undergo binding arbitration in its labour dispute with Canada Post. This comes after Canada Post announced it will push back the 72-hour lockout deadline to Monday at 12:01 a.m. ET. There’s no guarantee of a quick resolution: Canada Post noted last night that the two sides “remain far apart on key issues” and the union filed a complaint with the Canada Industrial Relations Board, alleging Canada Post hasn’t demonstrated good faith. Even if a deal is struck immediately, how quickly will customers who deserted Canada Post return?

B.C. to unlock some real estate data

Who knows what the details will be, but British Columbia Finance Minister Mike de Jong is holding a news conference today to “release data related to real estate transactions.” What will de Jong have to say, today at 1:30 p.m. ET? It’s worth noting that on Monday, he vowed to release specific data on foreign buyers “very soon.”

Blaming regulations for holding back housing supply

The Fraser Institute says abundant regulations are limiting the supply of new homes in Canada and driving up prices in the process. According to the think tank, long wait times to get projects approved "are particularly detrimental." BNN will run through the report's findings and how they should factor into ongoing talks about taming Canada's hottest markets.

Tallying the cost of the Alberta wildfires

The Insurance Bureau of Canada will provide the first estimate of total insured damage caused by the Alberta wildfires at 12:00 p.m. ET.

$2.08 trillion Brexit meltdown was markets’ biggest loss ever, worse than Lehman Bros and Black Monday

$2.08 trillion Brexit meltdown was markets’ biggest loss ever, worse than Lehman Bros and Black Monday NEW YORK — The $2.08 trillion wiped off global equity markets on Friday after Britain voted to leave the European Union was the biggest daily loss ever, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Monday stock market crash of 1987, according to Standard & Poor’s Dow Jones Indices. Global markets skidded following the unexpected result from Thursday’s referendum, in which Britons voted to withdraw from the EU by a 52 per cent to 48 per cent margin. Markets in mainland Europe were hit the worst, with Milan and Madrid each down more than 12 per cent for their biggest losses ever. Britain’s benchmark FTSE 100 was down nearly 9 per cent at one point on Friday, but rallied to close down 3.15 per cent.

Source

Extreme Greed Vs Fear What Is The Markets Status Today?

Is this a bull market?

The chase by Frances Horodelski:

When doves cry and musicians die. According to theconversation.com, in a study of 11,054 musician deaths since 1950, 2.3% died at 56. Mathematically, not surprisingly, the average age of death of musicians has been rising (as it has been in the general population) from 50ish in the 50s, to late-50s/60s in this decade – 20 years below the average age of death in the general population. 12.2% (more than 2x the general population) die from an accident, 4.6% from suicide and 4.9% from homicide - the latter stat more than 5x the average population. Finally, hip-hop, metal, punk and rap musicians on average die earlier (the more recent nature of the genre likely a factor here) at around the 30-year mark, while blues, jazz, country, gospel musicians are more clustered around 60 years of age.

Overnight news

Yen drops on negative rates discussion, Nikkei bounces big on the same discussion, markets are tepidly higher in New York, higher in Asia and mixed in Europe (PMI data in line to weaker). Oil softish, gold up. Canadian dollar will focus on today’s economics calendar including retail sales and CPI. Note that the economic surprise index, which had soared from -90 (an increasingly negative number indicates economic data coming in at levels below expectations) to a recent high of 64.90 and more recently 39 – suggesting expectations had come up closer to actual fact. A disappointment or two could take the bloom off the Canadian rose.

Loving Canada?

“But we’re more upbeat on the great white north than we’ve been in a while”. (Steadyhand); “Therefore the TSX has the potential to be one of the best equity markets in the world come 2017.” (Bill Strazzullo, Bell Curve Trading.); Appreciation potential to S&P 500 target for 2016=0%. Potential for TSX to 15,300 target=10%. (Brian Belski, BMO Capital)

Is this a bull market?

Not by mutual fund statistics. According to the latest data from ICI.org, U.S. domestic equity flows have been negative every month since March 2015 with total withdrawals of $217.3 billion. Where has the money been going? International equities mostly (and ETFs too), but there has been a net draw down in total equity and in total bonds in the mutual fund space. Hmmm.

Earnings

Last night had a trifecta of misses – Starbucks, Microsoft and Google with the shares down 3.8%, 4.5% and 5.3%, respectively. This morning we’ve had some beats (Honeywell and General Electric). So far this earnings season, the blended earnings growth rate is -7.2% (according to Thomson Reuters) with 77% reporting above earnings estimates but only 57% have a beat on the revenue line. It is still very early on the Canadian earnings calendar, but according to a National Bank report the earnings set-up is for the TSX profits to fall 10.5% in the quarter versus the first quarter of 2015. However, excluding financials, the reports will show a 28.4% decline (depicting how important financials are to the TSX both in weight and profit) and excluding financials and energy, the index profits would be up 6.7%.

