Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC head of global energy research Greg Pardy made five changes to his Global Energy Best Ideas, adding Chord Energy Corp., Conocophillips and Norway-traded Subsea 7 SA.
Removed were Diamondback Energy and Permian Resources Group.
“In April, the RBC Global Energy Best Ideas List was up 0.2% compared to the iShares S&P Global Energy Sector ETF (IXC) which was up 0.4% and a hybrid benchmark (75% IXC, 25% JXI – iShares Global Utilities ETF) that was up 0.5% on a sequential basis. Since its inception in February 2013, the RBC Global Energy Best Ideas List is up 186.9% compared to the S&P Global Energy Sector ETF up 39.9%”
The full list is now BP, Suncor Energy, Obsidian Energy, Topaz Energy, Chord Energy Corporation, ConocoPhillips, ARC Resources, Tourmaline Oil, Canadian Natural Resources, MEG Energy, Santos Limited, Enerflex Ltd., Pason Systems Inc., SLB, Subsea 7, AltaGas Ltd, Pembina Pipeline Corporation, Archrock Inc., Energy Transfer LP, Northland Power, Superior Plus and PG&E Corporation.
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Scotiabank strategists note that the Canadian dollar is close to support levels that might not hold,
“We believe the Bank of Canada (BOC) has more room to cut than the Fed. While such a scenario has been around for some time, we believe the odds have been rising of late. Not surprisingly, the Canadian dollar has responded negatively, depreciating against a much stronger U.S. dollar… the Canadian dollar is down to a major support area (US$O.72). While it would be time for a bounce, Our Optimism is guarded. A breakdown would open the door to a re-test of the sub-US$O.70 levels. While some disconnect between the BOC and Fed is possible, we don’t believe the BOC has the luxury of fully parting ways with the Fed unless it’s ready to see the Canadian dollar go down the drain (which would be inflationary and clearly would not encourage Canadian businesses to invest more in machinery/lT — prolonging or worsening the productivity gap with the United States)”
“Scotiabank: CAD near long term support” – (charts) X
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The Federal Reserve once again pushed back on hopes for an interest rate cut, as J.P. Morgan economist Michael Feroli reports,
“”So far this year, the data have not given us that greater confidence [that inflation is coming down],” and that “it is likely that gaining such greater confidence will take longer than previously expected.” Even with these somewhat hawkish remarks, Powell was very reluctant to offer that the next move could be a hike. For that to happen, he said the Committee would need to see “persuasive evidence” that policy is not sufficiently restrictive. But in a number of places he said that it’s “clear” that policy is restrictive. Tying together these less hawkish observations, Powell saw three likely paths for the economy and policy: a path where inflation remains persistent, in which case they “hold off on rate cuts,” a path where they regain confidence that inflation is coming down (cut), and a path of unexpected weakening in the labor market (cut). Presumably the path to a hike is quite narrow. While the recent data have pointed to the risk of a later first cut than our July call, Powell’s remarks suggest the risk of a hike remain low … The only discussion of rate hikes in the press conference was initiated by the press corps; for Powell, such a move was “unlikely””
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Diversion: “The latest Charismatic Voice: Our adorably naive opera singer has discovered Steely Dan” – A Journal of Musical Things
Scott Barlow