| TUESDAY, AUGUST 4, 2015, CANADA EDITION TOP NEWS • Greece's financial woes see banking stocks plunge again Greece's banking stocks plunged for the second day in a row, dragging the main Athens index down in a graphic illustration of the country's financial and economic woes. • ADM earnings miss analysts' estimates on weaker ethanol margins U.S. agribusiness Archer Daniels Midland Co on Tuesday reported a lower-than-expected quarterly profit due to reduced exports of crops from North America and weaker margins in ethanol production. • CVS Health's sales rise 7.4 percent Drugstore operator CVS Health Corp reported a 7.4 percent rise in quarterly sales as demand for its specialty pharmacy services increased and pharmacy claims rose. • Aetna profit beats as government plans expand Aetna Inc reported a better-than-expected adjusted net profit for the second quarter as it added more members to its government plans and medical costs remained stable. • Fertilizer maker Mosaic's Q2 profit rises 57 pct U.S. fertilizer company Mosaic Co reported a 57 percent rise in quarterly profit, helped by strong phosphates sales, improved potash prices and lower costs. BEFORE THE BELL Stock futures pointed to a lower opening for Canada's main stock index as investors awaited corporate earnings reports and manufacturing data. U.S. stock index futures tracked weakness in European markets, while Asian shares closed mixed. Most commodities were higher. Brent, which has slumped more than 20 percent over the last month, jumped and traded around $50 a barrel. Copper nudged off a six-year low and gold edged up. The Canadian dollar was little changed and recovered from C$1.3176 - its lowest since August 2004. ANALYSTS' RECOMMENDATION • Medical Facilities Corp (DR). Canaccord Genuity raises to buy from hold as the company presents a very attractive yield of 7.9% and a payout ratio that is expected to remain below the company’s 80% annual target in the near and medium-term. • Sandstorm Gold Ltd (SSL). CIBC cuts target price to C$3.50 from C$4 as the company has a higher risk profile than its peers in the royalty space, especially in today's gold market. ECONOMIC EVENTS 0930 RBC Manufacturing PMI SA: Prior 51.3 MAJOR COMPANIES REPORTING RESULTS Aug 4: 5N Plus Inc (VNP). Expected Q2 loss of 2 cents per share Aptose Biosciences Inc (APS). Expected Q2 loss of 33 Canadian cents per share Blackpearl Resources Inc (PXX). Expected Q2 loss of 1 Canadian cent per share Canaccord Genuity Group Inc (CF). Expected Q1 earnings of 10 Canadian cents per share Centric Health Corp (CHH). Expected Full Year loss of 12 Canadian cents per share Clearwater Seafoods Inc (CLR). Expected Full Year earnings of 69 Canadian cents per share DIRTT Environmental Solutions Ltd (DRT). Expected Q2 earnings of 3 Canadian cents per share Ensign Energy Services Inc (ESI). Expected Q2 loss of 1 Canadian cent per share Genworth MI Canada Inc (MIC). Expected Q2 earnings of 96 Canadian cents per share Morneau Shepell Inc (MSI). Expected Q2 earnings of 22 Canadian cents per share Saputo Inc (SAP). Expected Q1 earnings of 34 Canadian cents per share Savanna Energy Services Corp (SVY). Expected Q2 loss of 14 Canadian cents per share Trinidad Drilling Ltd (TDG). Expected Q2 loss of 5 Canadian cents per share Western Forest Products Inc (WEF). Expected Q2 earnings of 6 Canadian cents per share Aug 5: Agrium Inc (AGU). Expected Q2 earnings of $4.77 per share Barrick Gold Corp (ABX). Expected Q2 earnings of 6 cents per share Bellatrix Exploration Ltd (BXE). Expected Q2 loss of 8 Canadian cents per share Boralex Inc (BLX). Expected Q2 loss of 4 Canadian cents per share BSM Technologies Inc (GPS.V). Expected Q3 loss of 1 Canadian cent per share Canexus Corp (CUS). Expected Q2 loss of 1 Canadian cent per share Cardiome Pharma Corp (COM). Expected Q2 loss of 26 cents per share Colliers International Group Inc (CIG). Expected Q2 earnings of 57 cents per share Essential Energy Services Ltd (ESN). Expected Q2 loss of 6 Canadian cents per share Fiera Capital Corp (FSZ). Expected Q2 earnings of 23 Canadian cents per share Gran Tierra Energy Inc (GTE). Expected Q2 loss of 4 cents per share Great Panther Silver Ltd (GPR). Expected Q2 loss of 2 Canadian cents per share High Liner Foods Inc (HLF). Expected Q2 earnings of 30 Canadian cents per share IAMGOLD Corp (IMG). Expected Q2 loss of 6 cents per share Information Services Corp (ISV). Expected Q2 earnings of 30 Canadian cents per share Innergex Renewable Energy Inc (INE). Expected Q2 earnings of 13 Canadian cents per share Keyera Corp (KEY). Expected Q2 earnings of 40 Canadian cents per share Killam Properties Inc (KMP). Expected Full Year earnings of 67 Canadian cents per share Lightstream Resources Ltd (LTS). Expected Q2 loss of 17 Canadian cents per share Mandalay Resources Corp (MND). Expected Q2 earnings of 1 cent per share North American Energy Partners Inc (NOA). Expected Q2 loss of 8 Canadian cents per share Paramount Resources Ltd (POU). Expected Q2 loss of 59 Canadian cents per share Points International Ltd (PTS). Expected Q2 earnings of 6 cents per share Primero Mining Corp (P). Expected Q2 loss of 3 cents per share Pure Technologies Ltd (PUR). Expected Q2 earnings of 7 Canadian cents per share Redknee Solutions Inc (RKN). Expected Q3 earnings of 4 cents per share Redline Communications Group Inc (RDL). Expected Q2 earnings of 2 cents per share Semafo Inc (SMF). Expected Q2 earnings of 3 cents per share Strad Energy Services Ltd (SDY). Expected Q2 loss of 9 Canadian cents per share Sun Life Financial Inc (SLF). Expected Q2 earnings of 82 Canadian cents per share Tekmira Pharmaceuticals Corp (ABUS). Expected Q2 loss of 26 cents per share TMX Group Ltd (X). Expected Q2 earnings of 97 Canadian cents per share Trimel Pharmaceuticals Corp (TRL). Expected Q2 loss of 1 cent per share Turquoise Hill Resources Ltd (TRQ). Expected Q2 earnings of 3 cents per share Veresen Inc (VSN). Expected Q2 earnings of 7 Canadian cents per share WSP Global Inc (WSP). Expected Q2 earnings of 47 Canadian cents per share CORPORATE EVENTS 13:00 Saputo Inc (SAP). Q1 earnings conference call 16:00 Ensign Energy Services Inc (ESI). Q2 earnings conference call EXDIVIDENDS No Ex-dividends are scheduled for the day (All analysts' estimates are according to Thomson Reuters I/B/E/S/) |