Concordia

Some might say “that’s convenient”. One week before the annual general meeting where the company is asking for approval from shareholders to create a new form of “blank cheque” preferreds and the fourth largest holder of the company has come out against the company’s executive compensation as well as a skyrocketing short position (which is now at the extreme of its ability to borrow according to Markit data), Concordia issues a statement about a Special Committee being formed to review options and rumours swirl about a possible Blackstone bid. BNN confirmed that the company has held discussions, but “there can be no assurance that any transaction will occur”. The stock soared yesterday closing 25% higher and another 5% in the pre-market. The company has $3.3 billion in debt, $3.96 billion in intangible assets, $1.15 billion in equity, revenue of $990 million and ebitda of $600 million. Relevant metrics include debt:ebitda 5x and ev/ebidta 7.8x.

Analysts Actions

Lots of interesting items. CIBC initiates coverage on big miners with Cameco, Teck and First Quantum getting the outperform nod ($22, $16, $10, respectively as targets). A company I made a lot of money on about a decade or more ago, Rigel Pharmaceuticals is a new buy at JP Morgan with a $5 target. It is still, it seems, a clinical stage development company with late stage products for immune thrombocytopenia and amenia. UBS upgrades Norfolk Southern to buy while Advanced Micro is a new buy at MKM Partners.

There is much more to say – but that’s why you want to join us all day long at BNN. Have a good weekend.

Apple could be a $150 stock

CP Rail scraps Norfolk Southern takeover
The chase by Frances Horodelski:

The world was “spiethless” watching the Masters. As my husband said Jordan “looked like me there for a few moments.” – Danny Willett wins the green jacket.
BNN
Canadian Pacific Railway is walking away from its pursuit of U.S. railway Norfolk Southern about six months after launching the US$28-billion bid. And it’s the second time in less than two years that CP is abandoning a major takeover attempt. BNN will have tons of reaction to the news. Another focus today will be on housing as Bill Morneau told BNN “the government won’t shy away from taking action again.” We’ll follow up Amber Kanwar’s story from Friday with respect to Pacific Exploration (which has now postponed its board meeting); we’ll follow TransCanada (and its Keystone leak) and Pembina Pipeline which holds its investors day today; we’ll look at the charts with JC Parets (who favours Canada over the U.S., technology over financials and Twitter over Facebook); we’ll preview the rails (where the companies have seen 1-2 per cent per month headcount reductions since June 2015); we’ll take a look at the earnings calendar; and generally keep you on track. It will be busy.
Calendar
Lots to wait for. The start of earnings week (Alcoa today, big rail, CSX tomorrow and big banks – JP Morgan on Wednesday and Bank of America and Wells Fargo on Thursday). Many Fed heads talking (again) including Dudley today, Williams and Lacker on Tuesday, Beige Book on Wednesday, Powell and Lockhart on Thursday and Charles Evan on Friday. Of those, only Powell and Dudley are voting members. The IMF is also on the docket with its World Economic Outlook tomorrow ahead of Spring meetings of the IMF and the World Bank that start Friday. On April 17^th, the world awaits the OPEC/Non-OPEC meeting and the potential for an oil production freeze. In Canada, the big story will be the Bank of Canada on Wednesday where recent economic data points to no change and potentially an even more optimistic tone on the Canadian economic outlook. April 18^th is the IRS tax filing date (three more days than usual).
Barron’s
Apple could be a $150 stock; Toll Bros has 40% upside; rates must rise (Bill Gross); commodities are the cheapest asset class and widely under owned (Jim Paulsen); insiders are again bearish with sales showing up at Apple, Gilead, Facebook, Tiffany, Ford, Coke, Amaya and General Mills.; bond investors are very bullish (81% by Market Vane’s calculation); Venezuela on the verge of financial collapse; Argentina begins a roadshow to sell about $12 billion in debt, the first offering since 2001.
Earnings
With Q1 kicking off today, there will be lots of discussion on the U.S. profits recession. Depending upon who you read, earnings have either been flat or in actual decline for four quarters in a row (including Q1 2016) and revenue down for five quarters. This quarter will be weighed down by the losses in the energy space and the declines in materials (-23%), financials (-11%) and industrials (-9%). With the exception of healthcare and discretionary, in the U.S. all sectors will show year over year declines. During the earnings calls watch 1) earnings relative to very low expectations; 2) outlooks; 3) GAAP vs non-GAAP (how big is the spread); 4) tax rates and buyback benefits.
Weekend chart watching
My conclusions from most of the chart watcher reading is that their conclusions are largest on the short side, although some admit the evidence isn’t conclusive. Here’s just one comment: “The risk vs reward is very much in favour of the bears here.” – JC Parets, allstarcharts.com.
Canadian dollar
In the last many weeks, the shorts on the Canadian dollar have plummeted to now being flat as, not surprisingly, the CAD has rallied, they have covered and are modestly net long for the first time since May 2015. Its further improvement will depend upon Mr. Poloz, the Fed and Doha. As CIBC’s Jeremy Stretch noted, “it seems unlikely that the BoC will signal excessive displeasure in relation to the CAD’s valuation, at least just yet.” And with GDP looking to have virtually stood still in Q1 in the U.S. (and a calendar problem for a Fed increase in June due to Brexit), economic relief for the U.S. dollar seems far away (although I wouldn’t be surprised for a surprise on the U.S. buck). Sunday’s Doha meeting – anyone’s guess.
Stuff
Yahoo to be in early talks with UK’s The Daily Mail; Boss beats Batman at the box office; Street forecasts for Canadian dollar by quarter looks for the currency to hang around these levels (76 cents) while oil is expected to rise to $45 by Q1 2017. The Japanese yen is hanging around 108 while the Nikkei closed down. Markets generally around the world are higher though with oil flat and gold up as the street awaits a reason to break out of the range.
Analysts
RBC upgrades Restaurant Brands to outperform ($48 new target up from $38); Alphabet is a new buy at Pivotal Research: Goldcorp downgraded at RBC to underweight with a higher $16.50 target; Toromont cut to hold at TD. The most loved stocks on the TSX right now are Milestone apartment REIT, Kinaxis, Intertape Polymer, DH Corp., Prometic Life, Algonquin Power, Mitel, Torc Oil, Secure Energy, New Flyer, Intertain Group, Enghouse, Brookfield Properties, Western Forest, Element Financial, Quebecor, Alaris Royalty, Seven Generations and Tricon – where every analyst that follows these companies rates them a BUY.

