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 17th, 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 18th 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.
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