| INSIGHT COLUMN-Poor commodities: an asset without a central bank backer Commodity investors stung by the four-year bear market made one simple mistake: investing in an asset class not backed by a central bank. Whereas equities and bonds have benefited from very meaningful support, direct and indirect, from central bank asset-purchase programs, commodities have not. That may or may not be good policy; certainly you can argue that the current downdraft in commodities prices reflects a singular lack of inflation risk in the global economy. That might argue for more quantitative easing, but given that what we’ve had so far has neither generated much inflation or kindled demand for raw materials, it would be hard to be too sure that more central bank buying of financial assets would help commodities prices. What the situation does underscore is the tremendous extent to which official policy, rather than performing analysis and bearing risks, makes or breaks investment strategy in the post-crisis world. Commodities are in the midst of a four-year bear market which has only intensified in recent months. The Thomson Reuters/CoreCommodity CRB index, down 46 percent since April 2011, has fallen more than 30 percent in the past year alone. The causes for the fall, are of course, complex. Not only have energy prices fallen sharply, in part due to weak demand, in part due to improved efficiency and in part due to a strategic decision by crude producers to make life difficult for emerging producers of shale and other energy sources. As well, China’s economy, which has been the dominant marginal buyer for most commodities for more than a decade, is both slowing rapidly and undergoing an historic shift away from investment and towards consumption, a change which implies less intensive demand for raw materials. Commodities are thus a bit of an unloved step-child in a world in which everyone’s new dad is a central bank. The Federal Reserve, European Central Bank, Bank of Japan and Bank of England have found it useful to buy government bonds, and sometimes other assets, at least in part because of the impact this has on other financial assets, making investors wealthier and financing easier to get and cheaper. LUCKY IS THE TOOL China has gone beyond this, stepping in to rescue its plunging equity market with an unparalleled intervention including financing lenders which in turn lend money for stock purchases. And official policy in China has been calibrated to ease and support the transition to a more consumption-oriented economy, thus hastening the arguably inevitable dampening effect this has on commodities prices. In this way financial assets, as opposed to commodities, have simply been lucky in that they are one of the few levers central banks have left to attempt to kindle demand and inflation. None of this is to say that policy should have supported commodities prices, though it is superficially attractive to put money into the pockets of the less well off who produce commodities, as opposed to the better off who own securities. At least in developed economies the fall in commodities, especially energy prices, is a bit of a break for policy makers, putting money in the pockets of consumers who might spend more or pay down debt. It may be too that central banks in supporting asset prices are fighting a battle they cannot ultimately win, both with inflation and with the very inflated expectations investors have about how much they should earn. Investor William Bernstein has argued that as economies grow they naturally give rise to lower returns. Not only is there simply more capital, but technological innovation speeds up, making huge new investments obligatory. Society ends up wealthier but returns drop, though speculative bubbles tend to rise. As in tech companies, so is something similar seen in commodities, where new technology makes the use of commodities more efficient, and the sourcing of new supplies easier. The coming wave of high-yield bond defaults among energy producers may well be an excellent example of this phenomenon. We’ve got access to more energy but returns are not what investors hoped. We all end up with much more of what we want, be it energy, steel or mobile phones, but outside small niches like Apple it becomes much harder to both pay for new investment and make good returns. Much of this is self-reinforcing. So long as central banks see asset markets as useful tools for other ends the performance gap between financial assets and real ones may persist. ---By James Saft ---James Saft is a Reuters columnist. The opinions expressed are his own. At the time of publication James Saft did not own any direct investments in securities mentioned in this article. | |