It's a Yellen kind of day

The chase by Frances Horodelski:

According to Music History, on this day in 1980, Pink Floyd’s album The Dark Side of the Moon spent its 303^rd week on the U.S. album chart. It went on to stay on that list for a total of 741 weeks – and combined with other charts is was listed for a total of 1500 weeks from 1973 through 2006.

Today is a Yellen kind of day. After various members of the Federal Open Mouth Committee (Barron’s frequently uses this description) spoke hawkishly last week, many expect Janet Yellenwho is speaking at the Economic Club of New York to be her usual dovish self. Note that the futures curve shows a 6 percent probability of a hike in April and just 38 percent probability for June. Watchers suggest that there is zero chance that the Fed will make a decision in the face of a Brexit vote (scheduled for June 23 while the Fed decision in June 15). A July move is a coin toss. There are two other FOMC members speaking today, including John Williams from San Francisco, who is already on the tape discussing gradual and thoughtful increases as warranted by the data. However, Yellen’s comments will be most watched, and “inflation expectations” will be a key to understanding what she is thinking.

There are also earnings from companies such as Lennar, and 3M has an investor day. In Canada, Finance Minister Morneau will be in Quebec marketing his budget. Economically, we have the Case Shiller housing data and March consumer confidence in the U.S. and industrial product pricing in Canada.

In corporate news, we’ll follow up on the FBI’s ability to unlock a terrorist’s iPhone as it relates generally to security and cyber issues, and how it might impact Blackberry (which reports on Friday). Currently there are 41 buy ratings on Apple, six holds and just two sells.

