Posthaste: Racial divide, trade tensions, pandemic and unemployment carnage — yet markets rally on ‘reopening joy’ – USA DAILY NEWS

Posthaste: Racial divide, trade tensions, pandemic and unemployment carnage — yet markets rally on ‘reopening joy’

Good morning!

It’s getting harder and harder to get any joy out of this year.

A devastating pandemic, oil price plunge, trade tensions between two superpowers, China’s attack on civil liberties in Hong Kong, and now the latest explosive episode of racial divide in the United States, are all conspiring to make 2020 perhaps the most miserable year for most of us.

Here in Canada, after an 8.2 decline in GDP in the first quarter, brace yourself for some more darkness before the light. The next Canada job report on Friday will give us a sense of the scale of silent economic carnage unfolding across the country. Scotiabank expects the Labour Force Survey to register another one million drop in total employment and a 16 per cent unemployment rate.

“To arrive at this figure, the change in the stock of CERB (Canada Emergency Response Benefit) applications of about 1.6 million between LFS reference periods was scaled back to compensate for expanded eligibility, while assuming no material gross job creation to offset the job destruction evidence through claims,” the bank said in a note to clients.

IHS Markit’s manufacturing purchasing managers index for May today will underscore the decline in that sector, while Thursday’s trade figures for April will likely register a wider trade deficit in the peak of the shutdown period.

The Canadian Imperial Bank of Commerce analysts expects Canadian unemployment rate to climb down more slowly than the United States.

Stateside, 87 per cent of newly unemployed persons described themselves as on “temporary layoff” in April, compared to only 60 per cent in Canada.

“That would equate to a smaller rebound in the employment ratio (around 2.5 percentage points) if all of those workers came back,” wrote Andrew Grantham, analyst at CIBC.

In addition, aggregate hours worked in Canada appear to have fallen more than in the U.S. That suggests that employment figures in Canada could take longer as companies will likely increase the hours for existing employees before they proceed with any extensive re-hiring.

Grantham expects May employment figures to be the lowest point of this dreadful cycle, assuming there are no new waves of the pandemic.

“How far those rebounds go, and how fast they occur, will of course be largely dependent on the spread of the virus and whether stricter

social distancing measures need to be reintroduced later in the year. But there are details within the labour force figures that suggest a longer road back in Canada than the U.S,” Grantham said. “We’ll see on Friday if those details are still pointing in that same direction.”


Meanwhile, the tone deaf stock markets continue to climb higher. News wires reported this morning that global stocks are scaling a three-month peak “on reopening joy”.

U.S. stock index futures slipped early Monday, but are now in positive territory suggesting a higher opening amid unrest in major American cities that will only delay reopening of the wider economy.

TSX futures were also up, building on its 35 per cent since its March 23 low.

“We’ve said for a long time that the bridge back to equities is dividend growth and income growth,” Bank of Montreal analyst Brian Belski told Bloomberg. “There are a lot of great names in Canada that provide income and the reality is that the big banks didn’t cut their dividends, that’s really important.”

Sure, markets are looking to the future — but can we honestly say medium-term economic prospects look any better.

Goldman Sachs analysts caution, however, “numerous medical, economic and political risks dot the investment landscape” that could see the U.S. market rally losing steam.

While the S&P 500 squeezed higher in May (up 4.5 per cent), investors took advantage of high share prices to liquidate equities in favour of U.S. credit and money market.

“May saw investors withdrawing US$6.1 billion from U.S. equities, after an US$22 billion injection in April,” according to Jefferies analysts. “The U.S. bond markets doubled their additions (+US$50 billion) in May. Both high-yield and investment grade corporate bonds experienced rising inflows but the purchase of sovereign bonds remained subdued.”

Most of the rally is driven by major blue-chips such as Inc. and Apple Inc., but they are showing signs of fatigue.

“Broader participation in the rally will be needed for the aggregate S&P 500 index to climb meaningfully higher. The modest upside for the largest stocks means the remaining 495 constituents will need to rally to lift the aggregate index,” Goldman analysts said.

David Rosenberg says while there is plenty to be worried about, central bank stimulus is keeping the rally going, and allowing investors to ignore the riots.

“But in today’s world where the central banks have told you that the stock market sits at the top of their list of responsibilities, investors get a free pass.”


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THEY CAN’T BREATHE: Protestors hold signs as a large placard asking for Justice for the victims of police killings was displayed below a statue on Montreal’s Place du Canada on May 31, 2020. Several thousands demonstrators marched on Sunday in central Montreal against racism and police violence, in solidarity with demonstrations in the United States following the death of George Floyd. The protests degenerated into clashes between police and some demonstrators on Sunday night. Eric Thomas/AFP via Getty Images


  • Human rights activists and federal politicians will urge the Canadian government in Ottawa to take further steps in response to a deepening crisis in Hong Kong, as China edges closer to adopting a dangerous new national security law
  • Cullen Commission, inquiry into money laundering, hearings into an overview of the problem, attempts to quantify the extent and regulatory models, in Vancouver
  • Scott Corwin, Deloitte’s Global Leader in Future Mobility, speaks at Transportation Forum 2020: The Future of Mobility
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Stephen Poloz first dreamed of becoming Bank of Canada governor in 1974, when he got hooked on economics as an undergrad at Queen’s University in Kingston, Ont. Thirty-nine years later, it happened. How many of us can match that? Not many.

But it would have required a dark soul to design the pre-mortem to prepare Poloz for an ending to his dream-come-true story that included the deaths of more than 360,000 people worldwide and an effective lockdown on travel and human interaction.

But in the time of COVID-19, you do what you can, writes Kevin Carmichael.


Monday, June 1 is the “official” extended deadline for Canadians to file their 2019 personal tax returns, unless you or your spouse (or common-law partner) is self-employed, in which case you both have until June 15, 2020 to file. You’ll recall that the normal filing deadline, as well as the deadline to pay amounts owed, is April 30, but it was extended back in March as part of the initial COVID-19 relief measures.

Is there any real rush to file by June 1 if there are no penalties as long as you file by Sept. 1?

Jamie Golombek, managing director, tax & estate planning with CIBC Private Wealth Management, examines the issue.


Today’s Posthaste was written by  Yadullah Hussain (@Yad_Fpenergy), with files from The Canadian Press, Thomson Reuters and Bloomberg.

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