Francis says...Dow To Rise Today

My inbox is a mess. It is currently getting completely unglued with gold bullion bulls. It is also all confused about where energy is going. I’ve seen a technical note that XLE should be shorted (the energy ETF) given its extreme overbought condition (maybe not today or tomorrow, but very soon). At the same time, the bulls are focused on the decline in U.S. oil production (what everyone has been waiting for although I should note it hasn’t dropped yet below nine million boe/day using EIA data), optimism about the possibility of Russia, OPEC and non-OPEC players meeting later in the month and three weeks in a row of gasoline inventory withdrawals (still just 3 per cent off of all time high levels). Of course, bulls are being energized by the price up 35%+ from the lows. Gold bulls too.
Stock-wise, one of my favourite analysts is hugely bullish on Apple but the stock is underperforming the market year to date and from the February lows. I’m seeing companies miss earnings but raise dividends (Gildan a few weeks ago and TransContinental yesterday afternoon). And companies in the oil patch slash and suspend dividends and the stocks soar (off, of course, extremely depressed levels). S&P 500 earnings for 2015 have a WIDE gap between adjusted and reported earnings – what number to use? For 2015, Thomson Reuters carries an operating earnings number of $118.13 while S&P’s operating numbers are $100.44 and reported earnings are $86.53 – according to Yardeni Research. Yikes (most use a number similar to Thomson Reuters). Meanwhile, based on new earnings and ebitda expectations, Scotia slashes its target on Performance Sports from $12.50 to $3.50(!). Meanwhile, the analyst says that Adidas went through a similar tough time in 2014 and he’s using Adidas valuation decline that year to value PSG. Adidas did have a nasty 2014 when the stock dropped 40% that year to the October 2014 low but has more than doubled since.
And for all of Donald J. Trump’s bluster about the Chinese currency manipulation, he might be a little confused. Certainly the yuan has been weak recently (down 7 per cent from its peak) but the currency has strengthened 23 per cent over the past 10 years – making goods from China more expensive. Interestingly, yesterday, Reuters reported that two out of every three positions taken out by hedge funds expecting a devaluation of the yuan have been taken off.
And what’s a birthday party if you’re actually dead? That’s what some are saying about the bull market celebrations. Did the bull actually die May 21 2015 (its high of this cycle). Only time will tell. We’ll discuss this morning, plus the market’s relationship with recessions and just how cheap are U.S. healthcare stocks with Julian Emmanuel from UBS. For reference, 300 of the S&P 500 companies are up 20%+ from their 52-week lows while 461 components are up 10%+. Short seller Carson Block calls the rally a dead cat bounce. There are only 13 stocks negative versus the Feb. 11 lows.
So after all that mess, here’s what’s happening today. Mario Draghi is holding a press conference after the members of the ECB cut rates by 10 basis points (further into negative territory), raised the buyback to 80 billion euro per month and also is now adding corporate bonds into the mix (a surprise given the relatively illiquidity in that market).
We’ll be watching Washington post the meeting between President Obama and Prime Minister Trudeau. In corporate news, we’ll analyze the earnings from companies like Empire having a challenging time integrating Safeway (for which they paid $5.8 billion and today announced a $1.59 billion good will write-down) but also Dorel, AG Growth, Canadian Solar, PennWest, Bankers, Transat and Intertape Polymer. We’ll talk with more companies from the FirstEnergy conference (Calfrac, Secure Energy, Kelt Exploration, Tourmaline and Painted Pony), we’ll find out about the VIX death cross, and about the auto parts business with Linda Hasenfratz from Linamar. And if you’re interested in what the former CEO of Biovail Eugene Melnyk is thinking about Valeant Pharmaceuticals (including his comment that Bill Ackman is “a piece of work”),the full interview is available on bnn.ca.
Markets are getting a further lift from the ECB news with the Dow futures up more than 100 points now. Mr. Draghi has said there is “no limit” to what he will do – and he didn’t hold back today. Be watchful and careful. The “smart money” is in full-blown bull market stampede. That’s good as price has a tendency to follow. But watch what you own and if you felt the quality of your portfolio as poor in early February (when the markets were collapsing), now is a good time to high-grade

Bull Market Is Old At 7 Years

Miners meet at Toronto's PDAC convention 
The chase by Frances Horodelski:

“This is the first time you lied to me since you stopped lying to me.” – Tom Yates to Claire Underwood. Season 4 House of Cards done.

I’ll try not to lie to you this morning.

First, get ready for the celebration. This Wednesday marks the seventh year of this bull market if you count from the March 9, 2009 low. Some might count from August 2011 (when the S&P 500 dropped just slightly less than 20%). But on the seven-year basis (and the market closingFriday at 1,999.98722585876 according to the keeper of the data Howard Silverblatt at S&P/Dow Jones Indices), the market is up 195.62% (just under 17% per annum and 19.3% with dividends). Consumer discretionary is the best performing sector and maybe not surprisingly, energy is the worst. The average bull market lasts under 59 months – this one at 84 seems old but is only the third longest.

So what happens with this one? A couple of cautious items from traders. Russell Rhoads from the CBOE noted this week a VIX death cross (he’s looking at one year versus five year trend lines) – something similar happened in November 2007. The percentage of stocks trading above their respective 50 day moving averages has recently soared to just under 74% (the last time we saw it this high was November 2015). CNN’s fear/greed index is at 71. And there are lots of questions about the sustainability of the commodities rally, although this is my favourite quote from weekend reading on markets: “I've never in my career heard someone call an early rally off the bottom sustainable.” Trend & Cycle’s technical analyst at RBC notes that markets are “still early in an upturn” and that they “expect pullbacks will be relatively short-lived and shallow.” The S&P 500 is now just 6% off its all-time high – but 190 names (from Best Buy to Southwestern Energy) are down 20%+ from 52-week highs.

Meanwhile, the price of hops has more than doubled over the past seven years (doing better than stocks) – putting pressure on craft brewers according to the Financial Times. Now that’s a story.

This week’s action will focus on central banks (Bank of Japan, European Central Bank and the Bank of Canada). For Canada, the odds of another rate cut are low (less than 10%) but with the Canadian dollar’s big recent bounce, the workload shifts back to the bank (and of course, fiscal policy). With a budget coming down March 22^nd, unlikely the bank would move in front of that. For the ECB, traders suggest another cut deeper into negative territory (10 basis points to -40 bp) plus an increase in asset purchases by 10-20 billion euros (versus 60 billion currently) and an extension to March 2017. There is a 100% probability according to the tea leave reading of Eurozone OIS (overnight index swaps) of a cut. We’ll also hear from Mark Carneytomorrow on the consequences of Britain’s exit from the EU (he’s speaking to Parliament). Today, Fed governor Lael Brainard and Vice Chair Stanley Fischer give speeches – the last as the Fed’s quiet period starts before next week’s meeting (92% probability the Fed stays pat at current rate levels).

In things closer to home, the mining world will focus on Toronto and the Prospectors and Developers Association of Canada (PDAC) meeting. Andrew Bell will be bringing reports all day today and tomorrow. Later in the week, FirstEnergy’s East Coast Energy conference will shift our attention to oil and gas companies will a series of CEO interviews.

Earnings wise watch names like Square (Wednesday) and laggard retailers (Urban Outfitters today and Dick’s Sporting goods tomorrow but also a number of investor days including NCR, Chevron, American Express, United Technologies, General Electric Healthcare. Today, Canadian earnings calendar focuses on CargoJet and Pizza Pizza. There is little economic data today (Germany factory orders came in better than expectations although negative) but we’ll build to Friday’s jobs numbers in Canada (10,000 jobs expected). Tomorrow, Magna has an investor day. Iron ore jumps 19%, the biggest one day bounce on record. Torque.

Markets this morning are light of news and weak of price with the exception of Chinese equities which have bounced post-the People’s National Congress where 6.5-7% GDP growth forecasts were entrenched in the next five-year plan, the first time in 20 years that a range of growth has been targeted.

I’m sure there will be lot more to say as the week unfolds. From Research, RBC adds Agrium and Enbridge to their technical best ideas list. CIBC highlights the benefits of buybacks and notes that names such as Metro, Canadian Tire, Thomson Reuters, Agrium and CN Rail fit its positive stance (and these names are on the recommended list). Barclays has upgraded Power Financial (PWF) to overweight while downgrading Power Corp. (POW) to neutral—a popular institutional trade. SunLife has come off the restricted list and is again a buy.

And the day begins.

Every morning Business Day Host Frances Horodelski writes a "chase note" to BNN's editorial staff listing the stories and events that will be in the spotlight that day

Why the stock market is tanking right now, and what comes next

 It’s been one of the worst starts to the year ever for the world’s stock markets. All the more reason to keep your nerve

Look around the global market place and you’d be hard pressed to find anywhere in the green. Out of hundreds of major global indices fewer than 20 are positive; you have to look to Slovakia (up 5% year to date) to find one of the few bright spots.

Everywhere else, it’s red—blood red, if you ask anyone owning equities. Today alone, the S&P/TSX Composite at one point was down 4%, although it’s since eased back and finished the day down 1.33%. And it’s not just Canada that’s feeling the pain. The benchmark U.S. indices, likewise, aren’t far behind, with the Dow Jones Industrial Average down 1.56% and the broader S&P 500 down 1.17%.

Such single day losses are always tough to swallow, but these drops come after an almost continuous stream of losses since the start of the year, with barely a whiff of a positive market response to act as a buffer. It’s been like this since the opening bell on January 2, the first day of trading for the year. It’s as if the market turned the page on 2015 and entered an entirely new reality.

It’s not, of course. Here is what need to know about the selloff and what it’s going to take to stop it:

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